Matinas BioPharma Holdings, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; financial statements are unaudited. Matinas is a clinical-stage biopharmaceutical company developing MAT9001, an omega-3 candidate, and MAT2203 and other candidates using its lipid nano-crystal (LNC) platform. It reported no product revenue.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.09 million | $2.31 million |
| General and administrative expense | $2.26 million | $1.79 million |
| Total operating expenses / operating loss | $6.35 million | $4.10 million |
| Net loss | $5.05 million | $4.05 million |
| Net loss attributable to common shareholders; loss per share | $5.22 million; $0.03 | $4.32 million; $0.04 |
| Cash used in operating activities | $4.66 million | $3.02 million |
Operating loss worsened year over year as R&D and G&A expenses increased. Management attributed higher R&D costs mainly to employee compensation and clinical-trial work for MAT9001 and MAT2203; higher G&A was primarily due to compensation. The company has no meaningful product gross margin because it has no product sales.
At March 31, cash and cash equivalents were $10.08 million, marketable securities $61.09 million, and restricted cash approximately $0.49 million. Cash plus marketable securities totaled $71.17 million. Investing cash outflow of $54.97 million mainly reflected purchases of marketable securities, rather than operating expenditure. Total liabilities were $6.51 million, including approximately $4.02 million of operating lease liabilities and $0.09 million of finance lease liabilities; the filing reports no outstanding borrowing debt at quarter-end. Current assets were $73.99 million and current liabilities $2.54 million.
Material changes and capital
- On January 14, 2020, the company sold 32.3 million common shares at $1.55 per share, receiving approximately $46.7 million net proceeds. No additional shares were issued under the underwriters’ option.
- Common shares outstanding rose from 163.2 million at December 31, 2019 to 197.2 million at March 31, 2020. The offering strengthened liquidity but diluted existing shareholders.
- R&D expense rose to $4.09 million from $2.31 million; clinical development expense was $1.49 million versus $0.50 million. G&A expense rose to $2.26 million from $1.79 million.
- The company recognized $1.07 million from selling New Jersey net operating losses and R&D tax credits; there was no comparable income in Q1 2019. This reduced the reported net loss but was not product revenue.
- Q1 2020 included $0.43 million of additional stock-based compensation from extending the exercise period for certain vested options.
Outlook, risks, and controls
Management expected existing cash and marketable securities to fund planned operations through the first half of 2023. It expects continued substantial losses and rising expenses, particularly as clinical development advances. Product revenue was not expected before 2023 at the earliest, if ever. The company may need additional financing; acceptable financing may not be available, and equity financing could further dilute shareholders.
COVID-19 had not significantly affected Q1 financial results, but the company temporarily halted clinical-trial enrollment and could not predict when recruitment would resume. Management warned of possible trial delays, supplier and drug-supply disruption, regulatory delays, and difficulty raising capital. Other key risks include clinical or regulatory failure, manufacturing capability, dependence on third parties and the LNC technology license, and protection of intellectual property.
Management concluded disclosure controls were not effective as of March 31, 2020 because of an existing material weakness in financial-reporting controls, principally insufficient formal policies and procedures for processing and reporting transactions. Remediation efforts were ongoing. The company reported no legal proceedings and no material changes to contractual obligations from its 2019 Form 10-K.
Investor verification priorities
- Verify the company’s cash runway assumptions against operating cash burn, planned trial spending, and the timing of future financing needs.
- Track whether clinical enrollment resumes and whether COVID-19, trial results, or supply constraints change development timelines for MAT9001 and MAT2203.
- Assess the extent and progress of remediation of the disclosed material weakness in financial-reporting controls.
- Monitor share-count changes, potential dilution from outstanding options, warrants, and preferred stock, and the recurring nature of non-product income such as NOL sales.