Imunon(IMNN) - 2021 Q4 - Annual Report

PART I Business Celsion is a clinical-stage biotech focused on DNA-based immunotherapies, next-gen vaccines, and directed chemotherapies - The company is a clinical-stage biotechnology firm focusing on DNA-based immunotherapies (GEN-1 for ovarian cancer), next-generation vaccines (PLACCINE platform), and directed chemotherapies (ThermoDox®)[20] - The company's business strategy is to advance its product candidates through collaborative arrangements and manage development risks by diversifying its pipeline[69][71] - As of December 31, 2021, the company had $56.9 million in cash, cash equivalents, and investments, anticipated to fund operations through the end of 2024[72] Immuno-Oncology Program The Immuno-Oncology program centers on the TheraPlas platform, with lead candidate GEN-1 for ovarian cancer, showing promising Phase I/II results - The company's lead immuno-oncology candidate, GEN-1, is a DNA-based immunotherapy from the TheraPlas platform for localized ovarian cancer treatment[21][27] - The OVATION I (Phase I) study of GEN-1 showed an 86% objective response rate (ORR) and 100% disease control rate, with a median PFS of 21 months[32][33] - Interim data from the ongoing OVATION 2 (Phase I/II) study showed an 80% complete tumor resection (R0) rate in the GEN-1 arm versus 58% in the control, a 38% improvement[43][44] - In February 2022, the DSMB recommended the OVATION 2 study continue as planned, finding the safety profile acceptable with no dose-limiting toxicities[43] PLACCINE DNA Vaccine Technology Platform Celsion is developing the PLACCINE platform for novel DNA-based vaccines, initially a next-gen COVID-19 vaccine, showing promising preclinical immunogenicity - The PLACCINE platform uses a single multi-cistronic DNA plasmid vector to express multiple pathogen antigens, aiming for broad-spectrum protection and resistance to mutations like SARS-CoV-2[46][47][55] - Preclinical in vivo studies showed the PLACCINE vaccine produced antibodies and a cytotoxic T-cell response specific to the SARS-CoV-2 spike antigen in mice[56] - In January 2022, a non-human primate (NHP) challenge study was initiated to evaluate the vaccine's safety, immunogenicity, and protection against SARS-CoV-2[57] ThermoDox® Directed Chemotherapy ThermoDox®, a heat-activated liposomal doxorubicin, saw its pivotal Phase III OPTIMA study halted in 2020 due to futility, with development continuing via investigator-sponsored studies - The global Phase III OPTIMA study of ThermoDox® for primary liver cancer was stopped in July 2020 due to futility, based on a DMC recommendation[64] - In February 2021, the company ceased following patients in the OPTIMA Study after independent analyses found no justification for continuation[67] - ThermoDox® is still evaluated in investigator-sponsored studies for pancreatic and metastatic breast cancer[68][70] Government Regulation Celsion's products face extensive FDA and international regulation, with GEN-1 receiving Fast Track and both GEN-1 and ThermoDox® gaining Orphan Drug Designation - The company's products are regulated as drugs and biological products by the FDA, requiring extensive preclinical and multi-phase clinical trials for approval[76][77] - GEN-1 received Fast Track designation from the FDA in January 2021, expediting development and review for unmet medical needs[93] - Both GEN-1 (ovarian cancer) and ThermoDox® (hepatocellular carcinoma) have Orphan Drug Designation from the FDA, offering potential market exclusivity[98] Intellectual Property Celsion's IP portfolio includes owned and licensed patents for ThermoDox® (expiring by 2026) and TheraPlas/GEN-1 (expiring by 2028), supplemented by trade secrets - The ThermoDox® technology is protected by licensed and owned patents with expiration dates extending to 2026[145] - The TheraPlas technology platform, including GEN-1, is covered by owned U.S. and international patents with expiration dates ranging from 2020 to 2028[146] Recent Events In early 2022, Celsion raised $28.5 million via preferred stock, executed a 15-for-1 reverse stock split, and subsequently redeemed the preferred stock - In January 2022, the company raised gross proceeds of approximately $28.5 million through the sale of Series A and Series B Convertible Redeemable Preferred Stock[153] - On February 28, 2022, the company implemented a 15-for-1 reverse stock split of its common stock[155] - On March 3, 2022, the company redeemed all outstanding shares of its Series A and Series B Preferred Stock for cash, retiring the entire class[154] Risk Factors Celsion faces significant risks including historical losses, high drug development failure rates, capital raising dependency, regulatory hurdles, and reliance on third parties - The company has a history of significant operating losses, with an accumulated deficit of $333 million as of December 31, 2021[160] - Drug development is highly uncertain, exemplified by ThermoDox®'s failure to meet primary endpoints in two Phase III trials[162] - The company will need to raise additional capital to fund future operations, which may not be available on favorable terms[164] - The COVID-19 pandemic poses a risk of disrupting preclinical studies, clinical trials, and regulatory timelines[170][173] - The company relies on third parties for clinical trials and manufacturing, making it vulnerable to partner delays or failures[188][193] Properties Celsion leases two primary facilities: a 9,850 sq ft corporate office in Lawrenceville, NJ (lease to Sept 2023), and 11,246 sq ft of research/lab space in Huntsville, AL - The company leases a 9,850 square foot corporate office in Lawrenceville, NJ, with the lease term extending to September 2023[263] - The company leases approximately 11,246 square feet of office and lab space in Huntsville, Alabama, under two separate agreements[264] Future Lease Payments | Future Lease Payments | Amount ($) | | :--- | :--- | | 2022 | $601,495 | | 2023 | $238,609 | | Total Future Payments | $840,104 | Legal Proceedings Celsion is involved in three legal proceedings related to ThermoDox® and the OPTIMA study: a securities class action, a derivative lawsuit, and a books and records demand - The company is defending a putative securities class action (Spar v. Celsion) alleging false and misleading statements regarding ThermoDox®[267] - A derivative shareholder lawsuit (Fidler v. Tardugno) has been filed against certain directors and officers, alleging breach of fiduciary duty related to statements about ThermoDox®[268] - A complaint regarding a corporate books and records demand (Pacheco v. Celsion) has been filed concerning the OPTIMA Study[269] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Celsion's common stock trades on The Nasdaq Capital Market under "CLSN"; the company has never paid cash dividends and plans to retain earnings for growth - The company's common stock trades on The Nasdaq Capital Market under the ticker symbol "CLSN"[274] - The company has never declared or paid cash dividends and does not plan to in the foreseeable future, retaining earnings to fund business growth[276] Management's Discussion and Analysis of Financial Condition and Results of Operations Celsion's 2021 net loss was $20.8 million, an improvement from 2020, with cash and investments increasing to $56.9 million, sufficient through 2024 Results of Operations For 2021, Celsion's net loss was $20.8 million, a slight improvement from 2020, due to reduced R&D expenses, offset by higher G&A costs and a $2.0 million goodwill impairment Financial Performance (2021 vs 2020) | Financial Metric | 2021 ($M) | 2020 ($M) | Change ($M) | | :--- | :--- | :--- | :--- | | Net Loss | ($20.8) | ($21.5) | $0.7 Decrease | | Revenue | $0.5 | $0.5 | No Change | | R&D Expenses | $10.6 | $11.3 | $0.7 Decrease | | G&A Expenses | $10.9 | $7.6 | $3.3 Increase | - The decrease in R&D expenses was primarily due to a $1.2 million reduction in costs associated with the OPTIMA Study, which was halted in 2020[369] - The increase in G&A expenses was mainly due to higher non-cash stock compensation ($1.3 million), professional fees including legal costs ($1.5 million), and insurance premiums ($0.3 million)[370] - A non-cash goodwill impairment charge of $2.0 million was recognized in Q4 2021 due to deterioration in biotech public capital markets[375] Financial Condition, Liquidity and Capital Resources As of December 31, 2021, Celsion's cash, cash equivalents, and investments totaled $56.9 million, up from $17.2 million in 2020, sufficient to fund operations through 2024 Financial Position (as of Dec 31) | Metric | Dec 31, 2021 ($M) | Dec 31, 2020 ($M) | | :--- | :--- | :--- | | Cash, Cash Equivalents & Investments | $56.9 | $17.2 | | Net Working Capital | $45.1 | $12.0 | | Accumulated Deficit | $333 | $312 | - Net cash used in operating activities was $16.2 million for 2021[385] - The company believes its current capital resources are sufficient to fund operations through 2024[385] Financial Statements and Supplementary Data This section presents Celsion's audited consolidated financial statements for 2021 and 2020, including the independent auditor's report highlighting critical audit matters Key Financial Data (2021 vs 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Balance Sheet ($M) | | | | Total Assets | $74.0 | $37.5 | | Total Liabilities | $18.3 | $18.9 | | Total Stockholders' Equity | $55.8 | $18.6 | | Statement of Operations ($M) | | | | Net Loss | ($20.8) | ($21.5) | | Net Loss Per Share | ($3.83) | ($10.08) | | Statement of Cash Flows ($M) | | | | Net Cash Used in Operating Activities | ($16.2) | ($15.6) | | Cash at End of Year | $25.6 | $17.2 | - The independent auditor, WithumSmith+Brown, PC, identified the valuation of goodwill, in-process research and development (IPR&D), and the earn-out milestone liability as critical audit matters due to significant estimation and subjective judgment[542][543][546][549] PART III Directors, Executive Officers and Corporate Governance Celsion's Board of Directors has seven members, including Chairman and CEO Michael H. Tardugno, and operates with four committees, emphasizing good governance practices - The Board of Directors has seven members, with Michael H. Tardugno serving as Chairman, President, and CEO[403][405][406] - The Board has four committees: Audit, Compensation, Nominating and Governance, and Science and Technology[422] - The company emphasizes good governance, with six of seven directors being independent, annual board committee self-evaluations, and an executive compensation clawback policy[424] Executive Compensation Celsion's executive compensation is performance-based, with CEO Michael H. Tardugno's 2021 total compensation at $2.33 million, tied to corporate objectives 2021 Named Executive Officer Compensation | Name | Position | Total Compensation ($) | | :--- | :--- | :--- | | Michael H. Tardugno | Chairman, President & CEO | $2,333,125 | | Nicholas Borys | Executive VP & CMO | $789,947 | | Khursheed Anwer | Executive VP & CSO | $1,020,478 | | Jeffrey Church | Executive VP & CFO | $1,087,963 | - The compensation philosophy emphasizes performance-based, "at-risk" pay; in 2021, 74% of the CEO's target total direct compensation was performance-based or stock-linked[449] - The 2021 incentive plan objectives included product development, research, finance, and corporate development goals, with financial and business development objectives met, but not research or bonus objectives[466] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 30, 2022, Celsion's directors and executive officers as a group beneficially owned 5.57% of common stock, with 512,884 securities available for future issuance under equity plans - As of March 30, 2022, all directors and executive officers as a group beneficially owned 321,557 shares, representing 5.57% of the outstanding common stock[516] - CEO Michael H. Tardugno was the largest individual insider holder, with beneficial ownership of 150,359 shares, or 2.61% of the company[516] Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be Issued Upon Exercise | Securities Remaining for Future Issuance | | :--- | :--- | :--- | | Approved by security holders | 433,676 | 512,884 | | Not approved by security holders | 9,332 | 0 | | Total | 443,008 | 512,884 | Principal Accountant Fees and Services Withum, Brown + Smith PC served as Celsion's independent auditor, with total fees of $166,384 in 2021 and $179,000 in 2020, all pre-approved by the Audit Committee Accountant Fees (2021 vs 2020) | Fee Category | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Audit Fees | $124,500 | $101,000 | | Audit-Related Fees | $17,550 | $69,000 | | Tax Fees | $24,334 | $9,000 | | Total Fees | $166,384 | $179,000 | - The company's independent accountant is Withum, Brown + Smith PC[521] - All audit and non-audit services were pre-approved by the Audit Committee in accordance with its policy[524] PART IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and the independent auditor's report, along with a comprehensive list of exhibits including corporate documents and material agreements - This section contains the list of consolidated financial statements filed with the report[526][527] - A detailed list of exhibits is provided, including key corporate documents, material agreements (such as the Asset Purchase Agreement with EGEN and license agreements with Duke University), and executive employment agreements[529][530][531]