10-Q: Celularity Faces Going Concern Doubt Amidst Deepening Losses

Celularity Inc. reported a significant increase in net losses and a substantial doubt about its ability to continue as a going concern, driven by declining product sales and ongoing operational expenditures.

Summary

• Celularity reported a net loss of $67.35 million for the nine months ended September 30, 2025, a substantial increase from $44.60 million in the prior year period.
• Total net revenues decreased by 37.8% to $22.45 million for the nine months ended September 30, 2025, primarily due to a 53.1% decrease in product sales.
• Cost of revenues increased by 66.1% to $12.70 million, including a $3.9 million write-off of capitalized bulk material costs and a $2.4 million milestone payment for the Rebound product.
• The company's cash and cash equivalents stood at a critically low $0.12 million as of September 30, 2025, down from $0.74 million at December 31, 2024.
• An accumulated deficit of $967.10 million as of September 30, 2025, highlights the company's long-standing unprofitability.
• Management has expressed substantial doubt about the company's ability to continue as a going concern for the next 12 months due to significant operating losses and insufficient capital.
• The company engaged in multiple financing activities, including merchant cash advances, private placements of common stock and warrants, and the issuance of a secured promissory note to a former director.
• A significant asset purchase agreement with Celeniv Pte. Ltd. resulted in the assignment of approximately $33.8 million in principal debt and $4.1 million in accrued interest in exchange for intellectual property, leading to a $35.72 million licensing obligation.
• Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to identified material weaknesses in internal control over financial reporting.

Sentiment

Score: 1

Explanation: The company is in severe financial distress, explicitly stating 'substantial doubt about our ability to continue as a going concern.' It reported significantly increased net losses, declining revenues, and critically low cash reserves. While it continues to raise capital, these efforts appear to be for survival rather than growth, often involving dilutive terms and debt restructuring. The identified material weaknesses in internal controls further compound the negative outlook.

Positives

• Net cash provided by financing activities increased to $7.43 million for the nine months ended September 30, 2025, from $6.06 million in the prior year, indicating continued ability to raise capital, albeit under challenging terms.
• Research and development expenses decreased by 13.9% to $11.68 million for the nine months ended September 30, 2025, primarily due to a $2.2 million decrease in lab supplies expense, reflecting cost management efforts.
• Selling, general and administrative expenses decreased by 15.0% to $36.20 million for the nine months ended September 30, 2025, driven by a $5.8 million decrease in sales rep fees and a $1.1 million decrease in stock-based compensation.
• The company recognized a gain of approximately $1.0 million from the forgiveness of accrued interest following the repayment of the C.V. Starr & Co. loan.
• Acquired Sequence LifeScience's Rebound full thickness placental-derived allograft matrix product, expanding the biomaterials portfolio.

Negatives

• Net loss significantly widened to $67.35 million for the nine months ended September 30, 2025, compared to $44.60 million in the prior year period.
• Total net revenues decreased by 37.8% to $22.45 million for the nine months ended September 30, 2025, primarily due to a 53.1% decline in product sales.
• Cost of revenues increased by 66.1% to $12.70 million, largely due to a $3.9 million write-off of capitalized bulk material costs and a $2.4 million milestone payment for Rebound, compressing margins.
• Cash and cash equivalents are critically low at $0.12 million as of September 30, 2025, indicating severe liquidity constraints.
• The accumulated deficit grew to $967.10 million, reflecting persistent unprofitability since inception.
• Operating loss increased by 35.0% to $39.25 million for the nine months ended September 30, 2025.
• Total other expense increased by 81.1% to $28.10 million, driven by increased losses on debt extinguishment, changes in fair value of warrant liabilities, and interest expense.
• The company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern, which may affect its ability to obtain future financing and may require curtailment of operations.
• Failure to obtain necessary additional capital or address liquidity needs may force delays, limits, or termination of operations, workforce reductions, discontinuation of commercialization efforts, liquidation of assets, or bankruptcy.
• Significant decline in sales of currently commercialized biomaterial products could significantly harm the business if alternative products are not available.
• The company's placental-derived cellular therapy candidates represent a novel approach with significant development challenges.
• Inability to obtain regulatory approval for lead therapeutic candidates and effectively commercialize them would significantly harm the business.
• Reliance on distribution arrangements for biomaterials products exposes the company to risks of unmet demand or costs incurred for unmaterialized forecasts.
• Regulatory authorities may determine that certain products derived from human cells or tissues do not qualify for reimbursement, as exemplified by CMS rejecting claims for Interfyl.
• Reliance on third parties for clinical trials means failure to carry out contractual duties or meet deadlines could delay or prevent regulatory approval and commercialization.
• The FDA regulatory approval process is lengthy and time-consuming, with potential for significant delays.
• Inability to file Investigational New Drug (IND) applications on expected timelines or FDA refusal could lead to substantial delays in clinical trials.
• Operating its own manufacturing and storage facility requires significant resources, and failures could adversely affect clinical trials and commercial viability.
• Inability to obtain an adequate supply of healthy human full-term post-partum placentas from qualified donors could adversely impact development of placental-derived allogeneic cells.
• Future clinical trials may fail to demonstrate safety and/or efficacy, preventing or delaying regulatory approval and commercialization.
• Inadequate protection of intellectual property could hinder effective competition.
• Disputes with third parties regarding agreements, payment obligations, contractual interpretation, or intellectual property rights could materially adversely impact the company.
• Therapeutic candidates may cause undesirable side effects, halting development, preventing approval, limiting commercial potential, or resulting in negative consequences.
• Significant competition from other biotechnology and pharmaceutical companies could negatively impact operating results.
• Relationships with customers, physicians, and third-party payors are subject to numerous laws and regulations, and violations could lead to substantial penalties.
• Business could be materially adversely affected by health pandemics, epidemics, geopolitical conflicts, inflation, bank failures, and recessions.
• Continued significant costs as a public company and substantial management time devoted to compliance initiatives.

Future Outlook

The company expects to continue incurring significant operating losses and using net cash for operations for the foreseeable future. Substantial expenditures are anticipated to fund investments in research and development. The company will need to secure additional outside capital to fund operations and meet obligations, including debt repayment. There is no assurance that additional capital will be secured on acceptable terms or at all. Failure to obtain necessary capital may force delays, limits, or termination of operations, workforce reductions, discontinuation of commercialization efforts, liquidation of assets, or bankruptcy. The company is not actively developing any cellular therapeutics in its pipeline given its liquidity constraints and does not expect revenue from cellular therapeutic product sales until successful development and regulatory approval, which is years away. Efforts are ongoing to expand the degenerative disease business and explore licensing/collaboration arrangements for cellular therapeutics and distribution for degenerative disease products. The company expects a decrease in selling, general and administrative costs in the near term due to reprioritization efforts.

Management Comments

• Management can provide no assurance that our research and development and commercialization efforts will be successfully completed, or that adequate protection of our intellectual property will be adequately maintained.
• Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital.
• Absent the ability to secure additional outside capital in the very near term, we will be unable to meet our obligations as they become due over the next 12 months beyond the issuance date.
• In the event we are unable to secure additional outside capital to fund our obligations when they become due, including repayment of our outstanding debt, over the next 12 months beyond the issuance date, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of our operations, a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.
• We expect that as a result of our reprioritization efforts, we will see a decrease in our selling, general and administrative costs in the near term.

Industry Context

Celularity operates in the highly competitive and capital-intensive biotechnology industry, specifically focusing on cell therapy and regenerative medicine. The company's strategy to leverage placental-derived allogeneic cells for cancer, infectious, and degenerative diseases represents a novel but challenging approach. The biomaterials business, including products like Biovance 3L and Rebound, faces market competition and regulatory scrutiny, as evidenced by CMS rejecting claims for Interfyl. The industry is characterized by lengthy and costly clinical development, stringent regulatory approval processes, and a high reliance on external funding. Recent state legislation, such as Florida's One Big Beautiful Bill Act, expanding access to stem cell therapies, could present new market opportunities for companies like Celularity, but the company's severe liquidity issues may hinder its ability to capitalize on such trends.

Comparison to Industry Standards

• The company's accumulated deficit of $967.10 million and continuous operating losses are indicative of an early-stage biotechnology company, but the magnitude suggests significant challenges in achieving profitability compared to more established peers.
• The reliance on frequent capital raises through private placements and debt, often with warrant issuances and conversion price adjustments, suggests a higher cost of capital and greater dilution risk compared to financially stable industry players.
• The explicit 'going concern' warning is a critical indicator of financial distress, placing the company significantly below industry standards for financial stability and operational viability.
• The ineffectiveness of disclosure controls and procedures, coupled with identified material weaknesses in internal control over financial reporting, indicates a governance and operational risk that is below acceptable industry standards for public companies.

Corporate Governance

Legal Proceedings

• Civil Investigative Demand from the U.S. Attorneys Office (dated August 14, 2022) regarding claims submitted to Medicare/Medicaid for services involving injectable human tissue therapy products, including Interfyl. The matter is in preliminary stages with uncertain liability.
• Celularity Inc. v. Evolution Biologyx, LLC, et al. (filed April 17, 2023): Company is seeking approximately $2.35 million for unpaid biomaterial product invoices. Evolution filed a counterclaim alleging breach of contract, warranty, quasi-contract, and fraud.
• TCWGlobal v. Celularity Inc. (filed March 27, 2024): TCWGlobal alleged breach of contract for unpaid invoices for leased workers. A settlement agreement for $516,000 was defaulted on in November 2024, and a motion to enforce judgment for $350,000 was granted on June 3, 2025.
• Hackensack Meridian v. Celularity Inc. (filed March 27, 2025): Hackensack Meridian Health is seeking $946,000 for clinical trial costs, with an agreed amount owed of $668,000. HUMC has moved for entry of default.
• Clinical Resource Network v. Celularity Inc. (filed May 28, 2025): CRN is seeking $176,000 for unpaid payrolling services. The company defaulted, and CRN moved for entry of default.

Related Party Transactions

• Dr. Robert Hariri (Chairman and CEO): Agreed to temporarily reduce his salary to minimum wage, with the remaining salary deferred. His loans were extended to December 31, 2025. He assumed the full loan from two unaffiliated lenders in an August 21, 2023 loan agreement.
• C.V. Starr & Co., Inc. (stockholder): Company repaid $5.9 million in outstanding principal and interest under the Starr Bridge Loan on July 29, 2025.
• Lim Kok Thay (former Director): Company issued a $6.812 million secured promissory note and warrants to him on July 21, 2025. The note was subsequently assigned to Celeniv Pte. Ltd.
• Genting Innovation Pte Ltd (subsidiary of Genting Berhad, a related party): Has distribution and manufacturing rights to certain company products in select Asia markets, including cell therapy products. No revenue recognized under this agreement as of September 30, 2025.
• Fountain Life Management LLC (Dr. Robert Hariri and Dr. Peter Diamandis are founding partners): Company entered into a Technology Services Agreement to process and store mononuclear cells for Fountain Life, receiving a one-time fee per sample.

Stakeholder Impact

• Shareholders: Face significant dilution from ongoing equity raises and warrant exercises. The 'going concern' warning indicates a high risk of capital loss. Increased net losses and declining revenues negatively impact shareholder value.
• Employees: Potential for further workforce reductions if liquidity issues are not resolved, as mentioned in the 'going concern' discussion.
• Creditors: Existing debt holders face uncertainty due to the 'going concern' warning and the need for continuous debt restructuring and extensions. New creditors are providing financing under terms that reflect the company's high risk.
• Customers: Potential for disruption in product supply or services if operations are curtailed or terminated due to financial distress.
• Suppliers/Vendors: Risk of delayed or unpaid invoices, as evidenced by multiple legal proceedings for unpaid services and products.

Next Steps

• Submit a 510(k) application for Celularity Tendon Wrap (CTW) in the fourth quarter of 2025.
• Advance development of FUSE Bone Void Filler with the objective of a 510(k) filing in the second half of 2026.
• Advance development of Celularity Placental Matrix (CPM) with the objective of a 510(k) filing in the second half of 2027.
• Actively assess opportunities in Florida and elsewhere to supply MLASCs cell therapy product candidates PDA 001 and PDA 002 to physicians in accordance with state law.
• Complete safety and efficacy assessment to determine progress to a Phase III clinical trial of PDA 001 in Crohn's disease and PDA 002 in DFU, when sufficiently capitalized.
• Explore opportunities to diversify the biobanking business, including adult cell banking.
• Continue implementing remediation plan to address material weaknesses in internal control over financial reporting, including hiring additional accounting personnel, formalizing roles and responsibilities, designing procedures for business changes, formalizing financial close processes, and engaging an outside firm.
• File a registration statement with the SEC for the resale of shares underlying the Series A Preferred Stock and October Warrants no later than thirty (30) days after October 24, 2025, and use reasonable best efforts to have it declared effective within ninety (90) days.

Key Dates

Recommendation

Celularity Inc. is in a precarious financial position, explicitly stating 'substantial doubt about our ability to continue as a going concern.' The company reported a significant increase in net losses, a sharp decline in revenues, and critically low cash reserves. While it has managed to secure various forms of financing, these appear to be short-term measures to sustain operations rather than fund sustainable growth, often involving dilutive equity issuances and complex debt arrangements. The identified material weaknesses in internal controls and ongoing legal disputes further exacerbate the operational and financial risks. Given the severe liquidity constraints, persistent unprofitability, and the explicit going concern warning, the investment risk is exceptionally high, making it an unsuitable holding for most investors.

Keywords

Cell Therapy, Regenerative Medicine, Biomaterials, SEC Filing, 10-Q, Biotechnology, Financial Results, Going Concern, Clinical Trials, Placental-derived, Warrants, Debt, Private Placement, Liquidity, Risk Factors, Corporate Governance, SEC, Nasdaq