CNS Pharmaceuticals, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 10, 2022. CNS is a clinical-stage pharmaceutical company developing cancer drug candidates, with Berubicin for glioblastoma as its lead program. The company reported no revenue.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| General and administrative expense | $1.21 million | $1.24 million | $3.81 million | $3.78 million |
| Research and development expense | $2.21 million | $2.58 million | $5.95 million | $7.45 million |
| Total operating expenses | $3.42 million | $3.81 million | $9.77 million | $11.23 million |
| Net loss | $3.42 million | $3.81 million | $9.77 million | $11.24 million |
| Basic and diluted loss per share | $0.09 | $0.14 | $0.25 | $0.43 |
Balance sheet at September 30: Cash and cash equivalents were $7.03 million, versus $5.00 million at December 31, 2021. Working capital was approximately $7.46 million. Total assets were $9.64 million; current liabilities and total liabilities were $1.24 million. Notes payable were $39,260 at quarter-end and were repaid in full after September 30. No meaningful revenue-based margin is available because the company had no revenue.
Cash flows for the first nine months: Operating activities used $8.25 million, compared with $10.30 million in 2021; investing activities used $4,423; financing activities provided $10.28 million. Cash increased by $2.02 million over the period. January’s private placement generated $10.63 million net proceeds; the company issued 9.49 million common shares and pre-funded warrants for up to 2.62 million shares, alongside warrants for up to 12.11 million shares.
Changes versus prior comparable periods
- Q3 net loss decreased by about $395,000 year over year; nine-month net loss decreased by about $1.47 million.
- R&D expense fell year over year, largely because the prior-year period included greater drug-manufacturing activity and 2022 included a credit related to WPD Pharmaceuticals’ Berubicin product purchase. Lower manufacturing activity was expected to continue during 2022, while clinical-trial organization costs increased.
- Nine-month G&A expense rose slightly, as higher legal and professional fees offset lower employee and stock-based compensation and advertising costs.
- Cash at September 30 exceeded the prior year-end balance, principally reflecting the January 2022 equity financing; cash remained below September 2021’s $8.33 million.
Outlook, risks, and notable items
- Management said existing cash was expected to fund operations into, but not beyond, the near term—then estimated as the first quarter of 2023. The filing states substantial doubt exists about the company’s ability to continue as a going concern without additional financing.
- The company estimated it would need approximately $13–$17 million of additional financing to complete the Berubicin Phase II trial, taking September 30 cash into account, approximately $5 million for near-term WP1244/WP1874 preclinical work, and additional working capital. Trial timing and costs could change, and financing may not be available.
- The randomized Phase II Berubicin study is planned to enroll an estimated 243 patients, comparing Berubicin with Lomustine, with overall survival as the primary endpoint. Management expected R&D costs to increase as the trial progressed. Berubicin’s FDA orphan-drug and Fast Track designations do not assure approval or commercial success.
- Nasdaq had notified the company that its share price was below the $1 minimum bid requirement. The company had until February 13, 2023 to regain compliance; stockholders authorized a possible reverse split. A split may not restore or sustain compliance and could adversely affect trading liquidity or market value.
- Disclosure controls and procedures were reported ineffective due to material weaknesses involving insufficient segregation of duties and lack of formal control-environment documentation. Management described additional review procedures and plans to add finance resources and upgrade systems when feasible.
- The company disclosed related-party arrangements involving HPI and WPD, both associated with founder and significant shareholder Waldemar Priebe. A Berubicin drug-product payment matter with WPD was resolved through return of 168 vials; the company reported confirmation of their transfer into inventory on October 24, 2022.
- Cash deposits exceeded FDIC insurance limits by $6.78 million. The company reported no current legal proceedings and no material capital-expenditure commitments.
Most important facts for investors to verify
- Available cash, actual cash burn, financing plans, and whether the company can fund the Berubicin trial and other obligations beyond Q1 2023.
- Berubicin trial enrollment, site activation, costs, interim analysis timing, and any clinical or regulatory updates.
- Potential dilution from outstanding warrants, options, and equity financing; 40,032,481 common shares were outstanding on November 10, 2022.
- Nasdaq bid-price compliance status and whether a reverse stock split is implemented.
- Progress in remediating the reported internal-control weaknesses and continued oversight of related-party arrangements.