Celcuity(CELC) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Celcuity Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with explanatory notes ITEM 1. Financial Statements (unaudited) This section details Celcuity Inc.'s unaudited condensed financial statements, encompassing balance sheets, statements of operations, equity, cash flows, and comprehensive explanatory notes Condensed Balance Sheets | Metric | June 30, 2022 (USD, unaudited) | December 31, 2021 (USD) | | :-------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $66,910,824 | $84,286,381 | | Total Assets | $72,350,187 | $85,906,320 | | Total Liabilities | $19,161,456 | $17,195,843 | | Total Stockholders' Equity| $53,188,731 | $68,710,477 | Condensed Statements of Operations | Metric (Three Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :---------------------------------- | :------------ | :------------- | | Research and development | $8,367,687 | $13,070,108 | | General and administrative | $1,233,040 | $573,360 | | Total operating expenses | $9,600,727 | $13,643,468 | | Net loss | $(9,960,526) | $(14,032,852) | | Net loss per share, basic and diluted | $(0.67) | $(1.11) | | Metric (Six Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :---------------------------------- | :------------ | :------------- | | Research and development | $15,064,000 | $15,306,451 | | General and administrative | $2,044,332 | $1,128,787 | | Total operating expenses | $17,108,332 | $16,435,238 | | Net loss | $(17,894,973) | $(16,824,520) | | Net loss per share, basic and diluted | $(1.20) | $(1.42) | Condensed Statements of Stockholders' Equity | Change in Stockholders' Equity (Six Months Ended June 30, 2022) | Amount (USD) | | :-------------------------------------------------------------- | :----------- | | Balance at December 31, 2021 | $68,710,477 | | Stock-based compensation | $2,275,727 | | Exercise of common stock options, net | $16,956 | | Employee stock purchases | $80,541 | | Net loss | $(17,894,973)| | Balance at June 30, 2022 | $53,188,731 | | Change in Stockholders' Equity (Six Months Ended June 30, 2021) | Amount (USD) | | :-------------------------------------------------------------- | :----------- | | Balance at December 31, 2020 | $11,702,270 | | Stock-based compensation | $989,415 | | Exercise of common stock warrants/options | $48,100 | | Issuance of common stock (follow-on offering) | $25,768,493 | | Issuance of common stock (ATM offering) | $38,962 | | Issuance of common stock (licensing agreement) | $5,000,000 | | Net loss | $(16,824,520)| | Balance at June 30, 2021 | $27,034,524 | Condensed Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :-------------------------------------------- | :------------ | :------------- | | Net cash used for operating activities | $(17,222,132) | $(10,139,253) | | Net cash used for investing activities | $(34,621) | $(57,397) | | Net cash provided by (used for) financing activities | $(118,804) | $40,197,362 | | Net change in cash and cash equivalents | $(17,375,557) | $30,000,712 | | Cash and cash equivalents, end of period | $66,910,824 | $41,638,623 | Notes to Unaudited Condensed Financial Statements 1. Organization Celcuity Inc. is a clinical-stage biotechnology company developing targeted therapies for hormonally driven cancers, with gedatolisib and the CELsignia diagnostic platform - Celcuity Inc. is a clinical-stage biotechnology company specializing in targeted therapies for hormonally driven cancers[21] - The lead therapeutic candidate is gedatolisib, a dual inhibitor targeting Class I PI3K isoforms and mTOR, with a Phase 3 study expected to initiate in 2022[21] - The CELsignia companion diagnostic platform analyzes live patient tumor cells to identify patients likely to benefit from targeted therapies[21] - The Company has not generated any revenues to date[21] 2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements Unaudited financial statements adhere to SEC Regulation S-X and U.S. GAAP, relying on management estimates, with the company opting out of extended transition periods for new accounting standards - Financial statements are prepared in accordance with Article 10 of Regulation S-X and U.S. GAAP, with management making significant estimates for items such as stock-based compensation and clinical trial costs[22][23][25] - The Company is subject to risks common to development-stage companies, including dependency on gedatolisib's success, regulatory approval, financing needs, market adoption, and competition[24] - As an emerging growth company, Celcuity has irrevocably elected not to use the extended transition period for new or revised financial accounting standards[27] 3. Net Loss Per Common Share Net loss per common share is calculated using weighted-average shares, excluding anti-dilutive securities like options and warrants from diluted EPS calculations - For all periods presented, common shares underlying options and warrants were excluded from diluted net loss per common share calculation due to their anti-dilutive effect[28] | Potentially Dilutive Securities Excluded (June 30) | 2022 Shares | 2021 Shares | | :------------------------------------------------- | :---------- | :---------- | | Options to purchase common stock | 1,782,782 | 1,023,513 | | Warrants to purchase common stock | 377,652 | 378,442 | | Restricted common stock | 3,273 | 2,964 | 4. Commitments The company holds operating and finance lease commitments, alongside material non-cancelable contractual commitments for clinical research studies and a Pfizer license agreement | Lease Type (June 30, 2022) | Right-of-use assets (USD) | Lease Liability (USD) | | :------------------------- | :------------------ | :-------------- | | Operating Lease | $148,727 | $156,769 | | Finance Lease (Net Book Value) | $5,304 | $5,379 | | Lease Costs (Six Months Ended June 30, 2022) | Amount (USD) | | :------------------------------------------- | :-------- | | Operating lease cost | $97,204 | | Finance lease cost (Amortization + Interest) | $2,918 | | Variable lease cost | $40,538 | | Total Lease Costs | $140,660 | - The Company has five Phase 2 clinical trial agreements and a license agreement with Pfizer for gedatolisib. As of June 30, 2022, there was one material non-cancelable contractual commitment of approximately $2,600,000 related to these arrangements[34] 5. Stockholders' Equity The company has pursued capital raising through a $100 million securities purchase agreement contingent on clinical milestones, an unutilized $50 million ATM, and prior follow-on offerings - On May 15, 2022, the Company entered into a securities purchase agreement for $100 million in common stock, preferred stock, and warrants, contingent on the first patient enrollment in the Phase 3 VIKTORIA-1 study by December 31, 2022[35][93] - The Company has an Open Market Sale Agreement with Jefferies LLC to sell up to $50,000,000 of common stock, with no sales made to date[36][119] - Previous capital raising included follow-on offerings in July 2021 ($56.3M gross) and February 2021 ($27.6M gross), and an At Market Issuance Sales Agreement (ATM) which was terminated in February 2021[37][38][39][43][44] 6. Stock-Based Compensation Significant stock-based compensation expense was recognized for options, restricted stock, and the ESPP, with option modifications impacting expense and reserved shares available | Stock Options Activity (Six Months Ended June 30) | 2022 Shares | 2022 Wtd Avg Exercise Price | 2021 Shares | 2021 Wtd Avg Exercise Price | | :------------------------------------------------ | :---------- | :-------------------------- | :---------- | :-------------------------- | | Options outstanding at beginning of year | 1,315,321 | $11.97 | 849,949 | $9.33 | | Granted | 550,747 | $6.52 | 218,050 | $24.70 | | Exercised | (3,286) | $5.16 | (39,620) | $7.32 | | Forfeited | (80,000) | $13.01 | (4,866) | $7.67 | | Balance at June 30 | 1,782,782 | $5.75 | 1,023,513 | $12.69 | | Stock-Based Compensation Expense (Three Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :------------------------------------------------------------ | :---------- | :--------- | | Research and development | $810,664 | $328,077 | | General and administrative | $708,795 | $212,240 | | Total | $1,519,459 | $540,317 | | Stock-Based Compensation Expense (Six Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :------------------------------------------------------------ | :---------- | :--------- | | Research and development | $1,261,183 | $583,258 | | General and administrative | $1,014,547 | $406,157 | | Total | $2,275,730 | $989,415 | - The Company modified the exercise price on 776,324 stock option awards to $5.50 in May 2022, resulting in an additional stock-based compensation effect of $428,343 for the three- and six-months ended June 30, 2022[45] 7. Debt The company holds a loan agreement with Innovatus, initially $25 million with $15 million funded at 12.85% interest, later amended to a $75 million facility across five tranches - Initial loan agreement with Innovatus for up to $25 million (three tranches), with $15 million Term A loan funded on April 8, 2021. The company is no longer eligible for the $5 million Term B loan[56][118] - The loan bears an effective interest rate of 12.85%, with 2.7% of the interest rate payable in kind, accruing as principal monthly[58] | Long-term Debt (June 30, 2022) | Amount (USD) | | :----------------------------- | :----------- | | Note payable | $15,000,000 | | Add: Payment-in-Kind interest | $506,000 | | Add: Final fee | $675,000 | | Less: Unamortized debt issuance costs | $(319,359) | | Less: Unamortized debt discount | $(850,181) | | Total long-term debt | $15,011,460 | - Innovatus has the right to convert up to 20% of the outstanding principal into common stock[59] 8. License Agreement An exclusive license agreement with Pfizer for gedatolisib involved a $5.0 million upfront payment and $5.0 million in common stock, with potential milestones up to $335.0 million and tiered royalties - On April 8, 2021, the Company entered into an exclusive license agreement with Pfizer for gedatolisib[63] - The Company paid Pfizer $5.0 million in upfront fees and issued $5.0 million of common stock, both expensed to research & development in Q2 2021[63] - The agreement includes potential milestone payments up to an aggregate of $335.0 million and tiered royalties on sales of gedatolisib[64] 9. Subsequent Events Post-June 30, 2022, the company extended its operating lease and amended its Innovatus loan agreement, increasing the facility to $75 million with revised terms - On July 27, 2022, the Company extended its operating lease for building space for one year, from May 1, 2023, to April 30, 2024[66] - On August 9, 2022, the loan agreement with Innovatus was amended, increasing the total loan facility from $25 million to $75 million across five tranches[67][90] - Funding for additional tranches (Term B, C, D, E) is conditioned upon the closing of the $100 million private placement and achievement of certain clinical trial milestones and financial covenants[67] - Under the amended loan, Innovatus has the right to convert up to 20% of the Term A loan and an additional 7% of the amount by which funded Term B, C, D, and E loans exceed $35 million into common stock at $10.00 per share[68] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, COVID-19 impact, and performance for the three and six months ended June 30, 2022 and 2021, including liquidity and forward-looking statements Overview Celcuity is a clinical-stage biotechnology company developing gedatolisib for HR+/HER2- advanced breast cancer and the CELsignia diagnostic platform, with gedatolisib showing promising Phase 1b results - Celcuity is a clinical-stage biotechnology company focused on developing gedatolisib, a pan-PI3K/mTOR inhibitor, for hormonally driven cancers and utilizing its CELsignia companion diagnostic platform[74][75] - Gedatolisib is administered intravenously, demonstrating better tolerability and lower toxicity compared to oral PI3K and mTOR inhibitors, with only 7% of patients experiencing Grade 3 or 4 hyperglycemia in Phase 1b trials, versus 39% for alpelisib[77][78] - In the Phase 1b trial (B2151009) for HR+/HER2- metastatic breast cancer, gedatolisib combined with palbociclib and endocrine therapy achieved an 85% objective response rate (ORR) in treatment-naïve patients and a median progression-free survival (PFS) of 31.1 months[81][82] - The VIKTORIA-1 Phase 3 clinical trial is expected to initiate in 2022 to evaluate gedatolisib's efficacy and safety in HR+/HER2- advanced breast cancer patients whose disease progressed after prior CDK4/6 therapy[84] - The CELsignia diagnostic platform uses live patient tumor cells to identify specific abnormal cellular processes and matching targeted therapies, aiming to expand markets for approved targeted therapies[86] Recent Developments Celcuity amended its Innovatus debt to $75 million, advanced the VIKTORIA-1 Phase 3 trial with an updated protocol, and secured FDA Breakthrough Therapy Designation for gedatolisib - On August 9, 2022, Celcuity amended its debt financing agreement with Innovatus, increasing the total term loans available to $75 million, a $50 million increase from the original agreement[90] - The VIKTORIA-1 Phase 3 clinical trial is on track to dose the first patient in the next few months, with operational activities completed[91] - The VIKTORIA-1 protocol was updated to include an additional study arm (Arm F) for PIK3CA mutated patients, mirroring the non-mutated patient arms, based on EMA recommendations[91] - On July 18, 2022, gedatolisib was granted Breakthrough Therapy Designation by the FDA for HR+/HER2- metastatic breast cancer after progression on CDK4/6 therapy, expediting its development and review[92] Impact of COVID-19 on our Business The COVID-19 pandemic continues to delay patient enrollment in clinical trials, pushing interim results for CELsignia Phase 2 trials (FACT-1 and FACT-2) to mid-2023 - The COVID-19 pandemic has caused delays in patient enrollment for ongoing clinical trials[95] - Interim results from CELsignia Phase 2 clinical trials, FACT-1 and FACT-2, are now expected to be delayed until mid-2023, with final results approximately nine months later[95] Results of Operations Celcuity reports no revenue and significant losses, with an accumulated deficit of $73.8 million, reflecting shifts in R&D, G&A, and interest expenses Overall Financial Performance - The Company has not generated any revenue from sales to date and has incurred losses in every period since its inception in 2012[96] | Metric (June 30) | 2022 (USD) | 2021 (USD) | | :--------------- | :------------ | :------------- | | Net loss (3 months) | $(9,960,526) | $(14,032,852) | | Net loss (6 months) | $(17,894,973) | $(16,824,520) | | Accumulated deficit | $(73,821,820) | N/A | | Cash and cash equivalents | $66,910,824 | N/A | Components of Operating Results - The Company expects to generate revenue from sales of gedatolisib, if approved, and from partnership agreements for companion diagnostics[98] - Research and development expenses are primarily focused on the CELsignia platform, gedatolisib development, and clinical trials, with external spending expected to grow faster than internal expenses[99][100] - General and administrative expenses are expected to increase due to potential future commercialization, expanding infrastructure, and public company professional fees[101][113] Comparison of the Three Months Ended June 30, 2022 and 2021 | Metric (Three Months Ended June 30) | 2022 (USD) | 2021 (USD) | Change (USD) | Change (%) | | :---------------------------------- | :------------ | :------------- | :------------ | :--------- | | Research and development | $8,367,687 | $13,070,108 | $(4,702,421) | (36)% | | General and administrative | $1,233,040 | $573,360 | $659,680 | 115% | | Total operating expenses | $9,600,727 | $13,643,468 | $(4,042,741) | (30)% | | Net loss | $(9,960,526) | $(14,032,852) | $4,072,326 | (29)% | | Interest expense | $(455,445) | $(391,187) | $(64,258) | 16% | | Interest income | $95,646 | $1,803 | $93,843 | 5,206% | - The 36% decrease in R&D expenses was primarily due to a $10 million reduction in gedatolisib licensing-related expenses in 2022, partially offset by a $5.3 million increase in other R&D expenses (employee, consulting, clinical trial costs)[108] - The 115% increase in G&A expenses was mainly driven by a $0.6 million increase in employee-related expenses, including $0.5 million in non-cash stock-based compensation[111] Comparison of the Six Months Ended June 30, 2022 and 2021 | Metric (Six Months Ended June 30) | 2022 (USD) | 2021 (USD) | Change (USD) | Change (%) | | :-------------------------------- | :------------ | :------------- | :------------ | :--------- | | Research and development | $15,064,000 | $15,306,451 | $(242,451) | (2)% | | General and administrative | $2,044,332 | $1,128,787 | $915,545 | 81% | | Total operating expenses | $17,108,332 | $16,435,238 | $673,094 | 4% | | Net loss | $(17,894,973) | $(16,824,520) | $(1,070,453) | 6% | | Interest expense | $(890,446) | $(391,210) | $(499,236) | 128% | | Interest income | $103,805 | $2,191 | $101,614 | 4,638% | - The 2% decrease in R&D expenses was due to a $10 million reduction in gedatolisib licensing fees in 2022, largely offset by a $9.8 million increase in other R&D expenses (employee, consulting, clinical trial costs)[109] - The 81% increase in G&A expenses was primarily due to an $0.8 million increase in employee-related expenses (including $0.6 million in non-cash stock-based compensation) and $0.1 million from director and officer insurance and professional fees[112] - Interest expense increased by 128% due to the loan agreement being in place for the entire six-month period in 2022 and a higher interest rate[115] Liquidity and Capital Resources Celcuity funds operations via capital raising, holding $66.9 million cash as of June 30, 2022, and expects current cash plus a $100 million private placement to cover expenses for at least twelve months - As of June 30, 2022, cash and cash equivalents were approximately $66.9 million, with an accumulated deficit of approximately $73.8 million[122] - The Company expects research and development, general and administrative, and future sales and marketing expenses to increase[123] - Management believes current cash on hand, combined with funds from the $100 million Securities Purchase Agreement, will provide sufficient liquidity for at least the next twelve months[124] | Cash Flow Activity (Six Months Ended June 30) | 2022 (USD) | 2021 (USD) | | :-------------------------------------------- | :------------ | :------------- | | Net cash used in operating activities | $(17,222,132) | $(10,139,253) | | Net cash used in investing activities | $(34,621) | $(57,397) | | Net cash provided by (used in) financing activities | $(118,804) | $40,197,362 | - Net cash used in operating activities increased significantly in 2022 due to a net loss and an increase in prepaid assets, partially offset by increases in accounts payable and accrued expenses[128] - Net cash used in financing activities in 2022 was minimal, contrasting with $40.2 million provided in 2021 from a follow-on offering and a loan agreement[131][132] Recent Accounting Pronouncements New accounting pronouncements are adopted as effective, with no material impact expected on the company's financial position or results of operations - The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption[133] Critical Accounting Policies and Use of Estimates Unaudited financial statements rely on management estimates and assumptions for items like stock-based compensation and clinical trial costs, which may differ from actual results - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities[134] - Significant items subject to such estimates include the valuation of stock-based compensation and prepaid or accrued clinical trial costs[23] Private Securities Litigation Reform Act This section provides a 'safe harbor' for forward-looking statements, acknowledging inherent risks and uncertainties that may cause actual results to differ materially from predictions - The report contains forward-looking statements that involve risks and uncertainties, including clinical trial plans, development costs, expected benefits of gedatolisib, and the impact of COVID-19[137] - Forward-looking statements are based on management's beliefs and assumptions, and actual results may differ materially due to known and unknown risks, such as limited operating history, the impact of COVID-19, and challenges in commercialization[138][139] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Celcuity Inc. is exempt from providing quantitative and qualitative disclosures regarding market risk - As a smaller reporting company, Celcuity Inc. is exempt from providing quantitative and qualitative disclosures about market risk[141] ITEM 4. Controls and Procedures Certifying Officers deemed disclosure controls and procedures effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures - The Certifying Officers (CEO and CFO) concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[142][143] Changes in Internal Control Over Financial Reporting - There were no changes in internal control over financial reporting during the three months ended June 30, 2022, that materially affected or are reasonably likely to materially affect internal control over financial reporting[144] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Celcuity Inc. is not currently involved in any legal proceedings expected to materially adversely affect its business, financial condition, or results of operations - The Company is not currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on its business, financial condition, and results of operations[146] ITEM 1A. Risk Factors As a smaller reporting company, Celcuity Inc. refers readers to its March 31, 2022, Form 10-Q for comprehensive risk factor disclosures, as none are required here - As a smaller reporting company, Celcuity Inc. is not required to provide disclosure for risk factors in this item[147] - Readers are directed to the 'Risk Factors' section in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2022, for a discussion of important factors[147] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds There have been no recent unregistered sales of equity securities by Celcuity Inc - There were no recent unregistered sales of equity securities[148] ITEM 3. Defaults Upon Senior Securities Celcuity Inc. has not defaulted upon any senior securities - There were no defaults upon senior securities[148] ITEM 4. Mine Safety Disclosures Celcuity Inc. has no mine safety disclosures to report - There are no mine safety disclosures[149] ITEM 5. Other Information Celcuity Inc. has no other information to disclose under this item - There is no other information to disclose[150] ITEM 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, security agreements, and certifications - The section lists various exhibits filed with the report, including the Certificate of Incorporation, Bylaws, Warrant forms, Loan and Security Agreement, and certifications[153][154] Signatures The report is duly signed by Brian F. Sullivan, Chairman and Chief Executive Officer, and Vicky Hahne, Chief Financial Officer, on August 12, 2022 - The report is duly signed by Brian F. Sullivan, Chairman and Chief Executive Officer, and Vicky Hahne, Chief Financial Officer, on August 12, 2022[157][158]