CNS Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. CNS is a clinical-stage pharmaceutical company developing treatments for brain and central nervous system cancers. It reported no revenue; operations are focused primarily on its Berubicin clinical trial.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $3.41 million | $2.21 million | $9.82 million | $6.32 million |
| General and administrative expense | $1.12 million | $1.21 million | $3.66 million | $3.81 million |
| Net loss | $4.52 million | $3.42 million | $13.48 million | $10.14 million |
| Loss per share, basic and diluted | $1.08 | $2.56 | $4.05 | $7.67 |
| Net cash used in operating activities | — | $11.60 million | $8.25 million |
At September 30, 2023, cash and cash equivalents were $0.91 million, compared with $10.06 million at December 31, 2022. Current assets were $2.06 million and current liabilities $4.07 million, resulting in a $2.01 million working-capital deficit. Total liabilities were $4.07 million, including $41,904 of notes payable. Stockholders’ deficit was $1.74 million. Gross margins are not applicable because the company reported no revenue.
Changes and financing
- Q3 R&D expense rose about 55% year over year, primarily due to Berubicin trial CRO and patient-treatment costs. Nine-month R&D expense increased about 56%.
- Q3 net loss increased about 32% year over year; nine-month net loss increased about 33%. G&A declined modestly in both comparable periods.
- Cash used in operations increased to $11.60 million for the first nine months, while financing activities provided $2.46 million, mainly from common-stock sales and warrant exercises. Cash fell by $9.15 million over the period.
- During the nine months, the company received $2.10 million net from sales of 723,406 shares under its equity sales agreement and $725,668 from warrant exercises. Common shares outstanding were 4,207,068 at September 30 and 5,248,598 as of November 14, 2023.
Outlook, risks and notable items
- Management said September-quarter cash would fund planned operations into, but not beyond, Q4 2023. It estimated that additional financing of approximately $9.4–$13.4 million would be needed to complete the Berubicin trial, plus about $5.0 million for near-term WP1244/WP1874 preclinical work and additional working capital.
- The company disclosed substantial doubt about its ability to continue as a going concern, citing recurring losses and negative operating cash flows and dependence on additional financing. It stated that cash on hand and subsequent warrant proceeds would fund planned operations through the end of Q4 2023, but not beyond.
- The Berubicin Phase 2 trial is planned to enroll an estimated 243 patients, comparing Berubicin with Lomustine. Management anticipated a non-binding interim futility analysis and potential data release in Q4 2023; timing and trial costs may change. Future R&D spending is expected to rise with enrollment and treatment costs.
- Subsequent to quarter-end, a warrant inducement transaction generated $2.40 million gross proceeds from exercise of existing warrants at $1.28 per share, with new warrants issued for up to 3,756,000 shares. The company also reported $215,641 net proceeds from post-quarter ATM share sales.
- UTMDACC may terminate the WP1244 license because the company had not met specified commercial-diligence milestones; UTMDACC had not given notice of termination as of the filing. Berubicin’s licensed patents had expired, and the company described orphan-drug designation as its primary intellectual-property protection.
- Disclosure controls were deemed ineffective due to material weaknesses involving segregation of duties, CRO cost information, and control documentation. Management said it was taking steps to improve reporting and controls.
Important facts for investors to verify
- Current cash runway, financing availability, and the terms and dilution effects of subsequent warrant and equity transactions.
- Berubicin enrollment, interim-analysis timing and outcome, trial budget, and whether management’s completion-funding estimate remains current.
- Status of the WP1244 license and compliance with its diligence milestones, as well as the scope and durability of Berubicin’s intellectual-property protection.
- Progress in remediating the disclosed internal-control weaknesses and improving CRO cost reporting.