Synthetic Biologics, Inc. — Form 10-Q Summary
Period: Quarter and six months ended June 30, 2015. The supplied filing is for Synthetic Biologics, Inc.; the request metadata names Theriva Biologics, Inc. The summary below reflects the filing as provided.
Business context and reporting period
Synthetic Biologics was a clinical-stage biotechnology company developing microbiome-focused and pathogen-specific therapies. Its Phase 2 programs included SYN-004 for prevention of C. difficile infection and antibiotic-associated diarrhea, SYN-010 for IBS-C, and Trimesta for multiple sclerosis. Pertussis antibodies were preclinical; its PKU program was at discovery stage. The company reported no product revenue and relied primarily on equity financing and collaborations.
Financial performance and position
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Operating expenses | $9.7 million | $17.9 million | $4.7 million and $8.5 million |
| Net loss | $13.6 million | $26.0 million | $4.6 million and $8.4 million |
| Net loss per share | $0.19 | $0.36 | $0.08 and $0.14 |
| Operating cash used | Not provided for the quarter | $12.7 million | $6.8 million for six months |
For the quarter, R&D expense rose 165% to $7.5 million and G&A rose 22% to $2.2 million. For the six months, R&D increased 152% to $14.0 million and G&A increased 34% to $3.9 million, principally reflecting expanded clinical, manufacturing and research activity, plus higher personnel and professional costs. No meaningful operating margin can be calculated because the company reported no revenue.
At June 30, cash and cash equivalents were $4.8 million, down from $17.5 million at December 31, 2014. Current assets were $11.7 million versus current liabilities of $25.5 million. Total liabilities were $25.5 million, including $14.8 million of warrant liabilities; the balance sheet reported no conventional borrowings. Stockholders’ deficit was $13.7 million, compared with equity of $9.6 million at year-end. Accumulated deficit was $127.0 million.
Six-month investing cash use was $0.1 million; financing cash provided was negligible. Cash fell by $12.8 million during the period. The filing does not provide a clear cash-runway estimate.
Material changes versus the prior comparable period
- Six-month net loss increased to $26.0 million from $8.4 million, as operating costs expanded and the company recorded $8.0 million of non-cash warrant remeasurement expense.
- R&D spending increased substantially as clinical programs advanced. It included a $1.0 million milestone expense for Prev ABR, settled with shares; the company issued 655,321 shares for $1.35 million of milestone payments during the six months.
- Cash and cash equivalents declined by $12.8 million from year-end, while accounts payable increased to $8.7 million from $1.0 million.
- Warrant liabilities rose to $14.8 million from $6.8 million. Their fair-value increase generated non-cash expense of $3.9 million in the quarter and $8.0 million in the six-month period.
Outlook, commentary, risks and unusual items
- Financing: On July 21, 2015, after quarter-end, the company completed a 15.3-million-share public offering at $3.00 per share, for approximately $46.0 million gross and $42.6 million net proceeds. This materially supplemented the June 30 cash balance. The company nevertheless warned that it would require additional capital over time and had no other committed financing source.
- Development outlook: Management expected SYN-004 Phase 2a topline data during the second half of 2015 and anticipated starting a roughly 370-patient Phase 2b trial in the third quarter of 2015; Phase 3 studies were anticipated in 2016. SYN-010 Phase 2 results were expected in the second half of 2015, with another trial planned for that half and results expected in the first half of 2016. These are stated expectations, not financial guidance.
- Subsequent agreements: In July 2015, the company amended its UCLA-related estriol license and clinical-trial arrangements, adding milestones, royalties and development-partner and trial obligations. In August 2015, it entered an Intrexon collaboration for PKU, including a $3 million technology access fee in shares, potential milestone payments of up to $27 million per product, and royalties.
- Funding and execution risks: The company had sustained operating cash outflows and substantial accumulated losses, and warned that further funding might not be available on acceptable terms. Failure to finance development could force delays, curtailed operations or discontinued programs. Clinical, regulatory, manufacturing, licensing, intellectual-property and competition risks were also highlighted.
- Listing risk: The filing noted a June 30 stockholders’ deficit and warned that NYSE MKT listing could be at risk if minimum equity requirements were not met. The subsequent offering occurred after the balance-sheet date.
- Unusual accounting item: Warrant liability is measured using a Black-Scholes model with significant unobservable inputs. Changes in assumptions or share price can materially affect reported non-cash gains or losses.
- Controls and legal matters: Management concluded disclosure controls were effective at June 30, 2015; no material change in internal control was reported. The filing reported no legal proceedings.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for Synthetic Biologics, Inc., not Theriva Biologics, Inc.
- Verify the public offering’s net proceeds, share issuance and resulting cash position after June 30, 2015.
- Assess cash burn, accounts-payable growth, funding needs and the timing of any additional financing.
- Review warrant-liability valuation assumptions and the potential impact of share-price movements on reported earnings.
- Check subsequent clinical-trial progress and whether management’s stated data and trial-start timelines were achieved.
- Review the financial and development obligations under the UCLA and Intrexon agreements, including contingent milestones, royalties and partner deadlines.