Theriva Biologics, Inc. (then Synthetic Biologics, Inc.) — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2018. The filing is under the name Synthetic Biologics, Inc.; share and per-share figures reflect its 1-for-35 reverse stock split effective August 10, 2018. Financial statement amounts below are in millions of dollars unless otherwise noted.
Business context
The company was a clinical-stage biotechnology business developing microbiome-focused therapies. Its leading programs were SYN-004 (ribaxamase), aimed at protecting the gut microbiome during IV beta-lactam antibiotic treatment, and SYN-010 for IBS-C. Other programs were preclinical. The company reported no meaningful product revenue and depended on financing, collaboration and potential partnering to fund development.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| General and administrative expense | $1.474 | $1.705 | $4.525 | $5.440 |
| Research and development expense | $2.846 | $4.137 | $9.788 | $15.028 |
| Operating loss | $(4.320) | $(5.842) | $(14.313) | $(20.468) |
| Net loss attributable to common stockholders | $(3.741) | $(17.823) | $(10.375) | $(24.925) |
| Loss per share | $(0.93) | $(4.90) | $(2.73) | $(7.00) |
| Cash used in operating activities | — | $(13.989) | $(16.272) |
No meaningful gross margin was reported because the filing shows no revenue. The smaller net losses included noncash warrant fair-value gains: $0.626 million for Q3 and $4.064 million for the first nine months of 2018. These gains reduced reported losses and are not operating cash receipts.
- Cash and cash equivalents: $9.549 million at September 30, 2018, down from $17.116 million at December 31, 2017. Current assets were $10.108 million versus current liabilities of $3.914 million.
- Debt: No conventional debt balance is reported. The company had $12.234 million of Series A convertible preferred stock classified as temporary equity, with cumulative 2% annual dividends and senior rights to common stock.
- Equity and warrants: Stockholders’ deficit was $5.681 million. Warrant liabilities fell from $4.083 million to $0.019 million, primarily due to a noncash fair-value change.
- Financing: During the first nine months, at-the-market (ATM) common-stock sales generated $6.422 million net. After quarter-end, the company reported approximately $5.8 million net from additional ATM sales and approximately $16.7 million net from an October public offering.
Changes versus the prior comparable period
- Q3 operating expenses fell 26% year over year; nine-month operating expenses declined 30%. Management attributed the reductions mainly to lower R&D spending, with no clinical trials ongoing during the nine-month period, and lower G&A costs following the prior CEO’s departure and reductions in related costs.
- R&D expense declined 32% for Q3 and 35% for the nine-month period. Management expected spending to rise as clinical studies and SYN-020 development progressed.
- Net loss attributable to common stockholders narrowed substantially, but comparisons were affected by warrant remeasurement and a $6.901 million preferred-stock deemed dividend in 2017; the 2018 nine-month preferred dividend was $0.181 million.
- Cash declined by $7.567 million during the first nine months of 2018, compared with a $1.995 million increase in the comparable 2017 period, when financing proceeds were higher.
Outlook, risks and notable items
- Management said the October financing and ATM proceeds would support operations as currently planned into 2020, but would not fund the company’s longer-term plans or completion of planned Phase 3 trials. It said major trials would require additional capital and/or strategic partners; no third-party funding commitments were in place.
- For SYN-004, the company held an FDA End-of-Phase-2 meeting and awaited official minutes. It was considering a broad Phase 3 program and/or studies in a narrower, higher-risk population; trial timing and strategy depended on funding and partnering. The company anticipated possible trial initiation in the second half of 2019.
- For SYN-010, the company agreed with Cedars-Sinai to co-fund an investigator-sponsored Phase 2 study, subject to protocol approval. First-patient dosing was anticipated in Q4 2018 and data in the second half of 2019. The agreement contemplated transferring subsidiary shares and issuing 50,000 company shares to Cedars-Sinai, subject to stated conditions.
- The October offering raised approximately $18.6 million gross and included common stock, Series B convertible preferred stock and five-year warrants. The securities could substantially dilute common shareholders if converted or exercised.
- The company disclosed NYSE American listing-compliance risk, including a previously accepted compliance plan running through September 2, 2019. Delisting could impair liquidity and access to financing. It also cited financing, clinical-development, regulatory, manufacturing and partnering risks.
- The filing reports no material legal proceedings, no off-balance-sheet arrangements, and no material changes in contractual obligations. Management concluded disclosure controls were effective as of September 30, 2018.
Important facts for investors to verify
- Reconcile operating cash use: the cash-flow statement reports $13.989 million used in operations for the first nine months of 2018, while the risk-factor discussion says approximately $17.8 million. The filing text does not explain this discrepancy.
- Confirm actual post-quarter net proceeds, cash balance and fully diluted share count after the October offering, ATM sales, preferred conversion rights and warrant exercises.
- Track the official FDA meeting minutes and whether SYN-004 proceeds in a broad population, a specialized population, or both—and whether a partner or additional funding is secured.
- Verify approval and enrollment of the Cedars-Sinai SYN-010 study and whether the contemplated subsidiary-share transfer and company-share issuance occur.
- Monitor cash burn, trial and manufacturing costs, and progress toward NYSE American listing compliance before September 2, 2019.