Celcuity Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing is an annual report; it does not provide separate fourth-quarter financial results. Celcuity is a development-stage oncology diagnostics company developing CELsignia tests that measure signaling activity in living tumor cells to help match patients with targeted therapies.
Financial and operating performance
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $6.27 million | $6.33 million |
| General and administrative expense | $1.54 million | $1.61 million |
| Total operating expenses / operating loss | $7.81 million / ($7.81 million) | $7.93 million / ($7.93 million) |
| Net loss | ($7.36 million) | ($7.48 million) |
| Basic and diluted loss per share | ($0.72) | ($0.74) |
| Cash used in operating activities | $6.00 million | $6.08 million |
With no revenue, gross profit and operating margins are not meaningful. Cash and cash equivalents were $18.74 million at year-end, compared with $15.94 million a year earlier; short-term investments were zero, versus $8.95 million in 2018. Total assets were $20.28 million, total liabilities $0.98 million, and stockholders’ equity $19.30 million. Liabilities include operating and finance lease obligations; the filing reports no material conventional borrowing. Net cash provided by investing activities was $8.53 million, primarily from investment maturities/sales, less $0.38 million of property and equipment purchases. Financing activities provided $0.26 million.
Changes versus 2018
- Net loss narrowed by approximately $0.12 million, or 2%; total operating expenses declined 2%.
- R&D expense decreased 1%. Lower compensation and stock-based compensation were largely offset by increased clinical validation, laboratory, patent, and business-development spending.
- Cash rose by $2.79 million, while cash plus short-term investments declined as the company held no investments at year-end 2019.
- Celcuity completed development of its PI3K-signaling breast cancer test in Q4 2019. Management intends to combine it with HER2 and c-Met testing in a multi-pathway test.
- A material weakness in internal control over financial reporting identified in 2018 was reported as remediated; management concluded controls were effective at December 31, 2019. The auditor did not attest to internal-control effectiveness.
Outlook, developments, and risks
- Management stated that available cash was expected to fund operations and obligations until the fourth quarter of 2021, based on its current business plan. It expects R&D, clinical-trial, general and administrative, and future sales and marketing expenses to increase; further capital may be needed and may not be available on acceptable terms.
- Celcuity had no revenue and had incurred losses since inception. Future revenue depends principally on pharmaceutical partnerships, clinical-trial testing and milestone payments, and eventual test commercialization; royalties are only a potential source.
- Two prospective trials use the CELsignia HER2 Signaling Function Test: the Genentech/NSABP FACT 1 trial and the Puma/West Cancer Center FACT 2 trial. FACT 1 enrollment was below NSABP’s initial expectations. Interim results were then expected in early-to-mid 2021, with final results about nine months later; FACT 2 interim results were expected in mid-2021, with final results 9–12 months later.
- A separate 35-patient metastatic colorectal cancer study was expected to finish in late 2021; Celcuity said it would not be paid for that testing. It also disclosed that additional clinical-trial payments could be due under existing agreements, including an estimated maximum of approximately $2.69 million under one agreement.
- Key risks include unsuccessful or delayed trials, limited physician adoption, uncertain reimbursement and pricing, inability to secure partners or additional financing, evolving FDA oversight of laboratory-developed tests, reliance on a single Minneapolis laboratory, and intellectual-property and regulatory-compliance risks. The company reported no legal proceedings expected to have a material adverse effect and no off-balance-sheet arrangements.
Important facts for investors to verify
- Cash runway assumptions behind management’s fourth-quarter 2021 estimate, including anticipated trial and commercialization spending.
- FACT 1 enrollment progress and updated timing, plus enrollment, safety, and results for FACT 2.
- Whether clinical evidence supports the tests’ proposed utility and whether pharmaceutical partners pursue companion-diagnostic programs.
- Reimbursement, achievable test pricing, and the timing and terms of any commercial partnerships or additional financing.
- Regulatory requirements for the tests and the company’s ability to maintain laboratory certification, operational continuity, and effective financial controls.