Tonix Pharmaceuticals Holding Corp. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Amounts below are in millions of dollars unless noted. Tonix is a clinical-stage pharmaceutical company with no commercial products or revenue.
Financial performance and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $10.3 | $5.2 | $26.0 | $12.8 |
| General and administrative expense | $3.0 | $2.2 | $8.7 | $5.8 |
| Operating loss | $(13.3) | $(7.4) | $(34.8) | $(18.7) |
| Net loss | $(13.3) | $(7.4) | $(34.7) | $(18.6) |
| Basic and diluted loss per share | $(0.72) | $(0.71) | $(2.15) | $(1.92) |
- R&D expense increased 98% in Q3 and 103% for the nine-month period, primarily reflecting increased clinical and development work on Tonmya/TNX-102 SL and TNX-201. G&A rose 36% and 50%, respectively, with higher professional services and compensation costs.
- At September 30, cash and cash equivalents were $33.0 million and available-for-sale marketable securities were $22.0 million, totaling approximately $55.0 million. Working capital was $52.1 million; total assets were $57.8 million and total liabilities $5.2 million. The balance sheet reports no interest-bearing debt.
- Cash used in operating activities was $30.6 million for the first nine months, versus $14.6 million in 2014. Investing activities used $22.2 million, mainly for marketable securities; financing provided $47.7 million, primarily from common-stock offerings. Cash and cash equivalents ended the period at $33.0 million, down from $38.2 million at year-end 2014.
- The company raised approximately $29.0 million net in a February offering and $18.7 million net in a July offering. Shares outstanding increased to 18,831,669 from 10,805,220 at December 31, 2014.
- Operating margins are not meaningful because the company had no revenue and incurred operating losses.
Business and clinical-program developments
- Fibromyalgia: Tonmya (TNX-102 SL) was in a 500-patient Phase 3 trial, AFFIRM; top-line results were expected in Q3 2016. A second Phase 3 trial was planned to begin in Q2 2016. The company completed a 12-month open-label safety-extension study in August 2015 and stated it believed the exposure data supported a future NDA filing.
- Prior fibromyalgia evidence: In the Phase 2b BESTFIT 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 the 30% responder analysis as the primary endpoint for the Phase 3 program.
- PTSD: The Phase 2 AtEase trial of TNX-102 SL was underway; results were expected in Q2 2016. The filing notes success could make it one of two pivotal studies needed to support approval.
- Episodic tension-type headache: A Phase 2 proof-of-concept trial of TNX-201 was underway, with results expected in Q1 2016.
- Other programs included early development of TNX-301 for alcohol use disorder and nonclinical biodefense programs. These were earlier-stage and subject to substantial development and regulatory uncertainty.
Outlook, risks and notable items
- Management believed existing funds would support operations and planned clinical trials for at least 12 months from the filing, while expecting operating losses and R&D cash use to increase significantly. Additional equity or debt financing may be needed; failure to raise funds could require cuts to programs or operations. Any equity financing could dilute shareholders.
- Research and development contracts had approximately $23.1 million of commitments for future work at September 30, 2015. Future minimum lease payments totaled $2.3 million.
- Key risks include clinical-trial failure or delay, inability to obtain FDA approval, reliance on contract research and manufacturing organizations, future financing needs, competition, intellectual-property disputes, and potential adverse effects. The company had never submitted an NDA and had no approved products.
- The filing reports no material legal proceedings. Management concluded disclosure controls were effective at a reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
- Available-for-sale securities were exposed to interest-rate and credit risk; management characterized interest-rate exposure as not significant. No material foreign-currency exposure was reported.
Investor verification points
- Track AFFIRM, AtEase and TNX-201 trial enrollment, timing, results and any changes to the stated milestones.
- Assess the implications of BESTFIT missing its primary endpoint despite positive secondary analyses, and verify FDA requirements for any eventual NDA.
- Monitor operating cash burn, cash and securities balances, and the timing and terms of any additional financing or dilution.
- Review the $23.1 million research-contract commitments and whether clinical-trial spending or timelines change.
- Confirm that management’s stated minimum 12-month funding outlook remains supportable as R&D expenses rise.