10-K: Celularity Inc. Reports Fiscal Year 2024 Results, Faces Going Concern Uncertainty

Celularity Inc.'s fiscal year 2024 results reveal a net loss and substantial doubt about its ability to continue as a going concern, despite increased revenues.

Summary

• Celularity Inc., a regenerative and cellular medicines company, reported its fiscal year 2024 results, highlighting a focus on aging-related and degenerative diseases.
• The company incurred a net loss of $57.9 million for the year ended December 31, 2024, and has an accumulated deficit of $899.7 million.
• Despite the losses, total revenues increased by 138.1% to $54.2 million, driven by higher product sales and license revenues.
• The company's advanced biomaterials business, featuring Biovance 3L and Rebound, saw significant growth.
• Celularity is developing new placental biomaterial products and cell therapy candidates, with key milestones expected in 2025 and 2026.
• The company's auditor has expressed substantial doubt about its ability to continue as a going concern without additional capital.
• Celularity is actively seeking additional financing to support its operations and strategic plans.
• The company is developing three medical devices: Celularity Tendon Wrap (CTW), Celularity Bone Void Filler (CBVF), and Celularity Placental Matrix (CPM).
• A 510(k) application for CTW is expected in the second half of 2025, with CBVF and CPM filings targeted for the second half of 2026 and 2027, respectively.
• The company plans to request an end of Phase 2 meeting with the FDA for its MLASCs cell therapy product candidate for DFU (PDA 002) in the first half of 2025.
• Celularity is also assessing the safety and efficacy data for its MLASCs cell therapy product candidate (PDA 001) in Crohn's Disease to determine whether to progress to a Phase 3 clinical trial.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While there is revenue growth, the significant net loss, accumulated deficit, and going concern warning from the auditor indicate substantial financial challenges. The need for additional capital and potential delisting from Nasdaq further contribute to a negative outlook.

Positives

• Total revenues increased by 138.1% to $54.2 million, driven by higher product sales and license revenues.
• The company is actively developing new placental biomaterial products and cell therapy candidates.
• Celularity is working towards key milestones for its product candidates in 2025 and 2026.
• The company has a robust global intellectual property portfolio with over 290 patents and patent applications.

Negatives

• The company incurred a net loss of $57.9 million for the year ended December 31, 2024.
• Celularity has an accumulated deficit of $899.7 million.
• The auditor has expressed substantial doubt about the company's ability to continue as a going concern.
• The company has outstanding debt in the principal amount of $36.4 million that is secured by all of its assets.
• The company's disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting.

Risks

• The company's historical operating results indicate substantial doubt exists related to its ability to continue as a going concern.
• Celularity will need substantial additional financing to develop its therapeutics and implement its operating plans.
• The company has substantial indebtedness, which is secured by all of its assets.
• The company's Class A common stock may be delisted from the Nasdaq if it is not successful in regaining compliance with the Nasdaq's continued listing standards.
• The company faces significant competition from other biotechnology and pharmaceutical companies.
• The company may form or seek strategic alliances or enter into additional licensing arrangements in the future, and it may not realize the benefits or such alliances or licensing arrangements.
• The company's business could be materially adversely affected by the effects of health pandemics or epidemics in regions where it or third parties on which it relies have concentrations of clinical trial sites or other business operations.

Future Outlook

Celularity expects to incur significant expenditures for the foreseeable future and will need to raise additional capital to implement its plans. The company is working toward a set of milestones with respect to off-the-shelf placental-derived allogeneic biomaterial product candidates and cell therapy product candidates, respectively.

Management Comments

• Management can provide no assurance that the company's research and development and commercialization efforts will be successfully completed, or that adequate protection of its intellectual property will be adequately maintained.
• Management can provide no assurance that the company will be able to secure additional outside capital in the future or on terms that are acceptable to the company.

Industry Context

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Celularity competes with novel therapies developed by biopharmaceutical companies, academic research institutions, governmental agencies, and public and private research institutions, in addition to existing standard of care treatments.

Comparison to Industry Standards

• The global tendon repair market was valued at approximately $2.2 billion with a 10-year compounded annual growth rate of 7.8%.
• The global bone graft substitute market was valued at approximately $3.4 billion with a 10-year compounded annual growth rate of 6.8%.
• The U.S. wound care market was valued at approximately $14.6 billion with a 10 year compounded annual growth rate of 5.1%.
• The global dermal filler market is estimated to be approximately $5.1 billion with a 10 year compounded annual growth rate of 10.8%.

Legal Proceedings

• The company is involved in an arbitration demand from Palantir Technologies Inc. related to a Master Subscription Agreement.
• The company is involved in a legal proceeding against Evolution Biologyx, LLC, et al. to recover unpaid invoice amounts.
• The company received a Civil Investigative Demand from the U.S. Attorneys Office for the Eastern District of Pennsylvania related to claims submitted to Medicare, Medicaid, or other federal insurers for services or procedures involving injectable human tissue therapy products derived from amniotic fluid or birth tissue and includes Interfyl.
• The company was involved in a legal proceeding with TargetCW v. Celularity Inc. which was settled on May 7, 2024.
• The company is involved in a legal proceeding with Hackensack Meridian v. Celularity Inc. seeking $947,576 allegedly owed by Celularity for costs associated with clinical trials.

Related Party Transactions

• Dr. Robert Hariri, the company's CEO, agreed to temporarily reduce payment of his salary pursuant to his employment agreement to minimum wage level with the remaining salary deferred until December 31, 2023.
• The company entered into a securities purchase agreement with two accredited investors, including its Chairman and Chief Executive Officer, Dr. Robert Hariri, providing for the private placement of (i) 938,183 shares of its Class A common stock, and (ii) accompanying warrants to purchase up to 938,183 shares of Class A common stock.
• The company entered into a $1,000 loan agreement with its Chairman and Chief Executive Officer, Dr. Robert Hariri, M.D., Ph.D., which bears interest at a rate of 15.0 % per year.
• The company made payments to Cryoport Systems, Inc for transportation of cryopreserved materials. The company's Chief Executive Officer and director, Dr. Robert Hariri, M.D, Ph.D., has served on Cryoports board of directors since September 2015.
• Alexandra Hariri, the daughter of Robert J. Hariri, M.D., Ph.D., Celularitys Chairman and Chief Executive Officer, is employed by the Company as an Executive Director, Corporate Strategy & Business Development.
• The company entered into a Technology Services Agreement with Fountain Life Management LLC (Fountain Life), under which the Company agreed to process and store mononuclear cells isolated from blood samples collected by Fountain Life or its authorized representatives in accordance with the Companys adult banking enrollment processes. The Companys Chairman and Chief Executive Officer, Dr. Robert Hariri, M.D, Ph.D., and director, Peter Diamandis, M.D., are founding partners of Fountain Life.
• The company entered into a second amended and restated senior secured loan agreement with Resorts World Inc Pte Ltd, (RWI) providing for an additional loan in the aggregate principal amount of $ 15,000 net of an original issue discount of $ 3,750 . RWI is affiliated with Lim Kok Thay, a significant stockholder and former member of the Company's board of directors.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances.
• Employees may experience uncertainty due to the company's financial instability and potential for further cost-cutting measures.
• Customers may be affected by potential disruptions in the supply of products and services.
• Suppliers and creditors face increased risk of non-payment due to the company's financial challenges.

Next Steps

• Submit a 510(k) application for CTW in the second half of 2025.
• Advance the development of CBVF with the objective of a 510(k) filing in the second half of 2026.
• Advance the development of CPM with the objective of a 510(k) filing in the second half of 2027.
• Request an end of Phase 2 meeting with the FDA for its MLASCs cell therapy product candidate for DFU (PDA 002) in the first half of 2025.
• Complete the safety and efficacy assessment of previously generated data for its MLASCs cell therapy product candidate (PDA 001) in Crohn's Disease in the first half of 2025.

Key Dates

Keywords

Celularity, financial results, going concern, cell therapy, biomaterials, clinical trials, revenue, net loss, intellectual property, financing