CELCUITY INC. You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our financial statements and the related notes included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" discussed in Item 1A of Part I of this Annual Report.
OVERVIEW
Gedatolisib, is a potent, well-tolerated, small molecule reversible dual
inhibitor, administered intravenously, that selectively targets all Class I
isoforms of PI3K and mammalian target of rapamycin (mTOR). In
? Overcomes limitations of therapies that only inhibit a single Class I PI3K
isoform or only one mTOR kinase complex.
Gedatolisib is a pan-class I isoform PI3K inhibitor with low nanomolar potency for the p110?, p110?, p110?, and p110? isoforms and mTORC1 and mTORC2 complexes. Each PI3K isoform and mTOR complex is known to preferentially affect different signal transduction events that involve tumor cell survival, depending upon the aberrations associated with the linked pathway. When a therapy only inhibits a single Class I isoforms (e.g., alpelisib, a PI3K-? inhibitor ) or only one mTOR kinase complex (e.g., everolimus, an mTORC1 inhibitor), numerous feedforward and feedback loops between the PI3K isoforms and mTOR complexes cross-activates the uninhibited sub-units. This, in turn, induces compensatory resistance that reduces the efficacy of isoform specific PI3K or single mTOR kinase complex inhibitors. Inhibiting all four PI3K isoforms and both mTOR complexes, as gedatolisib does, thus prevents the confounding effect of isoform interaction that may occur with isoform-specific PI3K inhibitors and the confounding interaction between PI3K isoforms and mTOR.
? Better tolerated by patients than oral PI3K and mTOR drugs.
Gedatolisib is administered intravenously (IV) on a four-week cycle of three weeks-on, one week-off, in contrast to the orally administered pan-PI3K or dual PI3K/mTOR inhibitors that are no longer being clinically developed. Oral pan-PI3K or PI3K/mTOR inhibitors have repeatably been found to induce significant side effects that were not well tolerated by patients. This typically leads to a high proportion of patients requiring dose reductions or treatment discontinuation. The challenging toxicity profile of these drug candidates ultimately played a significant role in the decisions to halt their development, despite showing promising efficacy. By contrast, gedatolisib stabilizes at lower concentration levels in plasma compared to orally administered PI3K inhibitors, resulting in less toxicity, while maintaining concentrations sufficient to inhibit PI3K/mTOR signaling.
Isoform-specific PI3K inhibitors administered orally were developed to reduce toxicities in patients. While the range of toxicities associated with isoform-specific inhibitors is narrower than oral pan-PI3K or PI3K/mTOR inhibitors, administering them orally on a continuous basis still leads to challenging toxicities. The experience with an FDA approved oral p110-? specific inhibitor, Piqray, illustrates the challenge. In its Phase 3 pivotal trial Piqray was found to induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia in 39% of patients evaluated. In addition, 26% of patients discontinued alpelisib due to treatment related adverse events. By contrast, in the 103-patient dose expansion portion of the Phase 1b clinical trial with gedatolisib, only 7% of patients experienced Grade 3 or 4 hyperglycemia and less than 10% discontinued treatment.
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As of
A Phase 1b trial (B2151009) evaluating patients with ER+/HER2- metastatic breast
cancer was initiated in 2016 and subsequently enrolled 138 patients. Seven
patients from this study continue to receive study treatment, as of
High objective overall response rates were observed in all four expansion arms and were comparable in each arm for PIK3CA WT and PIK3CA MT patients. In treatment-naïve patients (Arm A), ORR was 85%. In patients who received prior hormonal therapy alone or in combination with a CDK4/6 inhibitor (Arms B, C, and D), ORR ranged from 36% to 77%. Each arm achieved its primary endpoint target, which was reporting higher ORR in the study arm than ORR from either the PALOMA-2 (ORR=55%) study that evaluated palbociclib plus letrozole for Arm A or the PALOMA-3 study (ORR=25%) that evaluated palbociclib plus fulvestrant for Arms B, C, and D. For all enrolled patients, a clinical benefit rate (CBR) of ?79% was observed. Median progression-free survival (PFS) was 12.9 months for patients who received a prior CDK4/6 inhibitor and were treated with the Phase 3 dosing schedule (Arm D). For the Arm A patients that were treatment naive in the advanced setting, median PFS had not yet been reached.
Gedatolisib combined with palbociclib and endocrine therapy demonstrated a favorable safety profile with manageable toxicity. The majority of treatment emergent adverse events were Grade 1 and 2. The most frequently observed adverse events included stomatitis/mucosal inflammation, the majority of which were Grade 1 and 2. The most common Grade 4 AEs were neutropenia and neutrophil count decrease, which were assessed as related to treatment with palbociclib. No grade 5 events were reported in this study.
We activated VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to
evaluate the efficacy and safety of two regimens in adults with HR+/HER2-
advanced breast cancer whose disease has progressed after prior CDK4/6 therapy
in combination with an aromatase inhibitor: 1) gedatolisib in combination with
palbociclib and fulvestrant: and 2) gedatolisib in combination with fulvestrant.
Two hundred clinical sites in
The clinical trial will enable separate evaluation of subjects according to their PIK3CA status. Subjects who meet eligibility criteria and are PIK3CA WT will be randomly assigned (1:1:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm A), gedatolisib and fulvestrant (Arm B), or fulvestrant (Arm C). Subjects who meet eligibility criteria and are PIK3CA MT will be randomly assigned (3:3:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm D), alpelisib and fulvestrant (Arm E), or gedatolisib and fulvestrant (Arm F).
Our proprietary CELsignia diagnostic platform is the only commercially ready
technology we are aware of that uses a patient's living tumor cells to identify
the specific abnormal cellular process driving a patient's cancer and the
targeted therapy that best treats it. This enables us to identify patients whose
tumors may respond to a targeted therapy, even though they lack a previously
associated molecular mutation. By identifying cancer patients whose tumors lack
an associated genetic mutation but have abnormal cellular activity a matching
targeted therapeutic is designed to inhibit, CELsignia CDx can expand the
markets for a number of already approved targeted therapies. Our current CDx
identifies breast and ovarian cancer patients whose tumors have cancer drivers
potentially responsive to treatment with human epidermal growth factor receptor
2-negative (HER2), mesenchymal-epithelial transition factor (c-MET), or
phosphatidylinositol 3-kinases (PI3K) targeted therapeutics. While
We are supporting the advancement of new potential indications for four different targeted therapies, controlled by other pharmaceutical companies, that would rely on a CELsignia CDx to select patients. Four Phase 2 trials are underway to evaluate the efficacy and safety of these therapies in CELsignia selected patients. These patients are not currently eligible to receive these drugs and are not identifiable with a molecular test.
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Supporting the development of a potential first-in-class targeted therapy for breast cancer, like gedatolisib, with our CELsignia platform is a natural extension of our strategy to use our CELsignia CDx to enable new indications for other companies' targeted therapies. By combining companion diagnostics designed to enable proprietary new drug indications with targeted therapies that treat signaling dysregulation our CDx identifies, we believe we are uniquely positioned to improve the standard-of-care for many early and late-stage breast cancer patients. Our goal is to play a key role in the multiple treatment approaches required to treat breast cancer patients at various stages of their disease. With each program, we are:
? Leveraging the proprietary insights CELsignia provides into live patient tumor
cell function
? Using a CELsignia CDx to identify new patients likely to respond to the paired
targeted therapy
? Developing a new targeted therapeutic option for breast cancer patients
? Maximizing the probability of getting regulatory approval to market the
targeted therapy indication
Recent Developments
On
On
On
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We have not generated any revenue from sales to date, and we continue to incur
significant research and development and other expenses related to our ongoing
operations. As a result, we are not and have never been profitable and have
incurred losses in each period since we began operations in 2012. For the years
ended
Impact of COVID-19 on our Business
Although we have largely returned to normal operations in our facility, the COVID-19 pandemic continues and its effect on our operations and financial condition will depend in large part on future developments which cannot be reasonably estimated at this time. Future developments include the duration, scope and severity of the pandemic, the emergence of new virus variants that are more contagious or harmful than prior variants, actions taken by governmental authorities, suppliers, clinical trial sites, and other business partners to contain or mitigate the pandemic's impact, and the potential adverse effects on the suppliers, labor market and general economic activity.
As we continue to advance our clinical trial collaborations, we remain in close contact with our current clinical sponsors, and principal investigators, as well as prospective pharmaceutical company and clinical collaborators, to monitor the impact of COVID-19 on our trial enrollment timelines and collaboration discussions. We experienced delays in the enrollment of patients in our ongoing CELsignia Phase 2 clinical trials and now expect interim results from FACT-1 and FACT-2 to be delayed until the second half of 2023. We could experience further delays in clinical trials and collaborations with pharmaceutical companies and sponsors if new variants emerge or if the spread of COVID-19 once again accelerates. Due to the inherent uncertainty associated with the COVID-19 pandemic, we are unable to predict the impact the pandemic may have on our clinical trial work and overall financial condition.
RESULTS OF OPERATIONS
Components of Operating Results
Revenue
To date, we have not generated any revenue. With the execution of the Pfizer
license agreement in
Research and Development
Since our inception, we have primarily focused on research and development of gedatolisib, a PI3K/mTOR targeted therapy and our CELsignia platform and corresponding tests. Research and development expenses primarily include:
? employee-related expenses related to our research and development activities,
including salaries, benefits, recruiting, travel and stock-based compensation
expenses;
? laboratory supplies;
? consulting fees paid to third parties;
? clinical trial costs;
? validation costs for gedatolisib;
? facilities expenses; and
? legal costs associated with patent applications.
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Internal and external research and development costs are expensed as they are incurred. As we continue development of gedatolisib, manage the VIKTORIA-1 Phase 3 trial and other clinical trials to evaluate the efficacy of targeted therapies in cancer patients selected with one of our CELsignia tests, the proportion of research and development expenses allocated to external spending will grow at a faster rate than expenses allocated to internal expenses.
General and Administrative
General and administrative expenses consist primarily of salaries, benefits and stock-based compensation related to our executive, finance and support functions. Other general and administrative expenses include professional fees for auditing, tax, and legal services associated with being a public company, director and officer insurance, investor relations and travel expenses for our general and administrative personnel.
Sales and Marketing
Sales and marketing expenses consist primarily of professional and consulting fees related to these functions. To date, we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our first drug, gedatolisib, managing the VIKTORIA-1 Phase 3 trial, and development of our CELsignia platform and corresponding CELsignia tests. We would expect to begin to incur increased sales and marketing expenses in anticipation of the commercialization of our first drug, gedatolisib, and CELsignia tests. These increased expenses are expected to include payroll-related costs as we add employees in the commercial departments, costs related to the initiation and operation of our sales and distribution network and marketing related costs.
Interest Expense
Interest expense is primarily due to a Loan Agreement and finance lease obligations.
Interest Income
Interest income consists of interest income earned on our cash, cash equivalents and investment balances.
63 Results of Operations
Comparison of the Years Ended
Years Ended
December 31, Increase (Decrease)
2022 2021 $ Percent Change
Statements of
Operations Data:
Operating expenses:
Research and
development $ 35,289,548 $ 25,758,006 $ 9,531,542 37 %
General and
administrative 4,101,543 2,597,909 1,503,634 58
Total operating
expenses 39,391,091 28,355,915 11,035,176 39
Loss from operations (39,391,091 ) (28,355,915 ) (11,035,176 ) 39
Other income (expense)
Interest expense (2,106,111 ) (1,262,350 ) (843,761 ) 67
Interest income 1,127,162 13,262 1,113,900 8,399
Loss on sale of fixed
assets - (263 ) 263 n/a
Other income
(expense), net (978,949 ) (1,249,351 ) 270,402 (22 )
Net loss before income
taxes (40,370,040 ) (29,605,266 ) (10,764,774 ) 36
Income tax benefits - - - -
Net loss $ (40,370,040 ) $ (29,605,266 ) $ (10,764,774 ) 36 %
Research and Development
For the year ended
Conducting a significant amount of research and development is central to our business model. We plan to increase our research and development expenses for the foreseeable future as we seek to develop gedatolisib, manage the VIKTORIA-1 Phase 3 trial, discover new cancer sub-types, and develop and validate additional CELsignia tests to diagnose such sub-types. We also expect to incur increased expenses to support companion diagnostic business development activities with pharmaceutical companies as we develop additional CELsignia tests and manage a clinical trial for gedatolisib.
64 General and Administrative
For the year ended
We anticipate that our general and administrative expenses will increase in future periods, reflecting both increased costs in connection with the potential future commercialization of gedatolisib and CELsignia tests, an expanding infrastructure, and increased professional fees associated with being a public company.
Interest Expense
For the year ended
Interest Income
For the year ended
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have incurred losses and cumulative negative cash flows
from operations. Through
Private Placement. On
Open Market Sale AgreementSM. On
Innovatus Loan Agreement. On
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We expect that our research and development and general and administrative expenses will increase as we continue to develop gedatolisib, manage the VIKTORIA-1 Phase 3 trial, conduct research related to the discovery of new cancer sub-types, conduct clinical trials, and pursue other business development activities. We would also expect to incur sales and marketing expenses as we commercialize gedatolisib and our CELsignia tests. We expect to use cash on hand to fund our research and development expenses, clinical trial costs, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses.
Based on our current business plan, we believe that our current cash, cash equivalents and short-term investments together with available borrowings under the Innovatus Loan Agreement will provide sufficient cash to finance our operations and pay obligations when due through at least 2025.
Our expectations as to how long our current capital resources will be sufficient to fund our operations are based on assumptions that may not be accurate, and we could use our current capital resources sooner than we currently expect. In addition, we may seek to raise additional capital to finance capital expenditures and operating expenses over the next several years as we launch our integrated therapeutic and companion diagnostic strategy and expand our infrastructure, commercial operations and research and development activities, and to take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our stockholders. Additional capital may be raised through the sale of common or preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. Agreements entered into in connection with such capital raising activities could contain covenants that would restrict our operations or require us to relinquish certain rights. Additional capital may not be available on reasonable terms, or not at all.
Cash Flows The following table sets forth the primary sources and uses of cash for the years endedDecember 31 : December 31, 2022 2021 Net cash provided by (used in): Operating activities$ (36,008,171 ) $ (20,311,940 ) Investing activities (144,031,794 ) (81,398 ) Financing activities 120,325,141 93,041,808
Net increase (decrease) in cash and cash equivalents
Operating Activities
Net cash used in operating activities was approximately
Net cash used in operating activities was approximately
66 Investing Activities
Net cash used in investing activities for the year ended
Net cash used in investing activities for the year ended
Financing Activities
Net cash provided by financing activities for the year ended
Net cash provided by financing activities for the year ended
RECENT ACCOUNTING PRONOUNCEMENTS
From time-to-time new accounting pronouncements are issued by the
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Our significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report. Of our significant accounting policies, we believe that the following are the most critical:
Stock-Based Compensation
Our stock-based compensation consists of common stock options and restricted stock issued to certain employees and nonemployees and our Employee Stock Purchase Plan ("ESPP"). We recognize compensation expense based on an estimated grant date fair value using the Black-Scholes option-pricing method. We have elected to account for forfeitures as they occur.
The inputs for the Black-Scholes valuation model require management's
significant assumptions. Prior to our IPO, the price per share of common stock
was determined by our board based on recent prices of common stock sold in
private offerings. Subsequent to the IPO, the price per share of common stock is
determined by using the closing market price on the Nasdaq Capital Market on the
grant date. The risk-free interest rates are based on the rate for
All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees. In the event we terminate any of our consulting agreements, the unvested options issued in connection with such agreements would also be cancelled.
For grants of restricted stock, we record compensation expense based on the quoted fair value of the shares on the grant date over the requisite service period. Compensation expense for ESPP rights is recorded in line with each respective offering period.
Clinical Trial Costs
The Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers, which includes the conduct of preclinical studies and clinical trials. These costs can be a significant component of the Company's research and development expenses. The Company primarily relies on a compilation of progress reports from third-party service providers, including the respective invoicing, to record actual expenses, along with determining changes to prepaid assets and accrued liabilities. To date, the company believes utilization of third-party reports most accurately reflects expenses. As the current VIKTORIA-1 Phase 3 trial ramps up site activation and patient enrollment, the Company may need to estimate expenses in future periods and actual services performed may vary from these estimates. Changes in these estimates that result in material changes to the Company's prepaid assets or accrued expenses could materially affect the Company's results of operations.
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