Theriva Biologics, Inc. annual report, FY2015

Business context and reporting period

This is Synthetic Biologics, Inc.’s Form 10-K for the fiscal year ended December 31, 2015, filed March 10, 2016. The request identifies Theriva Biologics, Inc.; that name does not match the registrant in the supplied filing. The filing reports annual results, with unaudited quarterly figures including fourth-quarter 2015.

Synthetic Biologics was a clinical-stage therapeutics company. Its lead Phase 2 candidates were SYN-010 for IBS-C and SYN-004 to protect the gut microbiome during IV antibiotic treatment and prevent C. difficile infection and antibiotic-associated diarrhea. Other programs included preclinical pertussis antibodies and discovery-stage PKU and intestinal alkaline phosphatase programs.

Financial performance and position

Fourth-quarter 2015 operating loss was $11.4 million; net loss was $11.3 million, or $0.12 per basic and diluted share. Gross margin and operating margin are not meaningful because the company reported no revenue. The balance sheet shows no interest-bearing borrowings; current liabilities include $10.6 million of warrant liabilities.

Material changes versus the prior comparable period

• Annual net loss more than doubled from 2014, while R&D expense rose 127%, reflecting expanded clinical, manufacturing, and research activity in the SYN-004, SYN-010, and pertussis programs, as well as new PKU work.
• Operating cash use increased to $38.9 million from $16.1 million. Cash nevertheless rose by $3.3 million, primarily because the company raised $42.6 million net in a July 2015 public stock offering.
• A $3.8 million noncash expense from remeasuring warrant liabilities contributed to the 2015 loss; the prior year included $0.6 million of noncash warrant-related income.
• Common shares outstanding increased from 72.5 million at year-end 2014 to 90.8 million at year-end 2015, reflecting the public offering and other share issuances.

Outlook, risks, contingencies, and unusual items

• Management said available cash was expected to fund operations for at least the foreseeable future, but also stated that additional funding would ultimately be needed and that no committed financing sources existed. The company warned that financing may be unavailable or dilutive.
• Management planned to seek an FDA end-of-Phase-2 meeting and initiate pivotal Phase 3 trial(s) for SYN-010 in the second half of 2016. It also planned Phase 3 trial(s) for SYN-004 in the second half of 2016; these were plans, not assured milestones.
• SYN-010’s first Phase 2 trial reported positive topline results in December 2015, including reduced breath methane and improved stool frequency, with no serious adverse events reported. A second, open-label extension reported positive topline results in January 2016, after the fiscal year-end.
• SYN-004’s first Phase 2a topline results, reported in December 2015, indicated degradation of residual IV ceftriaxone in intestinal contents without affecting bloodstream levels. Its Phase 2b proof-of-concept trial had enrolled 98 patients as of March 8, 2016; the trial was expected to enroll approximately 370.
• The company discontinued its Trimesta multiple-sclerosis program after an independent analysis of an investigator-sponsored Phase 2 trial; termination of the related licenses was scheduled to take effect May 2, 2016.
• Key risks include clinical-trial failure or delay, regulatory uncertainty, reliance on third-party manufacturers, CROs and collaborators, limited commercialization capabilities, intellectual-property risks, competition, and the need to raise capital. The company reported no material pending legal proceedings.
• Auditors issued an unqualified opinion on the financial statements and internal controls. Management also concluded disclosure controls and internal control over financial reporting were effective at year-end.

Important facts for investors to verify

• Confirm the issuer and reporting period: the supplied filing is Synthetic Biologics’ 2015 10-K, not a Theriva Biologics filing, and is not a standalone Q4 filing.
• Review current cash, burn rate, and financing plans against the year-end cash balance of $20.8 million and 2015 operating cash use of $38.9 million.
• Verify subsequent clinical-trial progress and whether planned Phase 3 starts occurred; the filing’s timelines are forward-looking expectations.
• Assess dilution and potential share overhang, including the 2015 equity issuance, outstanding options and warrants, and warrant-liability valuation.
• Evaluate whether Phase 2 topline findings are supported by complete data and later-stage trials, and whether development, manufacturing, regulatory, and collaboration obligations remain on track.