Celularity (CELU) - 2024 Q4 - Annual Report

Part I Business Celularity is a regenerative and cellular medicines company with three core business lines: advanced biomaterials, cell therapy pipeline, and biobanking services - The company's business is structured around three core areas: 1) Advanced biomaterials (e.g., Biovance 3L, Rebound) for wound care, 2) Development of off-the-shelf placental-derived cell therapies (MLASCs, NK cells), and 3) A commercial biobanking service for storing birth byproducts[24][26] - Celularity is developing new biomaterial products requiring 510(k) clearance, including Celularity Tendon Wrap (CTW), FUSE Bone Void Filler (FUSE), and Celularity Placental Matrix (CPM), with expected filings in 2025, 2026, and 2027, respectively[25][37] - The company has refocused its cell therapy pipeline, prioritizing advanced-stage programs for MLASCs in Diabetic Foot Ulcer (DFU) and Crohn's Disease (CD) It has discontinued internal development for oncology indications like CYNK-001 (AML, GBM) and CYCART-19, now seeking collaboration partners for these assets[32][35] - The company operates a 147,215 sq. ft. cGMP-ready manufacturing, research, and biobanking facility in Florham Park, NJ, which underpins its Celularity IMPACT platform and supports plans to offer contract manufacturing services[51][90] Risk Factors The company faces substantial risks including significant net losses, an accumulated deficit, low cash, and material weaknesses in internal controls, raising going concern doubts - The company has a history of net losses, reporting a net loss of $57.9 million for FY 2024 and an accumulated deficit of $899.7 million as of December 31, 2024[193] - Historical operating results and a cash balance of $0.7 million at year-end indicate substantial doubt about the company's ability to continue as a going concern The independent auditor's report includes an explanatory paragraph regarding this uncertainty[195] - The company has substantial indebtedness of $36.4 million as of December 31, 2024, which is secured by all of its assets, posing a risk to liquidity and operations[269] - The company is at risk of being delisted from Nasdaq for failing to meet continued listing standards, including the timely filing of its 10-K report An appeal has been filed[366] - Material weaknesses in internal control over financial reporting have been identified, which could lead to inaccurate financial reporting and loss of investor confidence[268][384] - The business is highly dependent on key personnel, including CEO Robert Hariri Recent reductions-in-force and attrition, particularly in finance and legal, have created operational challenges[229][240] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[385] Cybersecurity Celularity maintains a cybersecurity program managed by a VP reporting to the CEO, with no material incidents reported for FY 2024 - The company's cybersecurity program is managed by a vice president who reports to the CEO, with ultimate oversight by the Board of Directors[387] - For the year ended December 31, 2024, the company is not aware of any material cybersecurity incidents[388] Properties The company's primary operations are conducted from a 150,000 sq. ft. facility in Florham Park, New Jersey, leased until 2036 - Celularity occupies a ~150,000 sq. ft. facility in Florham Park, New Jersey, under a lease that expires in 2036[389] Legal Proceedings Celularity is involved in multiple legal matters, including a settled dispute with Palantir, claims against Evolution Biologyx, and a Civil Investigative Demand - The company is cooperating with a Civil Investigative Demand from the U.S. Attorney's Office for the Eastern District of Pennsylvania related to its Interfyl product and claims submitted to federal insurers[393] - Celularity filed a complaint against Evolution Biologyx to recover approximately $2.35 million in unpaid invoices and is defending against counterclaims from Evolution[392] - A settlement with Palantir Technologies was finalized in June 2024, with Celularity making payments of $3.5 million and issuing 60,584 shares of Class A common stock[391] - Hackensack Meridian Health (HUMC) filed a complaint seeking $947,576 for alleged unpaid clinical trial costs[395] Mine Safety Disclosures This item is not applicable to the company - Not applicable[396] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock and warrants trade on Nasdaq, with approximately 96 stockholders of record as of May 7, 2025 - Class A common stock trades on Nasdaq under the symbol 'CELU' Warrants trade under 'CELUW'[398] - As of May 7, 2025, there were approximately 96 stockholders of record of Class A common stock[399] Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenues increased significantly in FY 2024, while net loss narrowed due to lower impairment charges, but liquidity remains critical Comparison of Operations (in thousands) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $54,220 | $22,771 | $31,449 | 138.1% | | Product sales, net | $35,336 | $13,149 | $22,187 | 168.7% | | License, royalty and other | $13,744 | $4,181 | $9,563 | 228.7% | | Loss from operations | $(38,358) | $(192,287) | $153,929 | (80.1)% | | Research and development | $17,386 | $30,465 | $(13,079) | (42.9)% | | Goodwill impairment | $0 | $112,347 | $(112,347) | (100.0)% | | IPR&D impairment | $0 | $107,800 | $(107,800) | (100.0)% | | Net loss | $(57,892) | $(196,295) | $138,403 | (70.5)% | - The company had $0.7 million in cash and cash equivalents and an accumulated deficit of $899.7 million as of December 31, 2024, raising substantial doubt about its ability to continue as a going concern[442][422] - The significant decrease in operating loss was primarily due to the absence of goodwill ($112.3 million) and IPR&D ($107.8 million) impairment charges that were recorded in 2023[440] - R&D expenses decreased by 42.9% to $17.4 million, driven by a reduction in outside services and clinical trial costs following the discontinuation of certain cell therapy trials[437] Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure is primarily to interest rates, but it is not significant due to short-term cash and no variable interest debt - The company's exposure to interest rate risk is considered not significant as its investments are primarily short-term and it has no variable interest debt[471] Financial Statements and Supplementary Data This section presents audited financial statements for FY 2024 and 2023, with the auditor's report highlighting going concern doubts - The independent auditor's report for FY 2024, issued by EisnerAmper LLP, contains a 'Going Concern' paragraph, citing recurring losses, net cash outflows, and outstanding due debt as factors that raise substantial doubt about the company's ability to continue[476] Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $738 | $227 | | Total Assets | $132,682 | $143,889 | | Total Liabilities | $123,845 | $102,929 | | Total Stockholders' Equity | $8,837 | $40,960 | Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,401) | $(38,685) | | Net cash provided by (used in) investing activities | $514 | $(4,048) | | Net cash provided by financing activities | $6,701 | $24,094 | - As of December 31, 2024, the company had total debt of $42.3 million, with significant portions related to loans from C.V. Starr and RWI that are subject to forbearance agreements[621][643][654] - For FY 2024, the Degenerative Disease segment generated $48.4 million in revenue with a segment contribution of $13.7 million, while the Cell Therapy segment had a negative contribution of $15.1 million[750] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[766] Controls and Procedures Management concluded that disclosure controls were ineffective as of December 31, 2024, due to five material weaknesses, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024[768] - Five material weaknesses in internal control over financial reporting were identified, relating to: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring[770] - The company is implementing a remediation plan that includes hiring more accounting staff and engaging an external firm to help document and implement a stronger internal control environment[771][774] Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fourth quarter of 2024 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans in the three months ended December 31, 2024[773] Part III Part III incorporates information by reference from the company's Definitive Proxy Statement, covering directors, executive compensation, security ownership, and related transactions Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's Definitive Proxy Statement Executive Compensation Information for this item is incorporated by reference from the company's Definitive Proxy Statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's Definitive Proxy Statement Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's Definitive Proxy Statement Principal Accounting Fees and Services Information for this item is incorporated by reference from the company's Definitive Proxy Statement Part IV Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and exhibits, including key corporate documents and officer certifications Form 10-K Summary This item is not applicable - Not applicable[792]