Soligenix, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Soligenix is a late-stage biopharmaceutical company with BioTherapeutics and Vaccines/BioDefense segments. It primarily earns revenue from government contracts and grants and has no approved commercial products described in this filing.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 or prior date |
|---|---|---|
| Revenue | $1.12 million | $1.33 million |
| Gross profit (margin) | $141,000 (13%) | $244,000 (18%) |
| Research and development | $1.80 million | $1.22 million |
| General and administrative | $732,000 | $764,000 |
| Operating loss | $2.39 million | $1.74 million |
| Net loss | $2.38 million | $1.73 million |
| Net loss per share | $0.27 | $0.32 |
| Cash used in operations | $1.46 million | $1.63 million |
| Cash and cash equivalents | $6.37 million at March 31, 2018 | $7.81 million at December 31, 2017 |
| Working capital | $3.95 million at March 31, 2018 | $6.19 million at December 31, 2017 |
Current liabilities were $3.41 million; the filing reports no debt balance. Total assets were $7.48 million and shareholders’ equity was $4.07 million at quarter-end. Cash declined 18% and working capital 36% from year-end, principally due to spending on Phase 3 trials. Basic and diluted weighted-average shares were 8.73 million; 3.36 million options and warrants were excluded from diluted EPS as anti-dilutive. The company issued 10,083 shares through its Lincoln Park equity line for $19,800 during the quarter.
Changes versus the prior-year quarter
- Revenue fell 16%, mainly because OrbeShield BARDA work had ended and a RiVax primate study was completed in Q1 2017. New NIH grants for SGX301 and SGX942 partly offset the decline.
- Gross profit fell 42%, and margin declined five percentage points, reflecting lower revenue and a smaller share of reimbursable costs eligible for fixed overhead reimbursement.
- R&D expense increased 48%, driven by the SGX301 and SGX942 Phase 3 programs, including expansion of SGX942 to European sites. Net loss increased 37%.
- Operating cash use improved year over year, but quarter-end cash and working capital were materially lower than at December 31, 2017.
Outlook, commentary and risks
- Management says existing cash, expected government contract and grant proceeds, the Lincoln Park facility, and New Jersey tax-credit certificate proceeds should fund anticipated working capital and capital expenditures for at least 12 months from issuance of the financial statements. The company expects continued losses and depends on spending controls, funding awards, partnerships and/or additional financing.
- Management estimates approximately $11.5 million of R&D spending over the next 12 months before reimbursements ($7.5 million BioTherapeutics and $4.0 million Vaccines/BioDefense), with approximately $5.9 million of anticipated contract reimbursements. These are estimates, not earnings guidance.
- The company reported up to $18.4 million of active government contract and grant funding remaining, subject to agency options and non-termination. It also reported $10.2 million available under the Lincoln Park equity facility, which expires in March 2019. Additional equity or debt financing and partnerships are not assured and could be on unfavorable terms.
- Key development milestones described include SGX301 Phase 3 interim analysis anticipated in the second half of 2018 and final results in the first half of 2019; SGX942 Phase 3 interim analysis anticipated in the first half of 2019 and final results in the second half of 2019; and a planned SGX203 Phase 3 trial in the second half of 2018, contingent on funding or a partnership. RiVax Phase 1/2 was planned for the second half of 2018.
- Principal risks include clinical and regulatory uncertainty, reliance on government funding and optional contract extensions, ongoing cash burn and need for capital, and potential dilution. Up to $7.9 million in milestone payments and royalties of up to 6% of net sales may be payable under certain agreements upon success; $197,000 of milestones was accrued. The filing also notes potential additional Hy Biopharma milestone payments of up to $10 million if specified conditions are achieved.
- Management reported disclosure controls and procedures were effective at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether clinical trial enrollment, analyses and results meet the stated timelines, particularly for the SGX301 and SGX942 Phase 3 trials.
- Whether government agencies exercise funding options, maintain existing awards, or provide replacement support for programs such as OrbeShield.
- Whether actual cash burn, grant reimbursements and New Jersey tax-credit proceeds support management’s 12-month liquidity expectation.
- Whether the company can secure partnerships or financing before liquidity needs arise, and the potential cost and dilution of such financing.
- How clinical, regulatory, milestone and royalty obligations develop; quarter-end common shares outstanding were 8,740,723, and 8,750,801 were reported outstanding as of May 7, 2018.