Tonix Pharmaceuticals Holding Corp. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. The company is a clinical-stage biopharmaceutical developer with no approved commercial products and no revenue. Financial statement amounts below are in millions unless stated otherwise.
Financial results
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $3.91 | $5.47 | $9.71 | $23.65 |
| General and administrative expense | $1.93 | $2.14 | $6.04 | $7.81 |
| Total operating expense / operating loss | $5.84 | $7.61 | $15.75 | $31.46 |
| Net loss | $5.79 | $7.58 | $15.63 | $31.36 |
| Net loss per share | $0.77 | $2.90 | $2.49 | $14.52 |
| Operating cash used | Not separately stated | Not separately stated | $14.20 | $31.87 |
There is no meaningful revenue or profit margin because Tonix had no product sales and reported operating losses. Net interest income was $0.05 million for Q3 and $0.12 million for the nine-month period in 2017.
Liquidity, capitalization and cash flow
- At September 30, 2017, cash and cash equivalents were $29.31 million; marketable securities were zero, down from $7.18 million at December 31, 2016 after maturities. Working capital was approximately $28.4 million.
- Total liabilities were $1.86 million, primarily accounts payable and accrued expenses. The balance sheet reports no debt.
- Nine-month cash use from operations was $14.20 million. Investing activities provided $7.17 million, mainly from security maturities; financing activities provided $17.40 million, primarily from equity sales. Cash increased by $10.37 million to $29.31 million.
- The company issued shares through an ATM program and an April public offering during 2017. Common shares outstanding rose from 3.92 million at year-end 2016 to 7.58 million at September 30, 2017; the filing reflects a 1-for-10 reverse split in March 2017.
- A September 2017 agreement allows Lincoln Park to purchase up to $15 million of stock, subject to conditions and limits. The registration statement became effective October 12, with conditions met October 13. Through November 3, Tonix had sold 248,340 shares for approximately $1.1 million gross. The company also reported that its separate $9 million Cowen ATM could not be used until a new shelf registration became effective.
Changes versus prior comparable periods
- Q3 net loss improved to $5.79 million from $7.58 million; nine-month net loss fell to $15.63 million from $31.36 million.
- R&D expense declined 29% in Q3 and 59% for the nine months. Management attributed the reductions mainly to ending fibromyalgia development and, for the nine-month comparison, episodic tension-type headache work, alongside lower clinical, manufacturing and personnel costs.
- G&A expense declined 10% in Q3 and 23% for the nine months, mainly reflecting reduced personnel-related costs.
- Operating cash use was substantially lower than in the prior-year nine-month period, principally due to lower clinical, manufacturing, nonclinical, regulatory and payroll spending.
Business outlook, risks and notable items
- Tonmya (TNX-102 SL) is the lead candidate, in Phase 3 development for PTSD, and has FDA Breakthrough Therapy designation. In the Phase 2 AtEase study, the 2.8 mg dose did not reach statistical significance on the primary endpoint; the 5.6 mg dose showed a statistically significant result under one stated analysis (p=0.031). The ongoing Phase 3 HONOR study plans to enroll approximately 550 participants, with an interim analysis after about 275 are evaluable. The filing does not provide HONOR interim or final results.
- Management said the FDA indicated that a single-study NDA may be possible if HONOR topline results are statistically persuasive. FDA acceptance of the proposed commercial manufacturing data approach was described as in principle; Tonmya is not approved, and the proposed name remains subject to NDA approval.
- Management expects operating losses to continue, anticipates higher R&D spending as development proceeds, and expects near-term G&A to decrease. It stated that available cash was sufficient for operating expenses and planned clinical trials for at least 12 months from the filing date, while also stating that additional capital will be needed for future R&D.
- Key risks include trial efficacy or safety outcomes, enrollment or regulatory delays, financing availability and potential shareholder dilution. Tonix reported approximately $11.8 million of CRO commitments for future work and $0.78 million of future minimum lease payments.
- The company also disclosed earlier-stage programs including TNX-601, TNX-801, TNX-301 and TNX-701. Their development, approval and commercial prospects are uncertain. No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- HONOR enrollment, interim-analysis timing and results, and whether those results support the proposed regulatory pathway.
- Cash burn and runway against trial spending, CRO commitments and management’s stated need for future financing.
- Equity issuance under the Lincoln Park agreement and any resulting dilution; availability of the Cowen ATM facility.
- FDA requirements for an NDA and commercial manufacturing, and the status of Tonmya’s approval and proposed trade name.
- Whether reduced R&D spending reflects sustainable cost control or curtailed programs, and progress and funding priorities across the broader pipeline.