U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[mark one]
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 2020
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to ______________
Commission File Number 1-36598
CELLECTAR BIOSCIENCES,
INC.
( Exact name of registrant as specified in its charter
)
|
DELAWARE |
04-3321804 |
( State or other jurisdiction of
incorporation or organization ) |
( IRS Employer
Identification No. )
|
100 Campus Drive
Florham Park, New Jersey 07932
( Address of principal executive offices, including zip code
)
(608) 441-8120
( Registrant’s telephone number, including area code )
( Former name, former address and former fiscal year, if changed
since last report )
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each
class |
|
Trading Symbol(s) |
|
Name of each exchange
on which registered |
|
Common stock, par value $0.00001
Warrant to purchase common stock, expiring
April 20, 2021
|
|
CLRB
CLRBZ
|
|
NASDAQ Capital Market
NASDAQ Capital Market
|
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes x No
¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated
filer ¨ |
Accelerated
filer ¨ |
Non-accelerated
filer x |
Smaller reporting
company x |
Emerging growth
company ¨ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Number of shares outstanding of the issuer’s common stock as of the
latest practicable date: 26,813,593 shares of common stock,
$0.00001 par value per share, as of November 4, 2020.
CELLECTAR BIOSCIENCES, INC.
FORM 10-Q INDEX
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q of Cellectar Biosciences, Inc.
(the “Company”, “Cellectar”, “we”, “us”, “our”) contains
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to as
the Exchange Act. Examples of our forward-looking statements
include:
| |
· |
our
current views with respect to our business strategy, business plan
and research and development activities; |
| |
· |
the
future impacts of the COVID-19 pandemic on our business, employees,
operating results, ability to obtain additional funding, product
development programs, research and development programs, suppliers
and third-party manufacturers; |
| |
· |
the
progress of our product development programs, including clinical
testing and the timing of commencement and results
thereof; |
| |
· |
our
projected operating results, including research and development
expenses; |
| |
· |
our
ability to continue development plans for CLR 131, CLR 1800 series,
CLR 1900 series, CLR 2000 series, CLR 2100 series, CLR 2200 series
and CLR 12120; |
| |
· |
our
ability to continue development plans for our Phospholipid Drug
Conjugates (PDC)™; |
| |
· |
our ability to maintain orphan
drug designation in the U.S. for CLR 131 as a therapeutic for the
treatment of multiple myeloma, neuroblastoma, osteosarcoma,
rhabdomyosarcoma, Ewing’s sarcoma and lymphoplasmacytic lymphoma,
and the expected benefits of orphan drug status; |
| |
· |
any disruptions at our sole
supplier of CLR 131; |
| |
· |
our ability to pursue strategic
alternatives; |
| |
· |
our ability to advance our
technologies into product candidates; |
| |
· |
our enhancement and consumption
of current resources along with ability to obtain additional
funding; |
| |
· |
our current view regarding
general economic and market conditions, including our competitive
strengths; |
| |
· |
uncertainty and economic
instability resulting from conflicts, military actions, terrorist
attacks, natural disasters, public health crises, including the
occurrence of a contagious disease or illness, including the
COVID-19 pandemic, cyber-attacks and general
instability; |
| |
· |
assumptions underlying any of the
foregoing; and |
| |
· |
any other statements that address
events or developments that we intend or believe will or may occur
in the future. |
In some cases, you can identify forward-looking statements by
terminology such as “expects”, “anticipates”, “intends”,
“estimates”, “plans”, “believes”, “seeks”, “may”, “should”, “could”
or the negative of such terms or other similar expressions.
Accordingly, these statements involve estimates, assumptions and
uncertainties that could cause actual results to differ materially
from those expressed in them. Forward-looking statements also
involve risks and uncertainties, many of which are beyond our
control. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout this
report.
You should read this report completely and with the understanding
that our actual future results may be materially different from
what we expect. You should assume that the information appearing in
this report is accurate as of the date hereof only. Because the
risk factors referred to herein could cause actual results or
outcomes to differ materially from those expressed in any
forward-looking statements made by us or on our behalf, you should
not place undue reliance on any forward-looking statements.
Further, any forward-looking statement speaks only as of the date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for us to predict which factors will
arise. In addition, we cannot assess the impact of each factor on
our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statements. We qualify all of the
information presented in this report, and particularly our
forward-looking statements, by these cautionary statements.
PART I. FINANCIAL
INFORMATION
| Item 1. |
Financial Statements |
CELLECTAR BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
|
September 30,
2020
(Unaudited)
|
|
|
December 31,
2019 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
18,841,944 |
|
|
$ |
10,614,722 |
|
|
Prepaid expenses and other current assets |
|
|
960,906 |
|
|
|
770,951 |
|
| Total
current assets |
|
|
19,802,850 |
|
|
|
11,385,673 |
|
| Fixed assets,
net |
|
|
374,697 |
|
|
|
435,083 |
|
| Right-of-use asset,
net |
|
|
299,982 |
|
|
|
348,841 |
|
| Long-term assets |
|
|
219,121 |
|
|
|
75,000 |
|
|
Other assets |
|
|
— |
|
|
|
6,214 |
|
| TOTAL
ASSETS |
|
$ |
20,696,650 |
|
|
$ |
12,250,811 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
3,839,318 |
|
|
$ |
2,663,873 |
|
|
Lease liability |
|
|
116,257 |
|
|
|
105,885 |
|
|
Total current liabilities |
|
|
3,955,575 |
|
|
|
2,769,758 |
|
| LONG-TERM
LIABILITIES: |
|
|
|
|
|
|
|
|
|
Lease liability |
|
|
333,375 |
|
|
|
421,644 |
|
|
Loan payable |
|
|
184,000 |
|
|
|
— |
|
|
Total long-term liabilities |
|
|
517,375 |
|
|
|
421,644 |
|
|
TOTAL LIABILITIES |
|
|
4,472,950 |
|
|
|
3,191,402 |
|
|
COMMITMENTS AND CONTINGENCIES (Note 7) |
|
|
|
|
|
|
|
|
| STOCKHOLDERS’
EQUITY: |
|
|
|
|
|
|
|
|
Preferred stock, $0.00001 par value; 7,000 shares authorized;
Series C preferred stock: 215 issued and outstanding as of
September 30, 2020 and December 31, 2019 |
|
|
1,148,204 |
|
|
|
1,148,204 |
|
|
Common stock, $0.00001 par value; 80,000,000 shares authorized;
26,813,593 and 9,386,689 shares issued and outstanding as of
September 30, 2020 and December 31, 2019, respectively |
|
|
268 |
|
|
|
94 |
|
| Additional paid-in
capital |
|
|
138,235,579 |
|
|
|
119,592,366 |
|
|
Accumulated deficit |
|
|
(123,160,351 |
) |
|
|
(111,681,255 |
) |
|
Total stockholders’ equity |
|
|
16,223,700 |
|
|
|
9,059,409 |
|
| TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
20,696,650 |
|
|
$ |
12,250,811 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CELLECTAR BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
| |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
2,683,944 |
|
|
$ |
2,703,831 |
|
|
$ |
7,765,673 |
|
|
$ |
6,821,775 |
|
|
General and administrative |
|
|
1,225,993 |
|
|
|
1,260,048 |
|
|
|
3,725,153 |
|
|
|
3,972,275 |
|
|
Total costs and expenses |
|
|
3,909,937 |
|
|
|
3,963,879 |
|
|
|
11,490,826 |
|
|
|
10,794,050 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(3,909,937 |
) |
|
|
(3,963,879 |
) |
|
|
(11,490,826 |
) |
|
|
(10,794,050 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on revaluation of derivative warrants |
|
|
— |
|
|
|
46,000 |
|
|
|
— |
|
|
|
43,000 |
|
|
Interest income, net |
|
|
374 |
|
|
|
14,072 |
|
|
|
11,730 |
|
|
|
38,041 |
|
|
Total other income |
|
|
374 |
|
|
|
60,072 |
|
|
|
11,730 |
|
|
|
81,041 |
|
|
NET LOSS |
|
$ |
(3,909,563 |
) |
|
$ |
(3,903,807 |
) |
|
$ |
(11,479,096 |
) |
|
$ |
(10,713,009 |
) |
|
BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER
COMMON SHARE |
|
$ |
(0.15 |
) |
|
$ |
(0.42 |
) |
|
$ |
(0.69 |
) |
|
$ |
(1.51 |
) |
|
SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS PER COMMON SHARE |
|
|
26,326,782 |
|
|
|
9,386,703 |
|
|
|
16,539,183 |
|
|
|
7,098,285 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CELLECTAR BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Equity |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Par Amount |
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2018 |
|
|
473 |
|
|
$ |
2,526,049 |
|
|
|
4,732,387 |
|
|
$ |
47 |
|
|
$ |
108,323,208 |
|
|
$ |
(97,588,343 |
) |
|
$ |
13,260,961 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
207,654 |
|
|
|
— |
|
|
|
207,654 |
|
| Vested
restricted stock |
|
|
— |
|
|
|
— |
|
|
|
9,334 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Retired
shares |
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Conversion of
preferred shares into common shares |
|
|
(138 |
) |
|
|
(736,987 |
) |
|
|
345,000 |
|
|
|
4 |
|
|
|
736,983 |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,621,641 |
) |
|
|
(3,621,641 |
) |
|
BALANCE AT MARCH 31, 2019 |
|
|
335 |
|
|
$ |
1,789,062 |
|
|
|
5,086,709 |
|
|
$ |
51 |
|
|
$ |
109,267,845 |
|
|
$ |
(101,209,984 |
) |
|
$ |
9,846,974 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and warrants, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
4,000,000 |
|
|
|
40 |
|
|
|
9,024,529 |
|
|
|
— |
|
|
|
9,024,569 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
301,471 |
|
|
|
— |
|
|
|
301,471 |
|
| Retired
shares |
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Conversion of
preferred shares into common shares |
|
|
(120 |
) |
|
|
(640,858 |
) |
|
|
300,000 |
|
|
|
3 |
|
|
|
640,855 |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,187,561 |
) |
|
|
(3,187,561 |
) |
|
BALANCE AT JUNE 30, 2019 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
9,386,703 |
|
|
$ |
94 |
|
|
$ |
119,234,700 |
|
|
$ |
(104,397,545 |
) |
|
$ |
15,985,453 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
149,774 |
|
|
|
— |
|
|
|
149,774 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,903,807 |
) |
|
|
(3,903,807 |
) |
|
BALANCE AT SEPTEMBER 30, 2019 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
9,386,703 |
|
|
$ |
94 |
|
|
$ |
119,384,474 |
|
|
$ |
(108,301,352 |
) |
|
$ |
12,231,420 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2019 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
9,386,689 |
|
|
$ |
94 |
|
|
$ |
119,592,366 |
|
|
$ |
(111,681,255 |
) |
|
$ |
9,059,409 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
144,146 |
|
|
|
— |
|
|
|
144,146 |
|
| Vested
restricted stock |
|
|
— |
|
|
|
— |
|
|
|
9,334 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Retired
shares |
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,957,608 |
) |
|
|
(3,957,608 |
) |
|
BALANCE AT MARCH 31, 2020 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
9,396,015 |
|
|
$ |
94 |
|
|
$ |
119,736,512 |
|
|
$ |
(115,638,863 |
) |
|
$ |
5,245,947 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and warrants, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
14,601,628 |
|
|
|
146 |
|
|
|
18,258,435 |
|
|
|
— |
|
|
|
18,258,581 |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
92,643 |
|
|
|
— |
|
|
|
92,643 |
|
|
Conversion of warrants into common shares |
|
|
— |
|
|
|
— |
|
|
|
1,474,740 |
|
|
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,611,925 |
) |
|
|
(3,611,925 |
) |
|
BALANCE AT JUNE 30, 2020 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
25,472,383 |
|
|
$ |
254 |
|
|
$ |
138,087,590 |
|
|
$ |
(119,250,788 |
) |
|
$ |
19,985,260 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
116,292 |
|
|
|
— |
|
|
|
116,292 |
|
|
Conversion of warrants into common shares |
|
|
— |
|
|
|
— |
|
|
|
1,341,210 |
|
|
|
14 |
|
|
|
31,697 |
|
|
|
— |
|
|
|
31,711 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,909,563 |
) |
|
|
(3,909,563 |
) |
|
BALANCE AT SEPTEMBER 30, 2020 |
|
|
215 |
|
|
$ |
1,148,204 |
|
|
|
26,813,593 |
|
|
$ |
268 |
|
|
$ |
138,235,579 |
|
|
$ |
(123,160,351 |
) |
|
$ |
16,223,700 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CELLECTAR BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
Nine Months Ended
September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(11,479,096 |
) |
|
$ |
(10,713,009 |
) |
|
Adjustments to reconcile net loss to cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
105,529 |
|
|
|
100,216 |
|
|
Stock-based compensation expense |
|
|
353,081 |
|
|
|
658,899 |
|
|
Noncash lease expense |
|
|
48,859 |
|
|
|
41,542 |
|
|
Gain on revaluation of derivative warrants |
|
|
— |
|
|
|
(43,000 |
) |
|
Changes in: |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
(189,955 |
) |
|
|
(331,451 |
) |
|
Other assets |
|
|
— |
|
|
|
— |
|
|
Lease liability |
|
|
(77,897 |
) |
|
|
(57,263 |
) |
|
Accounts payable and accrued liabilities |
|
|
1,175,445 |
|
|
|
1,331,523 |
|
|
Cash used in operating activities |
|
|
(10,064,034 |
) |
|
|
(9,012,543 |
) |
| CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of fixed assets |
|
|
(45,143 |
) |
|
|
(18,817 |
) |
|
Cash used in investing activities |
|
|
(45,143 |
) |
|
|
(18,817 |
) |
| CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
underwriting
issuance costs |
|
|
18,258,581 |
|
|
|
9,024,569 |
|
|
Deferred issuance costs |
|
|
(137,907 |
) |
|
|
— |
|
|
Proceeds from long-term obligations |
|
|
184,000 |
|
|
|
— |
|
|
Proceeds from issuance of warrants |
|
|
31,697 |
|
|
|
— |
|
|
Issuance of common stock in connection with exercise of
warrants |
|
|
28 |
|
|
|
— |
|
|
Payments on capital lease obligations |
|
|
— |
|
|
|
(2,213 |
) |
|
Cash provided by financing activities |
|
|
18,336,399 |
|
|
|
9,022,356 |
|
| NET INCREASE IN CASH
AND CASH EQUIVALENTS |
|
|
8,227,222 |
|
|
|
(9,004 |
) |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
10,614,722 |
|
|
|
13,310,616 |
|
| CASH AND
CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
18,841,944 |
|
|
$ |
13,301,612 |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
Cash paid for interest expense |
|
$ |
1,584 |
|
|
$ |
1,936 |
|
|
Obtaining a right-of-use asset in exchange for a lease
liability |
|
$ |
— |
|
|
$ |
405,000 |
|
|
Lease liability established through right-of-use asset |
|
$ |
— |
|
|
$ |
609,000 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CELLECTAR BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. NATURE OF BUSINESS, ORGANIZATION AND GOING CONCERN
Cellectar Biosciences, Inc. (the Company) is a late-stage clinical
biopharmaceutical company focused on the discovery, development and
commercialization of drugs for the treatment of cancer leveraging
our proprietary phospholipid drug conjugate™ (PDCs™) delivery
platform that are designed to specifically target cancer cells and
deliver improved efficacy and better safety as a result of fewer
off-target effects. The COVID-19 pandemic has created
uncertainties in the expected timelines for clinical stage
biopharmaceutical companies such as us, and because of such
uncertainties, it is difficult for us to accurately predict
expected outcomes at this time. The Company has not yet experienced
any significant impacts as a result of the pandemic and have
continued to enroll patients in our clinical studies. However,
COVID-19 may impact our future ability to recruit patients for
clinical studies, obtain adequate supply of CLR 131 and obtain
additional financing.
The accompanying financial statements have been prepared on a basis
that assumes that the Company will continue as a going concern and
that contemplates the continuity of operations, realization of
assets and the satisfaction of liabilities and commitments in the
normal course of business. The Company has incurred losses since
inception in devoting substantially all of its efforts toward
research and development and has an accumulated deficit of
approximately $123,160,351 at September 30, 2020. The Company has
devoted substantially all its efforts toward research and
development and has, during the nine months ended September 30,
2020, generated an operating loss of approximately $11,491,000. The
Company expects that it will continue to generate operating losses
for the foreseeable future.
The Company believes that it has sufficient liquidity to fund
operations for at least 12 months from the filing of these
financial statements, therefore, the accompanying financial
statements have been prepared on a basis that assumes the Company
will continue as a going concern and that contemplates the
continuity of operations, realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. The Company’s ability to execute its operating plan
beyond that time depends on its ability to obtain additional
funding via the sale of equity and/or debt securities, a strategic
transaction or otherwise. The Company plans to continue to actively
pursue financing alternatives as there can be no assurance that the
Company will obtain the necessary funding.
The accompanying Condensed Consolidated Balance Sheet as of
December 31, 2019 has been derived from audited financial
statements. The accompanying unaudited Condensed Consolidated
Balance Sheet as of September 30, 2020, the Condensed Consolidated
Statements of Operations, the Condensed Statements of Stockholders’
Equity for the three and nine months ended September 30, 2020 and
2019, the Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2020 and 2019 and the related
interim information contained within the notes to the Condensed
Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information and with
the instructions, rules and regulations of the Securities and
Exchange Commission (“SEC”) for interim financial information.
Accordingly, they do not include all the information and the notes
required by U.S. GAAP for complete financial statements. In the
opinion of management, the unaudited interim condensed consolidated
financial statements reflect all adjustments which are of a nature
necessary for the fair presentation of the Company’s consolidated
financial position at September 30, 2020 and consolidated results
of its operations, stockholders’ equity and cash flows for the nine
months ended September 30, 2020 and 2019. The results for the three
or nine months ended September 30, 2020 are not necessarily
indicative of future results.
These unaudited condensed consolidated financial statements should
be read in conjunction with the audited financial statements and
related notes thereto included in the Company’s Form 10-K for the
fiscal year ended December 31, 2019, which was filed with the SEC
on March 9, 2020.
Principles of Consolidation — The consolidated
financial statements include the accounts of the Company and the
accounts of its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Fixed Assets — Property and equipment are stated at
cost. Depreciation on property and equipment is provided using the
straight-line method over the estimated useful lives of the assets
(3 to 10 years). Because of the significant value of leasehold
improvements purchased, leasehold improvements are depreciated over
64 months (their estimated useful life), which represents the full
term of the lease. The Company’s only long-lived assets are
property and equipment. The Company periodically evaluates
long-lived assets for potential impairment. Whenever events or
circumstances change, an assessment is made as to whether there has
been impairment to the value of long-lived assets by determining
whether projected undiscounted cash flows generated by the
applicable asset exceed its net book value as of the assessment
date. There were no long-lived fixed asset impairment charges
recorded during the nine months ended September 30, 2020 or year
ended December 31, 2019.
Right-of-Use Asset and Lease
Liabilities — In February 2016, the Financial Accounting
Standard Board (“FASB”) issued Accounting Standard Update (“ASU”)
2016-02, Leases (ASC 842), which supersedes the existing guidance
for lease accounting, Leases (Topic 840). ASU 2016-02 required
lessees to recognize Right-Of-Use (“ROU”) Asset and Lease Liability
for virtually all of their leases (other than leases that meet the
definition of a short-term lease). On January 1, 2019, the Company
adopted FASB Accounting Standards Codification (“ASC”) Topic 842
using the modified retrospective method for all material leases
that existed at or commenced after January 1, 2019. ROU Assets are
amortized over their estimated useful life, which represents the
full term of the lease.
Stock-Based Compensation — The Company uses the
Black-Scholes option-pricing model to calculate the grant-date fair
value of stock option awards. The resulting compensation expense,
net of expected forfeitures, for awards that are not
performance-based is recognized on a straight-line basis over the
service period of the award, which for grants issued in 2020 and
2019 ranged from one year to three years for stock options. For
stock options with performance-based vesting provisions,
recognition of compensation expense, net of expected forfeitures,
commences if and when the achievement of the performance criteria
is deemed probable. The compensation expense, net of expected
forfeitures, for performance-based stock options is recognized over
the relevant performance period. Non-employee stock-based
compensation is accounted for in accordance with the guidance of
FASB ASC Topic 505, Equity. As such, the Company recognizes
expense based on the estimated fair value of options granted to
non-employees over their vesting period, which is generally the
period during which services are rendered and deemed completed by
such non-employees.
Research and Development — Research and development
costs are expensed as incurred. To the extent that such costs are
reimbursed by the federal government on a fixed price, best efforts
basis and the federal government is the sole customer for such
research and development, the funding is recognized as a reduction
of research and development expenses.
Income Taxes — Income taxes are accounted for using
the liability method of accounting. Under this method, deferred tax
assets and liabilities are determined based on temporary
differences between the financial statement basis and tax basis of
assets and liabilities and net operating loss and credit
carryforwards using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Valuation allowances are established when it is more likely
than not that some portion of the deferred tax assets will not be
realized. Management has provided a full valuation allowance
against the Company’s gross deferred tax asset. Tax positions taken
or expected to be taken in the course of preparing tax returns are
required to be evaluated to determine whether the tax positions are
“more likely than not” to be sustained by the applicable tax
authority. Tax positions deemed not to meet a more-likely-than-not
threshold would be recorded as tax expense in the current year.
There were no uncertain tax positions that require accrual to or
disclosure in the financial statements as of September 30, 2020 and
December 31, 2019.
Fair Value of Financial Instruments — The guidance
under FASB ASC Topic 825, Financial Instruments, requires
disclosure of the fair value of certain financial instruments.
Financial instruments in the accompanying financial statements
consist of cash equivalents, prepaid expenses and other assets,
accounts payable and long-term obligations. The carrying amount of
cash equivalents and accounts payable approximate their fair value
as a result of their short-term nature. The carrying value of
long-term obligations, including the current portion, approximates
fair value because the fixed interest rate approximates current
market rates of interest available in the market.
Derivative Instruments — The Company generally does
not use derivative instruments to hedge exposures to cash flow or
market risks; however, certain warrants to purchase common stock
that do not meet the requirements for classification as equity, in
accordance with the Derivatives and Hedging Topic of the FASB ASC,
are classified as liabilities. In such instances, net-cash
settlement is assumed for financial reporting purposes, even when
the terms of the underlying contracts do not provide for a net-cash
settlement. These warrants are considered derivative instruments
because the agreements contain a certain type of cash settlement
feature, contain “down-round” provisions whereby the number of
shares for which the warrants are exercisable, and/or the exercise
price of the warrants are subject to change in the event of certain
issuances of stock at prices below the then-effective exercise
price of the warrants. The number of shares issuable under such
warrants was 49,425 at June 30, 2019. The primary underlying risk
exposures pertaining to the warrants and their related fair value
is the change in fair value of the underlying common stock, the
market price of traded warrants, and estimated timing and
probability of future financings. Such financial instruments are
initially recorded at fair value with subsequent changes in fair
value recorded as a component of gain or loss on derivatives on the
consolidated statements of operations in each reporting period. If
these instruments subsequently meet the requirements for equity
classification, the Company reclassifies the fair value to equity.
At June 30, 2019, these warrants represented the only outstanding
derivative instruments issued or held by the Company and expired on
August 20, 2019.
Concentration of Credit Risk — Financial instruments
that subject the Company to credit risk consist of cash and
equivalents on deposit with financial institutions. The Company’s
excess cash as of September 30, 2020 and December 31, 2019 is on
deposit in interest-bearing transaction accounts with
well-established financial institutions. At times, such amounts may
exceed the FDIC insurance limits. As of September 30, 2020, and
December 31, 2019, uninsured cash balances totaled approximately
$18,600,000 and $10,100,000, respectively.
Leases — In February 2016, the FASB issued ASU
2016-02, Leases (ASC 842), which supersedes the existing guidance
for lease accounting, Leases (Topic 840). ASU 2016-02 required
lessees to recognize Right-Of-Use Asset and Lease Liability for
virtually all of their leases (other than leases that meet the
definition of a short-term lease). Lessor accounting remains
largely unchanged except for changes in the definition and
classification of leases. Because of the immaterial financial
impact, the Company will not apply ASC 842 to leases that
individually have total lease payments of less than $100,000 over
their life of service to the Company.
2. FAIR VALUE
In accordance with Fair Value Measurements and Disclosures Topic of
the FASB ASC 820, the Company groups its financial assets and
financial liabilities generally measured at fair value in three
levels, based on the markets in which the assets and liabilities
are traded and the reliability of the assumptions used to determine
fair value:
| |
· |
Level 1: Input prices quoted in an active market
for identical financial assets or liabilities. |
| |
· |
Level 2: Inputs other than prices quoted in Level
1, such as prices quoted for similar financial assets and
liabilities in active markets, prices for identical assets, and
liabilities in markets that are not active or other inputs that are
observable or can be corroborated by observable market
data. |
| |
· |
Level 3: Input prices quoted that are significant
to the fair value of the financial assets or liabilities which are
not observable or supported by an active market. |
To the extent that the valuation is based on models or inputs that
are less observable or unobservable in the market, the
determination of fair value requires more judgment. Accordingly,
the degree of judgment exercised by the Company in determining fair
value is greatest for instruments categorized in Level 3. A
financial instrument’s level within the fair value hierarchy is
based on the lowest level of any input that is significant to the
fair value measurement.
3. STOCKHOLDERS’ EQUITY
June 2020 Public Offering
On June 5, 2020, the Company issued and sold 14,601,628 shares of
common stock, 2,789,700 pre-funded warrants exercisable for one
share of our common stock at an exercise price of $0.00001 per
share and 8,695,664 Series H warrants to purchase 8,695,664 shares
of common stock. The public offering price of a share of common
stock together with one-half of a Series H warrant to purchase one
share of common stock was $1.15. The public offering price of a
pre-funded warrant together with one-half of a Series H Warrant was
$1.1499. The Series H warrants have an exercise price of $1.2075
per share and are exercisable for five years from the date of
issuance. As of September 30, 2020, all 2,789,700 pre-funded
warrants and 26,250 Series H warrants have been exercised.
In accordance with the concept of ASC 820 regarding the June 2020
public offering, the Company allocated value of the proceeds to the
common stock and warrants utilizing a relative fair value basis.
Using the Nasdaq closing trading price for our stock on June 5,
2020, the Company computed the fair value of the shares sold. The
fair value of the warrants was estimated using the Black-Scholes
option-pricing model at that same date. This valuation did not
impact total Stockholders’ Equity of $20.0 million, but is an
internal proportionate calculation allocating the gross proceeds of
approximately $12.1 million to common stock and $7.9 million to
warrants.
Gross offering proceeds to the Company were $20.0 million, with net
proceeds to the Company of approximately $18.3 million after
deducting placement agent fees and related offering expenses. The
Company intends to use the net proceeds from the offering for
research and development, funding clinical studies, working capital
and general corporate purposes.
The common stock, pre-funded warrants and Series H warrants were
offered by the Company pursuant to a registration statement on Form
S-1 filed on May 8, 2020 with the SEC under the Securities Act of
1933, as amended (the “Act”) and an additional registration
statement filed on June 2, 2020 pursuant to Rule 462(b) under the
Act.
May 2019 Public Offering
On May 20, 2019, the Company issued and sold 1,982,000 shares of
common stock at an offering price of $2.50 per share. In a
concurrent private placement, the Company issued to the purchasers
of our common stock, Series F warrants to purchase an aggregate of
1,982,000 shares of common stock. The Series F warrants were
immediately exercisable, expire five years after the date of
issuance, and have an exercise price of $2.40.
In a separate concurrent private placement transaction, the Company
sold 2,018,000 shares of common stock together with Series G
warrants to purchase an aggregate of up to 2,018,000 shares of
common stock. The shares of common stock and Series G warrants were
priced at $2.50 per fixed combination. The warrants sold in the
private placement were immediately exercisable, expire five years
after the date of issuance, and have an exercise price of
$2.40.
In accordance with the concept of ASC 820 regarding the May 2019
public offering, the Company allocated value to the proceeds to the
common stock and warrants utilizing a relative fair value basis.
Using the Nasdaq closing trading price for our stock on May 20,
2019, the Company computed the fair value of the shares sold. The
fair value of the warrants was estimated using the Black-Scholes
option-pricing model at that same date. This valuation did not
impact total Stockholders’ Equity of $10.0 million, but is an
internal proportionate calculation allocating the gross proceeds of
approximately $6 million to common stock and $4.0 million to
warrants.
Gross offering proceeds to the Company were $10.0 million, with net
proceeds to the Company of approximately $9.0 million after
deducting placement agent fees and related offering expenses. The
Company used the net proceeds from the offering for research and
development, funding clinical studies, working capital and general
corporate purposes.
The registered direct offering described above was made pursuant to
a registration statement on Form S-3 previously filed with and
subsequently declared effective by the SEC. The unregistered common
shares and warrants were offered pursuant to the exemption from
registration afforded by Section 4(a)(2) under the Act, and
Regulation D promulgated thereunder. The offerings’ unregistered
common shares and warrants were ultimately registered through our
May 31, 2019 filing of Form S-1 and acceptance of this Registration
Statement by the SEC.
Common Stock Warrants
The following table summarizes information with regard to
outstanding warrants to purchase common stock as of September 30,
2020.
|
Offering |
|
Number of Shares
Issuable Upon
Exercise of
Outstanding
Warrants |
|
|
Exercise
Price |
|
|
Expiration Date |
| June 2020
Series H Warrants |
|
|
8,669,414 |
|
|
$ |
1.21 |
|
|
June 5, 2025 |
| May 2019 Series F
Warrants |
|
|
1,982,000 |
|
|
$ |
2.40 |
|
|
May 20,
2024 |
| May 2019 Series G
Warrants |
|
|
2,018,000 |
|
|
$ |
2.40 |
|
|
May 20,
2024 |
| July 2018 Series E
Warrants |
|
|
4,140,000 |
|
|
$ |
4.00 |
|
|
July 31,
2023 |
| October 2017 Series D
Warrants |
|
|
310,856 |
|
|
$ |
17.80 |
|
|
October
14, 2024 |
| November 2016 Public
Offering Series C |
|
|
415,785 |
|
|
$ |
15.00 |
|
|
November
29, 2021 |
| April 2016
Underwritten Registered Series A |
|
|
362,694 |
|
|
$ |
30.40 |
|
|
April
20,2021 |
| October 2015
Incremental Series A |
|
|
30,006 |
|
|
$ |
21.30 |
|
|
October
20,2021 |
| October 2015 Private
Placement Series A |
|
|
8,636 |
|
|
$ |
21.30 |
|
|
April 1,
2021 |
|
October 2015 Offering – Placement Agent |
|
|
375 |
|
|
$ |
283.00 |
|
|
October 1, 2020 |
| Total |
|
|
17,937,766 |
|
|
|
|
|
|
|
4. STOCK-BASED COMPENSATION
Accounting for Stock-Based Compensation
During the nine-month periods ended September 30, 2020 and 2019
options granted were 653,750 and 411,930, respectively. The
following table summarizes amounts charged to expense for
stock-based compensation related to employee and director stock
option grants and recorded in connection with stock options granted
to non-employee consultants:
| |
|
Nine Months Ended
September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Employee and director
stock option grants: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
50,071 |
|
|
$ |
47,825 |
|
|
General and administrative |
|
|
303,010 |
|
|
|
611,074 |
|
| Total
stock-based compensation |
|
$ |
353,081 |
|
|
$ |
658,899 |
|
Assumptions Used in Determining Fair Value
Valuation and amortization method. The fair value of each
stock award is estimated on the grant date using the Black-Scholes
option-pricing model. The estimated fair value of employee stock
options is amortized to expense using the straight-line method over
the required service period which is generally the vesting period.
The estimated fair value of the non-employee options is amortized
to expense over the period during which a non-employee is required
to provide services for the award (usually the vesting period).
Volatility. The Company estimates volatility based on the
Company’s historical volatility since its common stock has been
publicly traded.
Risk-free interest rate. The risk-free interest rate is
based on the U.S. Treasury yield curve in effect at the time of
grant commensurate with the expected term assumption.
Expected term. The expected term of stock options granted is
based on an estimate of when options will be exercised in the
future. The Company applied the simplified method of estimating the
expected term of the options, as described in the SEC’s Staff
Accounting Bulletins 107 and 110, as the historical experience is
not indicative of the expected behavior in the future. The expected
term, calculated under the simplified method, is applied to groups
of stock options that have similar contractual terms. Using this
method, the expected term is determined using the average of the
vesting period and the contractual life of the stock options
granted. The Company applied the simplified method to non-employees
who have a truncation of term based on termination of service and
utilizes the contractual life of the stock options granted for
those non-employee grants which do not have a truncation of
service.
Forfeitures. The Company records stock-based compensation
expense only for those awards that are expected to vest. A
forfeiture rate is estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from
initial estimates. An annual forfeiture rate of 2% was applied to
all unvested options for employees and directors, respectively, for
the nine months ended September 30, 2020 and for the year ended
December 31, 2019. Ultimately, the actual expense recognized over
the vesting period will be for only those shares that vest.
Dividends. The Company has not historically recorded
dividends related to stock options.
Exercise prices for all grants made during the nine months ended
September 30, 2020 were equal to the market value of the Company’s
common stock on the date of grant.
Stock Option Activity
A summary of stock option activity is as follows:
| |
|
Number of
Shares Issuable
Upon Exercise
of Outstanding
Options |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining
Contracted
Term in
Years |
|
|
Aggregate
Intrinsic
Value |
|
| Outstanding at December 31,
2019 |
|
|
610,714 |
|
|
$ |
6.78 |
|
|
|
8.83 |
|
|
$ |
34,750 |
|
| Granted |
|
|
653,750 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(80,000 |
) |
|
$ |
2.46 |
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2020 |
|
|
1,184,464 |
|
|
$ |
4.34 |
|
|
|
8.82 |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable,
September 30, 2020 |
|
|
432,096 |
|
|
$ |
8.62 |
|
|
|
7.94 |
|
|
$ |
— |
|
| Unvested,
September 30, 2020 |
|
|
752,368 |
|
|
$ |
1.88 |
|
|
|
9.33 |
|
|
$ |
— |
|
The aggregate intrinsic value of options outstanding is calculated
based on the positive difference between the estimated per-share
fair value of common stock at the end of the respective period and
the exercise price of the underlying options. There have been no
option exercises to date. Shares of common stock issued upon the
exercise of options are from authorized but unissued shares.
As of September 30, 2020, there was approximately $904,000 of total
unrecognized compensation cost related to unvested stock-based
compensation arrangements. Of this total amount, the Company
expects to recognize approximately $114,000, $425,000, $292,000,
and $73,000 during 2020, 2021, 2022, and 2023 respectively. The
Company’s expense estimates are based upon the expectation that all
unvested options will vest in the future, less the forfeiture rate
discussed above. The weighted-average grant-date fair value of
vested and unvested options outstanding at September 30, 2020 was
$6.91 and $1.45, respectively.
Restricted Stock Grants. During 2017, the Company issued
46,000 shares under the 2015 Plan of restricted common stock with a
weighted average grant date fair value of $20.96. The shares vested
annually over a three year period. The following table summarizes
the restricted stock grants:
| |
|
Number of
Shares |
|
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
|
|
Total Grant
Date Fair
Value |
|
| Outstanding at December 31,
2019 |
|
|
9,334 |
|
|
$ |
21.00 |
|
|
$ |
196,000 |
|
| Vested |
|
|
(9,334 |
) |
|
$ |
21.00 |
|
|
$ |
(196,000 |
) |
| Outstanding at
September 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
5. INCOME TAXES
The Company accounts for income taxes in accordance with the
liability method of accounting. Deferred tax assets or liabilities
are computed based on the difference between the financial
statement and income tax basis of assets and liabilities, and net
operating loss carryforwards, (“NOLs”) using the enacted tax rates.
Deferred income tax expense or benefit is based on changes in the
asset or liability from period to period. The Company did not
record a provision or benefit for federal, state or foreign income
taxes for the nine months ended September 30, 2020 or 2019 because
the Company has experienced losses on a tax basis since inception.
Because of the limited operating history, continuing losses and
uncertainty associated with the utilization of the NOLs in the
future, management has provided a full allowance against the value
of its gross deferred tax assets.
The Company also accounts for the uncertainty in income taxes
related to the recognition and measurement of a tax position taken
or expected to be taken in an income tax return. The Company
follows the applicable accounting guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure and transition related to the uncertainty in
income tax positions. No uncertain tax positions have been
identified.
6. NET LOSS PER SHARE
Basic net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of shares of common
stock outstanding during the period. Diluted net income (loss) per
share for the three and nine months ended September 30, 2020 and
September 30, 2019 is computed by dividing net income (loss) by the
sum of the weighted average number of shares of common stock and
the dilutive potential common stock equivalents then outstanding.
Potential common stock equivalents consist of stock options,
non-vested restricted stock, preferred shares convertible into
common stock and, pre-funded warrants. Since there is a net loss
attributable to common stockholders for the three and nine months
ended September 30, 2020 and September 30, 2019, the inclusion of
common stock equivalents in the computation for that period would
be antidilutive.
The following potentially dilutive securities have been excluded
from the computation of diluted net income (loss) per share since
their inclusion would be antidilutive:
| |
|
Nine Months Ended
September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Warrants |
|
|
17,937,766 |
|
|
|
9,268,352 |
|
| Preferred shares as
convertible into common stock |
|
|
537,500 |
|
|
|
537,500 |
|
| Stock options |
|
|
1,184,464 |
|
|
|
610,714 |
|
|
Non-vested restricted stock |
|
|
— |
|
|
|
9,334 |
|
| Total
potentially dilutive shares |
|
|
19,659,730 |
|
|
|
10,425,900 |
|
7. COMMITMENTS AND CONTINGENCIES
Real Property Leases
Florham Park, New Jersey
On June 4, 2018, the Company entered in an Agreement of Lease for
3,893 square feet for its new corporate headquarters in Florham
Park, New Jersey. The lease commencement date was October 2018 and
terminates in February 2024. The Company has an option to extend
the term of the lease for one additional 60-month period.
Under the terms of the lease, the Company paid a security deposit
of $75,000 and the aggregate rent due over the term of the lease is
approximately $828,000, which will be reduced to approximately
$783,000 after certain rent abatements. The Company is required to
pay its proportionate share of certain operating expenses and real
estate taxes applicable to the leased premises. After certain rent
abatements the rent is approximately $12,500 per month for the
first year and then escalates thereafter by 2% per year for the
duration of the term.
Madison, Wisconsin
The Company presently rents office space in Madison and is rented
for approximately $3,000 per month under an agreement that expires
on August 31, 2021.
Legal
From time to time, the Company may become engaged in litigation or
other legal proceedings as part of our ordinary course of business
but are not currently party to any litigation or legal proceedings
that, in the opinion of management, are likely to have a material
adverse effect on its business.
8. LEASES
Operating Lease Liability
In June 2018, the Company executed an
agreement for office space in the Borough of Florham Park, Morris
County, New Jersey to be used as its headquarters (“HQ Lease”). The
HQ Lease commenced upon completion of certain improvements in
October 2018 and terminates in February 2024 with an option to
extend the term of the lease for one additional 60-month
period. During 2018, the landlord made certain improvements
to the facility. As of December 31, 2018, the Company recorded a
deferred lease liability of approximately $176,000 for the
improvements funded by the landlord in deferred rent current and
deferred rent, long-term on the consolidated balance sheet. The
Company amortized the deferred liability as a reduction to rent
expense in the consolidated statement of operations over the term
of the lease.
For fiscal year 2018, rent expense was recognized on a
straight-line basis and accordingly the difference between the
recorded rent expense and the actual cash payments had been
recorded as deferred rent current and deferred rent, long-term of
each balance sheet date on the consolidated balance sheet.
As of December 31, 2018, the Lease
Liability was measured at the present value of the lease payments
to be made over the lease term. Lease payments comprise of fixed
and variable payments to be made by the Company to the Lessor
during the lease term minus any incentives or rebates or abatements
receivable by the Company from the Lessor or owner. Payments for
non-lease components did not form part of lease payments. The lease
term calculation included renewal options only in the case if these
options are specified in the lease agreement and if failure to
exercise the renewal option imposes a significant economic penalty.
As there are no such significant economic penalties in the HQ Lease
and renewal cannot be reasonably assured, the valuation of the HQ
Lease does not include any renewal options. The Company has not
entered into any leases with related parties.
Under the HQ Lease, the Company will pay monthly fixed rent based
on approximate rate per rentable square foot which ranges between
approximately $12,400 to $13,600 over the lease period. In
addition, the Company received certain rent abatements and lease
incentives subject to the limitations in the HQ Lease. The HQ
Lease’s net ROU asset and ROU lease liability are approximately
$300,000 and ($450,000), respectively, as of September 30, 2020 and
rental expense for the nine months ended September 30, 2020 is
approximately $85,000.
On January 1, 2019, the Company adopted ASC 842 using the modified
retrospective method for all material leases that existed at or
commenced after January 1, 2019 and elected to apply the practical
expedients in ASC 842-10-65-1 (f) and (gg) to the HQ Lease. The
Company accounts for short-term leases (i.e., lease term of 12
months or less) by making the short-term lease policy election and
will not apply the recognition and measurement requirements of ASC
842. As a result of the immaterial financial impact, the Company
will not apply ASC 842’s extensive calculation and reporting
requirement against the leases that individually have total lease
payments of less than $100,000 over their life of service to the
Company. The adoption of ASC 842 did not have a material net impact
on the Company’s Condensed Consolidated Statements of Operations as
of the effective date. See Note 1 for additional
details.
Discount Rate
The Company has determined the interest rate implicit in the lease
considering factors such as Company’s credit rating, borrowing
terms offered by the U.S. Small Business Administration, amount of
lease payments, quality of collateral and alignment of the
borrowing term and lease term. The Company considers 10% per annum
as reasonable to use as the incremental borrowing rate for purposes
of the calculation of lease liabilities.
Maturity Analysis of Short-Term and Operating Leases
The following table
approximates the dollar maturity of
the Company’s undiscounted payments for its short-term leases and
operating lease liabilities as of September 30, 2020:
| Remainder
of 2020 |
|
$ |
39,000 |
|
| Years
ending December 31, |
|
|
|
|
|
2021 |
|
|
155,000 |
|
|
2022 |
|
|
158,000 |
|
|
2023 |
|
|
161,000 |
|
|
2024 |
|
|
14,000 |
|
| Total
undiscounted lease payments |
|
|
527,000 |
|
|
Less: Imputed interest |
|
|
(77,000 |
) |
|
Present value of lease liabilities |
|
$ |
450,000 |
|
9. LOAN PAYABLE
On April 21, 2020, the Company received loan proceeds in the amount
of approximately $184,000 under the Paycheck Protection Program
(“PPP”). The PPP, established as part of the Coronavirus Aid,
Relief and Economic Security Act (“CARES Act”), provides for loans
to qualifying businesses for amounts up to 2.5 times of the average
monthly payroll expenses of the qualifying business. The loans and
accrued interest are forgivable after twenty four weeks as long as
the borrower uses the loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and maintains its
payroll levels. The amount of loan forgiveness will be reduced if
the borrower terminates employees or reduces salaries during the
twenty four-week period.
The unforgiven portion of the PPP loan is payable over two years at
an interest rate of 1%, with a deferral of payments for the first
six months. The Company intends to use the proceeds for
purposes consistent with the PPP requirements. While the Company
currently believes that its use of the loan proceeds will meet the
conditions for forgiveness of the loan, the Company cannot assure
you that it will not take actions that could cause the Company to
be ineligible for forgiveness of the loan, in whole or in part.
| Item 2. |
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations |
Overview
We are a late-stage clinical biopharmaceutical company focused on
the discovery, development and commercialization of drugs for the
treatment of cancer. Our core objective is to leverage our
proprietary phospholipid drug conjugate™ (PDC™) delivery
platform to develop PDCs that are designed to specifically target
cancer cells and deliver improved efficacy and better safety as a
result of fewer off-target effects. Our PDC platform possesses
the potential for the discovery and development of the next
generation of cancer-targeting treatments, and we plan to develop
PDCs both independently and through research and development
collaborations. The COVID-19 pandemic has created
uncertainties in the expected timelines for clinical stage
biopharmaceutical companies such as us, and because of such
uncertainties, it is difficult for us to accurately predict
expected outcomes at this time. We have not yet experienced any
significant impacts as a result of the pandemic and have continued
to enroll patients in our clinical studies. However, COVID-19 may
impact our future ability to recruit patients for clinical studies,
obtain adequate supply of CLR 131 and obtain additional
financing.
Our lead PDC therapeutic, CLR 131 is a small-molecule PDC designed
to provide targeted delivery of iodine-131 directly to cancer
cells, while limiting exposure to healthy cells. We believe this
profile differentiates CLR 131 from many traditional on-market
treatment options. CLR 131 is the company’s lead product candidate
and is currently being evaluated in two clinical studies: the
CLOVER-1 Phase 2 Adult B-Cell Malignancy study and the CLOVER-2
Phase 1 pediatric safety study.
The CLOVER-1 study met the primary efficacy endpoints from the Part
A dose-finding portion, conducted in relapsed/refractory (r/r)
B-cell malignancies, and is now enrolling in expansion cohorts to
evaluate triple class refractory multiple myeloma (MM) and BTK
inhibitor failed Waldenstrom’s macroglobulinemia (WM) patients. The
dosing regimen is designed to provide the optimal dose identified
in Part A of >60mCi total body dose.
The CLOVER-2 Phase 1 pediatric study is an open-label,
sequential-group, dose-escalation study to evaluate the safety and
tolerability of CLR 131 in children and adolescents with relapsed
or refractory cancers, including malignant brain tumors,
neuroblastoma, sarcomas, and lymphomas (including Hodgkin’s
lymphoma). The study is being conducted internationally at seven
leading pediatric cancer centers.
The U.S. Food and Drug Administration (“FDA”) granted CLR 131 Fast
Track Designation for both r/r MM and r/r diffuse large B-cell
lymphoma (DLBCL) and Orphan Drug Designation (ODD) of MM, WM,
neuroblastoma, rhabdomyosarcoma, Ewing’s sarcoma and osteosarcoma.
CLR 131 was also granted Rare Pediatric Disease Designation (RPDD)
for the treatment of neuroblastoma, rhabdomyosarcoma, Ewing’s
sarcoma and osteosarcoma. Earlier this year, the
European Commission granted an ODD for r/r MM and most recently,
the FDA granted Fast Track Designation for CLR 131 in WM
patients
having received two prior treatment regimens or more.
Our product pipeline also includes one preclinical PDC
chemotherapeutic program (CLR 1900) and several partnered PDC
assets. The CLR 1900 Series is being targeted for solid tumors with
a payload that inhibits mitosis (cell division) a validated pathway
for treating cancers.
We have leveraged our PDC platform to establish four collaborations
featuring five unique payloads and mechanisms of action. Through
research and development collaborations, our strategy is to
generate near-term capital, supplement internal resources, gain
access to novel molecules or payloads, accelerate product candidate
development and broaden our proprietary and partnered product
pipelines.
Our PDC platform provides selective delivery of a diverse range of
oncologic payloads to cancerous cells, whether a hematologic cancer
or solid tumor, a primary tumor, or a metastatic tumor and cancer
stem cells. The PDC platform’s mechanism of entry does not rely
upon specific cell surface epitopes or antigens as are required by
other targeted delivery platforms. Our PDC platform takes advantage
of a metabolic pathway utilized by all tumor cell types in all
stages of the tumor cycle. Tumor cells modify specific regions on
the cell surface as a result of the utilization of this metabolic
pathway. Our PDCs bind to these regions and directly enter the
intracellular compartment. This mechanism allows the PDC molecules
to accumulate over time, which enhances drug efficacy, and to avoid
the specialized highly acidic cellular compartment known as
lysosomes, which allows a PDC to deliver molecules that previously
could not be delivered. Additionally, molecules targeting specific
cell surface epitopes face challenges in completely eliminating a
tumor because the targeted antigens are limited in the total number
on the cell surface, have longer cycling time from internalization
to being present on the cell surface again and available for
binding and are not present on all of the tumor cells in any
cancer. This means a subpopulation of tumor cells always exist that
cannot be targeted by therapies targeting specific surface
epitopes. In addition to the benefits provided by the mechanism of
entry, PDCs offer the ability to conjugate payload molecules in
numerous ways, thereby increasing the types of molecules
selectively delivered via the PDC.
The PDC platform features include the capacity to link with almost
any molecule, provide a significant increase in targeted oncologic
payload delivery and the ability to target all types of tumor
cells. As a result, we believe that we can generate PDCs to treat a
broad range of cancers with the potential to improve the
therapeutic index of oncologic drug payloads, enhance or maintain
efficacy while also reducing adverse events by minimizing drug
delivery to healthy cells, and increasing delivery to cancerous
cells and cancer stem cells.
We employ a drug discovery and development approach that allows us
to efficiently design, research and advance drug candidates. Our
iterative process allows us to rapidly and systematically produce
multiple generations of incrementally improved targeted drug
candidates.
In June 2020, the European Medicines Agency (EMA) granted us Small
and Medium-Sized Enterprise status by the EMA’s Micro, Small and
Medium-sized Enterprise office. SME status allows us to participate
in significant financial incentives that include a 90% to 100% EMA
fee reduction for scientific advice, clinical study protocol
design, endpoints and statistical considerations, quality
inspections of facilities and fee waivers for selective EMA pre and
post-authorization regulatory filings, including orphan drug and
PRIME designations. We are also eligible to obtain EMA
certification of quality and manufacturing data prior to review of
clinical data. Other financial incentives include EMA-provided
translational services of all regulatory documents required for
market authorization, further reducing the financial burden of the
market authorization process.
A description of our PDC product candidates follows:
Clinical Pipeline
Our lead PDC therapeutic, CLR 131 is a small-molecule, PDC designed
to provide targeted delivery of iodine-131 directly to cancer
cells, while limiting exposure to healthy cells. We believe this
profile differentiates CLR 131 from many traditional on-market
treatments and treatments in development. CLR 131 is currently
being evaluated in two clinical studies: the CLOVER-1 Phase 2 adult
B-cell malignancy study and the CLOVER-2 Phase 1 pediatric safety
study.
The CLOVER-1 study met the primary efficacy endpoints from the Part
A dose-finding portion, conducted in r/r B-cell malignancies, and
is now enrolling in expansion cohorts to evaluate triple class
refractory MM and BTK inhibitor failed WM patients. The dosing
regimen is designed to provide the optimal dose of >60mCi
total body dose (TBD) identified in Part A. The initial
Investigational New Drug (IND) application was accepted by the FDA
in March 2014 with multiple INDs submitted since that time.
Initiated in March 2017, the primary goal of the Phase 2A study was
to assess the compound’s efficacy in a broad range of hematologic
cancers. In the expansion portion of the study the goal is to
confirm the efficacy of the >60mCi TBD in triple class
refractory MM and BTK inhibitor failed WM patients. The Phase 1
study was designed to assess the compound’s safety and tolerability
in patients with r/r MM (to determine maximum tolerated dose (MTD))
and was initiated in April 2015. The study completed enrollment and
the final clinical study report is expected in the first half of
2021.
The CLOVER-2 Phase 1 pediatric study is being conducted
internationally at seven leading pediatric cancer centers. The
study is an open-label, sequential-group, dose-escalation study to
evaluate the safety and tolerability of CLR 131 in children and
adolescents with relapsed or refractory cancers, including
malignant brain tumors, neuroblastoma, sarcomas, and lymphomas
(including Hodgkin’s lymphoma). The FDA previously accepted our IND
application for a Phase 1 open-label, dose escalating study to
evaluate the safety and tolerability of a single intravenous
administration of CLR 131 in up to 30 children and adolescents with
cancers including neuroblastoma, sarcomas, lymphomas (including
Hodgkin’s lymphoma) and malignant brain tumors. This study was
initiated during the first quarter of 2019. These cancer types were
selected for clinical, regulatory and commercial rationales,
including the radiosensitive nature and continued unmet medical
need in the r/r setting, and the rare disease determinations made
by the FDA based upon the current definition within the Orphan Drug
Act.
In December 2014, the FDA granted ODD for CLR 131 for the treatment
of MM. In 2018, the FDA granted ODD and RPDD for CLR 131 for the
treatment of neuroblastoma, rhabdomyosarcoma, Ewing’s sarcoma and
osteosarcoma. In May 2019, the FDA granted Fast Track designation
for CLR 131 for the treatment of MM and in July 2019 for the
treatment of DLBCL, in September 2019 CLR 131 received Orphan Drug
Designation from the European Union for Multiple Myeloma, and in
January 2020, the FDA granted Orphan Drug Designation for CLR 131
Waldenstrom’s macrogloulinemia. The FDA granted Fast Track
designation for CLR 131 for the treatment of WM in May 2020.
The FDA may award priority review vouchers to sponsors of a RPDD
that meet its specified criteria. The key criteria to receiving a
priority review voucher (PRV) is that the disease being treated is
life-threatening and that it primarily effects individuals under
the age of 18. Under this program, a sponsor who receives an
approval for a drug or biologic for a rare pediatric disease can
receive a PRV that can be redeemed to receive a priority review of
a subsequent marketing application for a different product.
Additionally, the PRV’s can be exchanged or sold to other companies
so that the receiving company may use the voucher.
Phase 2 Study in Patients with r/r select B-cell
Malignancies
In February 2020, we
announced positive data from our Phase 2 CLOVER-1 study in patients
with relapsed/refractory B-cell lymphomas. Relapsed/Refractory MM
and non-Hodgkin lymphoma (NHL) patients were treated with
three different doses (<50mCi, ~50mCi and >60mCi total
body dose (TBD). The <50mCi total body dose was a deliberately
planned sub-therapeutic dose. CLR 131 achieved the primary endpoint
for the study. Patients with r/r MM who received the
>60mCi TBD of CLR 131 showed a 42.8% overall response
rate (ORR). Those who received ~50mCi TBD had a 26.3% ORR with a
combined rate of 34.5% ORR (n=33) while maintaining a
well-tolerated safety profile. Patients in the studies were elderly
with a median age of 70, and heavily pre-treated, with a median of
five prior lines of treatment (range: 3 to 17), which included
immunomodulatory drugs, proteasome inhibitors and CD38 antibodies
for the majority of patients. Additionally, a majority of the
patients (53%) were quad refractory or greater and 44% of all
treated multiple myeloma patients were triple class refractory.
100% of all evaluable patients (n=43) achieved clinical benefit
(primary outcome measure) as defined by having stable disease or
better. 85.7% of multiple myeloma patients receiving the higher
total body dose levels of CLR 131 experienced tumor reduction. The
>60mCi TBD demonstrated positive activity in both
high-risk patients and triple class refractory patients with a 50%
and 33% ORR, respectively.
Patients with r/r NHL who
received <60mCi TBD and the >60mCi TBD had a 42% and
43% ORR, respectively and a combined rate of 42%. These patients
were also heavily pre-treated, having a median of three prior lines
of treatment (range, 1 to 9) with the majority of patients
being refractory to rituximab and/or ibrutinib. The patients had a
median age of 70 with a range of 51 to 86. All patients had bone
marrow involvement with an average of 23%. In addition to these
findings, subtype assessments were completed in the r/r B-cell NHL
patients. Patients with DLBCL demonstrated a 30% ORR with one
patient achieving a complete response (CR), which continues at
nearly 24 months post-treatment. The ORR for CLL/SLL/MZL patients
was 33%. Current data from our Phase 2 CLOVER-1 clinical study show
that four LPL/WM patients demonstrated 100% ORR with one patient
achieving a CR which continues at nearly 35 months post-treatment.
This may represent an important improvement in the treatment of
relapsed/refractory LPL/WM as we believe no approved or late-stage
development treatments for second- and third-line patients have
reported a CR. LPL/WM is a rare, indolent and incurable form of NHL
that is composed of a patient population in need of new and better
treatment options.
Based upon the dose response observed in Part A patients receiving
total body doses of 60mCi or greater, we determined that patient
dosing of CLR 131 would be >60mCi TBD. Therefore,
patients are now grouped as receiving <60mCi or >60mCi
TBD. In September 2020, we announced that a clinically meaningful
40% ORR was observed in the subset of refractory multiple myeloma
patients deemed triple class refractory who received 60 mCi or
greater TBD. Triple class refractory is defined as patients that
are refractory to immunomodulatory, proteasome inhibitors and
anti-CD38 antibody drug classes. The 40% ORR (6/15 patients)
represents triple class refractory patients enrolled in Part A of
Cellectar’s CLOVER-1 study and additional patients enrolled in Part
B from March through May 2020 and received >60mCi TBD.
All MM patients enrolled in the expansion cohort are required to be
triple class refractory. The additional six patients were heavily
pre-treated with an average of nine prior multi-drug regimens.
Three patients received a total body dose of > 60 mCi and
three received less than 60 mCi. Consistent with the data released
in February 2020, patients receiving > 60 mCi typically
exhibit greater responses. Based on study results to date, patients
continue to tolerate CLR 131 well, with the most common and almost
exclusive treatment emergent adverse events being cytopenias.
We recently held FDA Type B guidance meeting to define the
registrational pathway for our priority adult hematology oncology
indications and planned initiation of the pivotal study for our
lead indication in the fourth quarter
The most frequently reported
adverse events in r/r MM patients were cytopenias, which followed a
predictable course and timeline. The frequency of adverse events
have not increased as doses were increased and the profile of
cytopenias remains consistent. Importantly, these cytopenias have
had a predictable pattern to initiation, nadir and recovery and are
treatable. The most common grade ≥3 events at the highest dose
(75mCi TBD) were hematologic toxicities including thrombocytopenia
(65%), neutropenia (41%), leukopenia (30%), anemia (24%) and
lymphopenia (35%). No patients experienced cardiotoxicities,
neurological toxicities, infusion site reactions, peripheral
neuropathy, allergic reactions, cytokine release syndrome,
keratopathy, renal toxicities, or changes in liver enzymes. The
safety and tolerability profile in patients with r/r NHL was
similar to r/r MM patients except for fewer cytopenias of any
grade. Based upon CLR 131 being well tolerated across all dose
groups and the observed response rate, especially in difficult to
treat patients such as high risk and triple class refractory or
penta-refractory, and corroborating data showing the potential to
further improve upon current ORRs and durability of those
responses, the study has been expanded to test a two-cycle dosing
optimization regimen with a target total body dose >60
mCi/m2 of CLR 131.
In July 2016, we were awarded a $2,000,000 National Cancer
Institute (NCI) Fast-Track Small Business Innovation Research grant
to further advance the clinical development of CLR 131. The funds
are supporting the Phase 2 study initiated in March 2017 to define
the clinical benefits of CLR 131 in r/r MM and other niche
hematologic malignancies with unmet clinical need. These niche
hematologic malignancies include Chronic Lymphocytic Leukemia,
Small Lymphocytic Lymphoma, Marginal Zone Lymphoma,
Lymphoplasmacytic Lymphoma/WM and DLBCL. The study is being
conducted in approximately 10 U.S. cancer centers in patients with
orphan-designated relapse or refractory hematologic cancers. The
study’s primary endpoint is clinical benefit response (CBR), with
secondary endpoints of ORR, progression free survival (PFS,) median
Overall Survival (mOS) and other markers of efficacy following
patients receiving one of three TBDs of CLR 131 (<50mCi, ~50mCi
and >60mCi), with the option for a second cycle
approximately 75-180 days later. Dosages were provided either as
single bolus or fractionated (the assigned dose level split into
two doses) given day 1 and day 15.
In May 2020, we announced that the FDA granted Fast Track
Designation for CLR 131 in WM in patients having received two prior
treatment regimens or more.
Phase 1 Study in Patients with r/r Multiple Myeloma
In February 2020, we announced the successful completion of our
Phase 1 dose escalation study. Data from the study demonstrated
that CLR 131 was safe and tolerated at total body dose of
approximately 90mCi in r/r MM. The Phase 1 multicenter, open-label,
dose-escalation study was designed to evaluate the safety and
tolerability of CLR 131 administered as a 30-minute I.V. infusion,
either as a single bolus dose or as fractionated doses. The r/r
multiple myeloma patients in this study received single cycle doses
ranging from approximately 20mCi to 90mCi total body dose. An
independent Data Monitoring Committee determined that all doses
have been safe and well-tolerated by patients.
CLR 131 in combination with dexamethasone is currently under
investigation in adult patients with r/r MM. Patients must have
been refractory to or relapsed from at least one proteasome
inhibitor and at least one immunomodulatory agent. The clinical
study is a standard three-plus-three dose escalation safety study
to determine the maximum tolerable dose. Multiple myeloma is an
incurable cancer of the plasma cells and is the second most common
form of hematologic cancers. Secondary objectives include the
evaluation of therapeutic activity by assessing surrogate efficacy
markers, which include M protein, free light chain (FLC), PFS and
OS. All patients have been heavily pretreated with an average of
five prior lines of therapy. CLR 131 was deemed by an Independent
Data Monitoring Committee (IDMC) to be safe and tolerable up to its
planned maximum single, bolus dose of 31.25 mCi/m2. The
four single dose cohorts examined were: 12.5 mCi/m2
(~25mCi TBD), 18.75 mCi/m2 (~37.5mCi TBD), 25
mCi/m2(~50mCi TBD), and 31.25 mCi/m2(~62.5mCi
TBD), all in combination with low dose dexamethasone (40 mg
weekly). Of the five patients in the first cohort, four achieved
stable disease and one patient progressed at Day 15 after
administration and was taken off the study. Of the five patients
admitted to the second cohort, all five achieved stable disease
however one patient progressed at Day 41 after administration and
was taken off the study. Four patients were enrolled to the third
cohort and all achieved stable disease. In September 2017, we
announced results for cohort 4, showing that a single infusion up
to 30-minutes of 31.25mCi/m2 of CLR 131 was safe and
tolerated by the three patients in the cohort. Additionally, all
three patients experienced CBR with one patient achieving a partial
response (PR). We use the International Myeloma Working Group
(IMWG) definitions of response, which involve monitoring the
surrogate markers of efficacy, M protein and FLC. The IMWG defines
a PR as a greater than or equal to 50% decrease in FLC levels (for
patients in whom M protein is unmeasurable) or 50% or greater
decrease in M protein. The patient experiencing a PR had an 82%
reduction in FLC. This patient did not produce M protein, had
received seven prior lines of treatment including radiation, stem
cell transplantation and multiple triple combination treatments
including one with daratumumab that was not tolerated. One patient
experiencing stable disease attained a 44% reduction in M protein.
In January 2019, we announced that the pooled mOS data from the
first four cohorts was 22.0 months. In late 2018, we modified this
study to evaluate a fractionated dosing strategy to potentially
increase efficacy and decrease adverse events.
Cohort 5 and 6 were fractionated cohorts of 31.25
mCi/m2(~62.5mCi TBD) and 37.5 mCi/m2(~75mCi
TBD), each administered on day 1 and on day 8. Following the
determination that all prior dosing cohorts were safe and
tolerated, we initiated a cohort 7 utilizing a 40mCi/m2 (~80mCi
TBD) fractionated dose administered 20mCi/m2 (~40mCi TBD) on days 1
and day 8. Cohort 7 was the highest pre-planned dose cohort and
subjects have completed the evaluation period. The study completed
enrollment and the final clinical study report is expected in the
first half of 2021.
In May 2019, we announced that the FDA granted Fast Track
Designation for CLR 131 in fourth line or later r/r MM. CLR 131 is
our small molecule radiotherapeutic PDC designed to deliver
cytotoxic radiation directly and selectively to cancer cells and
cancer stem cells. It is currently being evaluated in our ongoing
CLOVER-1 Phase 2 clinical study in patients with relapsed or
refractory multiple myeloma and other select B-cell lymphomas.
Phase 1 Study in r/r
Pediatric Patients with select Solid tumors, Lymphomas and
Malignant Brain Tumors
In December 2017 the Division of Oncology at the FDA accepted our
IND and study design for the Phase 1 study of CLR 131 in children
and adolescents with select rare and orphan designated cancers.
This study was initiated during the first quarter of 2019. In
December 2017, we filed an IND application for r/r pediatric
patients with select solid tumors, lymphomas and malignant brain
tumors. The Phase 1 clinical study of CLR 131 is an open-label,
sequential-group, dose-escalation study evaluating the safety and
tolerability of intravenous administration of CLR 131 in children
and adolescents with cancers including neuroblastoma, sarcomas,
lymphomas (including Hodgkin’s lymphoma) and malignant brain
tumors. Secondary objectives of the study are to identify the
recommended efficacious dose of CLR 131 and to determine
preliminary antitumor activity (treatment response) of CLR 131 in
children and adolescents. In August 2020, it was announced that
four dose levels 15mCi/m2 up to 60mCi/m2 were
deemed safe and tolerable by an independent Data Monitoring
Committee and evaluation of the next higher dose cohort,
75mCi/m2 was to initiate. In 2018, the FDA granted OD
and RPDD for CLR 131 for the treatment of neuroblastoma,
rhabdomyosarcoma, Ewing’s sarcoma and osteosarcoma. Should any of
these indications reach approval, the RPDD would enable us to
receive a priority review voucher. Priority review vouchers can be
used by the sponsor to receive priority review for a future New
Drug Application (“NDA”) or Biologic License Application (“BLA”)
submission, which would reduce the FDA review time from 12 months
to six months. Currently, these vouchers can also be transferred or
sold to another entity. This Priority Review
Voucher Program is currently under evaluation for
renewal.
Phase 1 Study in r/r Head and Neck Cancer
In August 2016, the University of Wisconsin Carbone Cancer Center
(“UWCCC”) was awarded a five-year Specialized Programs of Research
Excellence (“SPORE”) grant of $12,000,000 from the National Cancer
Institute and the National Institute of Dental and Craniofacial
Research to improve treatments and outcomes for head and neck
cancer, HNC, patients. HNC is the sixth most common cancer across
the world with approximately 56,000 new patients diagnosed every
year in the U.S. As a key component of this grant, the UWCCC
researchers completed testing of CLR 131 in various animal HNC
models and initiated the first human clinical study enrolling up to
30 patients combining CLR 131 and external beam radiation with
recurrent HNC in Q4 2019. This clinical study was suspended due to
the COVID-19 pandemic but has now been reopened for enrollment.
Preclinical Pipeline
We believe our PDC platform has potential to provide targeted
delivery of a diverse range of oncologic payloads, as exemplified
by the product candidates listed below, that may result in
improvements upon current standard of care (“SOC”) for the
treatment of a broad range of human cancers:
| |
· |
CLR 1900 Series is an internally
developed proprietary PDC program leveraging a novel small molecule
cytotoxic compound as the payload. The payload inhibits mitosis
(cell division) and targets a key pathway required to inhibit
rapidly dividing cells that results in apoptosis. We believe that
this program could produce a product candidate targeted to select
solid tumors. Currently, the program is in early preclinical
development and if we elect to progress any molecules further, we
will select preferred candidates. |
| |
· |
CLR 2000 Series is a collaborative PDC program with Avicenna
Oncology, or Avicenna, that we entered into in July 2017. Avicenna
is a developer of antibody drug conjugates (“ADCs”). The objective
of the research collaboration is to design and develop a series of
PDCs utilizing Avicenna’s proprietary cytotoxic payload. Although
Avicenna is a developer of ADCs, this collaboration was sought as a
means to overcome many of the challenges associated with ADCs,
including those associated with the targeting of specific cell
surface epitopes. The CLR 2000 Series has demonstrated improved
safety, efficacy and tissue distribution with the cytotoxic payload
in animal models. A candidate molecule and a back-up have been
selected for further advancement at a future time.
|
| |
· |
CLR 12120 Series is a
collaborative PDC program with Orano Med for the development of
novel PDCs utilizing Orano Med’s unique alpha emitter, lead 212
conjugated to our phospholipid ether; the companies intend to
evaluate the new PDCs in up to three oncology indications.
Currently this series has shown efficacy in the first two animal
models tested. |
Results of Operations
Research and development expense. Research and
development expense consist of costs incurred in identifying,
developing and testing, and manufacturing product candidates, which
primarily include salaries and related expenses for personnel, cost
of manufacturing materials and contract manufacturing fees paid to
contract manufacturers and contract research organizations, fees
paid to medical institutions for clinical studies, and costs to
secure intellectual property. We analyze our research and
development expenses based on four categories as follows: clinical
study costs, preclinical study costs, manufacturing and related
costs, and general research and development costs that are not
allocated to the functional study costs, including personnel costs,
facility costs, related overhead costs and patent costs.
General and administrative expense. General and
administrative expense consists primarily of salaries and other
related costs for personnel in executive, finance and
administrative functions. Other costs include insurance, costs
for public company activities, investor relations, directors’ fees
and professional fees for legal and accounting services.
Three Months Ended September 30, 2020 and 2019
Research and Development. Research and development expense
for the three months ended September 30, 2020 was approximately
$2,684,000 compared to approximately $2,704,000 for the three
months ended September 30, 2019.
The following table is an approximate comparison summary of
research and development costs for the three months ended September
30, 2020 and September 30, 2019:
| |
|
Three Months Ended
September 30,
|
|
|
|
|
| |
|
2020 |
|
|
2019 |
|
|
Variance |
|
| |
|
|
|
|
|
|
|
|
|
|
Clinical study costs |
|
$ |
1,184,000 |
|
|
$ |
1,377,000 |
|
|
$ |
(193,000 |
) |
| Manufacturing and
related costs |
|
|
655,000 |
|
|
|
677,000 |
|
|
|
(22,000 |
) |
| Pre-clinical study
costs |
|
|
36,000 |
|
|
|
39,000 |
|
|
|
(3,000 |
) |
|
General research and development costs |
|
|
809,000 |
|
|
|
611,000 |
|
|
|
198,000 |
|
|
|
|
$ |
2,684,000 |
|
|
$ |
2,704,000 |
|
|
$ |
(20,000 |
) |
The overall decrease in research and development expense of
$20,000, or 1%, was primarily a result of a decrease in clinical
study costs offset by an increase in general research and
development costs resulting from increased personnel. Manufacturing
and related costs decreased due to a reduction in materials
production processes and related costs. Pre-clinical study costs
were relatively consistent.
General and administrative. General and administrative
expense for the three months ended September 30, 2020 was
approximately $1,226,000, compared to approximately $1,260,000 in
the three months ended September 30, 2019 and remained relatively
consistent.
Nine Months Ended September 30, 2020 and 2019
Research and Development. Research and development expense
for the nine months ended September 30, 2020 was approximately
$7,766,000 compared to approximately $6,822,000 for the nine months
ended September 30, 2019.
The following table is a comparison summary of research and
development costs for the nine months ended September 30, 2020 and
September 30, 2019:
| |
|
Nine Months Ended
September 30,
|
|
|
|
|
| |
|
2020 |
|
|
2019 |
|
|
Variance |
|
| |
|
|
|
|
|
|
|
|
|
|
Clinical study costs |
|
$ |
3,066,000 |
|
|
$ |
2,690,000 |
|
|
$ |
376,000 |
|
| Manufacturing and related
costs |
|
|
1,918,000 |
|
|
|
2,321,000 |
|
|
|
(403,000 |
) |
| Pre-clinical study
costs |
|
|
193,000 |
|
|
|
285,000 |
|
|
|
(92,000 |
) |
| General research and development
costs |
|
|
2,589,000 |
|
|
|
1,526,000 |
|
|
|
1,063,000 |
|
|
|
|
$ |
7,766,000 |
|
|
$ |
6,822,000 |
|
|
$ |
944,000 |
|
The overall increase in research and development expense of
approximately $944,000, or 12%, was primarily a result of higher
general research and development costs resulting from increased
personnel related costs and clinical study costs. Manufacturing and
related costs decreased because of a reduction in materials
production processes and related costs.
General and Administrative. General and administrative
expense for the nine months ended September 30, 2020 was
approximately $3,725,000, compared to approximately $3,972,000 in
the nine months ended September 30, 2019. The decrease of
approximately $247,000, or 6%, was primarily a result of lower
stock-based compensation expense.
Liquidity and Capital Resources
As of September 30, 2020, we had cash and cash equivalents of
approximately $18,842,000 compared to $10,615,000 as of December
31, 2019. This increase was due primarily to the approximately
$18,300,000 of net proceeds received in connection with the June 5,
2020 public offering. Net cash used in operating activities during
the nine months ended September 30, 2020 was approximately
$10,064,000.
Our cash requirements have historically been for our research and
development activities, finance and administrative costs, capital
expenditures and overall working capital. We have experienced
negative operating cash flows since inception and have funded our
operations primarily from sales of common stock and other
securities. As of September 30, 2020, we had an accumulated deficit
of approximately $123,160,000.
We believe that the cash balance is adequate to fund our basic
budgeted operations for at least 12 months from the filing of these
financial statements. However, our future results of operations
involve significant risks and uncertainties. Our ability to execute
our operating plan beyond that time depends on our ability to
obtain additional funding via the sale of equity and/or debt
securities, a strategic transaction or otherwise. We plan to
actively pursue all available financing alternatives; however,
there can be no assurance that we will obtain the necessary
funding. Other than the uncertainties regarding our ability to
obtain additional funding, there are currently no known trends,
demands, commitments, events or uncertainties that are likely to
materially affect our liquidity. Because we have had recurring
losses and negative cash flows from operating activities, and in
light of our expected expenditures, the report of our independent
auditors with respect to the financial statements as of December
31, 2019 and for the year ended December 31, 2019 contains an
explanatory paragraph as to the potential inability to continue as
a going concern. This opinion indicated at that time, that
substantial doubt existed regarding our ability to remain in
business.
|
Item
4. |
Controls and
Procedures |
Evaluation of Disclosure Controls and Procedures. Based on
our management’s evaluation (with the participation of our
principal executive officer and principal financial officer), as of
September 30, 2020, our management has concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) were effective to ensure that
information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and
forms.
Changes in internal control over financial reporting. There
have not been any significant changes in the Company’s internal
control over financial reporting.
The Chief Executive Officer and the Audit Committee perform
significant roles in ensuring the accuracy and completeness of our
financial reporting and the effectiveness of our disclosure
controls and procedures. We have not identified any changes that
occurred during the Company’s fiscal quarter ended June 30, 2020
that materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
Important Considerations. Any system of controls, however
well designed and operated, can provide only reasonable, and not
absolute assurance that the objectives of the system are met. In
addition, the design of any control system is based in part on
certain assumptions about the likelihood of future events. The
effectiveness of our disclosure controls and procedures is subject
to various inherent limitations, including cost limitations,
judgments used in decision making, assumptions about the likelihood
of future events, the soundness of our systems, the possibility of
human error, and the risk of fraud. Because of these and other
inherent limitations of control systems, there can be no assurance
that any system of disclosure controls and procedures will be
successful in achieving its stated goals, including but not limited
to preventing all errors or fraud or in making all material
information known in a timely manner to the appropriate levels of
management, under all potential future conditions, regardless of
how remote.
PART II. OTHER INFORMATION
| Item 1. |
Legal
Proceedings |
None.
Factors that could materially adversely affect our business and our
equity securities are described in the Risk Factors previously
disclosed in Form 10-K, our Annual Report filed with the SEC on
March 9, 2020 pursuant to Section 13 or 15(d) of the Exchange Act
(the “2019 10-K”). This information should be considered carefully,
together with other information in this report and other reports
and materials we file with the SEC. In addition, the following risk
factor included substantive changes from those disclosed in the
2019 10-K:
Our operations and financial condition may be adversely impacted
by the COVID-19 pandemic.
While we have not yet experienced any significant impacts as a
result of the pandemic and have continued to enroll patients in our
clinical studies, we anticipate that the
COVID-19 pandemic and a prolonged public health crisis may
negatively impact our future financial condition and operating
results. However, given the evolving health, economic, social, and
governmental environments, the breadth and duration of any such
impacts remains uncertain. Due to the pandemic, our clinical study
recruiting and participants and supply chain could also be slowed
or delayed, or in a more severe scenario, our business, financial
condition and operating results could be more severely affected.
Given the dynamic nature of these circumstances, the duration of
any business disruption or potential impact to our business
resulting from the COVID-19 coronavirus is difficult to predict,
but it may increase our costs or expenses.
The potential effects of the COVID-19 pandemic could impact many of
our risk factors, included in Part 1, Item A of our 2019 Form 10-K,
However, given the evolving health, economic, social, and
governmental environments, the potential impact that the COVID-19
pandemic could have on our risk factors that are described in our
2019 Form 10-K remain uncertain.
We will require additional capital in order to continue our
operations, and may have difficulty raising additional
capital.
We expect that we will continue to generate significant operating
losses for the foreseeable future. At September 30, 2020, our
consolidated cash balance was approximately $18.8 million. We
believe our cash balance at September 30, 2020, is adequate to fund
basic operations at budgeted levels for at least 12 months from the
filing of these financial statements. We will require additional
funds to conduct research and development, establish and conduct
clinical and preclinical studies, establish commercial-scale
manufacturing arrangements and provide for the marketing and
distribution of our products. Our ability to execute our operating
plan depends on our ability to obtain additional funding via the
sale of equity and/or debt securities, a strategic transaction or
otherwise. We continue to actively pursue financing alternatives.
However, there can be no assurance that we will obtain the
necessary funding in the amounts we seek or that it will be
available on a timely basis or upon terms acceptable to us. If we
obtain capital by issuing debt or preferred stock, the holders of
such securities would likely obtain rights that are superior to
those of holders of our common stock. Our capital requirements and
our ability to meet them depend on many factors, including:
| |
· |
current and future impacts of the COVID-19
pandemic on all aspects of our business; |
| |
· |
the
number of potential products and technologies in
development; |
| |
· |
continued progress and cost of our research and
development programs; |
| |
· |
progress with preclinical studies and clinical
studies; |
| |
· |
the
time and costs involved in obtaining regulatory
clearance; |
| |
· |
costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims; |
| |
· |
costs of developing sales, marketing and
distribution channels and our ability to sell our
drugs; |
| |
· |
costs involved in establishing manufacturing
capabilities for clinical study and commercial quantities of our
drugs; |
| |
· |
competing technological and market
developments; |
| |
· |
claims or enforcement actions with respect to our
products or operations; |
| |
· |
market acceptance of ou™r products; |
| |
· |
costs for recruiting and retaining management,
employees and consultants; |
| |
· |
our
ability to manage computer system failures or security
breaches; |
| |
· |
costs for educating physicians regarding the
application and use of our products; |
| |
· |
whether we are able to maintain our listing on a
national exchange; |
| |
· |
uncertainty and economic instability resulting
from conflicts, military actions, terrorist attacks, natural
disasters, public health crises, including the occurrence of a
contagious disease or illness, such as the COVID-19 pandemic,
cyber-attacks and general instability; and |
| |
· |
the
condition of capital markets and the economy generally, both in the
U.S. and globally. |
We may consume available resources more rapidly than currently
anticipated, resulting in the need for additional funding sooner
than expected. We may seek to raise any necessary additional funds
through the issuance of warrants, equity or debt financings or
executing collaborative arrangements with corporate partners or
other sources, which may be dilutive to existing stockholders or
have a material effect on our current or future business prospects.
In addition, in the event that additional funds are obtained
through arrangements with collaborative partners or other sources,
we may have to relinquish economic and/or proprietary rights to
some of our technologies or products under development that we
would otherwise seek to develop or commercialize by ourselves. If
we cannot secure adequate financing when needed, we may be required
to delay, scale back or eliminate one or more of our research and
development programs or to enter into license or other arrangements
with third parties to commercialize products or technologies that
we would otherwise seek to develop ourselves and commercialize
ourselves. In such an event, our business, prospects, financial
condition, and results of operations may be adversely affected.
We have incurred net losses and negative cash flows since
inception. We currently have no product revenues and may not
succeed in developing or commercializing any products that will
generate product or licensing revenues. We do not expect to have
any products on the market for several years. Our primary activity
to date has been research and development and conducting clinical
studies. Development of our product candidates requires a process
of preclinical and clinical testing, during which our product
candidates could fail. We may not be able to enter into agreements
with one or more companies experienced in the manufacturing and
marketing of therapeutic drugs and, to the extent that we are
unable to do so, we may not be able to market our product
candidates. Whether we achieve profitability or not will depend on
our success in developing, manufacturing, and marketing our product
candidates. We have experienced net losses and negative cash flows
from operating activities since inception and we expect such losses
and negative cash flows to continue for the foreseeable future. As
of September 30, 2020, we had a stockholders’ equity of
approximately $16,224,000. The net loss for the nine months ended
September 30, 2020 was approximately $11,479,000, and we may never
achieve profitability.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
| |
CELLECTAR
BIOSCIENCES, INC. |
| |
|
|
| Date: November 9,
2020 |
By: |
/s/ James V. Caruso
|
| |
|
James V. Caruso |
| |
|
President and Chief Executive
Officer |
