Celcuity Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; unaudited. Celcuity is a development-stage cancer diagnostics company developing its CELx platform and tests. It has not generated revenue.
Financial performance and position
- Revenue: None. Profitability and operating margins are not meaningful; the company reported an operating loss.
- Expenses: Research and development was $1.55 million, up 70% year over year. General and administrative expense was $531,000, up 523%. Total operating expenses were $2.08 million, up 109%.
- Net loss: $1.97 million, compared with $987,000 in Q1 2017. Basic and diluted loss per share was $0.19 versus $0.15.
- Cash flow: Operating activities used $1.45 million, compared with $947,000 used a year earlier. Investing activities provided $1.20 million, primarily from net investment sales; financing activities provided $184,000 from warrant exercises. Cash, cash equivalents, and restricted cash declined $67,000 to $2.62 million.
- Liquidity: Cash, cash equivalents, and investments totaled approximately $30.0 million at March 31, 2018. Current assets were $23.33 million and current liabilities $783,000. Management believes available cash will fund operations and obligations for at least 24 months.
- Debt: No debt was reported at quarter-end. Convertible notes issued in 2017 converted into common shares when the IPO closed.
- Equity: Stockholders’ equity was $29.94 million. The balance sheet reported an accumulated deficit of $3.98 million; MD&A separately describes historical combined deficits across the LLC and corporation.
Changes and business developments
- Net loss nearly doubled year over year as R&D spending increased to support platform development, validation studies, patent costs, clinical-trial start-up, and operations. G&A rose with compensation, public-company professional fees, and directors’ and officers’ insurance.
- Interest income increased to $108,000 from $6,600, reflecting cash and investment balances.
- Management completed development of a second breast-cancer test evaluating c-Met signaling during Q1, with plans to combine it with the HER2 signaling test as a CELx Multi-Pathway test.
- The company is collaborating with Genentech and NSABP on a prospective clinical trial; interim results were expected in early to mid-2019. It was also selected to analyze samples in a 35-patient colorectal cancer study, for which Celcuity said it would not receive payment for testing.
Outlook, risks, and commitments
- Management expects R&D and G&A spending to increase, with additional sales and marketing costs anticipated ahead of potential commercialization of the CELx HSF Test. No revenue or earnings guidance was provided.
- The company plans to develop additional tests and pursue pharmaceutical collaborations; timing, clinical outcomes, regulatory approval, commercial viability, market adoption, and reimbursement remain uncertain.
- A clinical research agreement includes future scheduled payments of $150,000 in 2018 and $50,000 in 2019, plus patient-enrollment-related payments estimated at up to approximately $2.04 million over the agreement.
- Operating lease minimum commitments totaled $571,000 at March 31, 2018. A new facility lease was expected to commence with a move in May 2018.
- Management identifies clinical and commercial success, additional financing needs, competition, regulatory approval, intellectual-property protection, and physician and payer acceptance as material risks. It reported no material litigation or off-balance-sheet arrangements.
- After quarter-end, on May 11, 2018, the company amended its charter to reduce authorized common shares from 45.0 million to 25.0 million and authorized preferred shares from 5.0 million to 2.5 million. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Important facts for investors to verify
- Progress, enrollment, costs, and result timing for the Genentech/NSABP trial and other clinical work.
- Whether CELx tests achieve required validation, regulatory and reimbursement pathways, and commercial adoption.
- Cash burn and actual liquidity runway as planned R&D and commercialization spending rises.
- Potential clinical-study payment obligations, including patient-enrollment costs, and execution of the new facility lease.
- Reconciliation of the historical accumulated-deficit figures described in MD&A with the balance-sheet presentation after the corporate conversion.