Matinas BioPharma Holdings, Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. The company is a development-stage biopharmaceutical business; its revenue was limited to NIH contract research, not product sales.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $59,858 | $0 | $194,494 | $0 |
| Research and development | $879,196 | $1,069,716 | $3,682,336 | $3,261,747 |
| General and administrative | $1,339,430 | $1,535,617 | $3,641,337 | $3,893,100 |
| Operating loss | $(2,158,768) | $(2,605,333) | $(7,129,179) | $(7,154,847) |
| Net loss | $(2,154,625) | $(2,611,828) | $(7,129,267) | $(7,176,723) |
| Basic and diluted loss per share | $(0.04) | $(0.08) | $(0.14) | $(0.22) |
Gross margin is not separately reported. At September 30, 2015, cash and cash equivalents were $4.36 million, with current assets of $4.88 million and current liabilities of $0.87 million. Total assets were $9.87 million, total liabilities $2.91 million, and stockholders’ equity $6.96 million. Accumulated deficit was $21.18 million.
Operating cash use was $6.70 million for the nine months, versus $5.55 million in 2014. Investing activities provided $18,000, including cash acquired in the Aquarius acquisition. Financing activities provided $8.45 million, principally from the 2015 private placement. Cash increased $1.77 million from year-end 2014. Debt was limited to a $10,000 current note payable; the filing reports no credit facilities or significant committed external funding.
Changes versus comparable periods and key transactions
- Q3 revenue was $60,000, and nine-month revenue was $194,000, compared with none in 2014; the revenue came from NIH contracts relating to MAT2203 and MAT2501.
- Q3 R&D and G&A expenses declined year over year. For the first nine months, R&D rose $420,000, primarily due to clinical work on MAT9001 and development and regulatory costs for MAT2203 and MAT2501; G&A fell about $252,000.
- In January 2015, Matinas acquired Aquarius for consideration valued at approximately $2.87 million. The purchase accounting included $3.02 million of in-process R&D, $1.38 million of goodwill, a $1.25 million deferred tax liability, and $0.78 million of contingent consideration at September 30.
- The March-April 2015 private placement raised $10 million gross and approximately $8.5 million net. It issued 20 million common shares and warrants to purchase 20 million shares. The placement agent, whose affiliates held more than 10% of the company before the offering and whose executive was a director, received $1.3 million in cash fees and expenses and warrants.
- Shares outstanding increased to 57.21 million at September 30, from 32.29 million at December 31, 2014. The company also had 39.25 million warrants outstanding and options for 7.08 million shares. Stockholders approved an increase in authorized common shares from 150 million to 250 million on October 29, effective October 30.
Outlook, risks, and other notable items
- Management estimated that September 30 cash would fund operating expenses and capital expenditures only through June 2016. Recurring losses and the need for additional financing raise substantial doubt about the company’s ability to continue as a going concern. Management noted that its cash-runway estimate depends on assumptions that may prove incorrect.
- The company implemented cost-deferral measures in Q3, including managing the timing of preclinical animal programs and reducing professional fees. It expected R&D to remain flat or decrease slightly and G&A to remain relatively flat in the near term; it expected spending to rise as programs advance.
- Management expected approximately $8,000 of NIH contract revenue in Q4 2015 and a similar amount in Q1 2016. It expected a lower monthly cash burn for the remainder of 2015 following completion of the MAT9001 human trial.
- MAT2203 had completed a single-escalating-dose Phase 1 study. In October 2015, the NIH IRB approved a NIAID Phase 2a protocol; the company expected the study to begin in 2015, with results expected in 2016 or earlier in certain circumstances. MAT2501 was in formal toxicology testing, with an IND filing then expected in late 2015.
- The company reported that a June 2015 comparative MAT9001 study showed superiority to Vascepa on the measured lipid, triglyceride, apolipoprotein, and PCSK9 levels. It was seeking development and partnership opportunities for MAT9001 and evaluating strategic options for MAT8800.
- On November 2, 2015, the company received notice that it had completed a state tax-credit transfer program and estimated receipt of $756,000 within three to four months. On October 29, it received $106,000 from a reduction in its lease security deposit.
- Key risks include the need to raise capital on acceptable terms, clinical and regulatory uncertainty, manufacturing and third-party dependence, intellectual-property protection, and the possibility of delays or reductions to product development. The company reported no legal proceedings and no material changes to internal control over financial reporting during the quarter.
Investor verification checklist
- Confirm subsequent cash receipts, financing, and actual runway against management’s June 2016 estimate.
- Track progress and results for the MAT2203 Phase 2a study and MAT2501 toxicology and IND plans.
- Verify the timing and amount of expected NIH contract revenue and whether cost-saving measures were sustained.
- Review the potential dilution and terms of outstanding warrants, options, and Aquarius milestone shares.
- Confirm receipt of the estimated $756,000 tax-credit transfer proceeds and assess continuing going-concern disclosures.