Business context and reporting period
Filing identity: The supplied filing is Synthetic Biologics, Inc.’s Form 10-K for the fiscal year ended December 31, 2013, signed March 31, 2014. It does not appear to be a filing by Theriva Biologics, Inc.; investors should confirm the issuer and filing match their request. This is an annual report, not a standalone fourth-quarter report.
Synthetic Biologics was a development-stage biotechnology company with no reported 2013 revenue. Its programs included candidates for C-IBS, prevention of C. difficile infection, pertussis, Acinetobacter infection and a subset of IBS, as well as legacy programs for multiple sclerosis and fibromyalgia.
Financial results and liquidity
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | None reported | Laboratory revenue was reported within discontinued operations |
| Research and development expense | $6.507 million | $12.287 million |
| General and administrative expense | $5.832 million | $5.012 million |
| Loss from continuing operations | $12.318 million | $17.284 million |
| Net loss attributable to Synthetic Biologics | $12.317 million | $17.068 million |
| Loss per share attributable to the company | $0.27 | $0.49 |
| Net cash used in operating activities | $7.719 million | $8.916 million |
At December 31, 2013, cash and cash equivalents were $14.625 million, versus $9.954 million a year earlier. Current assets were $16.216 million and current liabilities $1.027 million; total liabilities were also $1.027 million. The balance sheet reports no debt. Stockholders’ equity was $15.230 million, and accumulated deficit was $81.258 million. No meaningful operating margin is available because the company reported no revenue.
The company raised $13.2 million gross in a December 2013 public offering, with $1.0 million of direct offering costs. Management said cash was expected to fund planned operations for at least 12 months, but noted there were no committed financing sources. Cash was approximately $11.3 million as of March 27, 2014.
Material changes versus the prior year
- Continuing-operations loss narrowed to $12.318 million from $17.284 million. R&D expense fell 47%, largely because 2012 included $7.8 million of noncash Intrexon stock consideration and $1.2 million of noncash stock consideration for the C. difficile program acquisition; 2013 also included higher personnel and infectious-disease program costs.
- G&A expense increased 16%, including a $763,000 charge after the note and interest receivable from the sale of the clinical laboratory were deemed uncollectible.
- Operating cash use declined to $7.719 million from $8.916 million; year-end cash increased following equity financing.
- The company entered a CSMC license and option arrangement in December 2013 and issued 334,911 common shares valued at $425,000 in connection with it. The December public offering also materially increased shares outstanding.
Outlook, commentary, risks and unusual items
- Historical development plans stated in the filing: initiate SYN-010 in vivo/pharmacokinetic/pharmacodynamic work in the first half of 2014 and target a Phase II trial in the second half; initiate SYN-004 Phase Ia/Ib trials in the second half of 2014; and present topline results from the relapsing-remitting MS Phase II trial in April 2014. These were plans at the filing date, not current guidance.
- The relapsing-remitting MS trial had completed enrollment, with more than $8 million in grants to UCLA described as sufficient to fund completion. Enrollment in the separate cognitive-dysfunction MS trial was ongoing; the company had pledged approximately $500,000 over three years.
- Management emphasized continued operating losses, substantial R&D and clinical costs, reliance on equity or other financing, and uncertainty that financing would be available on acceptable terms. Further equity issuance could dilute shareholders.
- Key business risks include clinical and regulatory failure or delay, dependence on collaborators and grant funding, manufacturing and supply constraints, competition, and the possibility of losing licensed rights if development or other obligations are not met.
- The $763,000 write-off of the laboratory-sale note and interest was an unusual charge. The filing reports an uncollectible receivable, not a new borrowing or debt obligation.
- Auditors gave an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Confirm that Synthetic Biologics’ 2013 10-K is the intended filing, given the Theriva Biologics name in the request.
- Verify subsequent cash, financing, share-count and cash-runway disclosures; the runway estimate was management’s assessment at the 2014 filing date.
- Check whether the stated 2014 trial and data-presentation targets occurred, and review the resulting clinical evidence and regulatory status.
- Review the CSMC, Intrexon, University of Texas and Prev agreements for milestone, royalty, termination, stock-issuance and asset-return provisions.
- Assess the effect of future financing and outstanding options and warrants on dilution; the filing reported 58.2 million common shares outstanding at March 27, 2014.