Celcuity Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 7, 2020. Celcuity is a clinical-stage biotechnology company developing CELsignia companion diagnostic tests. It has not generated revenue.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.85 million | $1.59 million; up 16% |
| General and administrative expense | $463,399 | $383,545; up 21% |
| Total operating expenses | $2.31 million | $1.97 million; up 17% |
| Net loss | $2.25 million | $1.85 million; loss increased 22% |
| Basic and diluted loss per share | $0.22 | $0.18 |
| Net cash used in operating activities | $1.83 million | $1.59 million |
| Cash and cash equivalents, March 31 | $16.85 million | $18.74 million at December 31, 2019 |
| Total assets / total liabilities, March 31 | $18.39 million / $877,606 | $20.28 million / $983,229 at December 31, 2019 |
There is no revenue or gross profit, so operating margins are not meaningful. The company reported $63,851 of interest income, down 50% year over year, primarily due to lower market rates and a lower cash balance. Cash declined by $1.88 million during the quarter. Lease obligations were $195,040 in total: $176,600 operating and $18,440 finance; the filing reports no other material borrowing debt. Current assets were $17.44 million versus current liabilities of $864,946.
Management believes cash on hand is sufficient to fund ordinary-course needs for at least the next 12 months. The company may seek additional capital; availability and terms are uncertain, and equity or convertible-debt financing could dilute shareholders or carry senior rights.
Business developments, outlook, and risks
- Celcuity’s CELsignia HSF Test is intended to identify HER2-negative breast cancer subtypes with abnormal HER2 signaling. Two collaborative interventional trials, FACT-1 and FACT-2, are evaluating HER2-targeted therapies in test-selected patients.
- Management reported progress on a CELsignia test for RAS-driven cancers and expected to complete development for breast and ovarian cancer by the end of 2020. It planned to incorporate this into a next-generation Multi-Pathway test. The company also planned to report ovarian cancer preclinical results at an AACR meeting expected in late June 2020 and pursue pharmaceutical collaborations.
- COVID-19 was delaying enrollment in ongoing trials. Interim FACT-1 and FACT-2 results were expected no earlier than the second half of 2021, with final results approximately nine months later. COVID-related restrictions also reduced tumor-tissue availability and could slow research, collaborations, and other milestones. The extent and duration of the impact remained uncertain.
- Management expects R&D and G&A spending to increase as it develops tests, conducts research and trials, and expands operations; sales and marketing costs are also expected to rise as commercialization approaches. No financial revenue or earnings guidance was provided.
- Key risks include clinical and regulatory uncertainty, dependence on successful development and adoption of CELsignia tests, the need for additional financing, competition, reimbursement and market-acceptance uncertainty, and COVID-related disruption. Clinical-study milestone payments include up to approximately $2.69 million under one study agreement and approximately $112,000 under another.
Most important facts for investors to verify
- Whether COVID-related trial enrollment delays and the revised FACT-1/FACT-2 timelines materialized.
- Whether the RAS test was completed on schedule and whether ovarian cancer results and planned partnerships advanced.
- How quickly cash is being consumed relative to the stated 12-month runway, and whether additional financing becomes necessary.
- Whether CELsignia tests demonstrate clinical utility, obtain regulatory support where required, and achieve pharmaceutical partnerships and commercial adoption.
- The timing and amount of milestone-based clinical research commitments as studies progress.