In 2022, Citius Pharmaceuticals completed its Phase 3 trial for I/ONTAK, indicated for the treatment of persistent or recurrent cutaneous T-cell lymphoma (CTCL) and submitted its Biologics Licensing Application to the FDA. It has a PDUFA target date of July 28, 2023. It initiated a clinical collaboration with the University of Pittsburgh to evaluate I/ONTAK in combination with KEYTRUDA (pembrolizumab). CTXR also advanced its Phase 3 trial for Mino-Lok (a treatment to salvage infected catheters), expanding enrollment toward the FDA’s requirement of observing 92 catheter failure events. However, it said that the expansion will delay the completion of the clinical trial for some months. It also initiated a Phase 2b trial for its hemorrhoid treatment candidate, Halo-Lido, and expects a data readout during 23H2.
The company reported a full-year loss of $33.6 million ($0.23 per share), wider than 2021’s $24.5 million loss (also $0.23 per share), but a little better than my projected loss of $34.4 million ($0.24 per share). Cash used for operating activities increased from $23.3 million to $28.4 million, also modestly better than my estimate of a $29.7 million cash burn. As an early-stage drug development company, CTXR generates no revenues. It ended the year with $41.7 million in cash which it says is sufficient to fund its operations until December 2023. (Previously, it said that its cash would last until August 2023.)
Based upon the clinical trial data, it seems highly likely that I/ONTAK will be approved by the FDA next summer. Since its resources will expire by year end, however, it will need to raise more capital, probably more than $50 million, to cover milestone payments and initiate I/ONTAK’s commercial development. It also needs funding to continue its development programs for Mino-Lok and Halo-Lido. Since the market for equity issuance remains severely constrained, it is not clear whether enough capital will be available in a public offering or what the cost (in terms of dilution to its existing shareholders) will be. CTXR has said that it is exploring other options, including a spin-off of I/ONTAK. However, a spin-off does not seem viable without help from a third-party investor, perhaps another pharmaceutical company, that has the resources and infrastructure to pursue I/ONTAK’s commercial development.
Citius’s stock fell sharply after it released 22Q4 results on Dec. 22. Except for the delay in Mino-Lok’s Phase 3 clinical trial, there was no news to account for the decline. Even so, the challenge of obtaining significant equity funding to continue as a going concern under difficult capital market conditions is formidable. Although there are other possibilities – such as licensing or joint ventures – that may provide some funding, I am taking the cue of the stock’s recent decline to withdraw my performance rating and price target for now. To date, Citius has not provided sufficient detail about its development plans and the potential market opportunities for I/ONTAK and Mino-Lok to support a price target estimate. I am also reducing my safety rating on CTXR’s stock to D-.
As its December 2023 deadline approaches, CTXR may articulate more clearly and in greater detail its commercial development strategies for I/ONTAK and Mino-Lok in order to raise the capital that it needs. If it is successful, though, it seems more likely now that the costs to existing shareholders in terms of diluting their current equity stake, will be even more substantial.
This is a summary of my recent update report on Citius Pharmaceuticals (CTXR). For a copy of the full report, please reach out to me using the contact information provided below:
January 3, 2023
Stephen P. Percoco
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Linden, New Jersey 07036
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