Soligenix, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018; financial statements are unaudited. Soligenix is a development-stage biopharmaceutical company with BioTherapeutics and Vaccines/BioDefense segments. Revenue is primarily from government contracts and grants, rather than commercial product sales.
Financial performance and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $1.38 million | $1.82 million | $4.23 million | $4.14 million |
| Gross profit (margin) | $144,123 (10%) | $347,915 (19%) | $516,843 (12%) | $905,288 (22%) |
| Research and development | $1.39 million | $605,719 | $4.38 million | $3.61 million |
| General and administrative | $667,799 | $711,819 | $2.04 million | $2.32 million |
| Net loss | $1.86 million | $963,094 | $5.80 million | $5.01 million |
| Net loss per share | $0.11 | $0.17 | $0.50 | $0.89 |
Cash and liquidity: Cash and cash equivalents were $11.72 million at September 30, 2018, up from $7.81 million at December 31, 2017. Working capital was $9.12 million, compared with $6.19 million. Net cash used in operating activities for the first nine months was $4.57 million, versus $4.19 million in 2017. Financing activities provided $8.48 million, principally from the July public offering; investing cash use was $1,924.
Balance sheet: Total assets were $13.29 million and total current liabilities were $4.02 million. The balance sheet lists no debt line item. Accumulated deficit was $163.07 million. Common shares outstanding increased from 8.73 million at year-end 2017 to 17.68 million at September 30, 2018.
Changes versus prior period
- Q3 revenue fell 24%, mainly because the prior-year quarter included a RiVax milestone payment and reimbursable employee costs were lower in 2018. Nine-month revenue increased 2%.
- Net loss increased 93% for Q3 and 16% for the first nine months, primarily reflecting spending on pivotal Phase 3 trials of SGX301 and SGX942.
- Nine-month R&D expense rose 21%; SGX942 spending included expansion of the Phase 3 trial to select European sites. G&A declined 12% for the nine-month period.
- Gross margin declined year over year, which management attributed to lower reimbursable contractor and employee costs and the absence of the 2017 RiVax milestone fee. Nine-month costs of revenue also increased, including RiVax manufacturing scale-up costs.
- The July 2018 public offering raised approximately $9.2 million gross and $8.4 million net. It included common shares and warrants, contributing to the increase in shares outstanding.
Outlook, developments and risks
- Management said cash resources, expected government-contract and grant proceeds, available equity facilities and other anticipated sources should cover working capital and capital expenditures for at least 12 months from issuance of the financial statements. This depends in part on government agencies exercising contract options and on access to additional funding; the company expects continuing losses.
- For the next 12 months, management estimated R&D spending of approximately $13.4 million before contract reimbursements and contract/grant revenue of approximately $6.1 million. It disclosed up to $15.2 million of active government contract and grant funding, up to $9.0 million available under the ATM agreement, and up to $10.1 million on the Lincoln Park equity facility, which expires in March 2019. These are potential funding sources, not cash on hand.
- After quarter-end, the SGX301 Phase 3 interim analysis received a positive DMC recommendation to randomize approximately 40 additional subjects to preserve the trial’s planned statistical power. No safety concerns were reported. Management expected final results in Q1 2020.
- Management expected an SGX942 Phase 3 interim analysis in the first half of 2019 and final results in the second half of 2019. Enrollment was continuing, including at European sites.
- A material post-quarter development affected ThermoVax rights: on October 31, 2018, Soligenix and the University of California terminated their original license; the UC licensed the technology to VitriVax, and Soligenix entered into a sublicense with VitriVax for ricin and Ebola vaccine fields.
- Key risks include clinical and regulatory uncertainty, reliance on government grants and contracts that may not be extended, the need for further financing or partnerships and potential dilution, and contingent license obligations. Licensing agreements may require milestones of up to $7.9 million and royalties up to 6% of covered-product net sales; a separate hypericin agreement provides for up to $10.0 million in success-based payments. NOL utilization may be substantially limited under tax rules.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, enrollment and eventual efficacy and safety results for the SGX301 and SGX942 pivotal Phase 3 trials, including whether expected timelines remain achievable.
- Whether government agencies exercise funding options and whether grant, contract, ATM, equity-line or partnership proceeds materialize on acceptable terms.
- The commercial and development implications of the October 31, 2018 ThermoVax sublicense, including the scope and continuity of Soligenix’s rights.
- Cash burn against management’s 12-month liquidity assessment, and the extent of further share or warrant dilution.
- Potential milestone, royalty and other contractual obligations, along with restrictions on the use of tax-loss carryforwards.