Sunshine Biopharma, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated financial statements. Sunshine combines pharmaceutical research and development with commercial generic-drug and OTC businesses. The quarter includes Nora Pharma, acquired in October 2022; the notes state its results are included for January 1 through March 31, 2023. Accordingly, year-over-year comparisons are not like-for-like.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Sales | $4.894 million | $123 thousand |
| Gross profit / margin | $1.828 million / 37.3% | $63 thousand / 51.2% |
| General and administrative expenses | $3.657 million | $1.286 million |
| Operating loss | $1.829 million | $1.223 million |
| Net loss | $1.702 million | $1.236 million |
| Basic loss per share | $0.08 | $0.23 |
| Cash used in operating activities | $1.850 million | $1.304 million |
Sales increased $4.771 million, primarily from Nora Pharma. Cost of sales was $3.066 million, or 62.6% of sales, compared with 48.8% in the prior-year quarter. Higher administrative expenses reflected Nora Pharma and public-company overhead; salaries rose by approximately $1.739 million. Net interest income of $214 thousand helped offset operating losses.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $19.294 million, down $2.532 million from year-end 2022. Current assets were $24.947 million and current liabilities $6.906 million.
- Total liabilities were $7.562 million, including a $3.632 million Nora Pharma earnout payable and $734 thousand of current and long-term lease liabilities. The balance sheet reports no conventional notes payable.
- Operating cash outflow was $1.850 million; investing cash outflow was $146 thousand; financing cash outflow was $538 thousand, including $507 thousand spent repurchasing shares.
- Shareholders’ equity was $19.429 million. Common shares outstanding were 22,139,921 at March 31, compared with 22,585,632 at year-end.
Business developments, outlook and risks
- Nora Pharma’s Canadian portfolio included 50 prescription drugs and 11 OTC products. Management listed 27 generic products under regulatory review, with anticipated launches from Q2 2023 through Q3 2024; these are stated targets, not assured outcomes.
- Proprietary programs remain in development: Adva-27a was in IND-enabling studies, K1.1 in animal testing, and SBFM-PL4 in animal testing. The filing gives no launch dates for these candidates. The company reported signing a research agreement for Adva-27a IND-enabling studies and an exclusive worldwide license with the University of Arizona for PLpro inhibitor technology.
- Management said existing cash was expected to fund operations for the next 24 months, but estimated another approximately $30 million would be needed to fully implement its business plan, including R&D, possible clinical trials and generic-business expansion. No firm financing commitments were in place, and additional capital may not be available on acceptable terms.
- The company said it was not generating enough operating revenue to fully implement its business plan. It provided no formal revenue or earnings guidance. Management’s cash-runway estimate is not assurance of future funding sufficiency.
- A stock repurchase program of up to $2 million was announced in January 2023; 445,711 shares were repurchased for $506,822 during the quarter and canceled. The $3.632 million earnout is conditional on sales increases and the seller’s continued employment, but is recorded as salary payable.
- The company reported no material legal proceedings, off-balance-sheet arrangements or subsequent transactions identified through the financial statements’ availability date. Management concluded disclosure controls were effective at a reasonable-assurance level.
Most important facts to verify
- Confirm Nora Pharma’s contribution to Q1 sales, gross profit and cash use, and reconcile the MD&A’s statement that its results were included from October 2022 through December 2022 with the notes’ stated January–March 2023 inclusion.
- Assess whether cash runway and the estimated $30 million funding need remain current, and identify credible financing sources and potential dilution.
- Track product regulatory-review and launch milestones, and the scientific, clinical and regulatory progress of the proprietary drug candidates.
- Review Nora Pharma’s gross margins, inventory and receivables, and the conditions and potential timing of the earnout payment.
- Monitor cash burn, share repurchases and outstanding warrants, including the potential effects of warrant exercises on cash and dilution.