Business context and reporting period
CEL-SCI Corporation’s unaudited Form 10-Q covers the quarter and nine months ended June 30, 2023, compared with the same periods in 2022. The company is a pre-revenue biotechnology developer focused primarily on Multikine, an investigational immunotherapy for advanced head and neck cancer, and also conducts preclinical work on its LEAPS platform.
Financial performance and position
- Revenue and margins: No revenue was reported. As the company remains in development, conventional operating margins are not meaningful.
- Nine months ended June 30: Operating expenses were $24.0 million, down from $27.1 million; net loss was $24.6 million versus $28.2 million; and net loss available to common shareholders was $24.7 million, or $0.57 per share, versus $28.5 million, or $0.66 per share. R&D expense was $17.2 million (down 9%) and G&A was $6.8 million (down 17%).
- June quarter: Operating expenses were $8.2 million versus $8.7 million; net loss was $8.4 million versus $9.6 million; and loss per share was $0.19 versus $0.23.
- Cash flow: Operating activities used $17.8 million in the nine months, compared with $13.3 million in 2022. Investing activities used $0.4 million; financing activities provided $0.6 million. Cash declined $17.5 million to $5.1 million at June 30, 2023, from $22.7 million at September 30, 2022.
- Liquidity: Current assets were $7.7 million and current liabilities $5.3 million at June 30. The company deposited approximately $2.3 million with its landlord after falling below a lease cash threshold; this deposit is recorded as a noncurrent asset. On July 17, it raised approximately $4.6 million net from a common-stock offering.
- Debt and leases: The filing reports finance lease obligations of approximately $12.1 million, including $1.7 million current, and operating lease obligations of approximately $1.9 million, including $0.2 million current. Total liabilities were $17.5 million. The filing does not identify other outstanding borrowings in the balance sheet presented.
- Equity and noncash costs: Common shares outstanding were 44.7 million at June 30 and 47.3 million on August 8. Nine-month employee stock compensation was $5.0 million and depreciation and amortization was $3.0 million.
Material changes versus the prior comparable period
Nine-month operating expenses and losses declined year over year, largely reflecting lower stock-based compensation and Phase 3 study costs; spending to prepare for potential Multikine commercialization partly offset those decreases. Operating cash use increased by approximately $4.5 million. Cash fell substantially, while the company raised approximately $1.4 million through common-stock sales and received approximately $0.5 million from warrant exercises. In April and May, the company sold shares and the underwriter exercised its over-allotment option, generating approximately $1.4 million in aggregate proceeds. The July offering added approximately $4.6 million net and further increased share count.
Outlook, commentary, risks and unusual items
- Going concern and financing: Management states that recurring losses and future liquidity needs create substantial doubt about the company’s ability to continue as a going concern. Additional capital or long-term financing is needed; there is no assurance funding will be available on acceptable terms or in time. The company warns it may need to curtail operations if it cannot raise funds.
- Multikine trial and regulatory status: Management reports a 14.1 percentage-point five-year overall-survival advantage in the prespecified Phase 3 subgroup treated with Multikine followed by surgery and radiation (62.7% versus 48.6%; p=0.0236; HR=0.68). However, the overall study did not meet its primary endpoint when treatment arms were combined, and the reported benefit was in one treatment arm. Multikine is investigational and has not been approved; its safety and efficacy have not been established for any use.
- Potential Canada pathway: Management says Health Canada advised the company to seek advance consideration under its Notice of Compliance with Conditions policy. The company was preparing an application and planned to file by early 2024; commercialization during 2024 was described as possible only if approval is granted. Regulatory paths in the United States, United Kingdom and Europe remain under discussion.
- Trial costs and collaboration: The company reported approximately $64.3 million of direct Phase 3 trial and clinical study report costs through June 30, 2023, and estimated a further $0.7 million for the remaining trial and report costs. The estimate excludes related costs such as drug manufacturing. Ergomed’s contribution of discounted clinical services had reached approximately $11.8 million of its commitment of up to $12 million, in exchange for a share of certain milestones and royalties.
- Lease and related-party items: The company’s manufacturing-facility lease runs through October 2028. A two-year extension of Series RR warrants held by officers and a trust associated with the CEO resulted in a $171,552 deemed dividend in the nine-month period.
- Controls: Management concluded disclosure controls were not effective at June 30, 2023 due to material weaknesses previously described in the 2022 Form 10-K. No material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- Available cash and expected operating runway, including the effect and timing of the July offering proceeds and the landlord deposit.
- Whether additional financing can be secured and on what terms, given the going-concern disclosure and potential shareholder dilution.
- The full Phase 3 results, including the overall primary-endpoint failure, subgroup analysis, statistical methods and regulatory feedback.
- The status and timing of any Canadian NOCC application and the separate regulatory strategy in other markets; approval and 2024 commercialization are not assured.
- Progress on remediation of the disclosed material weaknesses and the company’s ability to meet its clinical, manufacturing and lease-related commitments.