Synthetic Biologics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended March 31, 2018. The filing is unaudited and identifies the issuer as Synthetic Biologics, Inc.
Business context
The company was a clinical-stage therapeutics developer focused on microbiome-related treatments. Its lead candidates were SYN-004 (ribaxamase), aimed at protecting the gut microbiome during certain IV antibiotic treatment, and SYN-010 for IBS-C. Other programs were preclinical. The company reported no meaningful revenue and did not expect product revenue in the near term.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 or prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Operating costs and expenses | $4.990 million | $8.149 million |
| Research and development | $3.370 million | $6.059 million |
| General and administrative | $1.620 million | $2.090 million |
| Net loss attributable to common stockholders | $2.375 million; $0.02 per share | $2.846 million; $0.02 per share |
| Net cash used in operating activities | $6.079 million | $6.008 million |
| Cash and cash equivalents | $11.037 million | $17.116 million at December 31, 2017 |
| Total current liabilities | $5.087 million | $9.793 million at December 31, 2017 |
| Total liabilities | $5.464 million | $10.195 million at December 31, 2017 |
| Accumulated deficit | Approximately $196.5 million | $194.2 million at December 31, 2017 |
Margins are not meaningful because the company reported no revenue. The filing does not disclose conventional borrowings or a debt balance; reported liabilities include accounts payable, accrued expenses, warrant liabilities and deferred rent. Stockholders’ deficit was $5.109 million, and Series A preferred stock of $12.112 million was presented as temporary equity.
Changes versus the prior-year quarter
- Operating expenses fell 39%, with R&D down 44%. Management attributed the R&D decline mainly to no clinical trials being underway in the quarter; spending focused on planning future trials.
- G&A fell 23%, mainly due to lower salary, stock compensation, benefits, travel, consulting and legal costs, partly offset by higher registration fees. Management cited the CEO’s resignation.
- Net loss attributable to common stockholders narrowed, while reported loss per share remained $0.02.
- Other income included $2.655 million of noncash warrant fair-value gains, compared with $5.090 million in Q1 2017. These gains reduced reported net loss but did not provide operating cash.
- Cash declined by $6.079 million during the quarter. There were no financing proceeds in Q1 2018, and no shares were sold under the at-the-market agreement.
Outlook, risks and unusual items
- Going concern and financing: Management stated cash was insufficient for the next 12 months and for planned operations, and the filing says there is substantial doubt about the company’s ability to continue as a going concern. No committed third-party financing was in place. Management was pursuing equity, debt, strategic partnerships and other funding; failure to obtain financing could delay trials or curtail development.
- Clinical plans: After quarter-end, the company reported preliminary FDA agreement on a proposed Phase 3 ribaxamase trial synopsis. It anticipated an End-of-Phase-2 meeting in the second half of 2018 and a Phase 3 start in 2019 or later, subject to financing and infrastructure. The company voluntarily withdrew ribaxamase’s Breakthrough Therapy Designation after FDA review of Phase 2b data; the FDA indicated this would not affect ongoing interactions.
- NYSE American listing: The company received a noncompliance notice and submitted a compliance plan on April 3, 2018, with a stated deadline of September 2, 2018. The filing warned that delisting could impair liquidity and access to capital.
- Other post-period development: On May 1, 2018, the USPTO issued a U.S. patent covering SYN-010-related composition of matter, with protection stated to extend to no later than 2035.
- Potential dilution and valuation: Additional equity financing could dilute shareholders. Warrant liabilities are measured using Level 3 assumptions, and their fair-value movements can materially affect reported earnings. Series A preferred stock carries a cumulative 2% dividend and conversion and redemption provisions.
- The company reported no material legal proceedings, no material changes to contractual obligations, and no off-balance-sheet arrangements.
Key facts investors should verify
- Whether the company secured sufficient financing to fund operations and planned clinical trials, and the resulting dilution or debt terms.
- Whether the FDA finalized the ribaxamase Phase 3 design and whether the trial began, including timing, funding and required manufacturing preparation.
- Whether the company regained NYSE American listing compliance by the stated deadline and retained access to registered or at-the-market financing.
- The cash runway and operating cash burn in subsequent filings, separating noncash warrant gains from cash performance.
- The potential conversion, dividend and redemption effects of the Series A preferred stock, and the dilution exposure from outstanding options and warrants.