CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Quarter and nine months ended June 30, 2018; filed August 14, 2018. CEL-SCI is a clinical-stage biotechnology company developing Multikine and preclinical LEAPS. It had no product sales revenue; operations depended on grants and external financing.
Financial performance and condition
| Metric | Three months ended June 30, 2018 | Nine months ended June 30, 2018 | Comparable 2017 period |
|---|---|---|---|
| Grant and other income | $104,170 | $350,029 | $17,389 and $51,822, respectively |
| Research and development | $2.43 million | $7.71 million | $3.18 million and $13.31 million |
| General and administrative | $1.75 million | $5.82 million | $1.60 million and $4.35 million |
| Net loss | $6.01 million | $16.91 million | $4.46 million and $9.37 million |
| Basic loss per share | $0.36 | $1.17 | $0.53 and $1.29 |
- Nine-month operating loss was $13.19 million, compared with $17.60 million in 2017. Lower R&D costs were more than offset in net loss by lower derivative gains and higher interest expense.
- Cash used in operations was $9.14 million for the nine months, versus $10.35 million a year earlier. Financing provided $9.13 million, including about $7.0 million from stock and warrant offerings and $2.1 million from warrant exercises. Cash ended at $2.35 million, little changed from September 30, 2017.
- At June 30, current assets were $3.44 million and current liabilities $8.38 million, implying negative working capital of about $4.94 million. Total liabilities were $22.95 million; the balance sheet showed no notes payable, but included a $13.34 million lease liability and $1.08 million of derivative liabilities. Stockholders’ deficit was $1.25 million.
- Common shares outstanding increased from 11.90 million at September 30, 2017 to 19.57 million at June 30, 2018. The filing reports 23.54 million shares outstanding at August 1, 2018.
Changes, outlook, and material matters
- Nine-month R&D expense declined $5.59 million year over year, principally because the Multikine Phase 3 study was fully enrolled and enrollment-stage costs had fallen. G&A increased $1.48 million, largely due to higher equity compensation and other administrative costs.
- Interest expense rose to $3.91 million for the nine months from $1.44 million, reflecting debt-discount amortization, accrued interest, a $291,000 warrant inducement expense and Ergomed-related financing costs. The nine-month derivative gain was $188,000, versus $9.67 million in 2017; fair-value changes are affected by CEL-SCI’s share price.
- The Multikine Phase 3 trial had enrolled and completed treatment for 928 patients. The primary endpoint is a 10% overall-survival improvement between the two main comparator groups; the endpoint assessment is triggered at 298 deaths in those groups. The company estimated $9.4 million of additional direct trial costs, excluding other related costs such as drug manufacturing, and cautioned that actual costs could be higher.
- Management said further capital is required to continue research and fund the trial, and planned to seek partnerships, debt and/or equity financing. It was pursuing cost reductions and other funding sources, but gave no assurance financing would be available on acceptable terms or in time. The filing states substantial doubt exists about the company’s ability to continue as a going concern due to recurring losses, negative working capital, stockholders’ deficit and future funding needs.
- In June, an arbitrator awarded CEL-SCI $2.92 million in its dispute with former CRO inVentiv, but the award proceeds are payable to the litigation funder under the funding agreement. CEL-SCI also expensed about $471,000 of a prepaid asset that would no longer be recovered.
- After quarter-end, CEL-SCI raised approximately $5 million gross in a July registered direct offering and concurrent warrant placement. The NYSE American notified the company that it was below continued-listing standards based on its March 31, 2018 filing; CEL-SCI submitted a compliance plan, with a stated target date of January 14, 2019 to regain compliance.
- Multikine had not been approved by the FDA or another regulator, and its safety and efficacy had not been established. The company reported disclosure controls were effective as of June 30, 2018 and described changes to controls addressing previously identified material weaknesses.
Most important facts for investors to verify
- Cash runway, near-term financing needs and whether additional funding can be secured without substantial dilution or unfavorable terms.
- Actual remaining Phase 3 costs, death accumulation and timing of the 298-death endpoint analysis.
- NYSE American compliance-plan status and continued listing eligibility.
- Terms and dilution potential of outstanding warrants, including the July 2018 offering warrants.
- How the inVentiv award is applied under the litigation-funding agreement and the status of any remaining CRO payables.