Citius Pharmaceuticals Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations for the three months ended December 31, 2023 should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this report and in conjunction with the audited financial statements of Citius Pharmaceuticals, Inc. included in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on December 29, 2023. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements” on page ii of this Report.

Current wording

The following discussion and analysis of our financial condition and results of operations for the three and six months ended March 31, 2024 and 2023 should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this report and in conjunction with the audited financial statements of Citius Pharmaceuticals, Inc. included in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on December 29, 2023. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements” on page ii of this Report.

Previous wording

In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics (“Brooklyn”). Pursuant to this transaction, the NoveCite license was assumed by Brooklyn with all original terms and conditions. In October 2021, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).

Current wording

In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics (“Brooklyn”). Pursuant to this transaction, the NoveCite license was assumed by Brooklyn with all original terms and conditions. As part of the Novellus and Brooklyn merger transaction, the 25% non-dilutive position per the subscription agreement between Novellus and NoveCite was removed. In October 2021, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).

Previous wording

Under the terms of the agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s (now owned by Citius Oncology). The exclusive license rights, through our subsidiary, include rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Additionally, we, through our subsidiary, retain an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the India option), Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid a $40 million upfront payment, which represents the acquisition date fair value of the in-process research and development acquired from Dr. Reddy’s. Dr. Reddy’s is entitled to up to $40 million in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales (within a range of 10% to 15%), and up to $300 million for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales (within a range of 10% to 15%). The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales.

Current wording

Under the terms of the agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s (now owned by Citius Oncology). The exclusive license rights, through Citius Oncology, include rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Additionally, we, through Citius Oncology, retain an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the India option), Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid a $40 million upfront payment, which represents the acquisition date fair value of the in-process research and development acquired from Dr. Reddy’s. Dr. Reddy’s is entitled to up to $40 million in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales (within a range of 10% to 15%), and up to $300 million for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales (within a range of 10% to 15%). The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales.

Previous wording

On September 8, 2023, we announced that the FDA agreed with our plans to address the requirements outlined in the CRL. The guidance from the FDA provides a path for completing the necessary activities to support the resubmission of the BLA. No additional clinical efficacy or safety trials have been requested by the FDA for the resubmission. Based on the feedback from the FDA.

Current wording

On September 8, 2023, we announced that the FDA agreed with our plans to address the requirements outlined in the CRL. The guidance from the FDA provides a path for completing the necessary activities to support the resubmission of the BLA. No additional clinical efficacy or safety trials were requested by FDA for the resubmission. On February 13, 2024, we filed the BLA resubmission package with the FDA and on March 18, 2024, the FDA accepted the resubmission of the BLA and assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of August 13, 2024.

Previous wording

For the three months ended December 31, 2023, research and development expenses were $2,621,910 as compared to $3,445,515 during the three months ended December 31, 2022, a decrease of $823,605.

Current wording

For the three months ended March 31, 2024, research and development expenses were $3,605,898 as compared to $4,726,855 during the three months ended March 31, 2023, a decrease of $1,120,957.

Previous wording

Research and development costs for Mino-Lok decreased by $276,031 to $891,624 for the three months ended December 31, 2023 as compared to $1,167,655 for the three months ended December 31, 2022, due primarily to decreased start-up costs associated with Biorasi, LLC (“Biorasi”), a global clinical research organization (“CRO”), to help expand the Company’s Phase 3 Mino-Lok trial to additional sites outside the United States, which are no longer incurred. On January 2, 2024, Citius announced that it has completed enrollment in its pivotal Phase 3 clinical trial for Mino-Lok, an antibiotic lock solution to salvage catheters in patients with catheter-related bloodstream infections. A total of 109 catheter failure events were observed in the event-based trial; a minimum of 92 catheter failure events were required to complete the trial. The study enrolled 241 patients at clinical sites in the U.S. and India.

Current wording

Research and development costs for Mino-Lok increased by $588,194 to $1,638,287 for the three months ended March 31, 2024 as compared to $1,050,093 for the three months ended March 31, 2023, due primarily to study close out costs related to the phase 3 trial. On January 2, 2024, Citius Pharma announced that it had completed enrollment in its pivotal Phase 3 clinical trial for Mino-Lok, an antibiotic lock solution to salvage catheters in patients with catheter-related bloodstream infections. A total of 109 catheter failure events were observed in the event-based trial; a minimum of 92 catheter failure events were required to complete the trial. The study enrolled 241 patients at clinical sites in the U.S. and India.

Previous wording

Research and development costs for Halo-Lido decreased by $521,954 to $246,572 for the three months ended December 31, 2023 as compared to $768,526 for the three months ended December 31, 2022 due to lower costs associated with the Phase 2b trial incurred in the three months ended December 31, 2023. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study. Citius Pharma has scheduled an end of Phase 2 meeting with the FDA, anticipated to occur in early 2024, to begin planning the next steps in the regulatory and clinical development program for CITI-002.

Current wording

Research and development costs for Halo-Lido decreased by $1,760,602 to $201,970 for the three months ended March 31, 2024 as compared to $1,962,572 for the three months ended March 31, 2023 due to lower costs associated with the Phase 2b trial incurred in the current quarter. On June 20, 2023, we announced that the high dose formulation of CITI-002, a lidocaine and halobetasol propionate combination formulation, provided a meaningful reduction in symptom severity, as reported by patients, when compared to individual components alone. Moreover, there were no reported significant adverse events and CITI-002 was well tolerated by patients in the study. Citius Pharma has scheduled an end of Phase 2 meeting with the FDA, anticipated to occur in the second calendar quarter of 2024, to begin planning the next steps in the regulatory and clinical development program for CITI-002.

Previous wording

Research and development costs for LYMPHIR were $1,472,464 during the three months ended December 31, 2023 as compared to $1,428,545 for the three months ended December 31, 2022. The $43,919 increase in expenses was primarily due to costs associated with new analytical testing methods related to the remediation activities to respond to the CRL during the three months ended December 31, 2023.

Current wording

Research and development costs for LYMPHIR were $1,760,916 during the three months ended March 31, 2024 as compared to $1,402,908 for the three months ended March 31, 2023. The $358,008 increase in expenses was primarily due to costs associated with new analytical testing methods related to the remediation activities to respond to the CRL. On February 13, 2024, we filed the BLA resubmission package with the FDA and on March 18, 2024, the FDA accepted the resubmission of the BLA and assigned a PDUFA goal date of August 13, 2024.

Previous wording

We expect that research and development expenses will stabilize in fiscal 2024 as we focus on the commercialization of LYMPHIR, complete our Phase 3 trial for Mino-Lok, and analyze the data from our Phase 2b trial and begin planning our Phase 3 trial for Halo-Lido.

Current wording

We expect that research and development expenses will stabilize at current levels in fiscal 2024 as we focus on the commercialization of LYMPHIR, complete our Phase 3 trial for Mino-Lok, and analyze the data from our Phase 2b trial and begin planning our Phase 3 trial for Halo-Lido.

Previous wording

For the three months ended December 31, 2023, general and administrative expenses were $3,660,728 as compared to $2,603,287 during the three months ended December 31, 2022. General and administrative expenses increased by $1,057,441 in comparison with the prior period. The primary reasons for the increase were costs associated with pre-launch and market research activities associated with LYMPHIR. General and administrative expenses consist primarily of compensation costs, professional fees for legal, regulatory, accounting, and corporate development services, and investor relations expenses.

Current wording

For the three months ended March 31, 2024, general and administrative expenses were $4,285,911 as compared to $4,792,850 during the three months ended March 31, 2023. General and administrative expenses decreased by $506,939 in comparison with the prior period. The primary reason for the decrease were lower costs for pre-launch and market research activities associated with LYMPHIR. General and administrative expenses consist primarily of compensation costs, professional fees for legal, regulatory, accounting, and corporate development services, and investor relations expenses.

Previous wording

For the three months ended December 31, 2023, stock-based compensation expense was $3,058,185 as compared to $1,201,081 for the three months ended December 31, 2022. For the three months ended December 31, 2023 and 2022, stock-based compensation includes $19,858 and $33,333, respectively, in expense for the NoveCite stock plan. For the three months ended December 31, 2023, stock-based compensation also includes $1,917,000 in expense for the recently adopted Citius Oncology stock plan. Stock-based compensation expense for the most recently completed quarter increased by $1,857,104 in comparison to the prior period primarily due to the Citius Oncology stock plan.

Current wording

For the three months ended March 31, 2024, stock-based compensation expense was $3,078,392 as compared to $1,165,595 for the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, stock-based compensation includes $13,858 and $33,333, respectively, in expense for the NoveCite stock plan. For the three months ended March 31, 2024, stock-based compensation also includes $1,957,000 in expense for the Citius Oncology stock plan. Stock-based compensation expense for the most recently completed quarter increased by $1,912,797 in comparison to the prior period primarily due to the Citius Oncology stock plan.

Previous wording

Interest income for the three months ended December 31, 2023 was $253,638 as compared to interest income of $214,549 for the prior period. The increase is due to higher interest rates on the investment of the remaining proceeds of our equity offerings and common stock warrant exercises in money market accounts.

Current wording

Interest income for the three months ended March 31, 2024 was $182,205 as compared to interest income of $303,275 for the prior period. The decrease is due to lower investable balances of the remaining proceeds of our 2021 and 2023 equity offerings and the 2021 common stock warrant exercises in money market accounts.

Previous wording

Other income for the three months ended December 31, 2022 also includes the $3,585,689 gain recognized in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program.

Current wording

Other income for the three months ended March 31, 2024 also includes a $2,387,842 gain recognized in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program.

Previous wording

For the three months ended December 31, 2023, we incurred a net loss of $9,231,185, compared to a net loss for the three months ended December 31, 2022 of $3,593,645. The $5,637,540 increase in the net loss was primarily due to the decrease of $823,605 in research and development expenses being offset by the increase of $1,057,441 in general and administrative expenses, the increase in stock-based compensation expense of $1,857,104 and the decrease in other income of $3,546,600.

Current wording

For the three months ended March 31, 2024, we incurred a net loss of $8,544,154, compared to a net loss for the three months ended March 31, 2023 of $10,526,025. The $1,981,871 decrease in the net loss was due to decreases of $1,120,957 in research and development expenses and $506,939 in general and administrative expenses, and the increase in other income of $2,266,772, being partially offset by the increase in stock-based compensation expense of $1,912,797.

Previous wording

Citius Pharma has incurred operating losses since inception and incurred a net loss of $9,231,185 for the three months ended December 31, 2023. At December 31, 2023, Citius Pharma had an accumulated deficit of $171,462,564. Citius Pharma’s net cash used in operations during the three months ended December 31, 2023 was $6,135,310.

Current wording

Citius Pharma has incurred operating losses since inception and incurred a net loss of $17,775,339 for the six months ended March 31, 2024. At March 31, 2024, Citius Pharma had an accumulated deficit of $180,006,718. Citius Pharma’s net cash used in operations during the six months ended March 31, 2024 was $13,921,321.

Previous wording

As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021 and the May 2023 registered direct offering, the Company had working capital of approximately $22,600,000 at December 31, 2023. At December 31, 2023, Citius Pharma had cash and cash equivalents of $20,345,618 available to fund its operations. The Company’s primary sources of cash flow since inception have been from financing activities. Our primary uses of operating cash were for in-licensing of intellectual property, product development and commercialization activities, employee compensation, consulting fees, legal and accounting fees, insurance, and investor relations expenses.

Current wording

As a result of the Company’s common stock offerings and common stock warrant exercises during the year ended September 30, 2021 and the May 2023 registered direct offering, the Company had working capital of approximately $17,400,000 at March 31, 2024. At March 31, 2024, Citius Pharma had cash and cash equivalents of $12,559,607 available to fund its operations. The Company’s primary sources of cash flow since inception have been from financing activities. Our primary uses of operating cash were for in-licensing of intellectual property, product development and commercialization activities, employee compensation, consulting fees, legal and accounting fees, insurance, and investor relations expenses.

Previous wording

Based on our cash and cash equivalents at December 31, 2023, we expect that we will have sufficient funds to continue our operations through August 2024. We expect to need to raise additional capital in the future to support our operations beyond August 2024. There is no assurance, however, that we will be successful in raising the needed capital or that the proceeds will be received in an amount or in a timely manner to support our operations.

Current wording

Based on our cash and cash equivalents at March 31, 2024, and after giving effect to a capital raising that closed on April 30, 2024, we expect that we will have sufficient funds to continue our operations through December 2024. We expect to need to raise additional capital in the future to support our operations beyond December 2024. There is no assurance, however, that we will be successful in raising the needed capital or that the proceeds will be received in an amount or in a timely manner to support our operations.