CNS Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 15, 2023. CNS is a clinical-stage pharmaceutical company developing cancer drug candidates, with Berubicin as its lead program. It reported no revenue for the quarter.
Financial performance and position
- Operating expenses: $4.93 million, up from $3.15 million in Q1 2022. Research and development was $3.57 million versus $1.89 million; general and administrative expense was $1.36 million versus $1.26 million.
- Net loss: $4.93 million, compared with $3.15 million. Basic and diluted loss per share was $2.59 versus $2.44; weighted-average shares were 1.91 million versus 1.29 million.
- Cash flow: $4.82 million used in operating activities, compared with $3.08 million in Q1 2022. Financing activities used $120,000; the prior-year period provided $10.51 million, mainly from stock sales.
- Cash and liquidity: Cash and cash equivalents were $5.11 million at March 31, down from $10.06 million at December 31, 2022. Working capital was approximately $3.05 million. Management said existing cash would fund planned operations into, but not beyond, Q3 2023.
- Liabilities and equity: Total liabilities were $3.92 million, including $289,000 of short-term notes payable. Total assets were $7.41 million and stockholders’ equity was $3.49 million. The filing provides no meaningful operating margin because the company had no revenue.
Changes and notable items
- R&D expense rose approximately 89%, primarily due to the timing and increased level of CRO costs for the Berubicin Phase II trial. Management expected trial-related R&D costs to continue and increase as the trial progresses.
- G&A expense increased approximately 8%; management expected it to remain around the current level for the rest of 2023.
- During the quarter, 609,000 warrants were exercised for only $609 in proceeds. Common shares outstanding rose to 2,226,325 at March 31, from 1,617,325 at year-end. The filing reported 4,143,339 shares outstanding as of May 15.
- On March 29, the board approved $550,750 in cash bonuses to officers and granted 33,488 options during the quarter.
- After quarter-end, investors exercised 1,016,000 pre-funded warrants and 238,958 investor warrants, the latter generating $724,043 net proceeds. The company also sold 659,677 shares through its at-the-market arrangement on April 20 for $1.97 million net proceeds.
Outlook, risks and contingencies
- Funding and going concern: Management stated cash would not fund operations beyond the near term, and the filing says substantial doubt exists about the company’s ability to continue as a going concern. CNS estimated it needed an additional $15.5–$19.5 million to complete the Berubicin Phase II trial, approximately $5 million for near-term WP1244/WP1874 preclinical work, and additional working capital. Further financing is not assured; absent funding, it may need to extend payables, reduce overhead or scale back operations.
- Clinical program: The Berubicin Phase II trial is planned to enroll approximately 243 patients, randomized 2:1 against Lomustine. The company anticipated an interim futility analysis and possible data release in Q3 2023. Trial timing, costs and results remain uncertain; the study’s primary endpoint is overall survival.
- Development and commercial risks: CNS depends on third-party manufacturers and has no sales organization. Berubicin’s patents licensed from HPI expired in March 2020; the company identifies orphan-drug designation as its primary intellectual-property protection. Approval, market acceptance, financing, trial execution and third-party performance remain significant risks.
- Controls and listing: Management concluded disclosure controls were ineffective due to material weaknesses involving segregation of duties and formal control documentation. The company reported it had regained Nasdaq’s minimum-bid-price compliance in December 2022 but cannot guarantee continued compliance.
- Other: No legal proceedings were pending, and the company reported no material off-balance-sheet arrangements. Cash exceeding FDIC insurance limits was approximately $4.86 million.
Important facts for investors to verify
- Available cash, subsequent financing proceeds and the company’s ability to raise enough capital to fund operations and planned clinical work.
- Actual Berubicin trial enrollment, timing and results of the anticipated interim analysis, and any changes to trial costs or design.
- Share count and potential dilution, including post-quarter warrant exercises, at-the-market share sales and outstanding warrants and options.
- Progress in remediating internal-control material weaknesses and maintaining Nasdaq listing compliance.
- Material changes to the company’s going-concern assessment, intellectual-property position, licensing obligations or related-party arrangements.