Cingulate Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Cingulate is a pre-revenue biopharmaceutical company developing drug-delivery products, initially focused on ADHD. Its lead candidate, CTx-1301, is in Phase 3 development.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.13 million | $2.76 million; down 22.9% |
| General and administrative expense | $1.72 million | $2.25 million; down 23.4% |
| Operating loss | $3.85 million | $5.01 million |
| Net loss | $4.00 million | $5.00 million |
| Net loss per share, basic and diluted | $0.35 | $0.44 |
| Net cash used in operating activities | $3.58 million | $3.86 million |
| Cash and cash equivalents at period end | $1.74 million | $12.61 million at March 31, 2022 |
There is no product revenue, gross profit, or meaningful operating margin to report. R&D expense fell primarily because Q1 2022 included CTx-1301 clinical-supply manufacturing; lower manufacturing costs in Q1 2023 partly offset higher clinical and regulatory costs. G&A declined mainly with lower legal/professional fees and insurance costs. Interest and other expense was $155,000, primarily reflecting interest on the related-party note.
At March 31, current assets were $3.75 million and current liabilities were $6.66 million, including a $5.00 million note payable. Total liabilities were $7.08 million; stockholders’ equity was only $81,614. Accumulated deficit was $73.41 million. The filing reports no conventional funded debt beyond the related-party note and lease liabilities; the note carried 15% annual interest.
Material changes and financing
- Cash fell by $3.62 million during the quarter, principally reflecting operating cash use. Net cash used in investing activities was $37,000 and financing activities used $4,000.
- After quarter-end, on May 9, 2023, the company received an additional $3.00 million from Werth Family Investment Associates LLC (WFIA), a related party, amending the note’s principal from $5.00 million to $8.00 million. The unsecured note bears 15% interest and may be callable following notice under specified quarterly terms.
- The company entered a $4.97 million at-the-market (ATM) offering arrangement in January 2023. It reported limited subsequent ATM sales by the filing date. In April, it also entered a 36-month agreement allowing Lincoln Park to purchase up to $12.00 million of stock, subject to conditions; the company issued 368,023 commitment shares and reported sales of 10,000 shares for net proceeds of $10,430.
- Management estimated that approximately $25 million of additional capital, beyond the 2023 WFIA financing, would be needed to reach the planned CTx-1301 NDA filing. Management said cash, including the subsequent $3 million financing, was expected to fund operations into the third quarter of 2023.
Outlook, development and risks
- CTx-1301: The first Phase 3 adult dose-optimization cohort was completed and the second was nearing completion; results were expected in Q3 2023. A fixed-dose pediatric/adolescent study was expected to start mid-2023, with results expected Q1 2024. A pediatric/adolescent dose-optimization classroom study was planned for Q3 2023, with results expected Q1 2024. Subject to positive trial results, the company expected to file an NDA in mid-2024.
- CTx-1302: The company planned a Phase 1/2 bioavailability study in mid-2024, followed, if successful, by pivotal Phase 3 studies in late 2024 or early 2025.
- CTx-2103: Formulation work showed the intended triple-release profile for buspirone. The company expected to request an FDA Pre-IND meeting in Q3 2023 and potentially file an IND in Q4 2023.
- The company reported successful transfer of CTx-1301 manufacturing processes to Societal CDMO in April 2023 and a March 2023 commercialization-services agreement with Indegene, contingent on potential FDA approval.
- Management expects substantial continuing losses and increasing expenses. The filing states that additional funding is required and that failure to obtain it could force delays, scaling back, or discontinuation of development. The company concluded that substantial doubt exists about its ability to continue as a going concern within one year after issuance of the financial statements. No assurance was given that financing would be available on acceptable terms.
- Other risks include clinical-trial execution and outcomes, FDA review and approval, manufacturing scale-up, commercialization, dilution from equity issuance, and the terms or availability of further debt or other financing. The filing reported no material change to critical accounting policies and no material change in internal control over financial reporting; disclosure controls were assessed as effective.
Most important facts for investors to verify
- Whether the company can secure enough capital beyond the reported near-term runway and meet its stated additional funding needs.
- CTx-1301 trial timing and results, and whether the planned mid-2024 NDA schedule remains achievable.
- The full terms and practical availability of the WFIA, ATM, and Lincoln Park financing arrangements, including dilution and repayment or demand provisions.
- Whether CTx-1301 manufacturing and commercialization preparations remain on schedule and within available resources.
- Developments affecting the going-concern uncertainty, including cash burn, financing access, and clinical or regulatory contingencies.