Tonix Pharmaceuticals Holding Corp. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Tonix is a clinical-stage biopharmaceutical company with no commercial products and no product revenue. Its pipeline spans CNS and immunology programs, including vaccine candidates and treatments for fibromyalgia, migraine, and cocaine intoxication.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $8.8 million | $5.1 million | $24.1 million | $12.5 million |
| General and administrative expense | $3.2 million | $2.8 million | $9.4 million | $7.6 million |
| Operating loss | $12.0 million | $7.9 million | $33.5 million | $20.1 million |
| Net loss | $12.0 million | $7.8 million | $33.4 million | $19.9 million |
| Net loss per common share | $0.09 | $5.69 | $0.49 | $23.93 |
Loss per share comparisons are affected by the substantial increase in weighted-average shares following financings and warrant exercises; the company also recorded $1.7 million of deemed dividends in the first nine months of 2020. Profit margins are not meaningful because the company had no revenue.
- Cash and cash equivalents: $55.7 million at September 30, 2020, versus $11.2 million at December 31, 2019; restricted cash was $0.2 million.
- Cash flows, nine months: $34.7 million used in operations, $4.0 million used in investing, and $83.2 million provided by financing. Financing was primarily equity issuance and warrant exercises.
- Working capital: $57.6 million. Total liabilities were $5.0 million, including $1.2 million of operating lease liabilities. The filing reports no borrowings or conventional debt.
- Accumulated deficit: $250.5 million at September 30, 2020.
Material changes and unusual items
- R&D expense rose 73% in Q3 and 93% year to date. Management attributed the increases mainly to Phase 3 fibromyalgia trial activity, TNX-801 and TNX-1800 development, broader pipeline spending, and, year to date, the $2.4 million Trigemina asset acquisition.
- G&A expense increased 14% in Q3 and 24% year to date, reflecting higher reporting, legal, insurance, and non-cash compensation costs.
- Tonix raised substantial equity capital through registered offerings, at-the-market sales, and warrant exercises. Common shares outstanding increased from 8.5 million at year-end 2019 to 140.2 million at September 30, 2020; 156.6 million were outstanding November 6. Further shareholder dilution is possible.
- The company purchased a Massachusetts facility for $4.0 million, intended for vaccine development and manufacturing. After quarter-end, it agreed to purchase Montana land for approximately $4.5 million, subject to contingencies, for intended commercial-scale manufacturing.
- Research and development contracts carried approximately $25.8 million of commitments for future work at September 30.
Outlook, risks, and contingencies
- Going concern: Management expected available cash to fund operations into the first half of 2021, but not for the one-year period from the filing date. The filing states that this raises substantial doubt about the company’s ability to continue as a going concern. Additional financing may be needed; acceptable financing may not be available. Without it, Tonix may have to delay, reduce, or discontinue programs.
- Pipeline milestones: Management expected TNX-102 SL Phase 3 RELIEF topline results in Q4 2020 and RALLY results in the second half of 2021. Animal-study data for COVID-19 vaccine candidate TNX-1800 were expected in Q4 2020. The company planned to submit an IND for TNX-1900 in Q1 2021 and target a Phase 2 migraine study in Q2 2021; a TNX-1300 Phase 2 safety study was planned for Q1 2021. These are stated expectations, not assurances.
- Development timing and costs remain uncertain, with risks including clinical efficacy or safety results, recruitment, regulatory decisions, third-party dependence, patent protection, competition, and COVID-19-related disruptions. The company has no approved products and no assurance that candidates will prove commercially viable.
- Nasdaq notified Tonix on October 1, 2020 that its share price failed the $1 minimum bid requirement. The company had until March 30, 2021 to regain compliance, with possible additional compliance time subject to conditions; delisting remains a risk.
- No material legal proceedings were reported. The filing does not provide formal financial earnings guidance.
Key facts for investors to verify
- Whether subsequent financing and operating cash use extend liquidity beyond management’s stated first-half 2021 estimate, and how the going-concern uncertainty evolves.
- Actual results and timing for the RELIEF, RALLY, TNX-1800, TNX-1900, and TNX-1300 milestones.
- Remaining capacity and terms under the ATM and Lincoln Park purchase agreements, and the extent of potential dilution.
- Progress toward Nasdaq bid-price compliance and the costs, timing, and funding needs for the Massachusetts facility and proposed Montana property.
- Whether the $25.8 million of contracted R&D work and contingent license milestones affect future cash requirements materially.