Matinas BioPharma Holdings, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; filed November 13, 2019. Matinas is a clinical-stage biopharmaceutical company developing MAT9001 and products using its lipid nano-crystal (LNC) delivery platform, including MAT2203. It has no approved products and has not generated product sales.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $89,812 | $119,750 |
| Research and development expense | $2.67 million | $1.38 million | $7.81 million | $5.10 million |
| General and administrative expense | $1.89 million | $1.57 million | $5.46 million | $5.50 million |
| Net loss | $4.40 million | $2.94 million | $11.80 million | $10.46 million |
| Net loss attributable to common shareholders | $4.56 million | $3.26 million | $12.49 million | $11.09 million |
| Loss per common share, basic and diluted | $0.03 | $0.03 | $0.09 | $0.12 |
- Revenue was grant-funded contract research revenue from the Cystic Fibrosis Foundation; there was no product revenue. Gross margin is not meaningful for the reported activity.
- For the nine months, operating cash outflow was $9.19 million, investing cash outflow was $0.41 million, and financing cash inflow was $29.84 million. Cash, cash equivalents and restricted cash increased $20.24 million to $33.25 million.
- At September 30, cash and cash equivalents were $32.66 million; restricted cash totaled $0.59 million. Current assets were $34.25 million and current liabilities $2.62 million. Total liabilities were $6.84 million, including $4.22 million of operating lease liabilities and $0.13 million of finance lease liabilities. The note payable reported at year-end 2018 was repaid.
- Accumulated deficit was $78.80 million. Management said cash and cash equivalents on hand were expected to fund planned operations through 2020.
Material changes and significant transactions
- R&D expense rose $1.29 million in Q3 and $2.72 million for the nine-month period year over year. Management attributed the increases primarily to manufacturing process development, clinical development, preclinical work, and staffing and overhead. Nine-month clinical development expense increased to $1.75 million from $0.44 million.
- G&A increased about $0.32 million in Q3, mainly due to higher compensation; nine-month G&A was approximately flat year over year.
- The company recognized $1.01 million from selling New Jersey state tax losses and research credits in the first nine months of 2019; this was reported as other income, not revenue.
- A March 2019 common-stock offering and over-allotment generated approximately $30.1 million in net proceeds. Common shares outstanding increased from 113.3 million at December 31, 2018 to 162.7 million at September 30, 2019. The company also converted all Series A preferred stock into common stock in July, issuing 14.68 million shares plus 3.52 million shares for accrued dividends.
- Adoption of lease accounting in January 2019 brought operating lease right-of-use assets and liabilities onto the balance sheet; the company reported $4.22 million of operating lease liabilities at quarter-end.
Outlook, risks and contingencies
- Management expects continuing substantial losses and increasing R&D spending as development advances. It stated that product revenue was not expected before 2023 at the earliest, if ever; regulatory approval and profitability are uncertain.
- Near-term priorities include advancing MAT9001 toward an initial severe hypertriglyceridemia indication, pursuing MAT2203 efficacy data in cryptococcal meningitis with NIH support, and seeking LNC-platform collaborations. The filing does not provide quantified revenue or earnings guidance.
- The company expects to need additional financing after its stated cash runway. Equity financing could dilute shareholders; debt or preferred financing could add fixed obligations or restrictive terms. Collaborations or licensing could require relinquishing valuable rights.
- Commitments include two NIH cooperative research agreements with annual funding commitments of $200,000 and $157,405, each with a three-year term. Existing Series A royalty rights provide for payments tied to MAT2203/MAT2501 sales or licensing proceeds, subject to stated caps; no royalty liability was accrued because payment was not considered probable. A Rutgers LNC license also provides for royalties, milestone and annual fees.
- Clinical, manufacturing, regulatory, recruitment, funding and third-party execution risks could delay or prevent development or approval. The company reported no material change to the risk factors in its 2018 Form 10-K and no legal proceedings.
- Disclosure controls were deemed ineffective as of September 30, 2019 because previously identified material weaknesses in internal control over financial reporting remained unremediated. The weaknesses involved formal financial reporting controls and insufficient accounting personnel and expertise; remediation was ongoing.
Important facts for investors to verify
- Whether the cash balance and actual spending support management’s stated runway through 2020, and the timing and terms of any additional financing.
- Clinical-development progress, trial timing and costs for MAT9001 and MAT2203, and the basis for any future regulatory or commercialization timelines.
- Whether R&D spending continues to rise and how much is attributable to clinical programs versus manufacturing, preclinical work and internal costs.
- The potential dilution from outstanding Series B preferred stock, options and warrants, as well as the effect of the 2019 offering and preferred-stock conversions.
- Progress in remediating the disclosed material weaknesses and whether management later concludes disclosure controls are effective.
- The financial implications and trigger conditions of lease obligations, NIH commitments, Rutgers license fees and Series A royalty rights.