Artelo Biosciences, Inc. (NASDAQ:ARTL) is a clinical-stage biopharmaceutical company focused on developing and commercializing therapeutics that target lipid-signaling pathways, including the endocannabinoid system (ECS). The company's product candidate pipeline broadly leverages leading scientific methodologies and balances risk across mechanism of action and stages of development.

Business Overview

Artelo Biosciences is currently developing a dual cannabinoid (CB) agonist that targets both the CB1 and CB2 receptors. This synthetic small molecule program is designated ART27.13 and is being developed as a potential treatment for anorexia associated with cancer. The company is conducting a Phase 1b/2a trial, titled the Cancer Appetite Recovery Study (CAReS), to evaluate ART27.13 for this indication.

The company's second program, ART26.12, is a small molecule and the lead product candidate from Artelo's chemical library of inhibitors of fatty acid binding proteins, notably Fatty Acid Binding Protein 5 (FABP5). ART26.12 is undergoing pre-clinical research as a potential treatment for painful neuropathies, including chemotherapy-induced peripheral neuropathy (CIPN). In addition, ART26.12 may have broad applications as a cancer therapeutic, a treatment for pain and inflammation, and potential use in anxiety-related disorders, including post-traumatic stress disorder.

Artelo is also developing its own invention, ART12.11, a patented solid-state composition of cannabidiol (CBD) and tetramethylpyrazine (TMP). ART12.11 may be considered by regulatory authorities as a fixed drug combination instead of a new chemical entity. Artelo plans to develop ART12.11 for multiple potential indications where CBD has shown activity, such as anxiety disorders, including post-traumatic stress disorder (PTSD), depression, epilepsy, insomnia, and inflammatory bowel disease (IBD).

Financials

For the fiscal year ended December 31, 2023, Artelo reported an annual net loss of $9.9 million, with no revenue generated. The company's annual operating cash flow was -$8.0 million, and its annual free cash flow was also -$8.0 million.

In the first quarter of 2024, Artelo reported a net loss of $2.5 million, with no revenue generated. The company's quarterly operating cash flow was -$2.9 million, and its quarterly free cash flow was also -$2.9 million.

Artelo's cash, cash equivalents, and investments totaled $7.6 million as of March 31, 2024. The company's current ratio was 14.58, indicating a strong liquidity position.

Liquidity

Artelo has incurred losses since inception and will continue to require substantial additional capital to fund its research and development activities. In November 2021, the company completed an equity offering that generated net proceeds of $18.3 million. Additionally, in May 2022, Artelo entered into a purchase agreement and a registration rights agreement (the "Equity Line") with an institutional investor, providing for the sale of up to $20.0 million worth of the company's common stock over a 36-month period.

As of March 31, 2024, Artelo had issued 372,012 shares of common stock under the Equity Line for aggregate proceeds of $622,000, including 38,741 shares issued for $55,000 during the first quarter of 2024. In July 2023, the company filed a $75.0 million shelf registration statement on Form S-3, which became effective on July 14, 2023. This shelf registration statement provides Artelo with additional flexibility to access capital markets when needed.

The company's existing cash resources are expected to provide sufficient funds to carry out its planned operations into the second half of 2025. However, Artelo will require significant additional capital to complete the development and commercialization of its product candidates.

Product Pipeline and Clinical Development

Artelo's lead product candidate, ART27.13, is a dual CB1 and CB2 receptor agonist being developed for the treatment of anorexia associated with cancer. The company commenced enrollment and dosed the first patient in the CAReS Phase 1b/2a clinical study in April 2021 and completed enrolling patients in the Phase 1b portion during the first quarter of 2023. Data from the Phase 1b stage was used to determine the most effective and safe dose selected as the starting dose for the Phase 2a portion of CAReS.

Artelo received approval from regulatory authorities in the UK, Ireland, and Norway to increase the daily dose of ART27.13 from 650 micrograms to 1,000 micrograms after 4 weeks and up to 1,300 micrograms initiated at 8 weeks in patients for whom intra-patient dose escalation is expected to be well-tolerated. The company also received approval to enroll 40 patients in the Phase 2a stage with a 3:1 randomization of ART27.13 to placebo. Artelo initiated the Phase 2a portion of CAReS during April 2023 and is planning for up to 14 sites from five countries to participate.

Artelo's second program, ART26.12, is a small molecule inhibitor of FABP5 that is undergoing pre-clinical research as a potential treatment for painful neuropathies, including CIPN. Based on positive pre-clinical evidence from five separate studies, the company has prioritized CIPN as the initial indication for development of ART26.12.

The ART26.12 program is undergoing regulatory-enabling studies, and Artelo anticipates first-in-human studies could begin in the second half of 2024, subject to the ability of selected contract research organizations to source materials and resources, as well as the review and approval process with regulatory authorities.

Artelo's third program, ART12.11, is a proprietary cocrystal composition of CBD that the company believes may offer advantages over other solid forms of CBD, including improved stability, solubility, and a more consistent absorption profile. Artelo plans to develop ART12.11 for multiple potential indications where CBD has shown activity, such as anxiety disorders, PTSD, depression, epilepsy, insomnia, and IBD.

Intellectual Property and Regulatory Landscape

Artelo has in-licensed key patents and patent applications for its product candidates from the NEOMED Institute and the Research Foundation at Stony Brook University. The company also has two US patents, one pending US patent application, and two foreign patent applications directed to its proprietary CBD cocrystal, ART12.11.

The development of Artelo's product candidates, particularly those involving cannabinoids, requires navigating a complex regulatory landscape. In the United States, the company's research activities must comply with the requirements of the Drug Enforcement Administration (DEA) and state-level controlled substance laws. Artelo also faces similar regulatory requirements in the UK and other countries where it is conducting research.

Risks and Challenges

Artelo faces several risks and challenges common to early-stage biopharmaceutical companies, including the need to raise significant additional capital to fund its operations, the inherent uncertainty of clinical development, and the potential for regulatory and commercialization challenges. The company also faces risks related to its reliance on third-party contract research organizations and manufacturers, as well as the potential for intellectual property disputes.

Additionally, Artelo's product candidates that involve cannabinoids may face public perception and stigma challenges, as well as potential regulatory hurdles related to the controlled substance status of certain cannabinoids.

Outlook

Artelo Biosciences is a clinical-stage biopharmaceutical company with a diverse pipeline of product candidates targeting the endocannabinoid system and other lipid-signaling pathways. The company's lead program, ART27.13, is currently in a Phase 1b/2a clinical trial for the treatment of anorexia associated with cancer, and its FABP5 inhibitor program, ART26.12, is advancing through pre-clinical development for the treatment of painful neuropathies.

Conclusion

While Artelo faces the typical challenges of a clinical-stage biotech company, its experienced management team, novel therapeutic approaches, and strong intellectual property position provide a solid foundation for the company's future growth and development. As Artelo continues to execute on its clinical and regulatory milestones, investors will closely monitor the company's progress in bringing its innovative therapies to market.