Citius Pharmaceuticals (CTXR) posted a 23Q4 loss of $11.1 million or $0.07 per share, $0.01 more than my estimate, mostly because of higher than expected stock-based compensation and $1.15 million for a deemed dividend associated with the one-year extension of the exercise period for certain outstanding warrants. Both are non-cash charges. R&D expense declined by about $1 million sequentially and YOY, but administrative expenses increased. With the completion of the Mino-Lok Phase 3 trial, Citius’s expenses are shifting more to activities associated with the launches the LYMPHIR and Mino-Lok.
Citius expects to publish topline results for the Mino-Lok Phase 3 trial in 24Q2. If the results are positive, it will file a new drug application with the FDA probably in 24H2 and could receive FDA approval by the end of the year. The company also plans to resubmit its Biologics License Application for LYMPHIR with FDA in early 2024 with the hope of obtaining a PDUFA date for FDA review later in the year.
Citius expects to complete the merger of its Citius Oncology (CO) subsidiary with TenX Keane Acquisition (NASDAQ: TENK), a SPAC, in 24H1. However, TenX’s shares traded last week at $10.95, which suggests that its shareholders will likely vote against the merger, aiming instead to have their investment refunded. If the merger is completed, CO would have estimated cash of $82 million, including Citius’s contribution of $10 million, to fund the launch of LYMPHIR, assuming final FDA approval. Citius would then own 67.5 million shares of CO, equal to 88% of pro forma shares outstanding.
While completing the merger is the main priority, Citius has not said at this time what it plans to do with those 67.5 million shares, if the merger is completed. One option would be to distribute them to CTXR shareholders. However, since Citius itself will probably need to raise capital to fund its other development activities, including the anticipated launch of Mino-Lok, it seems more likely that it would try to sell at least a portion of its Citius Oncology shares in a public offering. Alternatively, it could keep or distribute to its shareholders the Citius Oncology shares and raise capital in a separate offering. The company ended the year with $26.5 million in cash, which it says is enough to last until next August, but it is difficult to estimate what its remaining cash needs will be in 2025 , even if the merger is completed.
Adding to the uncertainty, Citius is not in compliance with NASDAQ’s minimum $1.00 per share threshold; so its stock may be delisted. It must regain compliance by having the stock trade above $1.00 for at least 10 consecutive business days before March 11 or obtain another 180-day waiver.
The potential delisting is obviously weighing on CTXR’s share price, which has been hovering around $0.76 for nearly the past three months, giving it a market capitalization of $121 million. Despite the uncertainty of the CO/TenX merger and whether other shareholder friendly capital raising options are available if the merger fails, the company’s efforts to obtain approval for LYMPHIR and Mino-Lok, which was the basis of my Buy rating, are still on track. Although the Citius’s stock remains highly speculative, I am maintaining my 12-month price target of $1.50 and my performance rating of “1” (Buy).
This is a summary of my recent update report on Citius Pharmaceuticals, Inc. (CTXR). To obtain a copy of the full report, please reach out to me using the contact information provided below.
January 8, 2024. (Report published on January 8, 2024.)
Stephen P. Percoco
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