Filing summary
Registrant note: The supplied filing is Salarius Pharmaceuticals, Inc.’s Form 10-Q, not a filing identified as Decoy Therapeutics Inc. It covers the quarter and six months ended June 30, 2020; statements are unaudited. Salarius is a clinical-stage biotechnology company developing seclidemstat (SP-2577), an LSD1 inhibitor. It had no approved products or product-sale revenue; reported revenue came from a CPRIT grant.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Grant revenue | $1.24 million | $0.90 million | $2.38 million | $1.55 million |
| Research and development expense | $1.44 million | $0.84 million | $3.09 million | $1.54 million |
| General and administrative expense | $1.70 million | $0.97 million | $3.56 million | $2.46 million |
| Net loss | $1.78 million | $0.90 million | $3.87 million | $2.43 million |
| Basic and diluted loss per share | $0.13 | $0.30 | $0.33 | $0.90 |
Q2 grant revenue increased 39% year over year, while R&D and G&A expenses rose 72% and 76%, respectively. For the first half, revenue increased 53%, R&D expense doubled, and G&A expense rose 45%; net loss increased 59%. Management attributed higher R&D costs principally to clinical activity, manufacturing clinical-trial tablets, and preclinical work, and higher G&A to public-company costs, insurance, personnel, and related expenses. There is no product gross-margin measure in the filing; grant revenue is not product sales.
At June 30, cash and cash equivalents were $7.22 million, working capital was $7.69 million, and grants receivable was $1.83 million. Total assets were $18.56 million and total liabilities were $1.71 million; stockholders’ equity was $16.85 million. The $0.50 million insurance-financing note was repaid during the first half. The company also received a roughly $0.18 million PPP loan, accounted for as a government grant based on its expectation of meeting forgiveness conditions. A $0.10 million warrant liability remained at quarter-end.
First-half operating cash use was $6.18 million, versus $3.40 million in 2019. Financing provided $9.67 million, including approximately $9.6 million net proceeds from the February offering and $0.58 million from warrant exercises. Cash increased by $3.48 million during the period. The filing provides no conventional operating margin; the company reported operating losses.
Material changes, outlook, and risks
- The February 2020 offering issued common and convertible preferred shares with warrants; all preferred shares had converted to common stock by June 30. Common shares outstanding increased substantially. The company reported 19,820,361 shares outstanding as of August 7, 2020.
- On August 3, 2020, after quarter-end, Salarius completed another common-stock offering of 5,130,390 shares at $1.20 per share, for approximately $6.2 million gross proceeds (before fees and expenses).
- Management said June 30 cash, the August offering proceeds (estimated at approximately $5.5 million net), and expected CPRIT funds were sufficient for anticipated operating and capital needs through at least 12 months from the filing date. It also said substantial additional capital would still be required. There is no formal earnings or revenue guidance.
- CPRIT had awarded up to $18.7 million; Salarius reported approximately $9.1 million of funds remaining, subject to requirements. The agreement was extended to November 30, 2020. Approximately $2.6 million had been allocated to a prostate study the company chose not to pursue; redeployment to the expanded Ewing sarcoma trial required CPRIT approval.
- The Ewing sarcoma and advanced solid tumor Phase 1/2 trials were active and enrolling. The company announced plans to expand the Ewing study to certain Ewing-related sarcomas. One patient’s target lesions decreased after six months of treatment, but increased non-target lesions resulted in an overall progressive-disease classification at eight weeks. Management planned to release clinical data during 2020 and 2021.
- Management reported minimal COVID-19 disruption through the period, but warned that the pandemic could impair trial enrollment, suppliers, operations, CPRIT funding, and access to capital. Other key risks include clinical and regulatory uncertainty, reliance on third-party research and manufacturing providers, conditional grant funding, future financing needs and dilution, and Nasdaq listing compliance. The company received a Nasdaq minimum-bid deficiency notice in April and reported regaining compliance in June.
- Warrant remeasurement produced a $0.22 million gain for the first half, but a $0.06 million loss in Q2, reflecting changes in the share price. The PPP proceeds were recognized as government-grant income, subject to reassessment of forgiveness eligibility.
Important facts for investors to verify
- Confirm the intended issuer: this document names Salarius Pharmaceuticals, Inc., rather than Decoy Therapeutics Inc.
- Verify net cash proceeds and dilution from the February and August offerings, including outstanding warrants and potential future share issuance.
- Check CPRIT approval, drawdown conditions, matching requirements, extension status, and permission to redirect prostate-study funds.
- Monitor actual cash burn and clinical-trial spending against management’s stated runway, including the timing and terms of any required financing.
- Assess trial enrollment, safety and efficacy data, and the impact of COVID-19 or third-party supply delays on development timelines.
- Confirm PPP loan forgiveness and continued Nasdaq listing compliance.