CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2023. The filing was signed May 12, 2023. CEL-SCI is a development-stage biotechnology company; it reported no revenue and its products remain under development.
Financial Results and Position
- Six months: Operating expenses were $15.83 million, including $11.48 million of R&D and $4.35 million of G&A. Net loss was $16.20 million; net loss available to common shareholders was $16.37 million, or $0.38 per share.
- Quarter: Operating expenses were $8.18 million. Net loss was $8.34 million, or $0.19 per share.
- Year-over-year: Six-month operating expenses declined 14% from $18.40 million, while net loss narrowed from $18.61 million. R&D declined 9% and G&A declined 25%, mainly reflecting lower employee stock-based compensation. No revenue or gross margin was reported.
- Cash flow: Operating cash use was $12.14 million for the six months, versus $7.54 million in the prior-year period. Cash and cash equivalents fell $12.63 million to $10.05 million from September 30, 2022. The cash use included a roughly $2.3 million landlord deposit after the company fell below a lease-required cash threshold.
- Liquidity: Current assets were $12.57 million and current liabilities $5.31 million at March 31. The balance sheet also included $2.32 million of long-term deposits, primarily the landlord deposit. Management disclosed substantial doubt about the company’s ability to continue as a going concern.
- Lease obligations: Total liabilities were $18.05 million, including approximately $12.52 million of finance lease obligations and $1.94 million of operating lease obligations. These are primarily lease liabilities, including the manufacturing facility; the filing does not identify conventional borrowings as a material balance.
Business, Developments and Outlook
- CEL-SCI’s lead candidate, Multikine, is an investigational immunotherapy for advanced primary head and neck cancer. The company reported a five-year overall-survival advantage of 14.1 percentage points in the prespecified surgery-plus-radiation subgroup (62.7% versus 48.6%; p=0.0236; HR=0.68). However, the combined Phase 3 study did not meet its primary endpoint; the filing says the apparent benefit was not seen when chemotherapy was added.
- Multikine has not been approved by the FDA or another regulator, and its safety and efficacy have not been established for any use. The company says it is evaluating how best to pursue a path to market.
- Management estimated about $0.8 million of additional direct costs to complete remaining Phase 3 activities and file the clinical study report with the FDA. The estimate excludes other related costs, including drug manufacturing.
- Management expects to need additional capital through partnerships, debt, and/or equity financing. It cautioned that financing may not be available on acceptable terms or at all and that operations could be curtailed if sufficient funding is not raised. No specific revenue or profitability guidance was provided.
- After quarter-end, CEL-SCI raised approximately $1.29 million net from a public offering and full exercise of the underwriters’ over-allotment option, issuing 913,234 shares in total. The filing reported 44,714,679 shares outstanding as of May 8, 2023.
Other Material Items and Risks
- Research and development spending on Multikine was $11.26 million for the six months; LEAPS spending was $0.22 million. LEAPS remains preclinical.
- CEL-SCI recorded a $172,552 deemed dividend for extending Series RR warrants held by company officers and a trust of which the CEO is a beneficiary. No warrant liabilities were outstanding at March 31, 2023.
- The company’s disclosure controls and procedures were concluded to be ineffective as of March 31, 2023 because of material weaknesses described in its prior Form 10-K. It reported no material change in internal control during the quarter.
- Financing, clinical and regulatory execution, continued losses, and the substantial-doubt going-concern conclusion are central risks. The company stated that it has no significant market-risk exposure.
Important Facts for Investors to Verify
- Whether Multikine’s subgroup survival findings support a viable regulatory strategy despite the overall Phase 3 trial missing its primary endpoint, and what regulators require next.
- Cash runway and planned spending, including costs excluded from the $0.8 million Phase 3 completion estimate, and whether additional financing can be secured.
- The impact of the San Tomas lease cash-threshold requirement and the timing and conditions for return of the $2.3 million deposit.
- Progress in addressing the material weaknesses underlying ineffective disclosure controls.
- Post-quarter offering proceeds, share-count changes, and potential dilution from outstanding options, warrants, and restricted stock.