Celcuity Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Celcuity is a development-stage cellular analysis and diagnostics company developing its CELx platform and cancer diagnostic tests. It had generated no revenue and remained unprofitable.
Financial performance and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.60 million | $1.36 million | $4.69 million | $3.58 million |
| General and administrative expense | $0.38 million | $0.16 million | $1.29 million | $0.55 million |
| Net loss | $1.87 million | $1.76 million | $5.66 million | $4.53 million |
| Net loss per share, basic and diluted | $0.18 | $0.26 | $0.56 | $0.69 |
- Nine-month operating cash use was $4.56 million, compared with $3.84 million in 2017. Operating expenses rose 45% for the period, while interest income increased to $326,000 from $53,000.
- Investing activities provided $5.43 million, primarily reflecting net investment maturities and purchases, partly offset by $482,000 of property and equipment purchases. Financing provided $247,000, mainly from warrant exercises and employee stock purchases.
- At September 30, cash and cash equivalents were $3.81 million and investments were $22.87 million, totaling approximately $26.68 million. Current assets were $23.16 million; current liabilities were $0.96 million. Total liabilities were $0.98 million, including $27,000 of capital lease obligations; the filing reports no material debt outstanding.
- No meaningful revenue or profit margins are available because the company had no revenue and reported operating losses. No income tax benefit was recorded because of net losses and a full valuation allowance.
Material changes versus comparable periods
- Q3 operating expenses increased 29% and net loss increased 6% year over year. For the first nine months, operating expenses increased 45% and net loss increased 25%.
- Management attributed R&D expense growth to compensation, clinical validation studies, laboratory supplies, and platform development. Higher G&A reflected compensation, public-company professional fees, and directors’ and officers’ insurance.
- Loss per share improved despite higher net loss, with weighted-average shares increasing substantially following the 2017 IPO and related capital transactions.
- Cash and investments totaled approximately $26.68 million, down from approximately $31.40 million at December 31, 2017. Investment sales and maturities drove 2018 investing cash inflows; the prior-year period included IPO and convertible-note financing.
Business outlook, risks and notable items
- Management stated that existing cash was expected to fund operations and obligations for at least the next 24 months, based on its current business plan. It expected R&D and G&A spending to rise, with additional sales and marketing costs as commercialization approaches; additional capital may be needed and may not be available on acceptable terms.
- The CELx HSF Test is described as analytically validated and commercially ready. Celcuity is developing a combined Multi-Pathway test and other tests for potential cancer sub-types. These are company statements about development and potential, not established commercial outcomes.
- Collaborations included a prospective trial with Genentech and NSABP, with interim results expected in mid-2019; a separate 35-patient colorectal cancer study was expected to finish in late 2020. In October 2018, the company announced a Phase II trial agreement with Puma Biotechnology and West Cancer Center; enrollment was expected to begin in early 2019. These timelines are forward-looking.
- Key risks include clinical and regulatory uncertainty, ability to establish pharmaceutical partnerships, physician and payer acceptance and reimbursement, competition, intellectual-property matters, and the need for further financing. The filing reported no material legal proceedings and no off-balance-sheet arrangements.
- Commitments included operating lease payments of $478,096 and a clinical research agreement with up to approximately $2.04 million of additional milestone payments. A separate October 2018 study agreement carried approximately $32,000 payable upon execution and approximately $150,000 upon milestones.
- Disclosure controls were assessed as effective; management reported no material change in internal control over financial reporting during the nine-month period.
Important facts for investors to verify
- Whether the stated 24-month cash runway remains valid as spending and clinical-trial commitments evolve.
- Trial enrollment, timing, and results for the CELx HSF and Multi-Pathway programs, and the status of each pharmaceutical collaboration.
- Progress toward revenue, commercialization, reimbursement, and regulatory requirements for CELx tests.
- Future cash burn, financing needs, and any dilution or restrictions from potential capital raises.
- The actual amount and timing of clinical-study milestone payments and other commitments.