Tonix Pharmaceuticals Holding Corp. — Q2 2015 Form 10-Q
Reporting period: Three and six months ended June 30, 2015; unaudited. Tonix is a clinical-stage pharmaceutical company with no commercial products or revenue. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $8.9 | $4.1 | $15.7 | $7.6 |
| General and administrative expense | $2.9 | $2.0 | $5.8 | $3.6 |
| Operating loss | $(11.8) | $(6.0) | $(21.5) | $(11.2) |
| Net loss | $(11.8) | $(6.0) | $(21.4) | $(11.2) |
| Basic and diluted loss per share | $(0.73) | $(0.61) | $(1.44) | $(1.20) |
- Six-month operating cash use was $18.3 million, versus $9.8 million in 2014. Investing cash use was $0.2 million; financing provided $29.0 million. Cash and cash equivalents rose by $10.6 million to $48.7 million.
- At June 30, cash was $48.7 million, working capital was $45.7 million, current liabilities were $4.6 million, and total liabilities were $4.7 million. The balance sheet reports no borrowings; the company said it had no available credit or bank financing.
- February 2015 equity offerings generated approximately $29.0 million net, with 5.32 million shares issued during the first half. After quarter-end, the July offering and fully exercised over-allotment generated approximately $18.7 million net.
- No gross margin is reported because the company had no revenue or cost of goods sold.
Material changes versus prior comparable periods
- For Q2, R&D expense increased 117% and G&A increased 45% year over year; six-month increases were 107% and 61%, respectively. Management attributed the R&D increase primarily to expanded clinical, nonclinical, formulation, manufacturing, and medical research work on Tonmya/TNX-102 SL and TNX-201.
- Six-month net loss widened to $21.4 million from $11.2 million, reflecting increased development and corporate costs. Operating cash use also increased materially.
- Cash and cash equivalents increased from $38.2 million at December 31, 2014 to $48.7 million at June 30, 2015, primarily following the February stock financing. Common shares issued and outstanding increased from 10.8 million to 16.1 million during that period.
Development, outlook, risks and other notable items
- Pipeline and milestones: Tonmya (TNX-102 SL) entered a 500-patient Phase 3 fibromyalgia trial in Q2; top-line results were expected in the second half of 2016. A second Phase 3 trial was planned to begin in Q2 2016. The Phase 2 PTSD trial of TNX-102 SL and Phase 2 episodic tension-type headache trial of TNX-201 were also underway; results for TNX-201 were expected in Q1 2016.
- Prior trial result: In the Phase 2b BESTFIT fibromyalgia study, Tonmya did not meet the primary pain endpoint (p=0.172). A 30% pain-responder analysis and several secondary measures were statistically significant. The FDA accepted a 30% pain-responder endpoint for the Phase 3 program.
- Outlook: Management expected R&D spending to increase significantly over the next 12–24 months and expected continuing operating losses. It believed available funds would support R&D and other requirements for at least 12 months; the July financing subsequently increased cash resources. Management cautioned that additional financing may be needed and could dilute shareholders.
- Commitments: Approximately $24.0 million of outstanding research and development contract commitments for future work were reported at June 30. Future minimum lease payments under three office leases totaled approximately $2.0 million.
- Key risks: Clinical failure, safety issues, enrollment or regulatory delays, dependence on third-party manufacturers and research organizations, inability to obtain financing, and the possibility that no product will receive approval or generate revenue. The company reported a history of losses and negative operating cash flows.
- Other items: The company acquired indefinite-lived internet domain rights for $0.12 million. It reported no material legal proceedings. Management concluded disclosure controls were effective as of June 30; the accounting system migration from QuickBooks to Microsoft Dynamics GP was completed during the quarter.
Important facts for investors to verify
- Current status and results of the AFFIRM, AtEase, and TNX-201 trials, including whether stated milestone timelines were met.
- Cash runway assumptions against actual operating cash burn, the July offering proceeds, and planned clinical spending.
- Timing and enforceability of the approximately $24.0 million R&D commitments and other contractual obligations.
- Potential future dilution from equity financing, outstanding options and warrants, and shares eligible for sale after lock-up periods.
- Whether subsequent filings disclose material changes to regulatory plans, trial safety or efficacy, financing needs, or the company’s ability to continue funding operations.