Business context and reporting period
This is Synthetic Biologics, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2017. The filing identifies the registrant as Synthetic Biologics, Inc.; the supplied metadata names Theriva Biologics, Inc. The company was a clinical-stage biotechnology developer focused on microbiome-related therapeutics, including SYN-004 (ribaxamase) and SYN-010.
Financial performance and position
Amounts below are in millions of dollars except per-share data.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Revenue | No revenue reported in the statements | No revenue reported in the statements |
| Research and development expense | $6.059 | $8.155 |
| General and administrative expense | $2.090 | $2.426 |
| Operating loss | $(8.149) | $(10.581) |
| Net loss attributable to Synthetic Biologics | $(2.846) | $(10.845) |
| Loss per share, basic and diluted | $(0.02) | $(0.12) |
| Cash and cash equivalents | $13.471 | $19.055 at Dec. 31, 2016 |
| Cash used in operating activities | $6.008 | $5.674 |
| Current assets / current liabilities | $16.837 / $16.488 | $21.570 / $19.757 at Dec. 31, 2016 |
| Total liabilities | $16.958 | $20.249 at Dec. 31, 2016 |
| Stockholders’ equity | $0.761 | $2.249 at Dec. 31, 2016 |
No product revenue or meaningful gross margin is reported. No borrowing balance is shown; liabilities include $9.731 million of warrant liabilities and deferred rent. The company reported an accumulated deficit of $174.9 million.
Changes versus the prior comparable period
- Operating expenses fell 23% overall. R&D expense declined 26%, mainly due to lower ribaxamase clinical-development, manufacturing, and other research costs; G&A declined 14%, primarily from lower salaries, benefits, travel, and legal costs.
- Net loss attributable to the company narrowed to $2.846 million from $10.845 million. The improvement was substantially affected by $5.090 million of noncash income from remeasurement of warrant liabilities, versus $0.498 million of warrant-related expense in Q1 2016.
- Operating cash use increased to $6.008 million from $5.674 million. Cash declined $5.584 million during Q1, despite $0.435 million of financing inflows.
- Cash fell from $19.055 million at year-end. Accounts payable rose to $3.796 million from $1.993 million, while warrant liabilities declined to $9.731 million from $14.821 million.
Outlook, commentary, and risks
- Funding and going concern: Management stated that cash on hand was insufficient to fund near-term plans and that additional capital was required. The filing says substantial doubt exists about the company’s ability to continue as a going concern; financing was not committed and might not be available on acceptable terms or at all. Failure to raise funds could delay trials or curtail development.
- Financing and dilution: The company was pursuing equity or debt financing and could use its at-the-market sales agreement. It reported $0.269 million of gross ATM proceeds in the cash-flow statement/note for Q1; the MD&A separately reports approximately $0.218 million. After quarter-end, it sold approximately 3.958 million shares for about $2.2 million gross proceeds.
- Pipeline: The company reported positive topline Phase 2b results for SYN-004, including a 71.4% relative reduction in CDI versus placebo (p=0.045), based on preliminary analysis. It planned Phase 3 trial(s) in the first half of 2018 or later. SYN-010’s planned adaptive Phase 2b/3 trial depended on financing and clinical infrastructure. Subsequent-to-quarter events described in the filing include April 2017 updates on SYN-004 microbiome findings and SYN-005 preclinical results.
- Listing risk: Equity of $0.761 million was below the filing’s stated $6.0 million NYSE MKT continued-listing equity threshold applicable to issuers with sustained losses. The company warned that failure to meet listing requirements could result in delisting and reduce liquidity and financing access.
- Other matters: The company reported no material legal proceedings, no material changes to contractual obligations, and no off-balance-sheet arrangements. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Most important facts for investors to verify
- Reconcile the Q1 ATM proceeds disclosure: $0.269 million in the financial statements/note versus approximately $0.218 million in MD&A; the share count also differs slightly (344,724 versus 344,721).
- Confirm current cash runway, planned operating spend, and the status and terms of additional financing; management said existing cash would not fund near-term plans.
- Monitor NYSE MKT listing compliance in light of reported stockholders’ equity of $0.761 million versus the stated $6.0 million threshold.
- Review complete clinical data and regulatory plans for SYN-004 and SYN-010; reported results and trial timing were preliminary or conditional.
- Assess the effect of warrant-liability remeasurement on reported earnings: the $5.090 million Q1 gain was noncash and tied to fair-value estimates.