Matinas BioPharma Holdings, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. This is an annual report, not a standalone fourth-quarter filing. Matinas is a clinical-stage biopharmaceutical company developing anti-infective candidates using its Rutgers-licensed cochleate drug-delivery platform. It reported no product revenue.
Financial results and liquidity
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $0 | $194,000 contract research revenue |
| Research and development expense | $3.95 million | $5.29 million |
| General and administrative expense | $4.31 million | $4.81 million |
| Net loss | $7.60 million | $9.14 million |
| Net loss attributable to common shareholders | $11.99 million | $9.14 million |
| Basic and diluted loss per share | $0.21 | $0.18 |
| Cash used in operating activities | $6.12 million | $7.81 million |
| Cash and cash equivalents at year-end | $4.11 million | $3.23 million |
- Operating expenses declined $1.85 million year over year. R&D fell mainly because a MAT9001 clinical study was completed in 2015; G&A declined primarily with lower compensation and professional fees. Management expected both R&D and public-company-related costs to rise in 2017.
- Gross margin and operating margin are not meaningful for this pre-revenue development-stage company. The 2016 common-shareholder loss included a $4.39 million deemed dividend from the preferred stock’s beneficial conversion feature; this is distinct from the $7.60 million net loss.
- At December 31, 2016, total assets were $9.82 million, total liabilities $2.67 million, and stockholders’ equity $7.15 million. Current assets were $4.57 million and current liabilities $1.44 million. The balance sheet included a $118,000 current note payable and $1.21 million deferred tax liability.
- Operating cash outflow was partly offset by $7.00 million of financing cash flow, principally the 2016 preferred-stock financing. In January 2017, a warrant tender offer generated approximately $13.5 million gross and $12.7 million net cash proceeds. Management said year-end cash plus those proceeds was expected to fund operations and capital needs through the second quarter of 2018; this estimate depends on assumptions and is not a guarantee.
- No cash dividends on common stock were paid or expected. The filing reports no off-balance-sheet arrangements.
Business, progress, and outlook
- MAT2203: Oral cochleate amphotericin B. Two Phase 2 studies were ongoing: an NIH/NIAID Phase 2a study in refractory mucocutaneous candidiasis and a randomized study in vulvovaginal candidiasis. Management expected interim/topline results in the first half of 2017, planned another Phase 2 study in patients with hematologic malignancies, and anticipated a Phase 3 prevention trial in 2018, subject to Phase 2 results and FDA discussions. The company held QIDP and Fast Track designations; it had applied for Orphan Drug Designation.
- MAT2501: Oral cochleate amikacin for NTM and potentially drug-resistant bacterial infections. The Phase 1 single-ascending-dose study in healthy volunteers reported no serious adverse events; adverse events were mostly mild and gastrointestinal, and decreased with food. Blood levels at tested doses were below levels cited for injected amikacin. The company planned a multiple-dose Phase 1 study before considering patient studies. MAT2501 had QIDP and Orphan Drug designations for NTM.
- The company had not obtained approval for any product or generated product sales, and said approval was not expected before 2021 at the earliest, if ever. It anticipated continued losses and additional financing needs; no committed external funding source was identified. Commercial success would also require manufacturing scale-up, reimbursement, and sales/marketing capabilities or partners.
- Research and development spending was $3.95 million in 2016 versus $5.29 million in 2015. Management planned to advance the MAT2203 trials, start another study, progress MAT2501, and invest approximately $1 million in the new R&D and manufacturing facilities during 2017.
Material risks, contingencies, and unusual items
- Financing and dilution: The company had a $35.18 million accumulated deficit and ongoing operating losses. At year-end, 1.6 million preferred shares were convertible into 16 million common shares at the stated conversion terms; the preferred stock carries an 8% annual cumulative dividend payable in common shares. The January 2017 warrant offer materially increased common shares outstanding. Options, remaining warrants, and up to 3 million contingent Aquarius merger shares could add further dilution.
- Preferred-stock royalty rights: Subject to vesting and other terms, holders may receive 4.5% of MAT2203/MAT2501 net sales, capped at $25 million per year, and 7.5% of licensing or disposition proceeds, capped at $10 million per year. These obligations could affect future economics if products are approved or licensed.
- Development and platform risk: Both lead candidates remain investigational. Clinical results may not confirm preclinical or Phase 1 findings; trials may be delayed, fail, or require additional funding. The business depends substantially on the Rutgers-licensed platform and on third-party collaborators, including NIH/NIAID, suppliers, and potential contract manufacturers.
- Manufacturing and commitments: The company had limited in-house manufacturing capacity, no formal long-term supply agreements for key active ingredients, and a new long-term laboratory/manufacturing lease. Reported minimum future lease payments totaled $3.29 million; the new facility was expected to carry monthly rent of approximately $43,000 initially, rising to approximately $64,000 in its final year.
- Other exposures: Patent validity and license continuity, competition, regulatory approval and exclusivity, pricing/reimbursement, and the ability to build commercialization capabilities are material uncertainties. Federal NOL use may be limited by ownership changes; the company had not completed a Section 382 ownership-change study.
- The company reported no pending legal proceedings. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end. The auditor gave an unqualified opinion on the financial statements but was not engaged to audit internal control effectiveness.
Most important facts for investors to verify
- Current cash, burn rate, and whether the stated runway through Q2 2018 was achieved; reconcile the year-end cash balance with January 2017 warrant-offer proceeds and subsequent spending.
- MAT2203 Phase 2 results, safety and efficacy evidence, FDA-agreed pivotal-trial requirements, and the timing and funding of any Phase 3 program.
- MAT2501 multiple-dose safety, pharmacokinetics, and progress toward trials in NTM patients.
- Fully diluted share count, preferred-stock conversion and dividend terms, remaining warrants/options, and potential milestone shares.
- Potential preferred-holder royalty liabilities and their effect on the economics of any future product sales or licensing transaction.
- Manufacturing scale-up, supply arrangements, lease and facility costs, and the company’s ability to raise additional capital on acceptable terms.