Cyclacel(CYCC) - 2019 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Unaudited H1 2019 financial statements show decreased cash and assets, a $3.6 million net loss, and increased operating cash outflow Consolidated Balance Sheets Total assets decreased to $19.5 million by June 30, 2019, driven by reduced cash, while liabilities also decreased, and new lease accounting recognized ROU assets and liabilities Consolidated Balance Sheet Highlights (in $000s) | Account | Dec 31, 2018 | June 30, 2019 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $17,504 | $15,159 | ($2,345) | | Total current assets | $19,787 | $18,150 | ($1,637) | | Right-of-use lease asset | $0 | $1,285 | +$1,285 | | Total assets | $19,823 | $19,464 | ($359) | | Liabilities & Equity | | | | | Total current liabilities | $4,451 | $2,500 | ($1,951) | | Lease liability | $0 | $1,233 | +$1,233 | | Total liabilities | $4,551 | $3,733 | ($818) | | Total stockholders' equity | $15,272 | $15,731 | +$459 | Consolidated Statements of Operations The company reported no revenue, with a Q2 2019 net loss of $1.8 million and a six-month net loss increasing to $3.7 million due to higher operating losses Statement of Operations Summary (in $000s, except per share data) | Metric | Q2 2018 | Q2 2019 | YTD 2018 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $0 | $0 | $0 | $0 | | R&D Expenses | $1,182 | $1,153 | $1,980 | $2,165 | | G&A Expenses | $1,283 | $1,184 | $2,647 | $2,376 | | Operating Loss | ($2,465) | ($2,337) | ($4,627) | ($4,541) | | Net Loss | ($1,852) | ($1,783) | ($3,201) | ($3,625) | | Net Loss per Share | ($0.16) | ($0.11) | ($0.28) | ($0.24) | Consolidated Statements of Cash Flows Net cash used in operations increased to $6.3 million for H1 2019, partially offset by $4.0 million from financing activities, leading to a $2.3 million cash decrease Cash Flow Summary for the Six Months Ended June 30 (in $000s) | Activity | 2018 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,942) | ($6,319) | | Net cash provided by (used in) investing activities | ($31) | $26 | | Net cash provided by (used in) financing activities | ($101) | $3,955 | | Net (decrease) in cash and cash equivalents | ($4,086) | ($2,345) | - The company received net proceeds of approximately $4.1 million from the issuance of common stock in the first six months of 2019[26] Notes to Unaudited Consolidated Financial Statements Notes detail the company's biopharmaceutical focus, cash sufficiency through 2020 with future capital needs, ASC 842 adoption, and details on dilutive securities and warrants - The company is a clinical-stage biopharmaceutical company focused on developing targeted medicines for cancer using cell cycle control, transcriptional regulation, and DNA damage response biology[29] - Management believes its cash of $15.2 million as of June 30, 2019, is sufficient to fund operations through the end of 2020, but notes that its future viability depends on raising additional capital[32][34] - On January 1, 2019, the company adopted the new lease accounting standard (ASC 842), resulting in the recognition of a $1.5 million lease liability and a corresponding right-of-use asset[36][38] - As of June 30, 2019, there were 7,490,500 warrants outstanding with an exercise price of $2.00, expiring in 2024[78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MD&A highlights clinical program progress, no revenue, increased R&D expenses, decreased G&A, and the need for additional capital beyond 2020 despite current cash Overview The company's H1 2019 focus was on clinical programs, including CYC065, sapacitabine, and CYC140, alongside a collaboration with MD Anderson Cancer Center - The company's main focus is on its clinical programs: CYC065 (transcriptional regulation), sapacitabine (DNA damage response), and CYC140 (anti-mitotic)[97] - A clinical collaboration with MD Anderson Cancer Center was established to evaluate three of the company's medicines in up to 170 patients with hematological malignancies[108] Results of Operations Q2 2019 R&D expenses were flat, G&A decreased 8%; H1 2019 R&D increased 9% due to clinical progress, while G&A decreased 10% R&D Expenses by Program - Three Months Ended June 30 (in $000s) | Program | 2018 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Transcriptional Regulation | $637 | $684 | $47 | 7% | | Sapacitabine | $340 | $109 | ($231) | (68%) | | Other R&D | $205 | $360 | $155 | 76% | | Total R&D | $1,182 | $1,153 | ($29) | (2%) | R&D Expenses by Program - Six Months Ended June 30 (in $000s) | Program | 2018 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Transcriptional Regulation | $1,106 | $1,304 | $198 | 18% | | Sapacitabine | $482 | $211 | ($271) | (56%) | | Other R&D | $392 | $650 | $258 | 66% | | Total R&D | $1,980 | $2,165 | $185 | 9% | - General and administrative expenses decreased by 8% for the three-month period and 10% for the six-month period ended June 30, 2019, compared to the same periods in 2018, primarily due to reduced legal and professional costs[118][133] Liquidity and Capital Resources As of June 30, 2019, the company had $15.2 million in cash, sufficient through 2020, but requires additional capital for full drug development and commercialization - The company expects its existing cash of $15.2 million (as of June 30, 2019) to be sufficient to fund operating expenses and capital requirements through the end of 2020[32][149] - The company does not currently have sufficient funds to complete the development and commercialization of any of its drug candidates and will need to raise additional capital[149] Key Liquidity Measures (in $000s) | Metric | June 30, 2018 | June 30, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $19,824 | $15,159 | | Working capital | $18,693 | $15,650 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosures as it qualifies as a smaller reporting company - The company is not required to provide information on quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[154] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2019, with no significant changes due to ASC 842 adoption - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[155] - The company implemented the new lease accounting standard (ASU 2016-02, Topic 842) on January 1, 2019, with no significant changes to internal controls over financial reporting[156] Part II. Other Information Item 1. Legal Proceedings No legal proceedings were reported during the period - There are no legal proceedings to report[159] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported - No material changes have occurred in the company's risk factors since the filing of its 2018 Form 10-K[160] Other Items (2, 3, 4, 5, 6) The company reported no unregistered equity sales, no defaults on senior securities, and no other material information, with mine safety disclosures not applicable - Item 2: No unregistered sales of equity securities and use of proceeds were reported[161] - Item 3: No defaults upon senior securities were reported[162] - Item 4: Mine Safety Disclosures are not applicable[163]