Matinas BioPharma Holdings, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Matinas is a clinical-stage biopharmaceutical company developing anti-infective drug candidates using its licensed cochleate delivery technology. It had no product revenue; reported revenue was limited to contract research funding.
Financial performance and position
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $44,906 | $0 | $59,875 | $0 |
| Research and development | $2.315 million | $0.643 million | $4.699 million | $1.564 million |
| General and administrative | $1.706 million | $0.978 million | $3.824 million | $2.293 million |
| Net loss | $3.968 million | $1.624 million | $8.464 million | $3.868 million |
| Loss per common share, basic and diluted | $0.04 | $0.03 | $0.29 | $0.07 |
- First-half net loss attributable to common shareholders was $25.205 million, including a $16.741 million non-cash warrant inducement charge. Excluding that charge, net loss was $8.464 million.
- First-half operating cash use was $6.759 million, investing cash use was $0.790 million, and financing provided $14.710 million. Cash and cash equivalents increased by $7.161 million to $11.266 million; restricted cash was an additional $0.155 million.
- At June 30, 2017, current assets were $11.739 million, current liabilities $1.335 million, and working capital approximately $10.4 million. Total liabilities were $2.592 million, including a $1.205 million deferred tax liability; the note payable was repaid, with lease liabilities remaining.
- Revenue came from a Cystic Fibrosis Foundation grant supporting preclinical MAT2501 research. With revenue negligible relative to expenses, operating margins are not meaningful.
Changes and notable developments
- Compared with the first half of 2016, R&D expense rose $3.135 million and G&A expense rose $1.531 million, reflecting increased clinical and preclinical work, staffing, laboratory operations, stock compensation, and professional fees.
- The January 2017 warrant tender and related exercises generated $14.834 million of net cash proceeds in the first half. The tender offer resulted in 29.667 million common shares issued; common shares outstanding were 91.972 million at June 30 and August 7, 2017.
- MAT2203: the company reported interim responses in two patients in an NIH Phase 2a study and topline results from a Phase 2 vulvovaginal candidiasis study. In the latter, reported clinical cure rates varied by analysis population and dose; the filing described a dose-response trend. Management planned an FDA meeting and a Phase 2 pharmacokinetic/tolerability study in leukemia patients, with prevention of invasive fungal infections in ALL patients as a potential next development step.
- MAT2501: the company reported Phase 1 single-ascending-dose topline results in healthy volunteers, with no serious adverse events and blood levels below cited safety levels for injected amikacin. Further development for NTM infections was planned.
Outlook, liquidity, and risks
- Management expected cash on hand and anticipated sales under its Cantor Fitzgerald controlled equity offering agreement to fund operating obligations through August 2018. No shares had been sold under that agreement through August 7, 2017. The agreement permits up to $30 million of common-stock sales, subject to its terms; the company also had a shelf registration statement allowing offerings of up to $150 million.
- The company expected significant and increasing losses as it advanced clinical programs and expanded operations. It stated FDA approval was not expected before 2022 at the earliest in its liquidity discussion, while elsewhere noting approval was not expected before 2021; timing is uncertain. Additional capital will be required, and availability on acceptable terms is not assured.
- Material risks include clinical and regulatory setbacks, financing and dilution, dependence on third-party manufacturers and clinical research organizations, protection and licensing of intellectual property, and the ability to manufacture and commercialize products.
- Series A preferred stock accrues an 8% annual dividend payable in common shares upon conversion and carries royalty rights: 4.5% of applicable net sales and 7.5% of licensing proceeds, subject to stated annual caps and vesting terms. The company reported no royalty accrual because payment was not considered probable.
- A new Medpace Phase II clinical-trial services agreement was estimated to cost $1.4 million through August 2018. A planned laboratory and manufacturing facility lease was expected to begin in Q3 2017, with total rent of approximately $6.4 million over its term.
Key facts for investors to verify
- Whether the reported clinical findings support the planned MAT2203 trial path, and the timing and outcomes of FDA discussions and subsequent studies.
- Actual cash burn, financing runway, and any shares sold under the Cantor agreement after August 7, 2017.
- Potential dilution from preferred-stock conversion, accrued preferred dividends, outstanding warrants and options, and future equity financing.
- The terms, vesting, caps, and potential future impact of Series A royalty rights, and the costs and commencement timing of the new facility lease.
- The filing states disclosure controls were effective at a reasonable assurance level and reports no material change in internal control, no legal proceedings, and no material risk-factor changes from the 2016 Form 10-K.