Citius Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three months ended December 31, 2018 (the first quarter of fiscal 2019). The unaudited statements consolidate Citius and its wholly owned subsidiaries. Citius is a development-stage specialty pharmaceutical company focused on products for critical care, including anti-infectives and cancer care.
Financial results and position
| Metric | Quarter ended Dec. 31, 2018 | Quarter ended Dec. 31, 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.113 million | $0.607 million |
| General and administrative expense | $1.588 million | $2.346 million |
| Stock-based compensation expense | $0.171 million | $0.290 million |
| Operating loss | $3.872 million | $3.243 million |
| Net loss | $3.875 million | $3.246 million |
| Basic and diluted loss per share | $0.22 | $0.38 |
| Net cash used in operating activities | $2.159 million | $2.441 million |
- Cash and cash equivalents were $7.041 million at December 31, 2018, down from $9.184 million at September 30, 2018. The company reported working capital of $3.188 million.
- Total assets were $28.078 million, including $19.4 million of in-process research and development and $1.587 million of goodwill. Stockholders’ equity was $24.178 million.
- Current liabilities were $3.900 million, including $172,970 of related-party notes payable and $61,857 of accrued related-party interest. The filing reports no long-term debt balance.
- Operating cash outflow was partly offset by $16,000 of proceeds from warrant exercises; cash declined by $2.143 million during the quarter. No cash interest was paid.
- Profit margins are not meaningful because the company had no revenue and reported operating and net losses.
Changes versus the prior comparable period
- Net loss increased $0.629 million. R&D expense rose $1.507 million, primarily from the ongoing Phase 3 Mino-Lok trial; Mino-Lok R&D expense was $1.994 million versus $0.561 million a year earlier.
- G&A expense declined $0.758 million, mainly reflecting the prior-year $357,400 underwriter-release cost and lower investor-relations expense. Stock-based compensation also declined $0.119 million.
- Basic and diluted loss per share improved from $0.38 to $0.22, while weighted-average shares rose from 8.605 million to 17.764 million.
- Operating cash use declined from $2.441 million to $2.159 million. Financing cash inflow fell from $6.608 million to $16,000; the prior period included offering proceeds.
- During the quarter, 1.6 million pre-funded warrants were exercised for $16,000, increasing common shares from 16.199 million to 17.799 million.
Outlook, risks and notable items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern. Citius had no operating revenue, incurred $2.159 million of quarterly operating cash outflow, and stated that capital was limited. Management expected funds to support operations through June 2019 and planned to seek additional equity, existing-investor funding and related-party borrowings; there is no assurance that funding will be available or sufficient.
- Development plans: Management expected R&D expense to increase in fiscal 2019 as the Mino-Lok Phase 3 trial continued and development work on Mino-Wrap began. Hydro-Lido was also under development.
- Mino-Wrap license: On January 2, 2019, Citius licensed exclusive worldwide rights to technology for a proposed minocycline-and-rifampin wrap intended to reduce breast-implant infections. It paid a nonrefundable $125,000 upfront fee and may owe up to $2.1 million in milestone payments, royalties, maintenance fees and patent expenses.
- Subsequent warrant exercise: On January 14, 2019, the remaining 721,569 pre-funded warrants were exercised for $7,216.
- Principal risks: The filing cites financing needs, clinical-trial cost, timing and results, regulatory approvals, commercial feasibility, competition, key personnel and suppliers, and regulatory compliance. It reports no change in risk factors from the September 2018 Form 10-K.
- There were no reported legal proceedings or off-balance-sheet arrangements. Management concluded disclosure controls were effective as of December 31, 2018 and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether Citius raised sufficient capital after the filing to fund operations beyond management’s stated June 2019 runway.
- Current cash, working capital, cash-burn rate and related-party debt, including any subsequent financing or borrowing.
- Progress, costs and regulatory milestones for the Mino-Lok Phase 3 trial, and development plans for Hydro-Lido and Mino-Wrap.
- Potential dilution from the substantial outstanding warrant and option balances; the filing reported 13.593 million warrants outstanding at December 31, 2018, before the subsequent pre-funded warrant exercise.
- Terms and potential costs of the Mino-Wrap and Mino-Lok licenses, including contingent milestones, royalties and annual minimum payments.