Tonix Pharmaceuticals Holding Corp. — Q3 2016 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2016. The company is a clinical-stage CNS pharmaceutical developer; it had no approved products, revenue, or cost of goods sold. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $5.5m | $10.3m | $23.7m | $26.0m |
| General and administrative expense | $2.1m | $3.0m | $7.8m | $8.7m |
| Operating loss | $7.6m | $13.3m | $31.5m | $34.8m |
| Net loss | $7.6m | $13.3m | $31.4m | $34.7m |
| Basic and diluted loss per share | $0.29 | $0.72 | $1.45 | $2.15 |
Margins are not meaningful because the company had no revenue. Q3 R&D expense fell 47%, mainly as development work on TNX-102 SL wound down; nine-month R&D fell 9%. G&A declined 30% for the quarter and 10% year to date, primarily from lower professional, travel, and administrative costs.
- Cash and investments: At September 30, cash and cash equivalents were $15.6m and available-for-sale marketable securities were $11.1m, totaling $26.7m. Total current assets were $29.2m.
- Cash flow: Operating activities used $31.9m in the first nine months, versus $30.6m in 2015. Financing provided $15.6m, compared with $47.7m in 2015; investing provided $12.7m, largely from securities maturities. Cash declined $3.5m to $15.6m.
- Balance sheet: Working capital was approximately $26.6m. Total liabilities were $2.7m, including $2.6m of current liabilities; the filing shows no interest-bearing debt. Total assets were $29.8m and stockholders’ equity $27.1m.
- Equity funding and dilution: During the nine months, public offerings and ATM sales provided net proceeds of approximately $15.6m. Shares outstanding rose to 29.35m at September 30 from 18.83m at year-end 2015. The company reported 39,181,106 shares outstanding as of November 8, after a subsequent offering.
Business developments, outlook, and risks
- Lead program: TNX-102 SL is an investigational treatment for PTSD. 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 effect in the reported MMRM with multiple-imputation analysis (p=0.031). The company reported no new safety signals in the completed open-label extension; TNX-102 SL remains unapproved.
- Regulatory and trial plans: Following an August 2016 FDA meeting, management expected two adequate, well-controlled Phase 3 efficacy and safety studies and six- and 12-month safety exposure data to support an NDA. The company planned to begin the approximately 550-patient military PTSD HONOR study in Q1 2017, subject to FDA acceptance of the design, followed by a study of approximately 550 predominantly civilian PTSD patients. These are plans, not assured outcomes.
- Other programs: The pipeline includes TNX-301 for alcohol use disorder, TNX-601 for PTSD and steroid-associated cognitive dysfunction, and two biodefense programs. These programs remain in early development.
- Funding outlook: Management stated that available funds were expected to cover operations and planned development for at least 12 months. The company expects continued operating losses and says additional capital will be needed to develop and commercialize its candidates. An October 2016 offering closed after quarter-end and was expected to provide approximately $4.6m net, plus approximately $0.7m net from the over-allotment warrant exercise.
- Commitments and key risks: Contractual obligations included approximately $14.6m of research and development commitments, largely due within one year, and $1.6m of lease obligations. Clinical-development delays, unsuccessful trials, regulatory decisions, recruitment, safety, and access to future financing could require program reductions or cause material delays. The company reported no material legal proceedings.
Most important facts for investors to verify
- Whether the Phase 3 design receives FDA acceptance and whether the planned trials start on schedule, enroll, and meet their endpoints.
- Whether the Phase 2 5.6 mg result is reproducible and whether its safety and longer-term exposure data support an NDA.
- Cash burn, the assumptions behind management’s 12-month runway statement, and the amount and timing of future financing needs.
- The dilution and warrant terms from the October offering and the resulting share count; also reconcile subsequent share issuance with the reported November 8 outstanding-share figure.
- Timing and cancellation terms for the $14.6m of R&D commitments, and changes in accrued clinical-trial expenses.