Business context and reporting period
Matinas BioPharma Holdings, Inc. reported unaudited results for the quarter ended March 31, 2015. The development-stage biopharmaceutical company completed its acquisition of Aquarius Biotechnologies on January 29, expanding its pipeline and adding Aquarius’s cochleate drug-delivery technology. Its candidates target serious fungal and bacterial infections, alongside lipid-based programs.
Financial performance and position
| Metric | Q1 2015 | Q1 2014 or comparison |
|---|---|---|
| Revenue | $57,636 | $0 |
| Research and development expense | $1.448 million | $1.074 million |
| General and administrative expense | $1.178 million | $1.055 million |
| Net loss | $2.570 million | $2.139 million |
| Basic and diluted loss per share | $0.07 | $0.07 |
| Net cash used in operating activities | $2.323 million | $2.089 million |
- Q1 contract research revenue came from NIH grants related to MAT2203 and MAT2501; management expected this revenue to remain approximately level through 2015.
- At March 31, cash and cash equivalents were $4.617 million, with a further $100,000 of restricted cash. Current assets were $4.840 million and current liabilities were $1.308 million.
- Total assets were $9.798 million and total liabilities were $3.405 million. Liabilities included a $1.253 million deferred tax liability and $844,000 of contingent consideration from the Aquarius acquisition. The company reported no material long-term borrowing; a $10,000 note payable was current.
- Stockholders’ equity was $6.393 million and accumulated deficit was $16.622 million. Cash increased by $2.026 million during the quarter, principally reflecting $4.283 million in net financing proceeds, partly offset by operating cash use.
- No operating profit or margin was reported; the company remained loss-making. Interest and other expense was $1,493.
Material changes versus the prior comparable period
- Revenue began with the Aquarius acquisition; Q1 2014 had no revenue. Research and development expense rose by $374,000, primarily due to increased clinical development, including MAT9001 studies and work on acquired candidates. General and administrative expense increased by $123,000, reflecting compensation, share-based compensation, and acquisition-related professional costs.
- Cash and cash equivalents at quarter-end were down from $8.558 million a year earlier, despite the quarter’s financing inflow. Operating cash use increased by approximately $234,000 year over year.
- The Aquarius acquisition added $3.017 million of in-process research and development, $1.385 million of goodwill, and $1.253 million of deferred tax liability. The company issued 4,608,020 shares at closing and recorded up to 3 million additional milestone shares as contingent consideration.
- Common shares outstanding rose to 46,775,670 at March 31 from 32,292,650 at December 31, 2014, including shares issued for the acquisition and first closing of the private placement.
Outlook, risks, and unusual items
- Management expected to start and complete a Phase 2a MAT2203 study with NIAID in 2015, with initial results expected in Q4 2015. MAT2501 was in formal toxicology testing, with an IND filing expected in late 2015. MAT9001 comparative PK/PD study enrollment had completed, with data expected in Q2 2015.
- The April 10, 2015 final closing completed a 20 million-unit private placement, generating total gross proceeds of $10 million. The filing estimated net proceeds of approximately $8.5 million after placement fees and other expenses; management expected available cash, including this financing, to fund operations into approximately March 2016. This was a funding estimate, not a guarantee.
- The company reported recurring losses and negative operating cash flows since inception and stated that substantial additional capital would be needed. It warned that financing may not be available on acceptable terms or at all, and that failure to raise capital could delay, reduce, or end development activities. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern; it also notes the auditor’s going-concern explanatory paragraph in the 2014 annual report.
- Clinical, regulatory, manufacturing, intellectual-property, and third-party execution risks remain significant. Management expected expenses and operating losses to rise as development programs advanced; FDA approval was not expected before 2018 at the earliest.
- The 2015 offering included five-year warrants and placement-agent warrants, creating potential dilution. Registration deadlines carry cash penalties of 0.5% of an investor’s investment for each 30-day period of delay, subject to a 6% cap. Aegis Capital and an affiliated director had relationships with the company, and the placement agent received fees and warrants.
- The company reported effective disclosure controls at March 31, no material changes in internal control over financial reporting, and no legal proceedings.
Important facts for investors to verify
- Whether the MAT2203 Phase 2a study, Q4 results target, MAT2501 IND target, and MAT9001 data timing were achieved.
- Actual cash burn and whether the April financing extended runway as management estimated; the estimate was only through approximately March 2016.
- The final offering’s net proceeds and the resulting share and warrant dilution. The filing reports 56,900,670 common shares outstanding as of May 12, 2015, versus 46,775,670 at March 31.
- Progress and potential impairment of Aquarius-related in-process research and development and goodwill, as well as the assumptions underlying milestone contingent consideration.
- Ability to secure further financing, maintain the Rutgers technology license, and meet clinical, regulatory, and manufacturing milestones.