Tonix Pharmaceuticals Holding Corp. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited; amounts below are U.S. dollars. Tonix is a clinical-stage biopharmaceutical company. Its drug and vaccine candidates were still in development, with none approved or marketed and no product revenue.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Research and development expense | $22.2 million | $13.1 million | $57.2 million | $46.5 million |
| General and administrative expense | $7.4 million | $5.5 million | $22.2 million | $16.3 million |
| Operating loss | $29.6 million | $18.5 million | $79.4 million | $62.8 million |
| Net loss | $29.0 million | $18.5 million | $78.5 million | $62.7 million |
| Basic and diluted loss per share | $0.69 | $1.60 | $3.06 | $6.02 |
Interest income was $0.6 million in Q3 and $0.8 million for the nine-month period, versus $7,000 and $99,000, respectively, in 2021. No revenue or gross margin was reported; the company said it had not generated revenue. R&D expense rose 69% in Q3 and 23% year to date, while G&A rose 35% and 36%, respectively. Management attributed increases principally to clinical and other development activity, staffing, manufacturing, facilities and related costs.
- Cash and liquidity: Cash and cash equivalents were $140.0 million at September 30, 2022, down from $178.7 million at December 31, 2021. Working capital was $137.8 million; accumulated deficit was $438.4 million.
- Cash flows, nine months: Operating activities used $75.8 million, compared with $53.1 million in 2021; investing activities used $43.5 million, compared with $9.7 million; financing activities provided $80.6 million, compared with $168.7 million. Capital spending largely related to property and facility development.
- Assets and liabilities: Total assets were $242.6 million and total liabilities $13.7 million. Property and equipment was $90.3 million, up from $50.6 million at year-end. The filing reports no conventional borrowings; lease liabilities totaled approximately $0.9 million, including $0.5 million current.
- Share issuance: Common shares outstanding increased from 15.6 million at December 31, 2021, to 53.3 million at September 30, 2022. The filing reports substantial equity issuance through ATM and Lincoln Park arrangements. Share figures and per-share amounts reflect the May 2022 1-for-32 reverse split.
Material changes, outlook and risks
- Development plans: TNX-102 SL was in Phase 3 development for fibromyalgia, with interim data expected in Q2 2023; a Phase 2 Long COVID study began in Q3 2022, with interim data also expected in Q2 2023. Management anticipated additional studies for TNX-1300, TNX-1900 and TNX-601 ER, and a Phase 1 study for TNX-1500 in 2023. These are forward-looking plans, not guaranteed outcomes.
- Facilities and investment: Property and equipment purchases totaled $43.5 million for the first nine months. The Frederick, Maryland facility was placed in service during Q3; the Dartmouth, Massachusetts facility was placed in service after quarter-end. The company also owned a vaccine facility site in Montana that was not yet ready for use at quarter-end.
- Going concern: Management said cash at quarter-end and subsequent equity proceeds were expected to fund operations and capital expenditures into Q3 2023, but not beyond. The filing states that recurring losses and negative operating cash flow raise substantial doubt about the company’s ability to continue as a going concern. Elsewhere, it says the company would not have enough resources for the one-year period from the filing date. This apparent inconsistency in the runway statements warrants review.
- Financing and dilution: The company redeemed its June 2022 convertible preferred stock in August for $31.5 million, including the redemption premium. It had sold $76.2 million net through its ATM during the first nine months. After quarter-end it reported additional ATM and Lincoln Park proceeds, and a new preferred-stock placement with $14.3 million gross proceeds held in escrow and expected to fund redemption. Further funding may require additional equity, debt or partnerships; the filing warns that financing may be unavailable on acceptable terms and equity issuance could dilute shareholders.
- Commitments: Contract research organization commitments were approximately $61.4 million, with another $3.3 million of construction commitments, at September 30. License agreements may also require future milestone payments and royalties upon specified events or commercial sales.
- Listing risk: Nasdaq notified the company on October 25, 2022 that its share price did not meet the $1 minimum bid requirement. The stated deadline to regain compliance was April 24, 2023; failure could put continued listing at risk.
- Other items: The OyaGen license was terminated effective September 20, 2022. The company reported no material legal proceedings and no material changes to its previously disclosed risk factors. Management concluded disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the filing’s different statements about cash runway and whether funding covers one year from the filing date.
- Review cash burn, planned R&D and facility spending, and the timing and conditions of subsequent financing, including the preferred-stock escrow and redemption.
- Assess dilution from ATM sales, Lincoln Park purchase agreements, stock-based awards and potential preferred-stock conversion.
- Track clinical milestones, trial enrollment and data timing; all candidates remain investigational and regulatory or commercial success is uncertain.
- Confirm Nasdaq bid-price compliance status and the potential impact of continued noncompliance.
- Evaluate CRO and construction commitments, as well as future contingent license milestones and royalties.