Cyclacel(CYCC) - 2019 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) Unaudited Q1 2019 financials reflect no revenue, increased net loss, and improved cash from financing, with new lease accounting adopted Consolidated Balance Sheets Total assets increased to $21.5 million by March 31, 2019, driven by cash and new lease assets, while liabilities decreased, raising equity Consolidated Balance Sheet Highlights (in $000s) | Balance Sheet Item | Dec 31, 2018 | Mar 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $17,504 | $17,934 | | Total current assets | $19,787 | $20,124 | | Right-of-use lease asset | $0 | $1,353 | | Total assets | $19,823 | $21,510 | | Total current liabilities | $4,451 | $2,487 | | Lease liability | $0 | $1,468 | | Total liabilities | $4,551 | $3,955 | | Total stockholders' equity | $15,272 | $17,555 | Consolidated Statements of Operations Q1 2019 operations show no revenue, with net loss increasing to $1.9 million due to higher R&D and lower other income Consolidated Statements of Operations (in $000s, except per share data) | Metric | Q1 2018 | Q1 2019 | | :--- | :--- | :--- | | Total revenues | $0 | $0 | | Research and development | $798 | $1,012 | | General and administrative | $1,364 | $1,192 | | Operating loss | ($2,162) | ($2,204) | | Total other income, net | $631 | $94 | | Net loss | ($1,349) | ($1,842) | | Net loss applicable to common stockholders | ($1,399) | ($1,892) | | Net loss per share – basic and diluted | ($0.12) | ($0.14) | Consolidated Statements of Cash Flows Q1 2019 saw increased cash used in operations ($3.7M), offset by $4.1M from financing, resulting in a net cash increase to $17.9M Consolidated Cash Flow Summary (in $000s) | Cash Flow Activity | Q1 2018 | Q1 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,139) | ($3,684) | | Net cash (used in) / provided by investing activities | ($22) | $27 | | Net cash (used in) / provided by financing activities | ($50) | $4,056 | | Net (decrease) / increase in cash | ($2,185) | $430 | | Cash and cash equivalents, end of period | $21,725 | $17,934 | Notes to Unaudited Consolidated Financial Statements Notes detail clinical-stage status, going concern through 2020, ASC 842 adoption, no revenue, and $4.3 million raised from stock issuance - The company is a clinical-stage biopharmaceutical company focused on developing targeted medicines for cancer and other serious diseases, leveraging expertise in cell cycle, transcriptional regulation, and DNA damage response biology[30] - Management concluded that the company's cash of $17.9 million as of March 31, 2019, is sufficient to fund operations through the end of 2020, though future viability beyond 2020 depends on raising additional capital[33][35] - On January 1, 2019, the company adopted lease accounting standard ASC 842, recognizing a lease liability of $1.5 million and a corresponding right-of-use asset, with prior period statements not recast[37][39] - The "At Market Issuance" sales agreement with H.C. Wainwright concluded in Q1 2019, with the company selling 4,702,527 shares for gross proceeds of approximately $4.3 million, and total net proceeds from the agreement approximately $4.7 million[77] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses CYC065 and sapacitabine programs, increased R&D, decreased G&A, no revenue, and cash sufficient through 2020 but needing more capital Overview The company focused on advancing clinical programs for CYC065, sapacitabine, and CYC140, including a collaboration with MD Anderson Cancer Center - The company's primary focus is on its transcriptional regulation program (evaluating CYC065, a CDK inhibitor) and its DNA damage response program (evaluating sapacitabine)[98] - A three-year Clinical Collaboration Agreement with MD Anderson Cancer Center is in place to evaluate the safety and efficacy of three Cyclacel medicines in up to 170 patients with various hematological malignancies[108] - CYC140, a novel polo-like-kinase 1 (PLK1) inhibitor, is open for enrollment in a first-in-human study for patients with advanced leukemias and MDS[107] Results of Operations Q1 2019 results show no revenue, increased R&D due to CYC065, decreased G&A, and significantly lower other income from reduced royalties Research and Development Expenses (in $000s) | Program | Q1 2018 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Transcriptional Regulation | $470 | $620 | $150 | 32% | | DNA Damage Response | $37 | $31 | ($6) | (16%) | | Sapacitabine | $141 | $102 | ($39) | (28%) | | Other R&D | $150 | $259 | $109 | 73% | | Total R&D Expenses | $798 | $1,012 | $214 | 27% | General and Administrative Expenses (in $000s) | Metric | Q1 2018 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total G&A Expenses | $1,364 | $1,192 | ($172) | (13%) | - Total other income decreased by approximately $0.5 million, from $0.6 million in Q1 2018 to $0.1 million in Q1 2019, primarily due to lower royalties receivable from a 2005 asset purchase agreement with a third party[120] Liquidity and Capital Resources As of March 31, 2019, the company had $17.9 million cash, increased operating cash use, and raised $4.1 million from financing, sufficient through 2020 but requiring additional capital Key Liquidity Measures (in $000s) | Metric | Mar 31, 2018 | Mar 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,725 | $17,934 | | Total working capital | $20,474 | $17,637 | Cash Flow Summary (in $000s) | Activity | Q1 2018 | Q1 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,139) | ($3,684) | | Net cash provided by financing activities | ($50) | $4,056 | - The company believes existing funds are sufficient to satisfy planned working capital and capital expenditures through the end of 2020, but it does not have sufficient funds to complete development and commercialization of any drug candidates and will need to raise additional capital[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Cyclacel is not required to provide information regarding quantitative and qualitative disclosures about market risk[137] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2019, with no significant changes to internal controls from new lease accounting standards - Based on an evaluation as of March 31, 2019, the company's chief executive officer and principal financial officer concluded that disclosure controls and procedures were effective[138] - The company implemented ASU 2016-02, Leases (Topic 842) on January 1, 2019, with no significant changes made to internal controls over financial reporting as a result[139] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[142] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for 2018 - There have been no material changes to the risk factors contained in the Annual Report on Form 10-K for the year ended December 31, 2018[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - None[144] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[145] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[146] Item 5. Other Information The company reported no other information - None[147] Item 6. Exhibits The report lists several exhibits filed with Form 10-Q, including employment agreements, SOX certifications, and XBRL data files - Exhibits filed include employment agreements, CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL formatted financial statements[148]