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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
March 31,
2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to
Commission
File No.
001-38207
CELCUITY INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
No.
82-2863566 |
(State
of incorporation) |
|
(IRS
Employer Identification No.) |
16305 36th Avenue North; Suite 100
Minneapolis,
Minnesota
55446
(Address
of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
(763)
392-0767
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, $0.001 par value per share |
|
CELC |
|
The
Nasdaq Stock Market LLC |
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 ☒
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 ☒ NO
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a 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 |
|
☒ |
|
Smaller
reporting company |
|
☒ |
|
|
|
|
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 ☒
On
May 8, 2023 there were
21,958,849 shares of the registrant’s common stock, $0.001
par value per share, outstanding.
Celcuity
Inc.
Table
of Contents
As
used in this report, the terms “we,” “us,” “our,” “Celcuity,” and
the “Company” mean Celcuity Inc., unless the context indicates
another meaning.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Celcuity Inc.
Condensed
Balance Sheets
See
accompanying notes to the financial statements
Celcuity Inc.
Condensed
Statements of Operations
(unaudited)
See
accompanying notes to the financial statements
Celcuity Inc.
Statements
of Changes in Stockholders’ Equity
Three
Months Ended March 31,2023
See
accompanying notes to the financial statements
Celcuity Inc.
Condensed
Statements of Changes in Stockholders’ Equity
Three
Months Ended March 31,2022
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
|
Common
Stock |
|
|
Additional Paid-In |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
Balance at December 31,
2021 |
|
|
14,918,887 |
|
|
$ |
14,919 |
|
- |
$ |
124,622,405 |
|
|
$ |
(55,926,847 |
) |
|
$ |
68,710,477 |
|
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
756,271 |
|
|
|
- |
|
|
|
756,271 |
|
Exercise of common stock options, net of shares withheld for
exercise price |
|
|
1,415 |
|
|
|
1 |
|
- |
|
7,413 |
|
|
|
- |
|
|
|
7,414 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,934,447 |
) |
|
|
(7,934,447 |
) |
Balance
at March 31, 2022 (unaudited) |
|
|
14,920,302 |
|
|
$ |
14,920 |
|
- |
$ |
125,386,089 |
|
|
$ |
(63,861,294 |
) |
|
$ |
61,539,715 |
|
See
accompanying notes to the financial statements
Celcuity Inc.
Condensed
Statements of Cash Flows
(unaudited)
See
accompanying notes to the financial statements
CELCUITY INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS (unaudited)
(For
the Three Months Ended March 31, 2023 and 2022)
1.
Organization
Nature of Business
Celcuity
Inc., a Delaware corporation (the “Company”), is a clinical-stage
biotechnology company focused on development of targeted therapies
for multiple solid tumor indications. The Company’s lead
therapeutic candidate is gedatolisib, a potent pan-PI3K and mTOR
inhibitor. Its mechanism of action and pharmacokinetic properties
are highly differentiated from other currently approved and
investigational therapies that target PI3K or mTOR alone or
together. A Phase 3 clinical trial, VIKTORIA-1, evaluating
gedatolisib in combination with fulvestrant with or without
palbociclib in patients with HR+/HER2- advanced breast cancer is
currently enrolling patients. Its CELsignia companion diagnostic
platform is uniquely able to analyze live patient tumor cells to
identify new groups of cancer patients likely to benefit from
already approved targeted therapies. The Company was co-founded in
2012 by Brian F. Sullivan and Dr. Lance G. Laing and is based in
Minnesota. The Company has not generated any revenues to
date.
2.
Basis of Presentation,
Summary of Significant Accounting Policies and Recent Accounting
Pronouncements
Basis of
Presentation
The
accompanying unaudited financial statements include the accounts of
the Company and have been prepared in accordance with Article 10 of
Regulation S-X promulgated by the Securities and Exchange
Commission (“SEC”). Accordingly, as permitted by Article 10, the
unaudited financial statements do not include all of the
information required by accounting principles generally accepted in
the United States (“U.S. GAAP”). The balance sheet at December 31,
2022 was derived from the audited financial statements at that date
and does not include all the disclosures required by U.S. GAAP. In
the opinion of management, all adjustments which are of a normal
recurring nature and necessary for a fair presentation have been
reflected in the financial statements. These unaudited condensed
financial statements should be read in conjunction with the audited
financial statements as of and for the year ended December 31, 2022
and the related footnotes thereto included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2022. Operating
results for the three months ended March 31, 2023 are not
necessarily indicative of the results to be expected during the
remainder of the current year or for any future period.
Accounting
Estimates
Management
uses estimates and assumptions in preparing these unaudited
condensed financial statements in accordance with U.S. GAAP. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could differ
from those estimates and the difference could be material.
Significant items subject to such estimates and assumptions include
the valuation of stock-based compensation and prepaid or accrued
clinical trial costs.
Risks and
Uncertainties
The
Company is subject to risks common to companies in the development
stage including, but not limited to, dependency on the clinical and
commercial success of its diagnostic tests, ability to obtain
regulatory approval of its diagnostic tests, the clinical and
commercial success of its initial drug product, gedatolisib, the
need for substantial additional financing to achieve its goals,
uncertainty of broad adoption of its approved products, if any, by
physicians and consumers, and significant competition.
Clinical Trial
Costs
The
Company records prepaid assets or accrued expenses for prepaid or
estimated clinical trial costs conducted by third-party service
providers, which includes the conduct of preclinical studies and
clinical trials. These costs can be a significant component of the
Company’s research and development expenses. The Company primarily
relies on a compilation of progress reports from third-party
service providers, including the respective invoicing, to record
actual expenses, along with determining changes to prepaid assets
and accrued liabilities. To date, the company believes utilization
of third-party reports most accurately reflects expenses incurred.
As the current VIKTORIA-1 Phase 3 trial ramps up site activation
and patient enrollment, the Company’s estimated expenses in future
periods and actual services performed may vary from these
estimates, and these estimates may become more significant. Changes
in these estimates that result in material changes to the Company’s
prepaid assets or accrued expenses could materially affect the
Company’s results of operations.
Recently Adopted
Accounting Pronouncements
In
June 2016 and related amendments, the FASB issued Accounting
Standards Update (ASU) No. 2016-13, Financial Instruments – Credit
Losses (Topic 326). This guidance changes the methodology to be
used to measure credit losses for certain financial instruments and
financial assets. The new methodology requires the recognition of
an allowance that reflects the current estimate of credit losses
expected to be incurred over the life of the financial asset. The
Company adopted this standard effective January 1, 2023. The
adoption of the standard did not have a material impact on the
Company’s consolidated financial statements.
3.
Net Loss Per Common
Share
Basic
and diluted net loss per common share is determined by dividing net
loss attributable to common stockholders by the weighted-average
common shares outstanding during the period. For all periods
presented, the common shares underlying the options and warrants
have been excluded from the calculation because their effect would
be anti-dilutive. Therefore, the weighted-average shares
outstanding used to calculate both basic and diluted loss per
common share are the same.
For
the three months ended March 31, 2023 and 2022, potentially
dilutive securities excluded from the computations of diluted
weighted-average shares outstanding were preferred stock on an
as-if-converted to common stock basis of
10,958,730 and
zero shares of common stock, respectively, options to
purchase
2,068,458 and
1,353,406 shares of common stock, respectively, warrants to
purchase
7,266,102 and
377,652 shares of common stock, respectively, and
3,273 and
2,964 shares of restricted common stock,
respectively.
4.
Investments
Debt
securities for which the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity and
reported at historical cost adjusted for amortization of premiums
and accretion of discounts. Expected credit losses, if any, are
recorded through the establishment of an allowance for credit
losses. All of the
Company’s held-to-maturity investment securities are U.S. Treasury
and agencies securities that are guaranteed or otherwise supported
by the United States government and have no history of credit
losses. Accordingly, the Company does not expect to incur any
credit losses on held-to-maturity investment securities and has no
allowance for credit losses
recorded for these securities.
The
following table summarizes the Company’s held-to-maturity
investment securities at amortized cost as of March 31, 2023 and
December 31, 2022:
Schedule
of Investment
|
|
Amortized Cost, as Adjusted
|
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Estimated Fair Value |
|
|
|
March 31, 2023 |
|
|
|
Amortized
Cost, as
Adjusted
|
|
|
Gross Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Estimated Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governmental Agency
Securities |
|
$ |
21,755,483 |
|
|
$ |
2,077 |
|
|
$ |
- |
|
|
$ |
21,757,560 |
|
U.S. Treasury
Notes |
|
|
102,083,744 |
|
|
|
11,822 |
|
|
|
- |
|
|
|
102,095,566 |
|
Total |
|
$ |
123,839,227 |
|
|
$ |
13,899 |
|
|
$ |
- |
|
|
$ |
123,853,126 |
|
|
|
Amortized Cost, as Adjusted |
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Estimated Fair Value |
|
|
|
December 31, 2022 |
|
|
|
Amortized
Cost, as
Adjusted
|
|
|
Gross Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Estimated Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governmental Agency
Securities |
|
$ |
46,230,893 |
|
|
$ |
29,517 |
|
|
$ |
- |
|
|
$ |
46,260,410 |
|
U.S. Treasury
Notes |
|
|
97,785,061 |
|
|
|
41,639 |
|
|
|
- |
|
|
|
97,826,700 |
|
Total |
|
$ |
144,015,954 |
|
|
$ |
71,156 |
|
|
$ |
- |
|
|
$ |
144,087,110 |
|
The
Company had no investments as of
March 31, 2022.
5.
Commitments
Operating and Finance Leases
The
Company leases its corporate space in Minneapolis, Minnesota. In
March 2023, the Company signed the fourth amendment to extend this
lease through April 30, 2026. This amendment provides for monthly
rent, real estate taxes and operating expenses. The Company
recorded an incremental $355,578
in the operating right-of-use (“ROU”) asset and lease liability
pertaining to this amendment.
Clinical Research Studies
The
Company enters into contracts in the normal course of business to
conduct research and development programs internally and through
third parties that include, among others, arrangements with
vendors, consultants, CMO’s, and CRO’s. The Company currently has
four Phase 2 clinical trial agreements in place to evaluate
targeted therapies selected with one of our CELsignia tests. Timing
of milestone payments related to the Phase 2 clinical trials are
uncertain and the contracts generally provide for termination
following a certain period after notice, therefore the Company
believes that non-cancelable obligations under the agreements are
not material. The Company also has a license agreement in place
with Pfizer to research, develop, manufacture and commercialize
gedatolisib. In conjunction with the license agreement, the Company
continued a Phase 1b study – B2151009 related to gedatolisib. These
patients subsequently transitioned to an Expanded Access study –
CELC-G-001. Contracts related to the Phase 1B study and the
Expanded Access study, are generally based on time and material. In
addition, contracts related to the Company’s Phase 3 clinical study
(VIKTORIA-1) are generally cancelable with reasonable notice within
120 days and the Company’s obligations under these contracts are
primarily based on services performed through termination dates
plus certain cancelation charges, if any, as defined in each of the
respective agreements. In addition, these agreements may, from time
to time, be subjected to amendments as a result of any change
orders executed by the parties. As of March 31, 2023, the Company
had only one material non-cancelable contractual commitment with
respect to these arrangements, which totaled approximately
$2.2
million.
6.
Stockholders’
Equity
Capital Stock
At
December 31, 2022, the Company’s authorized capital stock consisted
of 65,000,000 shares of
$.001 par
value common stock, of which 21,667,250 shares
were outstanding, and 2,500,000 shares
of $.001
par value preferred stock, of which 1,120,873 shares
were outstanding.
On
March 31, 2023, one of the Company’s preferred shareholders elected
to convert 25,000
shares of Series A Convertible Preferred Stock into 250,0000
shares of Common Stock, in accordance with the Securities Purchase
Agreement dated May 15, 2022. The cost basis of the shares
transferred is $5.75 per share.
At
March 31, 2023, the Company’s authorized capital stock consisted of
65,000,000 shares of
common stock, of which 21,941,372 shares
were outstanding, and 2,500,000 shares
of preferred stock, including 1,850,000 shares
designated as Series A Preferred Stock, of which 1,095,873 shares
were outstanding. As of March 31, 2023, no dividends have been
declared on the Company’s capital stock.
7.
Stock-Based
Compensation
The
following table summarizes the activity for all stock options
outstanding for the three months ended March 31:
Schedule of Stock Options
Activity
|
|
2023 |
|
|
2022 |
|
|
|
Shares |
|
|
Weighted
Average
Exercise Price
|
|
|
Shares |
|
|
Weighted
Average
Exercise Price
|
|
Options outstanding at
beginning of year |
|
|
1,976,586 |
|
|
$ |
6.34 |
|
|
|
1,315,321 |
|
|
$ |
11.97 |
|
Granted |
|
|
119,985 |
|
|
|
11.36 |
|
|
|
119,500 |
|
|
|
10.01 |
|
Exercised |
|
|
24,122 |
|
|
|
5.30 |
|
|
|
(1,415 |
) |
|
|
5.24 |
|
Forfeited |
|
|
(3,991 |
) |
|
|
6.55 |
|
|
|
(80,000 |
) |
|
|
13.01 |
|
Balance at March 31 |
|
|
2,068,458 |
|
|
$ |
6.65 |
|
|
|
1,353,406 |
|
|
$ |
11.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at March 31: |
|
|
1,114,767 |
|
|
$ |
5.91 |
|
|
|
625,912 |
|
|
$ |
9.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
for options granted during the period: |
|
|
|
|
|
$ |
7.81 |
|
|
|
|
|
|
$ |
6.72 |
|
The
following table summarizes additional information about stock
options outstanding and exercisable at March 31, 2023:
Schedule of Stock Options Outstanding and
Exercisable
Options Outstanding |
|
Options Exercisable |
Options Outstanding |
|
Weighted Average Remaining Contractual Life |
|
|
Weighted Average Exercise Price |
|
|
Aggregate Intrinsic Value |
|
|
Options Exercisable |
|
Weighted Average Exercise Price |
|
|
Aggregate Intrinsic Value |
|
|
2,068,458 |
|
|
7.85 |
|
|
$ |
6.65 |
|
|
$ |
7,795,439 |
|
|
|
1,114,767 |
|
$ |
5.91 |
|
|
$ |
5,004,674 |
|
The
Company recognized stock-based compensation expense for stock
options of $1,222,328 and
$709,509 for the
three months ended March 31, 2023 and 2022, respectively. In May
2022, the Company modified the exercise price on 776,324 stock
option awards to $5.50, the
closing market price on the Nasdaq Capital Market on May 17, 2022.
The effect of this modification on stock-based compensation was
$39,612 and
$0 for the
three months ending March 31, 2023 and 2022, respectively. The
effect of this modification on stock-based compensation over the
remaining service period will be approximately $277,000.
In December 2021, the Company modified the exercise price on
311,000 stock
option awards to $13.44, the
closing market price on the Nasdaq Capital Market on December 15,
2021. No director or officer awards were modified. The effect of
this modification on stock-based compensation was $16,924 and
$28,029 for
the three months ended March 31, 2023 and 2022, respectively. The
effect of this modification on stock-based compensation over the
remaining service period will be approximately $156,000.
In May 2020, the Company modified the exercise price on 203,750 stock
option awards to $5.10, the
closing market price on the Nasdaq Capital Market on May 14, 2020.
No director or officer awards were modified. The effect of this
modification on stock-based compensation was $7,108
and $11,614
for the three months ended March 31, 2023 and 2022, respectively.
The effect of this modification on stock-based compensation over
the remaining service period will be approximately $13,000.
The
Black-Scholes option-pricing model was used to estimate the fair
value of equity-based awards with the following weighted-average
assumptions for the three months ended March 31:
Schedule of Assumptions for Fair Value of
Equity-based Awards
|
|
2023 |
|
|
2022 |
|
Risk-free interest rate |
|
|
3.64% - 4.14 |
% |
|
|
1.68% - 2.41 |
% |
Expected volatility |
|
|
79.8 |
% |
|
|
76.2% - 76.5 |
% |
Expected life (years) |
|
|
5.25 to |
|
|
|
6.04 to 6.08 |
|
Expected
dividend yield |
|
|
0 |
% |
|
|
0 |
% |
The
inputs for the Black-Scholes valuation model require management’s
significant assumptions. Prior to the Company’s initial public
offering, the price per share of common stock was determined by the
Company’s board based on recent prices of common stock sold in
private offerings. Subsequent to the initial public offering, the
price per share of common stock is determined by using the closing
market price on the Nasdaq Capital Market on the grant date. The
risk-free interest rates are based on the rate for U.S. Treasury
securities at the date of grant with maturity dates approximately
equal to the expected life at the grant date. The expected life is
based on the simplified method in accordance with the SEC Staff
Accounting Bulletin Nos. 107 and 110. The expected volatility is
estimated based on historical volatility information of peer
companies that are publicly available in combination with the
Company’s calculated volatility since being publicly
traded.
All
assumptions used to calculate the grant date fair value of
non-employee options are generally consistent with the assumptions
used for options granted to employees. In the event the Company
terminates any of its consulting agreements, the unvested options
issued in connection with the agreements would also be
cancelled.
No restricted
stock awards were granted during the three months ended March 31,
2023 and 2022. The Company had 3,273 and
2,964 shares of
restricted stock outstanding as of March 31, 2023 and 2022,
respectively, and 0 shares of
restricted stock vested during the three months ended March 31,
2023 and 2022. The Company recognized stock-based compensation
expense for restricted stock of $4,642
and $20,344
for the three months ended March 31, 2023 and 2022,
respectively.
The
Company initially reserved a maximum of 750,000
shares of common stock for issuance under the 2017 Amended and
Restated Stock Incentive Plan (the “2017 Plan”). The number of
shares reserved for issuance was automatically increased by
102,998,
149,189
and 216,673
shares on January 1, 2021, 2022 and 2023, respectively, and will
increase automatically on January
1 of each year from 2024 through 2027 by the number of shares equal
to 1.0% of the aggregate number of outstanding shares of Company
common stock as of the immediately preceding December 31. At
the Annual Meeting held on May 12, 2021 and May 12, 2022, the
stockholders approved a one-time, 500,000
increase each year for a total of 1,000,000
increase, to the number of shares reserved for issuance under the
2017 Plan. However, the Company’s board may reduce the amount of
the increase in any particular year. The total remaining shares
available for grant under the Company’s 2017 Plan as of March 31,
2023 was 343,114.
Total
unrecognized compensation cost related to stock options and
restricted stock is estimated to be recognized as
follows:
Schedule of Unrecognized Compensation
Cost
|
|
|
|
|
2023 |
|
$ |
2,781,277 |
|
2024 |
|
|
2,291,390 |
|
2025 |
|
|
1,474,943 |
|
2026 |
|
|
435,113 |
|
2027 |
|
|
6,198 |
|
Total estimated compensation cost to be recognized |
|
$ |
6,988,921 |
|
The
Company recognized stock-based compensation expense related to its
employee stock purchase plan of $46,312
and $26,148
for the three months ended March 31, 2023 and 2022, respectively.
The Company initially reserved a total of 100,000
shares for issuance under the employee stock purchase plan. The
number of shares reserved for issuance was automatically increased
by 51,499,
74,594
and 108,337
shares on January 1, 2021, 2022 and 2023, respectively, and will
increase automatically on each subsequent January 1 by the
number of shares equal to 0.5% of
the total outstanding number of shares of Company common stock as
of the immediately preceding December 31. However, the
Company’s board may reduce the amount of the increase in any
particular year. The total remaining shares available for issuance
under the employee stock purchase plan as of March 31, 2023 was
.
The
Company recognized total stock-based compensation expense as
follows for the three months ended March 31:
Schedule of Stock-based Compensation
Expense
|
|
2023 |
|
|
2022 |
|
|
|
Three
Months Ended |
|
|
|
March |
|
|
|
2023 |
|
|
2022 |
|
Stock-based compensation expense in
operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
$ |
654,471 |
|
|
$ |
450,520 |
|
General and administrative |
|
|
618,811 |
|
|
|
305,751 |
|
Total |
|
$ |
1,273,282 |
|
|
$ |
756,271 |
|
8.
Debt
On
April 8, 2021, the Company entered into a loan and security
agreement (the “Loan Agreement”) with Innovatus Life Sciences
Lending Fund I, LP, a Delaware limited partnership (“Innovatus”) in
its capacity as Collateral Agent and sole Lender. On August 9,
2022, the Company amended the Loan Agreement. Under the amended
Loan Agreement, Innovatus, as Lender, has agreed to loan up to
$75 million,
a $50 million
increase from the original Loan Amount. As of March 31, 2023, term
loans totaling $35 million are
outstanding under the Loan Agreement, including the initial Term A
loan of $15 million which was
funded on April 8, 2021, and a $20 million Term B loan
which was funded on December 22, 2022.
Long-term
debt consisted of the following at March 31, 2023 and December 31,
2022:
Schedule of Long-term Debt
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Note payable |
|
$ |
35,000,000 |
|
|
$ |
35,000,000 |
|
Add: PIK interest
(added to principal) |
|
|
1,193,259 |
|
|
|
755,075 |
|
Add: final
fee |
|
|
- |
|
|
|
- |
|
Less: unamortized
debt issuance costs |
|
|
(653,555 |
) |
|
|
(707,001 |
) |
Less:
unamortized debt discount |
|
|
(61,442 |
) |
|
|
(65,000 |
) |
Total long-term
debt |
|
$ |
35,478,262 |
|
|
$ |
34,983,074 |
|
Future
principal payments, including the incurred PIK interest, are as
follows:
Schedule of Long Term Debt Future Principal
Payments
|
|
Years
Ending
December
31,
|
|
|
|
|
|
2025 |
|
$ |
13,572,473 |
|
2026 |
|
|
18,096,629 |
|
2027 |
|
|
4,524,157 |
|
Total |
|
$ |
36,193,259 |
|
ITEM 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
You
should read the following discussion and analysis of our financial
condition and results of operations together with our unaudited
condensed financial statements and the related notes appearing
under Item 1 of Part I of this Quarterly Report on Form 10-Q (this
“Quarterly Report”). Some of the information contained in this
discussion and analysis or set forth elsewhere in this Quarterly
Report, including information with respect to our plans and
strategy for our business and expected financial results, includes
forward-looking statements that involve risks and uncertainties.
You should review the “Risk Factors” discussed in our Annual Report
on Form 10-K for the year ended December 31, 2022, filed with the
SEC on March 23, 2023 and elsewhere in this Quarterly Report for a
discussion of important factors that could cause actual results to
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion
and analysis.
Overview
Celcuity
is a clinical-stage biotechnology company focused on the
development of targeted therapies for treatment of multiple solid
tumor indications. The Company’s lead therapeutic candidate is
gedatolisib, a pan-PI3K/mTOR inhibitor. Its mechanism of action and
pharmacokinetic properties are highly differentiated from other
currently approved and investigational therapies that target PI3K
or mTOR alone or together. The Company initiated VIKTORIA-1, a
Phase 3 study evaluating gedatolisib in patients with HR+/HER2-
advanced breast cancer in 2022 and is currently enrolling patients.
Its CELsignia companion diagnostic platform is uniquely able to
analyze live patient tumor cells to identify new groups of cancer
patients likely to benefit from already approved targeted
therapies.
Gedatolisib,
is a potent, well-tolerated, small molecule reversible dual
inhibitor, administered intravenously, that selectively targets all
Class I isoforms of PI3K and mammalian target of rapamycin (mTOR).
In April 2021, we obtained exclusive global development and
commercialization rights to gedatolisib under a license agreement
with Pfizer, Inc. We believe gedatolisib’s unique mechanism of
action, differentiated chemical structure, favorable
pharmacokinetic properties, and intravenous formulation offer
distinct advantages over currently approved and investigational
therapies that target PI3K or mTOR alone or together.
|
● |
Overcomes
limitations of therapies that only inhibit a single Class I PI3K
isoform or only one mTOR kinase complex. |
Gedatolisib
is a pan-class I isoform PI3K inhibitor with low nanomolar potency
for the p110α, p110β, p110γ, and p110δ isoforms and mTORC1 and
mTORC2 complexes. Each PI3K isoform and mTOR complex is known to
preferentially affect different signal transduction events that
involve tumor cell survival, depending upon the aberrations
associated with the linked pathway. When a therapy only inhibits a
single Class 1 isoform (e.g., alpelisib, a PI3K-α inhibitor ) or
only one mTOR kinase complex (e.g., everolimus, an mTORC1
inhibitor), numerous feedforward and feedback loops between the
PI3K isoforms and mTOR complexes cross-activate the uninhibited
sub-units. This, in turn, induces compensatory resistance that can
reduce the efficacy of isoform specific PI3K or single mTOR kinase
complex inhibitors. Inhibiting all four PI3K isoforms and both mTOR
complexes, as gedatolisib does, thus prevents the confounding
effect of isoform interaction that may occur with isoform-specific
PI3K inhibitors and the confounding interaction between PI3K
isoforms and mTOR.
|
● |
Better
tolerated by patients than oral PI3K and mTOR
drugs. |
Gedatolisib
is administered intravenously (IV) on a four-week cycle of three
weeks-on, one week-off, in contrast to the orally administered
pan-PI3K or dual PI3K/mTOR inhibitors that are no longer being
clinically developed. Oral pan-PI3K or PI3K/mTOR inhibitors have
repeatably been found to induce significant side effects that were
not well tolerated by patients. This typically leads to a high
proportion of patients requiring dose reductions or treatment
discontinuation. The challenging toxicity profile of these drug
candidates ultimately played a significant role in the decisions to
halt their development, despite showing promising efficacy. By
contrast, gedatolisib stabilizes at lower concentration levels in
plasma compared to orally administered PI3K inhibitors, resulting
in less toxicity, while maintaining concentrations sufficient to
inhibit PI3K/mTOR signaling.
Isoform-specific
PI3K inhibitors administered orally were developed to reduce
toxicities in patients. While the range of toxicities associated
with isoform-specific inhibitors is narrower than oral pan-PI3K or
PI3K/mTOR inhibitors, administering them orally on a continuous
basis still leads to challenging toxicities. The experience with an
FDA approved oral p110-α specific inhibitor, Piqray, illustrates
the challenge. In its Phase 3 pivotal trial Piqray was found to
induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia
in 39% of patients evaluated. In addition, 26% of patients
discontinued alpelisib due to treatment related adverse events. By
contrast, in the 103-patient dose expansion portion of the Phase 1b
clinical trial with gedatolisib, only 7% of patients experienced
Grade 3 or 4 hyperglycemia and less than 10% discontinued
treatment.
As of
March 31, 2023, 492 patients with solid tumors have received
gedatolisib in eight clinical trials sponsored by Pfizer. Of the
492 patients, 129 were treated with gedatolisib as a single agent
in three clinical trials. The remaining 363 patients received
gedatolisib in combination with other anti-cancer agents in five
clinical trials. Additional patients received gedatolisib in
combination with other anti-cancer agents in nine investigator
sponsored clinical trials.
A
Phase 1b trial (B2151009) evaluating patients with HR+/HER2-
metastatic breast cancer was initiated in 2016 and subsequently
enrolled 138 patients. Seven patients from this study continue to
receive study treatment, as of March 31, 2023, each of whom have
received study treatment for more than four years. The B2151009
clinical was an open label, multiple arm Phase 1b study that
evaluated gedatolisib in combination with palbociclib (CDK4/6
inhibitor) and fulvestrant or letrozole in patients with HR+/HER2-
advanced breast cancer. Thirty-five patients were enrolled in two
dose escalation arms to evaluate the safety and tolerability and to
determine the maximum tolerated dose (MTD) of gedatolisib when used
in combination with the standard doses of palbociclib and endocrine
therapy (letrozole or fulvestrant). The MTD was determined to be
180 mg administered intravenously once weekly. A total of 103
patients were subsequently enrolled in one of four expansion arms
(A, B, C, D).
High
objective overall response rates (ORR) were observed in all four
expansion arms and were comparable in each arm for PIK3CA WT and
PIK3CA MT patients. In treatment-naïve patients (Arm A), ORR was
85%. As of the data cut-off date, December 12, 2022, for Expansion
Arm A, median progression free survival (mPFS) was 48.6 months. In
patients who received prior hormonal therapy alone or in
combination with a CDK4/6 inhibitor (Arms B, C, and D), ORR ranged
from 32% to 77%. Each arm achieved its primary endpoint target,
which was reporting higher ORR in the study arm than ORR from
either the PALOMA-2 (ORR=55%) study that evaluated palbociclib plus
letrozole for Arm A or the PALOMA-3 study (ORR=25%) that evaluated
palbociclib plus fulvestrant for Arms B, C, and D. For all enrolled
patients, a clinical benefit rate (CBR) of ≥79% was observed.
Median progression-free survival (PFS) was 12.9 months for patients
who received a prior CDK4/6 inhibitor and were treated in the study
with the Phase 3 dosing schedule (Arm D).
Gedatolisib
combined with palbociclib and endocrine therapy demonstrated a
favorable safety profile with manageable toxicity. The majority of
treatment emergent adverse events were Grade 1 and 2. The most
frequently observed adverse events included stomatitis/mucosal
inflammation, the majority of which were Grade 1 and 2. The most
common Grade 4 AEs were neutropenia and neutrophil count decrease,
which were assessed as related to treatment with palbociclib. No
grade 5 events were reported in this study.
We
are currently enrolling patients in a Phase 3, open-label,
randomized clinical trial (VIKTORIA-1) to evaluate the efficacy and
safety of two regimens in adults with HR+/HER2- advanced breast
cancer whose disease has progressed after prior CDK4/6 therapy in
combination with an aromatase inhibitor: 1) gedatolisib in
combination with palbociclib and fulvestrant; and 2) gedatolisib in
combination with fulvestrant. Two hundred clinical sites in North
America, Europe, South America, Asia, and Australia have been
selected to participate in the study. The first clinical site was
activated in the third quarter of 2022. The first dosage of a
subject in the trial occurred in December 2022.
The
VIKTORIA-1 clinical trial will enable separate evaluation of
subjects according to their PIK3CA status. Subjects who meet
eligibility criteria and are PIK3CA WT will be randomly assigned
(1:1:1) to receive a regimen of either gedatolisib, palbociclib,
and fulvestrant (Arm A), gedatolisib and fulvestrant (Arm B), or
fulvestrant (Arm C). Subjects who meet eligibility criteria and are
PIK3CA MT will be randomly assigned (3:3:1) to receive a regimen of
either gedatolisib, palbociclib, and fulvestrant (Arm D) or
alpelisib and fulvestrant (Arm E), or gedatolisib and fulvestrant
(Arm F)
Our
proprietary CELsignia diagnostic platform is the only commercially
ready technology we are aware of that uses a patient’s living tumor
cells to identify the specific abnormal cellular process driving a
patient’s cancer and the targeted therapy that best treats it. This
enables us to identify patients whose tumors may respond to a
targeted therapy, even though they lack a previously associated
molecular mutation. By identifying cancer patients whose tumors
lack an associated genetic mutation but have abnormal cellular
activity a matching targeted therapeutic is designed to inhibit,
CELsignia CDx can expand the markets for a number of already
approved targeted therapies. Our current CDx identifies breast and
ovarian cancer patients whose tumors have cancer drivers
potentially responsive to treatment with human epidermal growth
factor receptor 2-negative (HER2), mesenchymal-epithelial
transition factor (c-MET), or phosphatidylinositol 3-kinases (PI3K)
targeted therapeutics. While U.S. Food and Drug Administration
(“FDA”) approval or clearance is not currently required for
CELsignia tests offered as a stand-alone laboratory developed test,
if we are partnered with a drug company to launch a CELsignia test
as a companion diagnostic for a new drug indication, we would be
required to obtain premarket approval, or PMA, in conjunction with
the pharmaceutical company seeking a new drug approval for the
matching therapy.
We
are supporting the advancement of new potential indications for
four different targeted therapies, controlled by other
pharmaceutical companies, that would rely on a CELsignia CDx to
select patients. Four Phase 2 trials are underway to evaluate the
efficacy and safety of these therapies in CELsignia selected
patients. These patients are not currently eligible to receive
these drugs and are not identifiable with a molecular
test.
Supporting
the development of a potential first-in-class targeted therapy for
breast cancer, like gedatolisib, with our CELsignia platform is a
natural extension of our strategy to use our CELsignia CDx to
enable new indications for other companies’ targeted therapies. By
combining companion diagnostics designed to enable proprietary new
drug indications with targeted therapies that treat signaling
dysregulation our CDx identifies, we believe we are uniquely
positioned to improve the standard-of-care for many early and
late-stage breast cancer patients. Our goal is to play a key role
in the multiple treatment approaches required to treat breast
cancer patients at various stages of their disease. With each
program, we are:
|
● |
Leveraging
the proprietary insights CELsignia provides into live patient tumor
cell function |
|
|
|
|
● |
Using
a CELsignia CDx to identify new patients likely to respond to the
paired targeted therapy |
|
|
|
|
● |
Developing
a new targeted therapeutic option for breast cancer
patients |
|
|
|
|
● |
Maximizing
the probability of getting regulatory approval to market the
targeted therapy indication |
Under
our April 2021 license agreement with Pfizer to research, develop,
manufacture and commercialize gedatolisib, we paid a $5.0 million
upfront fee and granted to Pfizer $5.0 million shares of Company
common stock, which fee and grant were effected and expensed to
research & development in full for the quarter in which we
signed the license agreement. In addition, we are also required to
make milestone payments to Pfizer upon achievement of certain
development and commercial milestone events, up to an aggregate of
$335.0 million. Additionally, the Company will pay Pfizer tiered
royalties on sales of gedatolisib at percentages ranging from the
low to mid-teens, which may be subject to deductions for expiration
of valid claims, amounts due under third-party licenses and generic
competition. Unless earlier terminated, the license agreement will
expire upon the expiration of all royalty obligations. The royalty
period will expire on a country-by-country basis upon the later of
(a) 12 years following the date of first commercial sale of such
product in such country, (b) the expiration of all regulatory or
data exclusivity in such country for such product or (c) the date
upon which the manufacture, use, sale, offer for sale or
importation of such product in such country would no longer
infringe, but for the license granted in the license agreement, a
valid claim of a licensed patent right.
The
Company has the right to terminate the license agreement for
convenience upon 90 days’ prior written notice. Pfizer may not
terminate the agreement for convenience. Either the Company or
Pfizer may terminate the license agreement if the other party is in
material breach and such breach is not cured within the specified
cure period. In addition, either the Company or Pfizer may
terminate the license agreement in the event of specified
insolvency events involving the other party.
Recent
Developments
In
May 2023, updated data from the Company’s Phase 1b study in
treatment naïve patients with HR+, HER2- advanced breast cancer was
presented at the European Society for Medical Oncology (ESMO)
Breast Cancer Annual Congress. These patients, from Expansion Arm A
and Escalation Arm A of the clinical trial, were treated with
gedatolisib in combination with palbociclib and letrozole. As of a
database update on March 16, 2023, median progression free survival
(mPFS) in treatment naïve patients in Expansion Arm A was 48.6
months (n=30) and Escalation Arm A was 45.8 months (n=11). When
treatment naïve patients from both Escalation Arm A and Expansion
Arm A arms are combined (N=41), mPFS was 48.6 months and mDOR was
46.9 months. These results compare favorably to published data with
other therapies in this setting.
In
April 2023, Celcuity presented a poster at the American Association
for Cancer Research (AACR) Annual Meeting 2023 highlighting
preclinical data of gedatolisib’s superior anti-proliferative
potency and efficacy in endometrial, ovarian and cervical cancer
cell lines compared to the other PI3K, AKT, and mTOR inhibitors
evaluated regardless of PTEN, P13K or AKT mutational
status.
In
February 2023, the company presented data from preclinical studies
evaluating gedatolisib and other PI3K, AKT, and mTOR inhibitors in
prostate cancer cell lines at the American Society of Clinical
Oncology Genitourinary Cancers Symposium. The presentation
demonstrated gedatolisib’s superior potency and efficacy across
different prostate cancer cell lines relative to the other PI3K,
AKT, and mTOR inhibitors evaluated regardless of PTEN or PI3K
mutational status.
Impact
of COVID-19 on our Business
Although
we have largely returned to normal operations in our facility, the
COVID-19 pandemic continues and its effect on our operations and
financial condition will depend in large part on future
developments which cannot be reasonably estimated at this time.
Future developments include the duration, scope and severity of the
pandemic, the emergence of new virus variants that are more
contagious or harmful than prior variants, actions taken by
governmental authorities, suppliers, clinical trial sites, and
other business partners to contain or mitigate the pandemic’s
impact, and the potential adverse effects on the suppliers, labor
market and general economic activity.
As we
continue to advance our clinical trial collaborations, we remain in
close contact with our current clinical sponsors, and principal
investigators, as well as prospective pharmaceutical company and
clinical collaborators, to monitor the impact of COVID-19 on our
trial enrollment timelines and collaboration discussions. We
experienced delays in the enrollment of patients in our ongoing
clinical trials and now expect interim results from the FACT-1 and
FACT-2 trials to be delayed until the first half of 2024 and final
results approximately nine months later. We could experience
further delays in clinical trials and collaborations with
pharmaceutical companies and sponsors if new variants emerge or if
the spread of COVID-19 once again accelerates. Due to the inherent
uncertainty associated with the COVID-19 pandemic, we are unable to
predict the impact the pandemic may have on our clinical trial work
and overall financial condition.
Results
of Operations
We
have not generated any revenue from sales to date, and we continue
to incur significant research and development and other expenses
related to our ongoing operations. As a result, we are not and have
never been profitable and have incurred losses in each period since
our inception in 2012. For the three months ended March 31, 2023
and 2022, we reported a net loss of approximately $11.9 million and
$7.9 million, respectively. As of March 31, 2023, we had an
accumulated deficit of approximately $108.2 million. As of March
31, 2023, we had cash and cash equivalents and short-term
investments of approximately $157.5 million.
Components of Operating Results
Revenue
To
date, we have not generated any revenue. With the execution of the
Pfizer license agreement in April 2021, whereby we acquired
exclusive world-wide licensing rights to develop and commercialize
gedatolisib, we initiated a Phase 3 clinical trial, VIKTORIA-1, in
2022 to support potential regulatory approval to market
gedatolisib. If we obtain regulatory approvals to market
gedatolisib, we expect to generate revenue from sales of the drug
for the treatment of breast cancer patients. Additionally, we will
seek to generate revenue from partnership agreements with
pharmaceutical companies to provide companion diagnostics for such
pharmaceutical partners’ existing or investigational targeted
therapies. If a new drug indication is received that requires use
of our companion diagnostic to identify eligible patients, we
expect to generate revenues from sales of tests to treating
physicians.
Research
and Development
Since
our inception, we have primarily focused on research and
development of gedatolisib, a PI3K/mTOR targeted therapy and our
CELsignia platform and corresponding tests. Research and
development expenses primarily include:
|
● |
employee-related
expenses related to our research and development activities,
including salaries, benefits, recruiting, travel and stock-based
compensation expenses; |
|
● |
laboratory
supplies; |
|
● |
consulting
fees paid to third parties; |
|
● |
clinical
trial costs; |
|
● |
validation
costs for gedatolisib |
|
● |
facilities
expenses; and |
|
● |
legal
costs associated with patent applications. |
Internal
and external research and development costs are expensed as they
are incurred. As we continue development of gedatolisib, manage the
VIKTORIA-1 Phase 3 trial, and other clinical trials to evaluate the
efficacy of targeted therapies in cancer patients selected with one
of our CELsignia tests, the proportion of research and development
expenses allocated to external spending will grow at a faster rate
than expenses allocated to internal expenses.
General
and Administrative
General
and administrative expenses consist primarily of salaries, benefits
and stock-based compensation related to our executive, finance and
support functions. Other general and administrative expenses
include professional fees for auditing, tax, and legal services
associated with being a public company, director and officer
insurance, investor relations and travel expenses for our general
and administrative personnel.
Sales
and Marketing
Sales
and marketing expenses consist primarily of professional and
consulting fees related to these functions. To date, we have
incurred immaterial sales and marketing expenses as we continue to
focus primarily on the development of our first drug, gedatolisib,
managing the VIKTORIA-1 Phase 3 trial, and development of our
CELsignia platform and corresponding CELsignia tests. We would
expect to begin to incur increased sales and marketing expenses in
anticipation of the commercialization of our first drug,
gedatolisib, and CELsignia tests. These increased expenses are
expected to include payroll-related costs as we add employees in
the commercial departments, costs related to the initiation and
operation of our sales and distribution network and marketing
related costs.
Interest
Expense
Interest
expense is primarily due to a Loan Agreement and finance lease
obligations.
Interest
Income
Interest
income consists of interest income earned on our cash, cash
equivalents, and investment balances.
Results of Operations
Comparison of the Three Months Ended March 31, 2023 and
2022
|
|
Three
Months Ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
Increase (Decrease) |
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
Percent Change |
|
Statements of
Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
11,278,493 |
|
|
$ |
6,696,313 |
|
|
$ |
4,582,180 |
|
|
|
68 |
% |
General and administrative |
|
|
1,269,044 |
|
|
|
811,292 |
|
|
|
457,752 |
|
|
|
56 |
|
Total operating
expenses |
|
|
12,547,537 |
|
|
|
7,507,605 |
|
|
|
5,039,932 |
|
|
|
67 |
|
Loss from
operations |
|
|
(12,547,537 |
) |
|
|
(7,507,605 |
) |
|
|
(5,039,932 |
) |
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(1,242,012 |
) |
|
|
(435,001 |
) |
|
|
(807,011 |
) |
|
|
186 |
|
Interest income |
|
|
1,851,132 |
|
|
|
8,159 |
|
|
|
1,842,973 |
|
|
|
n/a |
|
Other income
(expense), net |
|
|
609,120 |
|
|
|
(426,842 |
) |
|
|
1,035,962 |
|
|
|
n/a |
|
Net
loss before income taxes |
|
|
(11,938,417 |
) |
|
|
(7,934,447 |
) |
|
|
(4,003,970 |
) |
|
|
50 |
|
Income tax
benefits |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
loss |
|
$ |
(11,938,417 |
) |
|
$ |
(7,934,447 |
) |
|
$ |
(4,003,970 |
) |
|
|
50 |
% |
Research
and Development
Our
research and development expenses for the three months ended March
31, 2023 were approximately $11.3 million, representing an increase
of approximately $4.6 million, or 68%, compared to the same period
in 2022. Of the $4.6 million increase in research and development
expense, $0.8 million was related to increased employee and
consulting expenses, of which $0.2 million was in the form of
non-cash stock-based compensation. The remaining $3.8 million
increase of research and development costs is related to costs
supporting activities for the VIKTORIA-1 pivotal trial and other
existing clinical trials.
Conducting
a significant amount of research and development is central to our
business model. We plan to increase our research and development
expenses for the foreseeable future as we seek to develop
gedatolisib, manage the VIKTORIA-1 Phase 3 trial, discover new
cancer sub-types, and develop and validate additional CELsignia
tests to diagnose such sub-types. We also expect to incur increased
expenses to support companion diagnostic business development
activities with pharmaceutical companies as we develop additional
CELsignia tests and initiate a clinical trial for
gedatolisib.
General
and Administrative
Our
general and administrative expenses for the three months ended
March 31, 2023 were approximately $1.3 million, representing an
increase of approximately $0.5 million, or 56%, compared to the
same period in 2022. Non-cash stock-based compensation accounted
for $0.3 million of the $0.5 million increase. The remaining $0.2
million of the $0.5 million increase resulted from professional
fees and other expenses associated with being a public
company.
We
anticipate that our general and administrative expenses will
increase in future periods, reflecting both increased costs in
connection with the potential future commercialization of
gedatolisib and CELsignia tests, an expanding infrastructure, and
increased professional fees associated with being a public
company.
Interest
Expense
Interest
expense for the three months ended March 31, 2023 was $1.2 million
and represents an increase of $0.8 million compared to the same
period in 2022. Interest expense is primarily the result of a Loan
Agreement that was executed in April 2021 and amended in August
2022. The increase is due to rising interest rates and the
incremental $20 million funding of Term Loan B in December 2022.
The $1.2 million of interest expense includes $0.5 million of
non-cash interest expense.
Interest
Income
Interest
income for the three months ended March 31, 2023 increased $1.8
million compared to the same period in 2022. The increase was
primarily the result of higher market interest rates and the
closing of additional financing activities, leading to higher cash,
cash equivalents and short-term investment balances.
Liquidity
and Capital Resources
Since
our inception, we have incurred losses and cumulative negative cash
flows from operations. Through March 31, 2023, we have funded our
operations primarily through private placements and registered
offerings of our equity securities and unsecured convertible notes,
and borrowings under loan agreements. From inception through March
31, 2023, we raised an aggregate of approximately $223.7 million of
net proceeds through sales of our securities, and as of March 31,
2023 had $35.0 million of borrowings under loan agreements. As of
March 31, 2023, our cash and cash equivalents and short-term
investments were approximately $33.6 million and $123.8.0 million,
respectively, and we had an accumulated deficit of approximately
$108.2 million.
Private
Placement. On December 9, 2022, we issued 6,182,574 shares of
common stock, 1,120,873 shares of Series A Preferred Stock and
warrants exercisable for 6,956,450 shares of common stock to
certain institutional and other accredited investors pursuant to a
Securities Purchase Agreement entered into on May 15, 2022.
Pursuant to the Securities Purchase Agreement, the closing
(funding) of the private placement occurred following dosage of the
first patient in the Company’s Phase 3 study, VIKTORIA-1. Investors
purchased shares of common stock and Series A Preferred Stock at a
price of $5.75 per share (on an as converted to common stock
basis), with forty percent (40%) warrant coverage (on an as
converted to common stock basis) and customary resale registration
rights. The warrants have an exercise price of $8.05 per share. The
private placement generated gross proceeds of approximately $100
million before deducting placement agent fees and other offering
expenses of $4.3 million.
Open
Market Sale AgreementSM. On February 4, 2022, we
entered into an Open Market Sale AgreementSM with
Jefferies LLC, as agent, pursuant to which we may offer and sell,
from time to time, through Jefferies, shares of our common stock
having an aggregate offering price of up to $50,000,000. On October
12, 2022, pursuant to this agreement, the Company sold 500,000
shares of common stock in a single transaction at a price of $10.35
per share, generating gross proceeds of $5.2 million ($4.8 million
net of commissions and offering expenses). At March 31, 2023, $44.8
million of common stock remains available for sale under the
Jefferies agreement.
Innovatus
Loan Agreement. On April 8, 2021, we entered into a Loan
Agreement with Innovatus Life Sciences Lending Fund I, LP
(“Innovatus”), under which Innovatus agreed to loan up to $25
million in three tranches consisting of (i) a $15.0 million
non-contingent Term A loan that was funded on April 8, 2021, (ii) a
$5 million Term B loan with a deadline of March 31, 2022, and (iii)
a $5 million Term C loan to be funded upon our request, subject to
our ability to achieve certain milestones, no later than March 31,
2023. On August 9, 2022, the Company amended the Loan Agreement
with Innovatus to provide for up to $75 million in term loans. As
of March 31, 2023, term loans totaling $35 million are outstanding
under the Loan Agreement, including the initial Term A loan of $15
million which was funded on April 8, 2021, and a $20 million Term B
loan which was funded on December 22, 2022 following the closing of
the $100 million private placement described above. Additionally,
the Company will be able to draw on two additional tranches of $10
million and one additional tranche of $20 million upon achievement
of certain clinical trial milestones and satisfaction of certain
financial covenants determined on a pro forma as-funded basis.
Funding of these additional tranches is also subject to other
customary conditions and limits on when the Company can request
funding for such tranches.
We
expect that our research and development and general and
administrative expenses will increase as we continue to develop
gedatolisib, manage the VIKTORIA-1 Phase 3 trial, conduct research
related to the discovery of new cancer sub-types, conduct clinical
trials, and pursue other business development activities. We would
also expect to incur sales and marketing expenses as we
commercialize gedatolisib and our CELsignia tests. We expect to use
cash on hand, together with the funds to be received under the
Securities Purchase Agreement described above, to fund our research
and development expenses, clinical trial costs, capital
expenditures, working capital, sales and marketing expenses, and
general corporate expenses.
Based
on our current business plan, we believe that our current cash,
cash equivalents and short-term investments together with available
borrowings under the Innovatus Loan Agreement will provide
sufficient cash to finance our operations and pay obligations when
due for at least the next twelve months.
Our
expectations as to how long our current capital resources will be
sufficient to fund our operations are based on assumptions that may
not be accurate, and we could use our current capital resources
sooner than we currently expect. In addition, we may seek to raise
additional capital to finance capital expenditures and operating
expenses over the next several years as we launch our integrated
therapeutic and companion diagnostic strategy and expand our
infrastructure, commercial operations and research and development
activities, and to take advantage of financing or other
opportunities that we believe to be in the best interests of the
Company and our stockholders. Additional capital may be raised
through the sale of common or preferred equity or convertible debt
securities, entry into debt facilities or other third-party funding
arrangements. The sale of equity and convertible debt securities
may result in dilution to our stockholders and those securities may
have rights senior to those of our common shares. Agreements
entered into in connection with such capital raising activities
could contain covenants that would restrict our operations or
require us to relinquish certain rights. Additional capital may not
be available on reasonable terms, or not at all.
Cash Flows
The
following table sets forth the primary sources and uses of cash for
the three months ended March 31:
|
|
2023 |
|
|
2022 |
|
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(12,867,838 |
) |
|
$ |
(5,933,032 |
) |
Investing
activities |
|
|
21,867,551 |
|
|
|
(11,635 |
) |
Financing activities |
|
|
67,948 |
|
|
|
(46,288 |
) |
Net increase
(decrease) in cash and cash equivalents |
|
$ |
9,067,661 |
|
|
$ |
(5,990,955 |
) |
Operating
Activities
Net
cash used in operating activities was approximately $12.9 million
for the three months ended March 31, 2023 and consisted primarily
of a net loss of approximately $11.9 million and working capital
changes of $1.0 million, offset by non-cash expense items of
approximately $0.1 million. Non-cash expense items of approximately
$0.1 million primarily consisted of $1.3 million of stock-based
compensation expense and non-cash interest expense of $0.5 million,
offset by $1.7 million of non-cash interest income. The
approximately $1.0 million of working capital changes was primarily
due to a decrease in accrued expenses. The net cash used in
operating activities was approximately $5.9 million for the three
months ended March 31, 2022 and consisted primarily of a net loss
of approximately $7.9 million, offset by non-cash expense items of
$1.0 million and working capital changes of $1.0 million. Non-cash
expense items of approximately $1.0 million primarily consisted of
$0.7 million of stock-based compensation expense, non-cash interest
expense of $0.2 million, and depreciation expense of $0.1 million.
The approximately $1.0 million of working capital changes was
primarily due to an increase in accounts payable and accrued
expenses.
Investing
Activities
Net
cash provided by investing activities for the three months ended
March 31, 2023 was approximately $21.9 million and consisted
primarily of net proceeds from maturities of short-term investments
in government securities (U.S. Treasury Bills and U.S. government
securities) and minimal purchases of property and equipment. Net
cash used in investing for the three months ended March 31, 2022
were minimal and consisted of purchases of property and
equipment.
Financing
Activities
Net
cash provided by financing activities for the three months ended
March 31, 2023 was minimal and primarily consisted of proceeds from
the exercise of employee stock options, slightly offset by payments
for secondary registration and debt issuance costs. The net cash
provided by financing activities for the three months ended March
31, 2022 was minimal and primarily consisted of payments for
secondary registration costs.
Recent
Accounting Pronouncements
From
time-to-time new accounting pronouncements are issued by the
Financial Accounting Standards Board or other standard setting
bodies and adopted by us as of the specified effective date. Unless
otherwise discussed in Note 2 to our unaudited condensed financial
statements included in Item 1 of Part I of this Quarterly Report,
we believe that the impact of recently issued standards that are
not yet effective will not have a material impact on our financial
position or results of operations upon adoption.
Critical
Accounting Policies and Use of Estimates
Our
management’s discussion and analysis of financial condition and
results of operations is based on our unaudited condensed financial
statements, which have been prepared in accordance with U.S. GAAP.
The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the
reported expenses during the reporting periods. These items are
monitored and analyzed by us for changes in facts and
circumstances, and material changes in these estimates could occur
in the future. We base our estimates on historical experience and
on various other factors that we believe are reasonable under the
circumstances; the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Changes in estimates
are reflected in reported results for the period in which they
become known. Actual results may differ materially from these
estimates.
Our
significant accounting policies are more fully described in Note 2
to our unaudited condensed financial statements included in Item 1
of Part I of this Quarterly Report.
Private
Securities Litigation Reform Act
The
Private Securities Litigation Reform Act of 1995 provides a “safe
harbor” for forward-looking statements. Such forward-looking
information is included in this Quarterly Report and in other
materials filed or to be filed by us with the SEC (as well as
information included in oral statements or other written statements
made or to be made by us). Forward-looking statements include all
statements based on future expectations. This Quarterly Report
contains forward-looking statements that involve risks and
uncertainties including, but not limited to, (i) our clinical trial
plans and the estimated costs for such trials, including the timing
of launching a Phase 3 clinical trial for gedatolisib; (ii) our
expectations with respect to costs and timelines to develop,
validate and launch CELsignia tests and to continue to develop
gedatolisib; (iii) our beliefs related to the perceived advantages
of our CELsignia tests compared to traditional molecular or other
diagnostic tests; (iv) the expected benefits of gedatolisib; (v)
our expectations regarding the timeline of patient enrollment and
results from clinical trials, including the existing clinical trial
for gedatolisib; (vi) the future payments that may be owned to
Pfizer under the license agreement; (vii) our expectations
regarding partnering with pharmaceutical companies and other third
parties; (viii) our expectations regarding revenue from sales of
CELsignia tests and revenue from milestone or other payment
sources; (ix) our plans with respect to research and development
and related expenses for the foreseeable future; (x) our
expectations regarding business development activities, including
companion diagnostic related activities with pharmaceutical
companies, expanding our sales and marketing functions and the
costs associated with such activities; (xi) our expectations with
respect to the CELsignia tests and the analytical capabilities and
potential impact of such tests; (xii) our beliefs regarding the
ability of our cash on hand to fund our research and development
expenses, capital expenditures, working capital, sales and
marketing expenses, and general corporate expenses, as well as the
increased costs associated with being a public company; (xiii) our
plans with respect to potentially raising capital, and (xiv) our
expectations regarding the impact that the COVID-19 pandemic and
related economic effects will have on our business and results of
operations.
In
some cases, you can identify forward-looking statements by the
following words: “anticipate,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,”
“potential,” “predict,” “project,” “should,” “will,” “would,” or
the negative of these terms or other comparable terminology,
although not all forward-looking statements contain these words.
Forward-looking statements are only predictions and are not
guarantees of performance. These statements are based on our
management’s beliefs and assumptions, which in turn are based on
their interpretation of currently available information.
These
statements involve known and unknown risks, uncertainties and other
factors that may cause our results or our industry’s actual
results, levels of activity, performance or achievements to be
materially different from the information expressed or implied by
these forward-looking statements. Certain risks, uncertainties and
other factors include, but are not limited to, our limited
operating history; the potential impact of the COVID-19 pandemic on
our business; our initial success being heavily dependent on the
success of our CELsignia HER2 Pathway Activity Test; our inability
to develop and commercialize gedatolisib; our inability to
determine whether our CELsignia tests are currently commercially
viable; challenges we may face in developing and maintaining
relationships with pharmaceutical company partners; the complexity
and timeline for development of CELsignia tests and gedatolisib;
the uncertainty and costs associated with clinical trials; the
uncertainty regarding market acceptance by physicians, patients,
third-party payors and others in the medical community, and with
the size of market opportunities available to us; the pricing of
molecular and other diagnostic products and services that compete
with us; uncertainty with insurance coverage and reimbursement for
our CELsignia tests; difficulties we may face in managing
growth, such as hiring and retaining a qualified sales force and
attracting and retaining key personnel; changes in government
regulations; tightening credit markets and limitations on access to
capital; and obtaining and maintaining intellectual property
protection for our technology and time and expense associated with
defending third-party claims of intellectual property infringement,
investigations or litigation threatened or initiated against
us. These and additional risks, uncertainties and other
factors are described more fully in our Annual Report on Form 10-K
for the year ended December 31, 2022 and elsewhere in this
Quarterly Report. Copies of filings made with the SEC are available
through the SEC’s electronic data gathering analysis and retrieval
system (EDGAR) at www.sec.gov.
You
should read the cautionary statements made in this Quarterly Report
as being applicable to all related forward-looking statements
wherever they appear in this Quarterly Report. We cannot assure you
that the forward-looking statements in this Quarterly Report will
prove to be accurate. Furthermore, if our forward-looking
statements prove to be inaccurate, the inaccuracy may be material.
You should read this Quarterly Report completely. Other than as
required by law, we undertake no obligation to update these
forward-looking statements, even though our situation may change in
the future.
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk
As a
smaller reporting company, we are not required to provide
disclosure pursuant to this item.
ITEM 4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Our
Chief Executive Officer and Chief Financial Officer, referred to
collectively herein as the Certifying Officers, are responsible for
establishing and maintaining our disclosure controls and
procedures. The Certifying Officers have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) as of March
31, 2023. Based on that review and evaluation, the Certifying
Officers have concluded that, as of the end of the period covered
by this Quarterly Report, our disclosure controls and procedures,
as designed and implemented, are effective and provide reasonable
assurance that information required to be disclosed by us in the
periodic and current reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported
within the periods specified by the SEC’s rules and
forms.
Changes
in Internal Control Over Financial Reporting.
There
were no changes in our internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the three months ended March 31, 2023 that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II. — OTHER INFORMATION
ITEM 1. Legal Proceedings
From
time to time we may be involved in disputes or litigation relating
to claims arising out of our operations. We are not currently a
party to any legal proceedings that could reasonably be expected to
have a material adverse effect on our business, financial condition
and results of operations.
ITEM 1A. Risk Factors
As a
smaller reporting company, we are not required to provide
disclosure pursuant to this item. However, in addition to other
information set forth in this Quarterly Report, including the
important information in the section entitled “Private Securities
Litigation Reform Act,” you should carefully consider the “Risk
Factors” discussed in our Annual Report on Form 10-K for the year
ended December 31, 2022, for a discussion of important factors that
could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained
in this Quarterly Report. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial
might materially adversely affect our actual business, financial
condition and/or operating results.
ITEM 2. Unregistered Sales of Equity Securities and Use of
Proceeds
Recent
Unregistered Sales of Equity Securities
None
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
EXHIBIT
INDEX
Exhibit
No. |
|
Description |
|
|
|
3.1 |
|
Certificate
of Incorporation of the Company, as amended, including the
Certifications of Designations of Preferences, Rights, and
Limitations of Series A Convertible Preferred Stock (incorporated
by reference to Exhibit 3.1 to the Company’s Annual Report on Form
10-K/A filed with the SEC on April 7, 2023). |
|
|
|
3.2 |
|
Bylaws,
incorporated by reference from Exhibit 3.2 to the Company’s
Quarterly Report on Form 10-Q filed with the SEC on November 13,
2017. |
|
|
|
4.1 |
|
Specimen
Certificate representing shares of common stock of Celcuity Inc.,
(incorporated by reference from Exhibit 4.1 to the Company’s
Registration Statement on Form S-1/A filed September 12,
2017).
|
|
|
|
4.2 |
|
Form
of Warrant to Purchase Units of Membership Interest issued by
Celcuity LLC to Cedar Point Capital, LLC, as placement agent of
membership units and unsecured convertible promissory notes of
Celcuity LLC (incorporated by reference to Exhibit 10.9 to the
Company’s Registration Statement on Form S-1 filed with the SEC on
August 23, 2017).
|
|
|
|
4.3 |
|
Form
of Warrant to Purchase Shares of Common Stock issued by Celcuity
Inc. in connection with the conversion of 1.25% Unsecured
Convertible Promissory Notes (incorporated by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K filed with the SEC
on September 25, 2017). |
|
|
|
4.4 |
|
Representative’s
Warrant to Purchase Common Stock (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with
the SEC on September 25, 2017).
|
|
|
|
4.5 |
|
First
Amendment to Representative’s Warrant, dated September 13, 2022,
between Celcuity Inc. and Craig-Hallum Capital Group LLC
(incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on September 14,
2022).
|
|
|
|
4.6 |
|
Form
of Warrant issued by Celcuity Inc. to Innovatus Life Sciences
Lending Fund I, LP in connection with the Loan and Security
Agreement dated April 8, 2021(incorporated by reference from
Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with
the SEC on April 8, 2021).
|
|
|
|
4.7 |
|
Equity
Grant Agreement, dated April 8, 2021, between the Company and
Pfizer, Inc., (incorporated by reference from Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed with the SEC on April 8,
2021).
|
|
|
|
4.8 |
|
Form
of Warrant issued by Celcuity Inc. in connection with the
Securities Purchase Agreement, dated May 15, 2022 (incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form
8-K filed with the SEC on May 18, 2022). |
|
|
|
10.1 |
|
Commercial
Lease, Fourth Amendment to Lease, dated March 13, 2023, by and
between Celcuity Inc. and West Glen Development I, LLC
(incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on March 15,
2023). |
|
|
|
31.1* |
|
Certification
of Chairman and Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2* |
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1** |
|
Certification
of Chairman and Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2** |
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
101* |
|
Financial
statements from the Quarterly Report on Form 10-Q of the Company
for the quarter ended March 31, 2023, formatted in Inline XBRL: (i)
the Condensed Balance Sheets, (ii) the Condensed Statements of
Operations, (iii) the Condensed Statements of Changes in
Stockholders’ Equity, (iv) the Condensed Statements of Cash Flows,
and (v) the Notes to Condensed Financial Statements.
|
|
|
|
104* |
|
Cover
Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101) |
* |
Filed
herewith. |
** |
Furnished
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.
Dated:
May 15, 2023 |
|
CELCUITY
INC. |
|
|
|
|
By |
/s/
Brian F. Sullivan |
|
|
Brian
F. Sullivan |
|
|
Chairman
and Chief Executive Officer |
|
|
(Principal
Executive Officer) |
|
|
|
|
By |
/s/
Vicky Hahne |
|
|
Vicky
Hahne |
|
|
Chief
Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
Celcuity (NASDAQ:CELC)
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