Soligenix, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Soligenix is a development-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments; revenue is primarily from government grants and contracts, not product sales.
Key financial metrics
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | $214,824, down 57% year over year | $362,417, down 75% |
| Gross profit / margin | $10,507 / 5%, versus $141,949 / 28% | $35,740 / 10%, versus $236,998 / 17% |
| Operating expenses | $3.02 million | $5.28 million, down 54% year over year |
| Operating loss | $3.01 million, versus $2.81 million | $5.24 million, versus $11.29 million |
| Net loss | $1.90 million, or $0.05 per share | $4.26 million, or $0.11 per share |
| Cash used in operating activities | Not separately reported for the quarter | $5.64 million, versus $4.34 million |
The lower six-month net loss mainly reflects the absence of the prior-year $5.0 million HyBryte milestone expense and lower R&D spending after clinical trials concluded. The 2021 results also include a $421,584 gain from PPP loan forgiveness and an $864,742 income tax benefit from New Jersey NOL sales. Interest expense was $428,255 for the first half, primarily related to convertible debt.
At June 30, cash and equivalents were $28.98 million, up from $18.68 million at year-end 2020. Working capital was $25.23 million, versus $13.39 million. Total assets were $29.61 million and total liabilities $14.01 million. The company had $10.0 million of Pontifax convertible debt outstanding, net carrying value $9.84 million; the loan bears 8.47% interest, matures in 2025, and is convertible at $4.10 per share. The PPP loan was fully forgiven.
Material changes and operating developments
- Revenue and gross profit declined primarily following completion of the RiVax government contract. Six-month R&D expense fell 29% to $3.47 million; G&A rose 9% to $1.81 million, partly due to legal and consulting costs and the Emergent arbitration.
- The company issued 9.44 million shares through its B. Riley at-the-market program in the first half, raising $16.49 million gross at a weighted average $1.75 per share. Common shares outstanding increased from 30.64 million at December 31, 2020 to 40.08 million at June 30, 2021.
- HyBryte completed a positive Phase 3 study for cutaneous T-cell lymphoma. Management plans to file the U.S. NDA in the first half of 2022; it deferred a rolling submission to allow additional supportive data and address manufacturing delays.
- SGX942’s Phase 3 trial did not meet its prespecified statistical-significance criterion on the primary endpoint, despite a reported reduction in median severe oral mucositis duration from 18 to 8 days. The company is analyzing the data and possible patient subsets.
Outlook, risks and contingencies
- Management believes available cash and expected funding sources will cover working capital and capital expenditures for at least 12 months from issuance of the financial statements. This depends in part on spending controls, grants/contracts, available Pontifax borrowing and further financing.
- For the next 12 months, management estimated R&D spending of approximately $15.4 million before reimbursements, with about $1.3 million of anticipated grant and contract reimbursements. It disclosed up to $1.8 million in active government funding available at June 30, subject to agency termination rights.
- As of August 2021, up to $10.0 million remained available under the Pontifax agreement: a $5.0 million tranche and a further $5.0 million contingent on initial filing of the HyBryte NDA. Approximately $2.0 million remained under the B. Riley offering at August 13.
- COVID-19-related manufacturer and supply-chain disruptions delayed HyBryte manufacturing and contributed to the NDA timing change. The company cautions that future pandemic effects are uncertain.
- Soligenix is pursuing arbitration against Emergent over alleged manufacturing and contract failures affecting RiVax, seeking damages exceeding $19 million. Emergent denies the allegations; recovery is uncertain. The company has not accrued approximately $331,000 in Emergent invoices, which management considers invalid and not probable to be payable.
- Other commitments include approximately $450,000 in licensing fees and potential future milestones of up to $7.9 million and royalties of up to 6% of net sales, contingent on clinical or commercial success. The filing also identifies development, regulatory, manufacturing, funding, dilution and product-acceptance risks.
Important facts for investors to verify
- Whether HyBryte manufacturing and supportive-data work remain on schedule for an NDA filing in the first half of 2022, and the associated financing implications.
- Cash burn versus the company’s runway estimate, expected grant reimbursements, and availability and conditions of remaining Pontifax and ATM funding.
- HyBryte regulatory progress and the clinical/regulatory significance of the SGX942 Phase 3 results and any subsequent analysis.
- Potential dilution from further equity issuance or conversion of Pontifax debt, and progress and likely outcome of the Emergent arbitration.
- Dependence on government funding and the timing or termination risk of grants and contracts supporting the Public Health Solutions programs.