CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2021; comparative periods ended June 30, 2020. The filing was signed August 13, 2021. CEL-SCI is a clinical-stage biotechnology company developing Multikine and preclinical LEAPS candidates. It reported no product revenue.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Nine months ended June 30, 2021 |
|---|---|---|
| Grant income | $0 | $0 |
| Research and development expense | $7.18 million | $17.82 million |
| General and administrative expense | $3.27 million | $9.90 million |
| Operating loss | $10.46 million | $27.72 million |
| Net loss available to common shareholders | $9.20 million | $28.51 million |
| Loss per common share, basic | $0.22 | $0.71 |
| Cash used in operating activities | Not separately presented | $13.98 million |
Comparisons: For the quarter, operating expenses increased 46% and operating loss increased from $6.97 million; net loss available to common shareholders improved from $10.28 million. For the nine months, operating expenses rose from $21.07 million and net loss available to common shareholders increased from $24.90 million. R&D spending rose principally with Phase 3 trial costs and employee stock compensation. Grant income of $0.53 million in the prior-year nine-month period was from an SBIR grant not received in 2021. No meaningful operating margin is presented because the company had no revenue.
At June 30, cash and cash equivalents were $35.96 million and U.S. Treasury bills were $11.15 million; combined, approximately $47.11 million. Working capital was approximately $44.57 million ($49.73 million current assets less $5.16 million current liabilities). Total assets were $79.64 million, total liabilities $19.85 million, and stockholders’ equity $59.79 million. Liabilities included approximately $14.14 million of finance lease obligations and $1.66 million of operating lease obligations; the filing does not present a conventional borrowing balance as a separate debt line.
Cash increased $20.45 million during the nine months, after $11.15 million of net T-bill purchases. Financing provided $54.21 million, including $47.36 million from common-stock issuance and $6.20 million from warrant and option exercises. Investing used $19.77 million, including $8.63 million for property and equipment. Common shares outstanding increased from 38.73 million at September 30, 2020 to 42.96 million at June 30, 2021; 43.03 million were outstanding August 9, 2021.
Business developments, outlook and risks
- On June 28, 2021, the company reported five-year overall survival of 62.7% for the Multikine arm receiving surgery and radiation versus 48.6% for the corresponding control group (14.1 percentage-point difference; p=0.0236; HR=0.68; n=380). The filing says the combined study treatment arms did not meet the primary endpoint of a 10% overall-survival improvement, because the benefit was not seen when chemotherapy was added. The company said it intends to seek FDA approval for the surgery-and-radiation patient population.
- Multikine remains investigational: it has not been approved or licensed by the FDA or another regulatory agency, and its safety and efficacy have not been established for any use. Regulatory approval and commercial revenue are uncertain.
- Management estimated approximately $4.3 million of additional costs for the remainder of the Phase 3 trial and filing of the clinical study report; that estimate excludes other related costs, including drug manufacturing, and could rise. Ergomed had provided approximately $11.6 million of credits under an agreement to contribute up to $12 million in discounted clinical services in exchange for potential milestone and royalty payments.
- The company reported recurring operating losses and substantial doubt about its ability to continue as a going concern. It expects to depend on further financing, including equity, warrant exercises, partnerships, or debt; availability and terms are not assured. It reported no product revenue and does not anticipate significant revenue before regulatory approvals or licensing arrangements.
- Manufacturing-facility upgrades were estimated at approximately $10.6 million, with about $10.5 million incurred by June 30. The landlord agreed to finance the final $2.4 million through increased lease payments; approximately $1.6 million had been received by quarter-end.
- The company corrected lease discount-rate errors through a non-cash out-of-period adjustment. It said the September 2020 effect was not material; the correction increased right-of-use assets and lease liabilities by approximately $0.5 million at June 30 and increased 2021 expense by approximately $27,000.
- Disclosure controls and procedures were concluded to be ineffective as of June 30, 2021. Management described added lease-accounting controls and use of an outside valuation specialist.
- Warrant extensions involving the CEO-beneficiary de Clara Trust and certain officers were related-party transactions. The company recorded approximately $351,000 of warrant-modification deemed dividends for the nine months, including approximately $265,000 in the quarter.
- COVID-19’s full effect on the company’s finances, liquidity, operations, suppliers, and workforce remained uncertain. Management said it was monitoring the impact.
Key facts for investors to verify
- Whether the FDA accepts the company’s interpretation of the subgroup results and what evidence or filings will be required, given that the combined study arms missed the primary endpoint.
- Timing, cost, and regulatory pathway for any Multikine submission, including the remaining trial/report costs and excluded manufacturing expenses.
- Cash consumption and financing needs relative to the company’s approximately $47.11 million in cash and Treasury bills, and the potential dilution from further equity issuance, warrants, options, and stock compensation.
- Progress, total cost, and commercial readiness of the manufacturing-facility upgrade, along with the resulting lease-payment obligations.
- Remediation and effectiveness of disclosure controls after the identified lease-accounting errors, and monitoring of related-party warrant transactions.