Business context and reporting period
This unaudited Form 10-Q covers the quarter ended March 31, 2014. The filing identifies the registrant as Mast Therapeutics, Inc. (not Savara Inc.); investors should verify the company and filing identity. Mast was a development-stage biopharmaceutical company with no product sales, focused primarily on MST-188 and, following its February 2014 acquisition of Aires Pharmaceuticals, AIR001.
Financial performance and liquidity
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.28 million | $3.44 million |
| Selling, general and administrative expense | $2.27 million | $2.11 million |
| Operating loss | $6.84 million | $5.59 million |
| Net loss | $6.37 million | $5.58 million |
| Net loss per share | $0.06 | $0.12 |
| Cash used in operating activities | $6.27 million | $4.49 million |
At quarter-end, cash and cash equivalents were $29.85 million and investment securities were $19.77 million, totaling $49.62 million in cash and investments. Current assets were $50.61 million versus current liabilities of $6.17 million. The securities were FDIC-insured certificates of deposit. The balance sheet listed no outstanding debt at March 31; it did include a $3.40 million deferred income tax liability. No operating margin is meaningful because the company reported no quarterly revenue.
Material changes and unusual items
- R&D expense increased 24.3%, mainly due to additional clinical-trial material manufacturing and higher personnel costs. SG&A increased 7.3%. The net loss grew, while loss per share declined as weighted-average shares rose to 105.1 million from 46.3 million.
- Mast acquired Aires on February 27 in an all-stock transaction. It recorded $2.0 million of AIR001 in-process R&D and a preliminary $0.45 million bargain-purchase gain. The acquisition added $3.53 million of cash and $1.21 million of assumed accounts payable and accrued liabilities. Purchase-price allocation remained preliminary.
- Quarter-end shares outstanding were 113.72 million, compared with 102.71 million at year-end 2013. The company issued 9.96 million shares through its at-the-market program during the quarter, generating $8.3 million gross and $7.8 million net proceeds. The program authorized up to $30 million gross proceeds.
- Cash and cash equivalents increased by $4.17 million during the quarter, with $8.0 million net cash provided by financing offsetting operating cash use. There were no sales, gross profit, or product revenues in the quarter.
Outlook, management commentary and risks
Management expected cash, cash equivalents and investment securities to fund currently planned operations for at least 12 months, while warning that additional capital would be needed for longer-term development and that future financing might not be available on acceptable terms or at all. Management anticipated significant losses for several years.
- MST-188: The pivotal EPIC sickle-cell-disease trial was a top priority. Mast expected enrollment of 388 patients to finish by the end of 2015 and estimated external study costs from January 2014 through completion at approximately $16 million. A phase 2 acute-limb-ischemia study began in March 2014; it was expected to enroll about 60 patients over roughly 18 months, with estimated external study costs of $4 million.
- Other MST-188 programs: Management planned an EPIC sub-study in Q2 2014 and expected a nonclinical sickle-cell study to finish in late 2015. It was assessing heart-failure development, with a phase 2 study potentially beginning in the first half of 2015 subject to FDA feedback. A nonclinical trauma study was planned for 2014.
- AIR001: Management was evaluating the development strategy and expected data from about 20 participants in a pulmonary arterial hypertension study in Q3 2014. Estimated program costs for the 12 months after acquisition were approximately $2 million, but could change as plans were refined.
- Key risks include clinical enrollment, safety and efficacy outcomes, regulatory requirements, manufacturing and third-party performance, uncertain development costs, acquisition integration and the need for additional financing. The company disclosed no material change in internal control over financial reporting and concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Confirm that this Mast Therapeutics 10-Q is the intended filing for the requested Savara Inc. summary.
- Check subsequent EPIC enrollment, study outcomes and actual spending against the company’s stated schedule and $16 million cost estimate.
- Review subsequent financing, cash burn, ATM share issuance and dilution; warrant proceeds were uncertain and depended on share prices and exercise decisions.
- Track AIR001 clinical data, the final acquisition purchase-price allocation and any resulting changes to asset values or development plans.
- Assess whether the stated 12-month liquidity outlook remained valid as trial scope, costs and financing needs evolved.