CTXR 10-Q
Citius Pharmaceuticals, Inc. (CTXR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
OR
For the transition period from ______________ to ______________
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 12, 2024, there were
Citius Pharmaceuticals, Inc.
FORM 10-Q
TABLE OF CONTENTS
June 30, 2024
i
EXPLANATORY NOTE
In this Quarterly Report on Form 10-Q, and unless the context otherwise requires, the “Company,” “we,” “us,” and “our” refer to Citius Pharmaceuticals, Inc. (“Citius Pharma”) and its wholly-owned subsidiaries Leonard-Meron Biosciences, Inc., and Citius Oncology, Inc. (“Citius Oncology”), and its majority-owned subsidiary, NoveCite, Inc., taken as a whole.
ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this Report and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to:
| ● | our ability to apply for, obtain and maintain required regulatory approvals for our product candidates; | |
| ● | the cost, timing and results of our pre-clinical and clinical trials; | |
| ● | our ability to raise funds for general corporate purposes and operations, including our pre-clinical and clinical trials; |
| ● | the commercial feasibility and success of our technology and product candidates; |
| ● | our ability to recruit and retain qualified management and technical personnel to carry out our operations; | |
| ● | our ability to realize some or all of the benefits expected to result from the spinoff of Citius Oncology, or the delay of such benefits; | |
| ● | our ongoing businesses may be adversely affected and subject to certain risks and consequences as a result of the spinoff of Citius Oncology; and |
| ● | the other factors discussed in the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission on December 29, 2023, and elsewhere in this Report. |
Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing date of this Report.
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CITIUS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, | September 30, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Deposits | ||||||||
| In-process research and development | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued compensation | ||||||||
| Operating lease liability | ||||||||
| Total Current Liabilities | ||||||||
| Deferred tax liability | ||||||||
| Operating lease liability – noncurrent | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock – $ | ||||||||
| Common stock – $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Citius Pharmaceuticals, Inc. Stockholders’ Equity | ||||||||
| Non-controlling interest | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
1
CITIUS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2024 AND 2023
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Stock-based compensation – general and administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Gain on sale of New Jersey net operating losses | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend on warrant extension | ||||||||||||||||
| Net Loss Applicable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Weighted Average Common Shares Outstanding | ||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
2
CITIUS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2024 AND 2023
(Unaudited)
| Preferred | Common Stock | Additional Paid-In | Accumulated | Total Citius Pharmaceuticals, Inc. Stockholders’ | Non-Controlling | Total | ||||||||||||||||||||||||||
| Stock | Shares | Amount | Capital | Deficit | Equity | Interest | Equity | |||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||||||||||
| Issuance of common stock in registered direct offering, net of costs of $ | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon cashless exercise of stock options | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in registered direct offering, net of costs of $ | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
3
CITIUS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2024 AND 2023
(Unaudited)
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Issuance of common stock for services | ||||||||
| Amortization of operating lease right-of-use asset | ||||||||
| Depreciation | ||||||||
| Deferred income tax expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Accrued compensation | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Net proceeds from registered direct offering | ||||||||
| Proceeds from common stock option exercise | ||||||||
| Net Cash Provided By Financing Activities | ||||||||
| Net Change in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents - Beginning of Period | ||||||||
| Cash and Cash Equivalents - End of Period | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
4
CITIUS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 2024 AND 2023
(Unaudited)
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Citius Pharmaceuticals, Inc. (“Citius Pharma,” and together with its subsidiaries, the “Company,” “we” or “us”) is a late-stage biopharmaceutical company dedicated to the development and commercialization of first-in-class critical care products with a focus on oncology, anti-infectives in adjunct cancer care, unique prescription products and stem cell therapies.
On March 30, 2016, Citius Pharma acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary by issuing shares of its common stock.
On September 11, 2020, we formed NoveCite, Inc.
(“NoveCite”), a Delaware corporation, of which we own
On August 23, 2021, we formed Citius Oncology, Inc. (formerly named Citius Acquisition Corp.) (“Citius Oncology”), as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022. On October 23, 2023, Citius Pharma and Citius Oncology entered into an agreement and plan of merger and reorganization with TenX Keane Acquisition, and its wholly owned subsidiary, TenX Merger Sub Inc., whereby TenX Merger Sub Inc. will merge with and into Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX Keane Acquisition. The newly combined publicly traded company is to be named “Citius Oncology, Inc.” (see Note 9).
An inactive subsidiary, Citius Pharmaceuticals, LLC, was dissolved on December 29, 2023.
In-process research and development (“IPR&D”)
consists of (i) the $
Goodwill of $
Since our inception, we have devoted substantially all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital. We are subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius Pharma or its competitors of research and development stage products, regulatory approval and market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations.
5
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Preparation — The accompanying unaudited condensed consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, LMB and Citius Oncology, and its majority-owned subsidiary NoveCite. NoveCite began operations in October 2020 and Citius Oncology began operations in April 2022. All significant inter-company balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated financial position of the Company as of June 30, 2024, and the results of its operations and cash flows for the three- and nine-month periods ended June 30, 2024 and 2023. The operating results for the three- and nine-month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending September 30, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the Securities and Exchange Commission (“SEC”) on December 29, 2023.
Use of Estimates — Our accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development and goodwill impairment, stock-based compensation, valuation of warrants, and income taxes. Actual results could differ from those estimates and changes in estimates may occur.
Basic and Diluted Net Loss per Common Share — Basic and diluted net loss per common share applicable to common stockholders is computed by dividing net loss applicable to common stockholders in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of stock options and warrants, were not included in the calculation of the diluted loss per share because they were anti-dilutive.
Recently Issued Accounting Standards
Other than as disclosed in our Form 10-K, we are not aware of any other recently issued accounting standards not yet adopted that may have a material impact on our financial statements.
2. GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN
The accompanying unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company experienced negative cash flows from operations of $
The Company has generated no operating revenue to date and has principally raised capital through the issuance of equity instruments to finance its operations. However, the Company’s continued operations beyond December 2024, including its development plans for LYMPHIR (including after the proposed spin-off of Citius Oncology), Mino-Lok, Halo-Lido and NoveCite, will depend on its ability to obtain regulatory approval to market Mino-Lok, successfully commercialize LYMPHIR, Mino-Lok and any other approved products and generate substantial revenue from the sale of LYMPHIR and/or Mino-Lok and on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of its product candidates. However, the Company can provide no assurances on regulatory approval, commercialization, or future sales of LYMPHIR and/or Mino-Lok or that financing or strategic relationships will be available on acceptable terms, or at all. If the Company is unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of LYMPHIR and/or Mino-Lok, there would be a material adverse effect on its business. Further, the Company expects in the future to incur additional expenses as it continues to develop its product candidates, including seeking regulatory approval, and protecting its intellectual property.
6
3. PATENT AND TECHNOLOGY LICENSE AGREEMENTS
Patent and Technology License Agreement – Mino-Lok
LMB has a patent and technology license agreement
with Novel Anti-Infective Therapeutics, Inc. (“NAT”) to develop and commercialize Mino-Lok on an exclusive, worldwide sub-licensable
basis, as amended. LMB pays an annual maintenance fee each June until commercial sales of a product subject to the license commence.
The Company recorded an annual maintenance fee expense of $
LMB will also pay annual royalties on net sales
of licensed products, with a low double digit royalty rate (within a range of
Unless earlier terminated by NAT, based on the failure to achieve certain development and commercial milestones, the license agreement remains in effect until the date that all patents licensed under the agreement have expired and all patent applications within the licensed patent rights have been cancelled, withdrawn, or expressly abandoned.
Patent and Technology License Agreement – Mino-Wrap
On January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas M. D. Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast implants. We terminated the Mino-Wrap license agreement on December 11, 2023.
License Agreement with Eterna
On October 6, 2020, our subsidiary, NoveCite,
signed an exclusive license agreement for a novel cellular therapy for acute respiratory distress syndrome (ARDS) with a subsidiary of
Novellus, Inc. (“Novellus”). Upon execution of the agreement, we paid $
In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics, Inc. (“Brooklyn”). In connection with that transaction, the stock subscription agreement was amended to assign to Brooklyn all of Novellus’s right, title, and interest in the stock subscription agreement and delete the anti-dilution protection and replace it with a right of first refusal whereby Brooklyn will have the right to purchase all or a portion of the securities that NoveCite intends to sell or in the alternative, at the option of NoveCite, Brooklyn may purchase that amount of the securities proposed to be sold by NoveCite to allow Brooklyn to maintain its then percentage ownership. In October 2022, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).
Citius Pharma is responsible for the operational activities of NoveCite and bears all costs necessary to operate NoveCite. Citius Pharma’s officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. As such, NoveCite is accounted for as a consolidated subsidiary with a noncontrolling interest.
Eterna has no contractual rights in the profits or obligations to share in the losses of NoveCite, and the Company has not allocated any losses to the noncontrolling interest.
7
NoveCite is obligated to pay Eterna up to $
Under the terms of the license agreement, if
Eterna receives any revenue involving the original cell line included in the licensed technology, then Eterna shall remit to NoveCite
The term of the license agreement continues on a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term. Either party may terminate the license agreement upon written notice if the other party is in material default. NoveCite may terminate the license agreement at any time without cause upon 90 days prior written notice.
Eterna will be responsible for preparing, filing, prosecuting, and maintaining all patent applications and patents included in the licensed patents in the territory, provided however, that if Eterna decides that it is not interested in maintaining a particular licensed patent or in preparing, filing, or prosecuting a licensed patent, NoveCite will have the right, but not the obligation, to assume such responsibilities in the territory at NoveCite’s sole cost and expense.
License Agreement with Eisai
In September 2021, Citius Pharma entered into an asset purchase agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) and a license agreement with Eisai Co., Ltd. (“Eisai”) to acquire an exclusive license for E7777 (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. We renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR for the product. Citius Pharma assigned these agreements to Citius Oncology effective April 1, 2022.
Under the terms of the
agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s.
The exclusive license includes rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Additionally,
we retain an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights
for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the
India option), Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia,
and Papua New Guinea. Citius Pharma paid a $
8
The term of the license
agreement will continue until (i) if there has not been a commercial sale of a licensed product in the territory, the 10-year anniversary
of the original license effective date, March 30, 2016, or (ii) if there has been a first commercial sale of a licensed product in the
territory within the 10-year anniversary of the original license effective date, the 10-year anniversary of the first commercial sale
on a country-by-country basis. The term of the license may be extended for additional 10-year periods for all countries in the territory
by notifying Eisai and paying an extension fee equal to $
Also under the purchase agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials (both of which have been initiated), (iii) use commercially reasonable efforts to achieve each of the approval milestones, and (iv) complete each specified immuno-oncology investigator trial on or before the four-year anniversary of the effective date of the definitive agreement. Additionally, we are required to commercially launch a product in a territory within six months of receiving regulatory approval for such product in each such jurisdiction.
4. PREPAID EXPENSES
Prepaid expenses at June 30, 2024 and September
30, 2023 consist of $
5. COMMON STOCK, STOCK OPTIONS AND WARRANTS
Common Stock Issued for Services
On October 10, 2023, the Company issued
On January 17, 2024, the Company issued
On April 25, 2024, the Company issued
9
Common Stock Offerings
On May 8, 2023, the Company closed a registered
direct offering of
Net proceeds were $
On April 30, 2024, the Company closed a registered
direct offering of
Net proceeds were $
Stock Option Plans
Pursuant to our 2014 Stock Incentive Plan, we
reserved
Pursuant to our 2018 Omnibus Stock Incentive
Plan, we reserved
Pursuant to our 2020 Plan, we reserved
Pursuant to our 2021 Stock Plan, we reserved
In November 2022, our Board approved the 2023
Stock Plan, subject to stockholder approval, which was received on February 7, 2023. The 2023 Stock Plan reserved
The fair value of each stock option award is
estimated on the date of grant using the Black-Scholes option pricing model. The risk-free interest rate is based on the U.S. Treasury
yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted,
all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally
10
| Option Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||
| Outstanding at September 30, 2023 | $ | $ | ||||||||||||
| Granted | ||||||||||||||
| Exercised | ( | ) | ||||||||||||
| Forfeited or expired | ( | ) | ||||||||||||
| Outstanding at June 30, 2024 | $ | $ | ||||||||||||
| Exercisable at June 30, 2024 | $ | $ | ||||||||||||
On October 10, 2023, the Board of Directors granted
options to purchase
On October 4, 2022, the Board of Directors granted
options to purchase
Stock-based compensation expense for the three
months ended June 30, 2024 and 2023 was $
At June 30, 2024, unrecognized total compensation
cost related to unvested awards under the Citius Pharma stock plans of $
NoveCite Stock Plan - Under the
NoveCite Stock Plan, adopted November 5, 2020, we reserved
As of June 30, 2024, NoveCite has options outstanding
to purchase
11
Citius Oncology Stock Plan - Under
the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved
During the year ended September 30, 2023, Citius
Oncology granted options to purchase
At June 30, 2024, Citius Oncology has options
outstanding to purchase
Warrants
| Exercise price | Number | Expiration Date | ||||||||
| August 2018 Offering Investors | $ | |||||||||
| August 2018 Offering Agent | ||||||||||
| April 2019 Registered Direct/Private Placement Investors | ||||||||||
| April 2019 Registered Direct/Private Placement Agent | ||||||||||
| September 2019 Offering Investors | ||||||||||
| September 2019 Offering Underwriter | ||||||||||
| February 2020 Exercise Agreement Agent | ||||||||||
| May 2020 Registered Direct Offering Investors | ||||||||||
| May 2020 Registered Direct Offering Agent | ||||||||||
| August 2020 Underwriter | ||||||||||
| January 2021 Private Placement Investors | ||||||||||
| January 2021 Private Placement Agent | ||||||||||
| February 2021 Offering Investors | ||||||||||
| February 2021 Offering Agent | ||||||||||
| May 2023 Registered Direct Offering Investors | ||||||||||
| May 2023 Registered Direct Offering Agent | ||||||||||
| April 2024 Registered Direct Offering Investors | ||||||||||
| April 2024 Registered Direct Offering Agent | ||||||||||
On April 3, 2024, the Board of Directors approved
a one-year extension to April 5, 2025 for warrants to purchase
12
At June 30, 2024, the weighted average remaining
life of the outstanding warrants is
Common Stock Reserved
| Stock plan options outstanding | ||||
| Stock plan shares available for future grants | ||||
| Warrants outstanding | ||||
| Total |
6. OPERATING LEASE
Effective July 1, 2019, Citius Pharma entered into a 76-month lease for office space in Cranford, NJ. Citius Pharma pays its proportionate share of real estate taxes and operating expenses in excess of the base year expenses. These costs are variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability.
The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:
| ● | As the Company’s lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments based on the remaining lease term as of the adoption date. |
| ● | Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component. |
| ● | The expected lease terms include noncancelable lease periods. |
| Lease cost | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | |||||||
| Operating lease cost | $ | $ | |||||||
| Variable lease cost | |||||||||
| Total lease cost | $ | $ | |||||||
| Other information | |||||||||
| Weighted-average remaining lease term - operating leases | |||||||||
| Weighted-average discount rate - operating leases | % | % | |||||||
| Year Ending September 30, | June 30, 2024 | |||
| 2024 (excluding the 9 months ended June 30, 2024) | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
13
| Leases | Classification | June 30, 2024 | September 30, 2023 | |||||||
| Assets | ||||||||||
| Lease asset | Operating | $ | $ | |||||||
| Total lease assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Current | Operating | $ | $ | |||||||
| Non-current | Operating | |||||||||
| Total lease liabilities | $ | $ | ||||||||
Interest expense on the lease liability was $
7. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES
The Company recognized a gain of $
8. NASDAQ LISTING
On September 12, 2023, we received a notification
letter from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2)
because the minimum bid price of our common stock on the Nasdaq Capital Market closed below $
On March 12, 2024, Nasdaq granted our request
for an extension through September 9, 2024 to evidence compliance with the $
9. MERGER AGREEMENT
On October 23, 2023, Citius Pharma and Citius Oncology entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) with TenX Keane Acquisition, a Cayman Islands exempted company (“TenX”), and its wholly owned subsidiary, TenX Merger Sub Inc. (“Merger Sub”), a Delaware corporation. The Merger Agreement provides, among other things, (i) on the terms and subject to the conditions set forth therein, that Merger Sub will merge with and into Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX (the “Merger”), and (ii) that prior to the effective time of the Merger (the “Effective Time”), TenX will migrate to and domesticate as a Delaware corporation in accordance with Section 388 of the General Corporation Law of the State of Delaware and the Cayman Islands Companies Act (As Revised) (the “Domestication”). The newly combined publicly traded company is to be named “Citius Oncology, Inc.” (the “Combined Company”). The Domestication, Merger and the other transactions contemplated by the Merger Agreement are referred to as the “Business Combination.”
In the Merger, all shares of Citius Oncology would be converted into
the right to receive common stock of the Combined Company. As a result, upon closing, Citius Pharma would receive
The Merger Agreement, Business Combination and the transactions contemplated thereby were unanimously approved by the boards of directors of each of Citius Pharma, Citius Oncology and TenX. The transaction is expected to be completed in August 2024, subject to and the provisions of the Merger Agreement and other customary closing conditions, including final regulatory approvals and SEC filings. There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed at all.
10. SUBSEQUENT EVENTS
On August 8, 2024, the Company announced that the FDA had approved LYMPHIR.
On August 12, 2024, the Company completed the Merger, whereby its wholly owned subsidiary Citius
Oncology, Inc. (now known as Citius Oncology Sub, Inc.), became a wholly owned subsidiary of TenX Keane Acquisition (now Citius
Oncology, Inc.). In connection with Closing, Citius Pharma and Citius Oncology entered into an amended and restated shared services
agreement, which, among other things, governs certain management and scientific services that Citius Pharma will continue to provide
to Citius Oncology. After the closing of the Merger, Citius Pharma continues to control a majority of the voting power of Citius
Oncology, owning approximately
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations for the three and nine months ended June 30, 2024 and 2023 should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Report and in conjunction with the audited financial statements of Citius Pharmaceuticals, Inc. included in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on December 29, 2023. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements” on page iii of this Report.
Historical Background
Citius Pharmaceuticals, Inc. (“Citius Pharma,” and together with its subsidiaries, the “Company,” “we” or “us”) is a late-stage biopharmaceutical company dedicated to the development and commercialization of first-in-class critical care products with a focus on oncology, anti-infectives in adjunct cancer care, unique prescription products and stem cell therapies. On September 12, 2014, we acquired Citius Pharmaceuticals, LLC as a wholly-owned subsidiary. Citius Pharmaceuticals, LLC, was dissolved on December 29, 2023.
On March 30, 2016, we acquired all of the outstanding stock of Leonard-Meron Biosciences, Inc. (“LMB”) by issuing shares of our common stock. We acquired identifiable intangible assets of $19,400,000 related to in-process research and development and recorded goodwill of $9,346,796 for the excess of the purchase consideration over the net assets acquired.
On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% of the issued and outstanding capital stock.
On August 23, 2021, we formed Citius Oncology, Inc. (formerly named Citius Acquisition Corp.) (“Citius Oncology”) (now named “Citius Oncology Sub, Inc.), as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022. On August 12, 2024, Citius Pharma completed the Spinoff of Citius Oncology as a separate publicly traded entity (Nasdaq: CTOR) focused on commercializing LYMPHIR.
In-process research and development (“IPR&D”) consists of (i) the $19,400,000 acquisition value of LMB’s drug candidate Mino-Lok®, which is an antibiotic solution used to treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years commencing upon revenue generation, and (ii) the $40,000,000 acquisition value of the exclusive license for LYMPHIR (denileukin diftitox), which is a late-stage oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma, and is expected to be amortized on a straight-line basis over a period of twelve years commencing upon revenue generation.
Goodwill of $9,346,796 represents the value of LMB’s industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment.
Through June 30, 2024, we have devoted substantially all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital. We have not yet realized any revenues from our operations.
Recent Developments
On October 23, 2023, Citius Pharma and Citius Oncology entered into an agreement and plan of merger and reorganization with TenX Keane Acquisition, and its wholly owned subsidiary, TenX Merger Sub Inc., whereby TenX Merger Sub Inc. will merge with and into Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX Keane Acquisition. The newly combined publicly traded company is to be named “Citius Oncology, Inc.” On August 2, 2024, the shareholders of TenX Keane Acquisition approved the transaction. The transaction closed on August 12, 2024.
15
Patent and Technology License Agreements
Mino-Lok® – LMB has a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc. (“NAT”) to develop and commercialize Mino-Lok on an exclusive, worldwide sub-licensable basis, as amended. Since May 2014, LMB has paid an annual maintenance fee, which began at $30,000 and increased over five years to $90,000, where it will remain until the commencement of commercial sales of a product subject to the license. LMB will also pay annual royalties on net sales of licensed products, with a low double digit royalty rate (with a range of 10% to 15%). In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low- to mid-single digits (within a range of 2% to 7%). After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties that increase in subsequent years. LMB must also pay NAT up to $1,100,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified percentage of payments received from any sub licensees.
Mino-Wrap – On January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System on behalf of the University of Texas M. D. Anderson Cancer Center (“Licensor”), whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast implants. We terminated the Mino-Wrap license agreement on December 11, 2023.
NoveCite – On October 6, 2020, our subsidiary NoveCite entered into a license agreement with Novellus Therapeutics Limited (“Licensor”), whereby NoveCite acquired an exclusive, worldwide license, with the right to sublicense, develop and commercialize a stem cell therapy based on the Licensor’s patented technology for the treatment of acute pneumonitis of any etiology in which inflammation is a major agent in humans. Upon execution of the license agreement, NoveCite paid an upfront payment of $5,000,000 to Licensor and issued to Licensor shares of Novecite’s common stock representing 25% of NoveCite’s currently outstanding equity. We own the other 75% of NoveCite’s currently outstanding equity.
Citius Pharma is responsible for the operational activities of NoveCite and bears all costs necessary to operate NoveCite. Citius Pharma’s officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. As such, NoveCite is accounted for as a consolidated subsidiary with a noncontrolling interest.
In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics (“Brooklyn”). Pursuant to this transaction, the NoveCite license was assumed by Brooklyn with all original terms and conditions. As part of the Novellus and Brooklyn merger transaction, the 25% non-dilutive position per the subscription agreement between Novellus and NoveCite was removed. In October 2021, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).
Under the license agreement, NoveCite is obligated to pay Licensor up to an aggregate of $51,000,000 in regulatory and developmental milestone payments. NoveCite also must pay a royalty equal to a mid-teens percentage of net sales, commencing upon the first commercial sale of a licensed product. This royalty is subject to downward adjustment on a product-by-product and country-by-country basis to a mid-single digit percentage (within a range of 4% to 8%) of net sales in any country in the event of the expiration of the last valid patent claim or if no valid patent claim exists in that country. The royalty will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Licensor or any third party in the applicable country or (ii) the 10-year anniversary of the date of expiration of the last-to-expire valid patent claim in that country. In the case of a country where no licensed patent ever exists, the royalty will end on the later of (i) the date of expiry of such licensed product’s regulatory exclusivity and (ii) the 10-year anniversary of the date of the first commercial sale of the licensed product in the applicable country. In addition, NoveCite will pay to Licensor an amount equal to a mid-twenties percentage of any sublicensee fees it receives.
Under the terms of the license agreement, in the event that Licensor receives any revenue involving the original cell line included in the licensed technology, then Licensor shall remit to NoveCite 50% of such revenue.
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LYMPHIR – In September 2021, Citius Pharma entered into an asset purchase agreement with Dr. Reddy’s and a license agreement with Eisai to acquire an exclusive license for E7777 (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. Citius Pharma renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR for the product. Citius Pharma assigned these agreements to Citius Oncology effective April 1, 2022.
Under the terms of the agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s (now owned by Citius Oncology). The exclusive license rights, through Citius Oncology, include rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Additionally, we, through Citius Oncology, retain an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the India option), Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid a $40 million upfront payment, which represents the acquisition date fair value of the in-process research and development acquired from Dr. Reddy’s. Dr. Reddy’s is entitled to up to $40 million in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales (within a range of 10% to 15%), and up to $300 million for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales (within a range of 10% to 15%). The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales.
Under the license agreement, Eisai is to receive a $6 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds (which increases to $7 million in the event we have exercised our option to add India to the licensed territory prior to FDA approval) and an aggregate of up to $22 million related to the achievement of net product sales thresholds. Citius Oncology was also required to reimburse Eisai for up to $2.65 million of its costs to complete the Phase 3 pivotal clinical trial for LYMPHIR for the CTCL indication and reimburse Eisai for all reasonable costs associated with the preparation of a BLA for LYMPHIR. Eisai was responsible for completing the CTCL clinical trial, and CMC activities through the filing of a Biologics License Application (“BLA”) for LYMPHIR with the FDA. The BLA was filed with the FDA on September 27, 2022. We, through Citius Oncology, will be responsible for development costs associated with potential additional indications.
On July 29, 2023, we received a Complete Response Letter (“CRL”) from the FDA regarding the BLA seeking approval for LYMPHIR. The FDA has required that we incorporate enhanced product testing, and additional controls agreed to with the FDA during the market application review. The FDA raised no concerns relating to the safety and efficacy clinical data package.
On September 8, 2023, we announced that the FDA agreed with our plans to address the requirements outlined in the CRL. No additional clinical efficacy or safety trials were requested by FDA for the resubmission. On February 13, 2024, we filed the BLA resubmission package with the FDA and on March 18, 2024, the FDA accepted the resubmission of the BLA, and on August 8, 2024, we a announced that the FDA had approved LYMPHIR.
17
RESULTS OF OPERATIONS
Three months ended June 30, 2024 compared with the three months ended June 30, 2023
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| Revenues | $ | — | $ | — | ||||
| Operating expenses: | ||||||||
| Research and development | 2,763,865 | 3,764,675 | ||||||
| General and administrative | 4,808,551 | 3,733,326 | ||||||
| Stock-based compensation expense | 3,061,763 | 1,174,111 | ||||||
| Total operating expenses | 10,634,179 | 8,672,112 | ||||||
| Operating loss | (10,634,179 | ) | (8,672,112 | ) | ||||
| Interest income | 204,843 | 336,780 | ||||||
| Loss before income taxes | (10,429,336 | ) | (8,335,332 | ) | ||||
| Income tax expense | 144,000 | 144,000 | ||||||
| Net loss | $ | (10,573,336 | ) | $ | (8,479,332 | ) | ||
Revenues
We did not generate any revenues for the three months ended June 30, 2024 or 2023.
Research and Development Expenses
For the three months ended June 30, 2024, research and development expenses were $2,763,865 as compared to $3,764,675 during the three months ended June 30, 2023, a decrease of $1,000,810.
Research and development costs for Mino-Lok increased by $52,558 to $1,144,058 for the three months ended June 30, 2024 as compared to $1,091,500 for the three months ended June 30, 2023, due primarily to study close out costs related to the Phase 3 trial. On January 2, 2024, Citius Pharma announced that it had completed enrollment in its pivotal Phase 3 clinical trial for Mino-Lok, an antibiotic lock solution to salvage catheters in patients with catheter-related bloodstream infections. A total of 109 catheter failure events were observed in the event-based trial; a minimum of 92 catheter failure events were required to complete the trial. The study enrolled 241 patients at clinical sites in the U.S. and India. On May 21, 2024, we announced positive topline data from our Phase 3 study as primary and secondary endpoints were met with statistical significance. The next steps are to prepare a submission to the FDA and schedule a Type B meeting.
Research and development costs for Halo-Lido decreased by $973,287 to $29,596 for the three months ended June 30, 2024 as compared to $1,002,883 for the three months ended June 30, 2023 due to lower costs associated with the Phase 2b trial incurred in the current quarter. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study. An end of Phase 2 meeting was held with the FDA in the second calendar quarter of 2024 and we have begun planning the next steps in the regulatory and clinical development program for CITI-002.
Research and development costs for LYMPHIR were $1,583,970 during the three months ended June 30, 2024 as compared to $1,658,838 for the three months ended June 30, 2023. The $74,868 decrease in expenses was primarily due to completion of the BLA resubmission package in the prior quarter. On February 13, 2024, we filed the BLA resubmission package with the FDA and on March 18, 2024, the FDA accepted the resubmission of the BLA and assigned a PDUFA goal date of August 13, 2024.
We expect that research and development expenses will stabilize at current levels in fiscal 2024 as we focus on the commercialization of LYMPHIR, prepare a submission to the FDA and schedule a Type B meeting for Mino-Lok, and analyze the data from our Phase 2b trial and begin planning our Phase 3 trial for Halo-Lido.
18
General and Administrative Expenses
For the three months ended June 30, 2024, general and administrative expenses were $4,808,551 as compared to $3,733,326 during the three months ended June 30, 2023. General and administrative expenses increased by $1,075,225 in comparison with the prior period. The primary reasons for the increase were higher costs for pre-launch sales and market research activities associated with LYMPHIR. General and administrative expenses consist primarily of compensation costs, professional fees for legal, regulatory, accounting, and corporate development services, and investor relations expenses.
Stock-based Compensation Expense
For the three months ended June 30, 2024, stock-based compensation expense was $3,061,763 as compared to $1,174,111 for the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, stock-based compensation includes $13,858 and $31,858, respectively, in expense for the NoveCite stock plan. For the three months ended June 30, 2024, stock-based compensation also includes $1,957,000 in expense for the Citius Oncology stock plan. Stock-based compensation expense for the most recently completed quarter increased by $1,887,652 in comparison to the prior period primarily due to the Citius Oncology stock plan.
Other Income
Interest income for the three months ended June 30, 2024 was $204,843 as compared to interest income of $336,780 for the prior period. The decrease is due to lower investable balances of the remaining proceeds of our equity offerings and common stock warrant exercises in money market accounts.
Income Taxes
The Company recorded deferred income tax expense of $144,000 for both the three months ended June 30, 2024 and 2023, related to the amortization for taxable purposes of its in-process research and development asset.
Net Loss
For the three months ended June 30, 2024, we incurred a net loss of $10,573,336, compared to a net loss for the three months ended June 30, 2023 of $8,479,332. The $2,094,004 increase in the net loss was primarily due to increases of $1,075,225 in general and administrative expenses and $1,887,652 in stock-based compensation expense, being partially offset by the $1,000,810 decrease in research and development expenses.
Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023
| Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | |||||||
| Revenues | $ | — | $ | — | ||||
| Operating expenses: | ||||||||
| Research and development | 8,991,673 | 11,937,045 | ||||||
| General and administrative | 12,755,190 | 11,129,463 | ||||||
| Stock-based compensation expense | 9,198,340 | 3,540,787 | ||||||
| Total operating expenses | 30,945,203 | 26,607,295 | ||||||
| Operating loss | (30,945,203 | ) | (26,607,295 | ) | ||||
| Interest income | 640,686 | 854,604 | ||||||
| Gain on sale of New Jersey net operating losses | 2,387,842 | 3,585,689 | ||||||
| Loss before income taxes | (27,916,675 | ) | (22,167.002 | ) | ||||
| Income tax expense | 432,000 | 432,000 | ||||||
| Net loss | $ | (28,348,675 | ) | $ | (22,599,002 | ) | ||
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Revenues
We did not generate any revenues for the nine months ended June 30, 2024 or 2023.
Research and Development Expenses
For the nine months ended June 30, 2024, research and development expenses were $8,991,673 as compared to $11,937,045 during the nine months ended June 30, 2023, a decrease of $2,945,372.
Research and development costs for Mino-Lok increased by $364,721 to $3,673,969 for the nine months ended June 30, 2024 as compared to $3,309,248 for the nine months ended June 30, 2023, due primarily to study close out costs associated with the Phase 3 trial. On January 2, 2024, Citius Pharma announced that it had completed enrollment in its pivotal Phase 3 clinical trial for Mino-Lok, an antibiotic lock solution to salvage catheters in patients with catheter-related bloodstream infections. A total of 109 catheter failure events were observed in the event-based trial; a minimum of 92 catheter failure events were required to complete the trial. The study enrolled 241 patients at clinical sites in the U.S. and India. On May 21, 2024, we announced positive topline data from our Phase 3 study as primary and secondary endpoints were met with statistical significance. The next steps are to prepare a submission to the FDA and schedule a Type B meeting.
Research and development costs for Halo-Lido decreased by $3,255,843 to $478,138 for the nine months ended June 30, 2024 as compared to $3,733,981 for the nine months ended June 30, 2023 due to lower costs associated with the Phase 2b trial. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study. An end of Phase 2 meeting was held with the FDA in the second calendar quarter of 2024 and we have begun planning the next steps in the regulatory and clinical development program for CITI-002.
Research and development costs for LYMPHIR were $4,817,350 during the nine months ended June 30, 2024 as compared to $4,490,291 for the nine months ended June 30, 2023. The $327,059 increase in expenses was primarily due to costs associated with new analytical testing methods related to the remediation activities to respond to the CRL. On February 13, 2024, we filed the BLA resubmission package with the FDA and on March 18, 2024, the FDA accepted the resubmission of the BLA and assigned a PDUFA goal date of August 13, 2024.
We expect that research and development expenses will stabilize at current levels in fiscal 2024 as we focus on the commercialization of LYMPHIR, prepare a submission to the FDA and schedule a Type B meeting for Mino-Lok, and analyze the data from our Phase 2b trial and begin planning our Phase 3 trial for Halo-Lido.
General and Administrative Expenses
For the nine months ended June 30, 2024, general and administrative expenses were $12,755,190 as compared to $11,129,463 during the nine months ended June 30, 2023. General and administrative expenses increased by $1,625,727 in comparison with the prior period. The primary reasons for the increase were higher costs for pre-launch sales and market research activities associated with LYMPHIR. General and administrative expenses consist primarily of compensation costs, professional fees for legal, regulatory, accounting, and corporate development services, and investor relations expenses.
Stock-based Compensation Expense
For the nine months ended June 30, 2024, stock-based compensation expense was $9,198,340 as compared to $3,540,787 for the nine months ended June 30, 2023. For the nine months ended June 30, 2024 and 2023, stock-based compensation includes $47,574 and $98,524, respectively, in expense for the NoveCite stock plan. For the nine months ended June 30, 2024, stock-based compensation also includes $5,831,000 in expense for the Citius Oncology stock plan. Stock-based compensation expense for the nine months ended June 30, 2024 increased by $5,657,553 in comparison to the prior period primarily due to the Citius Oncology stock plan.
20
Other Income
Interest income for the nine months ended June 30, 2024 was $640,686 as compared to interest income of $854,604 for the prior period. The decrease is due to lower investable balances of the remaining proceeds of our equity offerings and common stock warrant exercises in money market accounts.
Other income for the nine months ended June 30, 2024 and 2023 includes gains of $2,387,842 and $3,585,689, respectively, recognized in connection with the sale of certain New Jersey income tax net operating losses to third parties under the New Jersey Technology Business Tax Certificate Transfer Program.
Income Taxes
The Company recorded deferred income tax expense of $432,000 for both the nine months ended June 30, 2024 and 2023, related to the amortization for taxable purposes of its in-process research and development asset.
Net Loss
For the nine months ended June 30, 2024, we incurred a net loss of $28,348,675 compared to a net loss for the nine months ended June 30, 2023 of $22,599,002. The $5,749,673 increase in the net loss was primarily due to the increase in stock-based compensation expense of $5,657,553.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Working Capital
Citius Pharma has incurred operating losses since inception and incurred a net loss of $28,348,675 for the nine months ended June 30, 2024. At June 30, 2024, Citius Pharma had an accumulated deficit of $190,580,054. Citius Pharma’s net cash used in operations during the nine months ended June 30, 2024 was $22,288,687.
As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021, the May 2023 registered direct offering and the April 2024 registered direct offering, the Company had working capital of approximately $23,800,000 at June 30, 2024. At June 30, 2024, Citius Pharma had cash and cash equivalents of $17,911,192 available to fund its operations. The Company’s primary sources of cash flow since inception have been from financing activities. Our primary uses of operating cash were for in-licensing of intellectual property, product development and commercialization activities, employee compensation, consulting fees, legal and accounting fees, insurance, and investor relations expenses.
Based on our cash and cash equivalents at June 30, 2024, we expect that we will have sufficient funds to continue our operations through December 2024. We expect to need to raise additional capital in the future to support our operations beyond December 2024. There is no assurance, however, that we will be successful in raising the needed capital or that the proceeds will be received in an amount or in a timely manner to support our operations.
Inflation
Our management believes that inflation has not had a material effect on our results of operations.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recorded during the reporting periods. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.
Our critical accounting policies and use of estimates are discussed in, and should be read in conjunction with, the annual consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on December 29, 2023.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer and principal accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2024. In designing and evaluating disclosure controls and procedures, we recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of June 30, 2024, based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Changes In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There have been no material changes to the Company’s risk factors as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on December 29, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On April 25, 2024, we issued 150,000 shares of common stock for financial, general and business development advisory services. The issuance of the shares was exempt from registration under Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Other Information.
During the quarter ended June 30, 2024, none
of our directors or officers
Warrant Extension
In August 2024, we extended the term by one year to August 14, 2025 for an aggregate of 3,921,569 warrants with an exercise price of $1.15 per share of common stock, par value $0.001 per share (the “Common Stock”). The warrants are held by Leonard Mazur, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and Myron Holubiak, the Company’s Executive Vice President and member of the Board of Directors, and were originally issued in August 2018 in a private placement conducted simultaneously with a registered direct offering of shares of Common Stock (the “2018 Offering”) managed by H. C. Wainwright & Co., LLC (“Wainwright”). Mr. Mazur and Mr. Holubiak participated in the private placement on the same basis as all other investors. Additionally, 189,412 placement agent warrants with an exercise price of $1.5938 per share of Common Stock issued in connection with the 2018 Offering were extended by one year to August 8, 2025. Such placement agent warrants are held by certain representatives of Wainwright. There are no other warrants remaining outstanding from the 2018 Offering and if such warrants are fully exercised, the Company would receive $4,811,680 in cash proceeds.
At The Market Offering Agreement
On August 12, 2024, Citius entered into an At The Market Offering Agreement (the “Agreement”) with Wainwright under which the Company may offer and sell, from time to time at its sole discretion, shares of Common Stock, having an aggregate offering price of up to $50 million through Wainwright as its sales agent.
Subject to the terms and conditions of the Agreement, Wainwright may sell the Common Stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. Wainwright will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay Wainwright a commission equal to 3.0% of the gross sales proceeds of any Common Stock sold through Wainwright under the Agreement, plus certain specified expenses. The Agreement contains customary representations and warranties and conditions to the sale of the Common Stock and includes customary indemnification rights for Wainwright.
The Company is not obligated to make any sales of Common Stock under the Agreement and may at any time suspend solicitation and offers thereunder. The offering of shares of Common Stock pursuant to the Agreement will terminate upon the earlier of (i) the sale of all Common Stock subject to the Agreement or (ii) termination of the Agreement in accordance with its terms.
The issuance and sale of shares, if any, of Common Stock by the Company under the Agreement will be pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-277319) filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2024 (the “Registration Statement”) and declared effective by the SEC on March 1, 2024, the prospectus supplement relating to the offering to be filed with the SEC, and any applicable additional prospectus supplements related to the offering that form a part of the Registration Statement.
This Report shall not constitute an offer to sell or the solicitation of an offer to buy the securities discussed herein, nor shall there be any offer, solicitation, or sale of the securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which is filed herewith as Exhibit 1.1 to this Report.
The opinion of Wyrick Robbins Yates & Ponton LLP, the Company’s legal counsel, regarding the legality of the shares of Common Stock to be offered and sold under the Agreement is filed as Exhibit 5.1 hereto. This opinion is also filed with reference to, and is hereby incorporated by reference into, the Registration Statement.
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Item 6. Exhibits.
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CITIUS PHARMACEUTICALS, INC. | ||
| Date: August 12, 2024 | By: | /s/ Leonard Mazur |
| Leonard Mazur | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: August 12, 2024 | By: | /s/ Jaime Bartushak |
| Jaime Bartushak | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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