Cellectar Biosciences, Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Cellectar is a clinical-stage oncology company developing Phospholipid Drug Conjugate (PDC) therapies. It reported no product revenue; operations are funded principally through securities offerings.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development | $2.704 million | $1.996 million | $6.822 million | $5.799 million |
| General and administrative | $1.260 million | $1.092 million | $3.972 million | $3.647 million |
| Net loss | $3.904 million | $3.015 million | $10.713 million | $9.411 million |
| Net loss per common share | $0.42 | $1.65 | $1.51 | $5.29 |
| Operating cash used | Not stated for quarter | Not stated for quarter | $9.013 million | $8.699 million |
At September 30, cash and cash equivalents were $13.302 million, versus $13.256 million at December 31, 2018; total current assets were $14.752 million and current liabilities $2.978 million. Total assets were $15.659 million, total liabilities $3.428 million, and stockholders’ equity $12.231 million. The balance sheet showed lease liabilities of $552,229 in total ($102,597 current and $449,632 long-term); the filing reports no conventional borrowing balance. Operating cash use was nearly offset by $9.025 million net proceeds from the May 2019 stock and warrant offering, leaving cash, cash equivalents and restricted cash down $9,004 over the nine-month period. The filing does not provide a meaningful operating margin because there was no revenue.
Changes and notable items
- Quarterly operating expenses rose 28% year over year; nine-month expenses increased 14%. R&D growth reflected clinical-trial activity, pediatric-study startup and manufacturing costs, partly offset by lower preclinical and general R&D costs.
- Quarterly net loss increased from $3.015 million to $3.904 million. The comparative 2018 common-stockholder loss also included a $2.242 million deemed preferred-stock dividend; accordingly, reported loss per share is not directly comparable without considering that item and the increase in weighted-average shares.
- The May 2019 offering generated approximately $9.0 million net: 4.0 million common shares were sold alongside Series F and G warrants for up to 4.0 million additional shares at $2.40 per share. As of September 30, 9.386 million common shares were outstanding and 9.268 million warrants to purchase common shares were outstanding.
- The company adopted lease accounting standard ASC 842 on January 1, 2019, recognizing a right-of-use asset and lease liability; management said adoption had no material net impact on the statement of operations.
Business outlook, risks and contingencies
Management estimated that cash would fund budgeted operations for at least 12 months from filing and into the first quarter of 2021. The company expects continuing losses and negative operating cash flows and will need additional funding to continue development and potentially commercialize products. It is pursuing equity or debt financing, strategic transactions and other alternatives, with no assurance of timely funding on acceptable terms. The 2018 auditor’s report had included an explanatory paragraph regarding substantial doubt about the company’s ability to continue as a going concern; management stated it believed current cash was sufficient for the stated near-term runway.
CLR 131 was being tested in a Phase 2 study in relapsed or refractory B-cell malignancies and in Phase 1 adult multiple-myeloma and pediatric-cancer studies. Management expected top-line Phase 2 CLOVER-1 data in Q4 2019 and planned to initiate a head-and-neck cancer trial in Q4 2019. The filing described early clinical results as encouraging, but these were interim results and do not establish efficacy or approval. Development, trial enrollment and results, regulatory decisions, manufacturing, financing needs, potential dilution and the company’s ability to maintain its market listing are material risks. No material litigation or subsequent event was reported; management said there were no known legal proceedings likely to have a material adverse effect.
Investor verification points
- Confirm actual cash burn, spending and financing needs against management’s projected runway into Q1 2021.
- Check subsequent CLOVER-1 results and trial progress, including whether anticipated timing and enrollment were achieved.
- Assess the terms and potential dilution from outstanding warrants, preferred shares and any further capital raises.
- Review clinical, regulatory and manufacturing risks, as well as any updates to going-concern disclosures and risk factors.
- Verify reported cash, lease obligations and operating cash flow in subsequent filings; the filing’s cash-flow figures cover nine months, not Q3 alone.