Business context and reporting period
This summary covers the unaudited quarter and nine months ended September 30, 2016. The supplied filing is for Synthetic Biologics, Inc. (not Theriva Biologics, Inc.); verify the issuer identity and any subsequent name or corporate changes before relying on this summary. The company was a clinical-stage therapeutics developer, with lead programs SYN-010 for IBS-C and SYN-004 (ribaxamase) for prevention of CDI and antibiotic-associated diarrhea. It reported no meaningful product revenue and expected no significant revenue in the near term.
Financial results and liquidity
Amounts below are in U.S. dollars; income statement and cash flow figures are in millions unless noted.
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | No meaningful revenue reported | No meaningful revenue reported | No meaningful revenue reported | No meaningful revenue reported |
| Research and development expense | $7.061 | $10.046 | $22.380 | $24.048 |
| General and administrative expense | $2.095 | $1.604 | $6.668 | $5.539 |
| Net loss | $8.489 | $7.507 | $25.331 | $33.488 |
| Net loss per share, basic | $0.09 | $0.08 | $0.27 | $0.42 |
| Cash used in operating activities | Not separately stated | Not separately stated | $17.517 | $27.920 |
As a pre-revenue clinical-stage company, operating margins are not meaningful. The company reported cash and cash equivalents of $4.549 million at September 30, 2016, down from $20.818 million at December 31, 2015. Investing activities used $0.199 million and financing activities provided $1.447 million during the first nine months; cash declined by $16.269 million. Total assets were $8.248 million, total liabilities $14.224 million, and stockholders’ deficit $5.976 million. Current assets of $7.640 million compared with current liabilities of $14.010 million (derived current ratio approximately 0.55). The filing reports no debt balance; it does report $6.886 million of current warrant liabilities. The accumulated deficit was $169.7 million.
Material changes versus comparable periods
- Q3 R&D expense fell 30% year over year, principally because Q3 2015 included a $3.0 million noncash Intrexon technology-access charge. Nine-month R&D expense declined 7%, despite increased clinical and research activity; the 2015 period included the Intrexon charge and a $1.0 million Prev ABR milestone.
- G&A expense rose 30% in Q3 and 20% for the nine-month period, with higher stock compensation and employee costs among the cited factors.
- Q3 net loss increased to $8.489 million from $7.507 million. For the nine months, net loss improved to $25.331 million from $33.488 million, substantially affected by a $3.681 million noncash gain from the change in warrant fair value in 2016 versus a $3.906 million noncash expense in 2015.
- Operating cash use decreased to $17.517 million from $27.920 million for the nine-month comparison. The filing attributes cash movement to operating needs and working capital; prepaid expenses and other current assets declined materially.
Outlook, management commentary, risks and unusual items
- Going concern and financing: Management said existing cash was insufficient for near-term plans and that additional funding was required. The filing states that this uncertainty raises substantial doubt about the company’s ability to continue as a going concern. There were no committed third-party funding sources; failure to raise funds could force development delays or cessation of activities.
- ATM financing and dilution: An August 2016 sales agreement authorized up to $40 million of common-stock sales, subject to availability and conditions, with agent commissions of up to 3%. By September 30, the company had sold 380,265 shares for approximately $650,000 gross; after quarter-end it reported approximately 520,000 additional shares sold for approximately $900,000 gross. Further equity financing could dilute shareholders.
- Clinical outlook: SYN-004 Phase 2b enrollment was completed at 413 patients. The independent interim committee recommended continuing the study without modification and identified no safety issues; topline results were expected in Q1 2017. The company planned an FDA end-of-Phase-2 meeting and Phase 3 trial(s) toward the latter part of 2017. It planned to initiate a SYN-010 adaptive Phase 2b/3 pivotal study in Q1 2017, subject to FDA feedback on the submitted protocol.
- Other programs: SYN-007 remained preclinical; SYN-005 pertussis antibody work and SYN-200 PKU work were earlier-stage programs. SYN-020 was in preclinical development. These programs add development and financing demands without near-term product revenue.
- CDC contract: After quarter-end, the company announced a CDC contract of up to $521,014 to support research associated with the SYN-004 trial. Management stated the award would not fund completion of clinical trials as planned.
- Warrant accounting: Fair-value changes in warrants created noncash income of $0.666 million in Q3 and $3.681 million for the nine months. These gains reduced reported losses but did not provide operating cash.
- Listing and execution risks: The company disclosed a $5.976 million stockholders’ deficit against an NYSE MKT continued-listing equity requirement cited as $6.0 million for issuers with specified recent losses, and warned of possible delisting. Clinical success, regulatory approval, funding availability, dilution, and future listing compliance remained significant risks. The company reported no material legal proceedings and no material changes in contractual obligations.
- Management reported disclosure controls and procedures were effective as of September 30, 2016, and no materially affecting change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Confirm the issuer identity: the supplied 10-Q names Synthetic Biologics, Inc., whereas the request metadata names Theriva Biologics, Inc.
- Check subsequent cash balances, ATM sales, financing availability, and the company’s ability to fund operations, including whether the going-concern uncertainty was resolved.
- Review actual SYN-004 Phase 2b results and subsequent FDA feedback, trial plans, and financing required for Phase 3; verify the status and timing of the SYN-010 pivotal study.
- Confirm NYSE MKT listing compliance and stockholders’ equity position, plus any further equity issuance and resulting dilution.
- Distinguish recurring operating performance and cash burn from noncash warrant remeasurement gains; verify outstanding warrant and option exposure.