Theriva Biologics, Inc. (registrant: Synthetic Biologics, Inc.; ticker SYN) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing was signed March 16, 2022. Financial statements reflect the pre-acquisition company; VCN Biosciences was acquired on March 10, 2022, after year-end.
Business context
At year-end, Synthetic Biologics was a clinical-stage biotechnology company focused primarily on gastrointestinal and microbiome programs SYN-004 and SYN-020. Its SYN-010 program had been discontinued after a Phase 2b futility analysis. The subsequent VCN acquisition added oncology programs, led by oncolytic adenovirus candidate VCN-01 for pancreatic cancer and retinoblastoma.
Financial performance and liquidity
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Revenue | No significant product revenue reported | No significant product revenue reported |
| General and administrative expense | $6.5 million | $5.0 million |
| Research and development expense | $7.8 million | $5.1 million |
| Operating loss | $14.3 million | $10.2 million |
| Net loss | $14.3 million | $10.1 million |
| Net loss attributable to common stockholders | $23.2 million | $12.6 million |
| Basic and diluted loss per share | $0.19 | $0.66 |
| Net cash used in operating activities | $12.9 million | $12.2 million |
| Cash and cash equivalents | $67.3 million | $6.2 million |
| Total liabilities | $5.0 million | $3.2 million |
Gross margin and operating margin are not meaningful for this pre-commercial business with no significant product revenue. No conventional funded debt is disclosed at December 31, 2021; reported liabilities included $1.5 million of lease liabilities. Cash flow from financing was $74.0 million in 2021, mainly from ATM stock sales ($66.0 million net) and warrant exercises ($8.0 million).
Changes, outlook and material items
- Operating expenses rose year over year: R&D increased 53%, primarily due to SYN-004 and SYN-020 clinical activity and manufacturing costs; G&A increased 29%, including acquisition-related legal and consulting costs.
- Common shares outstanding increased from 29.3 million at year-end 2020 to 132.0 million at year-end 2021. The company sold approximately 78.7 million shares through its ATM facility during 2021. Preferred-stock conversions and deemed dividends also materially affected loss attributable to common stockholders; the 2021 Series A conversion generated a $7.4 million deemed dividend.
- Management reported $57.1 million of cash in mid-March 2022 and estimated it would fund operations through at least Q4 2023, including VCN commitments. The filing also cautions that later-stage programs will require additional financing or partnerships; the forecast depends on development spending and other assumptions.
- VCN acquisition consideration included $4.7 million cash, 26.4 million common shares, and assumption of up to $2.4 million of VCN liabilities. The company also committed to an approximately $27.8 million VCN R&D and G&A budget over three years, plus a $425,000 loan. Additional clinical and regulatory milestone payments to Grifols could total up to $70.25 million if specified milestones are achieved.
- Management expected SYN-020 Phase 1 multiple-dose data in Q2 2022 and anticipated starting at least one Phase 2 study in H2 2022. A VCN-01 pancreatic cancer Phase 2 protocol submission was anticipated in Q2 2022, with recruitment potentially beginning in Q4, subject to regulatory clearance.
- A Phase 3 SYN-004 program for prevention of primary C. difficile infection was estimated to cost more than $80 million and was not expected to proceed without a strategic partner. COVID-19, clinical enrollment, manufacturing capacity, regulatory review and funding availability could delay programs.
- VCN reported an earlier VCN-01 pancreatic cancer study death considered treatment-related, and the filing emphasizes that early-stage results from small trials may not predict later outcomes. The company also identified acquisition integration, dilution, reliance on third-party manufacturers and the risk of future capital shortages.
Audit, controls and contingencies
BDO USA, LLP issued an unqualified opinion on the consolidated financial statements. The auditor identified liquidity evaluation as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the company was not required to obtain, and the auditor did not provide, an audit opinion on internal control effectiveness. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Investor facts to verify
- Confirm post-acquisition cash, liabilities, share count and funding runway against subsequent filings; the acquisition closed after the 2021 balance-sheet date.
- Track the actual timing, enrollment and results of VCN-01 and SYN-020 trials, and assess whether regulatory agencies agree with the proposed development plans.
- Verify the amount and timing of VCN spending, assumed liabilities and any milestone payments triggered under the purchase agreement.
- Assess future capital needs, potential ATM or other equity issuance, remaining authorized shares and resulting dilution.
- Monitor manufacturing and clinical-site dependencies, COVID-19 or other disruptions, and whether a partner is secured for any costly SYN-004 Phase 3 program.