Citius Pharmaceuticals (CTXR) 23Q1 Update

Citius Pharmaceuticals (CTXR) posted a 23Q1 loss of $0.02 per share, better than I had anticipated, mostly because of a $3.6 gain on the sale of net operating loss carryforwards (equivalent to $0.02 per share) from the State of New Jersey and also due to modestly lower-than-expected operating costs.  The lower level of operating costs is apparently expected to continue, as the company now says that it has sufficient cash to fund its operations until February 2024.  (Previously, it had indicated December 2023.)

The company ended the quarter with $36.9 million of cash and cash equivalents.  My updated projections, which are consistent with management’s February 2024 cash exhaustion date, reflect a $6 million milestone payment due to Eisai Pharmaceuticals, the creator of I/ONTAK, in 23Q4 after that drug is expected to receive FDA approval in July.

Assuming that I/ONTAK does gain FDA approval, Citius’s attention will turn to marketing I/ONTAK.  That will require additional cash, since the costs of manufacturing and marketing I/ONTAK will most likely exceed revenues generated for some time, probably two years or more (as a guess).  My projections anticipate that CTXR will raise $50 million in an equity offering in 23Q4 at a price of $1.20 per share.  I anticipate I/ONTAK revenues of $15 million in 2024, which is 3.75%-5.00% of the estimated addressable market of $300-$400 million.  With costs assumed to exceed revenues, my projections show a 2024 loss per share of $0.27, compared with the 2023 projected loss per share of $0.22.

Even so, there are still a few variables that will affect both CTXR’s financial performance and its stock price.  First, my revenue and cost assumptions are just guesses that could prove to be conservative.  Second, Citius is continuing to pursue the development of other assets, including Mino-Lok, which will complete its Phase 3 trial this year, and Halo-Lido, which just completed enrollment for its Phase 2b trial.  If the Mino-Lok Phase 3 trial is successful, the formulation could begin generating revenues in fiscal 2024.  Finally, the company has announced that it has hired Maxim Group LLC as a financial advisor to explore ways of funding the commercialization of I/ONTAK, including possibly a (partial) spin-off.  I still believe that a complete spin-off of I/ONTAK is unlikely, but there are other ways to structure a transaction that will give investors specific rights to the earnings and cash flows of I/ONTAK that may be feasible.

At this point, CTXR’s stock valuation is highly speculative.  I await more guidance from management about the financing and roll-out plans for I/ONTAK in fiscal 2024 and beyond to assess a potential market value for both I/ONTAK and the company as a whole.  Since my brief update (and performance rating upgrade) on CTXR in the March M&P monitor, the stock has advanced 28% from $1.07 to $1.37.  Since it is now less than 10% away from my $1.50 price target, I am reducing my performance rating from “1” (Strong BUY) to “3” (Neutral).  CTXR’s stock performance from here will depend upon the FDA’s decision on I/ONTAK at the end of July and then the company’s financing plan (and associated sales and profit forecast) for the drug.  Product development risk for Citius appears to be low, but projecting its financial performance is still a speculative exercise.

This is a summary of my recent update report on Citius Pharmaceuticals, Inc. (CTXR). To obtain a copy of the full report, reach out to me using the contact information provided below:

April 10, 2023

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250

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