Biopharmaceutical company Cardax Inc. posted a 71% drop in revenue in the third quarter and said in a regulatory filing Friday that it needs to continue raising capital to avoid curtailing or ceasing its operations.
But the Honolulu-based company expressed encouragement about receiving an invitation from a federal agency to submit a grant application for a COVID-19 clinical trial.
The Honolulu-based company, which produces the anti-inflammatory dietary supplement ZanthoSyn, said revenue was lower from the year-earlier quarter due to reduced orders by Cardax’s largest customer, General Nutrition Corp., and COVID-19-related impacts on GNC store sales. Cardax said the reduction in orders as well as the decrease in sales at GNC stores was driven by GNC’s Chapter 11 bankruptcy filing in June.
Cardax was encouraged, though, by an invitation from a federal government agency to submit a grant application for a proposed multicenter, randomized, double-blind, placebo-controlled human clinical trial to assess the time to recovery and other endpoints in hospitalized COVID-19 patients age 65 and older. The proposed test agent is the same form of astaxanthin utilized in ZanthoSyn but would be studied at a higher dose as an investigational new drug.
The application, which Cardax submitted in July, was reviewed by the agency in August, and in October the agency invited Cardax to submit an updated grant application based on guidance from the agency’s clinical trial advisory panel. The updated grant application is being prepared and is expected to be submitted in December or January. Cardax said it doesn’t know yet whether the grant will be funded or the timing or amount of a funding award, if any.
Cardax, which began selling ZanthoSyn to GNC in 2017, posted revenue of $66,502 compared with $229,142 in the year-earlier period. The company had a slightly narrower loss of $1.35 million versus $1.43 million in the third quarter of 2019 due to a decrease in professional fees; research and development; salaries and wages; and selling, general and administrative expenses. Cardax, which has never made a profit, has lost $71.1 million since its inception in March 2006. Cardax also recorded an allowance in the quarter of $52,766 for “doubtful collections” from GNC.
Funding activities continue for Cardax with the company issuing notes and raising $640,000 in the third quarter to bring its nine-month total to just over $2.1 million. In its SEC filing, Cardax said that its ability to raise capital during the pandemic is unknown and that if it is unable to obtain adequate capital, it “may be required to cease operations or substantially curtail its ongoing and planned commercial activities.” Cardax added that “the ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern.”
Cardax CEO David G. Watumull said that despite the accelerating COVID-19 pandemic, the company continues to make progress on several fronts.
“First, we are very pleased with the important next step in the review process for our invited COVID-19 clinical trial grant application and believe that the excellent safety profile and strong scientific rationale for astaxanthin support testing in a rigorous clinical trial,” he said. “In addition, GNC’s emergence from bankruptcy and the resumption of ZanthoSyn orders is encouraging. We also continue to pursue multiple funding opportunities to support our business.”
GNC, a health and wellness company, was sold through bankruptcy in October to its largest shareholder, Chinese-based Harbin Pharmaceutical Group, for about $780 million. The retailer filed for bankruptcy with about $895 million in debt and assets of $1.4 billion in U.S. Bankruptcy Court in Delaware. As part of its bankruptcy, GNC said it would close at least 800 of its 7,300 stores. Six stores on Oahu have since closed. They were at Windward Mall in Kaneohe, 1003 Bishop St., International Market Place, Wahiawa Town Center, Moanalua Shopping Center and Kailua Village Shops.
Cardax’s stock closed unchanged at $1.74 Friday on the Over the Counter market.
