Filing summary
Entity and period mismatch: The supplied filing is Senesco Technologies, Inc.’s Form 10-Q, not an Eloxx Pharmaceuticals filing. It covers the three months ended September 30, 2013 (the company’s fiscal first quarter), with comparisons to the three months ended September 30, 2012. The filing describes Senesco as a development-stage biotechnology company focused on human therapeutics and agricultural gene technology.
Financial performance and position
| Metric | Quarter ended September 30, 2013 | Comparable 2012 quarter |
|---|---|---|
| Revenue | $100,000 | $0 |
| Operating expenses | $1.853 million | $1.246 million |
| Operating loss | $1.753 million | $1.246 million |
| Net loss | $1.784 million | $2.085 million |
| Loss per common share | $0.78 | $2.52 |
| Cash used in operations | $670,465 | $636,454 |
The $100,000 revenue was a milestone payment under an agricultural license agreement. Gross margin is not separately reported. General and administrative expense rose 28.2% to $940,449, and research and development expense rose 41.7% to $727,119. A $185,161 write-off of abandoned patent costs was recorded.
At September 30, 2013, cash and cash equivalents were $789,176; current assets were $2.356 million and current liabilities were $3.598 million, producing a working-capital deficit of $1.242 million. Total liabilities were $3.697 million. The company had a $2.187 million line-of-credit balance, due on demand and bearing interest at the broker rate plus 2% (3.75% broker rate at quarter-end). The credit line is supported by certain assets of a board member. No material off-balance-sheet arrangements were reported.
Changes and operating developments
- Net loss declined $301,121, or 14.4%, from the prior-year quarter, primarily because the prior period included a $785,171 loss on settlement of warrant liabilities. The current-quarter operating loss increased as expenses rose.
- Cash fell by $813,118 during the quarter, to $789,176. Operating cash use increased modestly year over year; investing cash use was $142,943, primarily for patent costs.
- During the quarter, 220 preferred shares converted into 73,333 common shares, and common shares were also issued in lieu of preferred dividends. The company authorized a 1-for-100 reverse stock split, effective October 21, 2013.
- After quarter-end, on October 2, the company completed a registered direct offering of 690,000 common shares for $1.725 million gross proceeds and approximately $1.505 million net proceeds. On November 11, Bayer notified the company it would discontinue work on the company’s technology for canola, rice, and cotton and return those rights.
Outlook, commentary, and risks
Management estimated that quarter-end cash plus October offering proceeds would fund operations through March 2014. The company said it would seek further debt or equity financing to fund operations through at least September 2014; it did not provide a specific forecast of revenue, profit, or cash flow. Management expected losses to continue for several years and said it could not predict when, if ever, the company would become profitable.
SNS01-T was in an open-label Phase 1b/2a dose-escalation study for multiple myeloma and certain B-cell lymphomas. The first two cohorts were completed, the third was enrolling and treating patients, and the company reported that treatment was safe and well tolerated in those cohorts; 2 of 6 evaluable patients met criteria for stable disease. These early findings do not establish efficacy. The company also reported that Bayer’s discontinued agricultural programs had not met Bayer’s commercial performance requirements.
Key risks include substantial doubt about the company’s ability to continue as a going concern, limited cash and recurring losses, dependence on future financing, clinical and regulatory uncertainty, reliance on third-party research and license partners, and patent and commercialization risks. If financing is unavailable, the company said it may delay or reduce development, seek partners or a sale, or cease operations. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer and reporting period: this is Senesco Technologies, Inc., not Eloxx Pharmaceuticals, Inc.
- Review the going-concern discussion and whether subsequent financing was sufficient to extend the stated March 2014 cash runway.
- Verify the terms and proceeds of the October 2013 offering, the reverse split, and the resulting share count and dilution.
- Track SNS01-T enrollment, safety, and later efficacy results; the reported stable-disease observations were limited and preliminary.
- Assess the commercial and financial impact of Bayer’s returned crop rights and the company’s ability to find new licensees.
- Review the demand line-of-credit terms and the board-member collateral support.