Matinas BioPharma Holdings, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The unaudited filing covers a clinical-stage biopharmaceutical company developing MAT9001 and MAT2203 using its lipid nano-crystal delivery platform. It had no product sales; reported revenue was contract research funding.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $89,812 | $89,813 | $89,812 | $119,750 |
| Research and development | $2.829 million | $1.523 million | $5.143 million | $3.716 million |
| General and administrative | $1.782 million | $1.972 million | $3.570 million | $3.930 million |
| Operating loss | $4.521 million | $3.405 million | $8.624 million | $7.526 million |
| Net loss | $3.345 million | $3.411 million | $7.395 million | $7.521 million |
| Net loss attributable to common shareholders | $3.607 million | $3.580 million | $7.923 million | $7.837 million |
| Loss per common share, basic and diluted | $0.03 | $0.04 | $0.06 | $0.08 |
Revenue consisted of a Cystic Fibrosis Foundation research grant. Given the minimal grant revenue and absence of product sales, the filing does not present a meaningful commercial gross margin. The $1.007 million gain from selling New Jersey net operating losses and research credits reduced reported net loss in 2019; it was not operating revenue.
- Cash and liquidity: At June 30, cash and cash equivalents were $36.831 million, with restricted cash of $586,000. Current assets were $37.426 million and current liabilities $3.464 million.
- Cash flow, first half: Operating activities used $5.120 million, investing activities used $332,000, and financing activities provided $29.861 million. Cash, cash equivalents and restricted cash increased $24.409 million.
- Debt and leases: No note payable remained at June 30. Finance lease liabilities totaled approximately $149,000; operating lease liabilities totaled $4.309 million. The company adopted lease accounting that brought lease assets and liabilities onto the balance sheet.
- Equity financing: The March 2019 common-stock offering generated approximately $30.1 million in net proceeds, including the underwriters’ option. Common shares outstanding increased from 113.3 million at December 31, 2018 to 144.2 million at June 30, 2019.
Changes versus comparable periods and balance-sheet date
- First-half R&D expense rose $1.428 million, principally from higher clinical development and overhead costs; management cited increased clinical development and overhead as the main drivers in Q2 as well.
- First-half G&A expense declined $360,000, primarily because of lower compensation expense.
- Operating loss widened in both the quarter and first half as higher R&D costs more than offset lower G&A. Net loss was lower year over year in both periods, helped by the 2019 NOL-sale gain and other income.
- After quarter-end, on July 29, all outstanding Series A preferred stock converted into 14,678,580 common shares; the company also issued 3,522,860 common shares for accrued dividends. The filing reported 162,407,290 common shares outstanding as of August 9, 2019.
Outlook, risks and unusual items
- Management said cash and cash equivalents were expected to fund planned operations through 2020. The company nevertheless expects substantial losses and increasing expenses for the foreseeable future and says it will need additional financing; no additional funding source was committed beyond limited NIH grant support.
- Management’s stated priorities were advancing MAT9001 toward clinical development for severe hypertriglyceridemia, moving MAT2203 toward efficacy data for cryptococcal meningitis with NIH support, and seeking collaborations to expand LNC platform applications. The filing says FDA or EMA approval for a product candidate was not expected before 2023 at the earliest, while separately describing MAT2203/MAT2501 approval as uncertain and not expected before 2020, if ever.
- Key risks include clinical and regulatory failure or delay, manufacturing and good manufacturing practice requirements, reliance on third-party manufacturers/CROs and the NIH, dependence on Rutgers-licensed LNC technology, intellectual-property protection, and the need to raise capital. Financing could dilute shareholders or require unfavorable terms; collaboration or licensing could require relinquishing rights.
- Series A preferred stock carried royalty rights tied to MAT2203 and MAT2501: 4.5% of defined net sales and 7.5% of defined licensing or disposition proceeds, subject to stated annual caps. The filing recorded no royalty liability because payment was not considered probable. Series B preferred stock also has conversion and dividend provisions.
- The company renewed and entered NIH cooperative research agreements with annual funding commitments of $200,000 and $157,405, each for three years. It also disclosed long-term lease payments and ordinary-course research and development commitments.
- Disclosure controls were deemed ineffective at June 30, 2019 because previously reported material weaknesses in internal controls remained under remediation. Weaknesses involved formal transaction and reporting controls and accounting staffing, training, and application of U.S. GAAP.
- The company has accumulated losses since inception, had an accumulated deficit of $73.8 million, and had not generated product revenue. Management cautioned that profitability and product revenue may never be achieved. No material changes to the prior annual report’s risk factors were reported.
Important facts for investors to verify
- Whether the stated cash runway through 2020 remains achievable given clinical spending, lease commitments, and the need for future financing.
- Current clinical, regulatory, and manufacturing milestones for MAT9001 and MAT2203, and whether timelines or program priorities have changed.
- Progress and effectiveness of remediation of the disclosed material weaknesses in internal controls.
- Post-conversion share count, remaining Series B conversion and dividend exposure, and potential dilution from outstanding options and warrants. At June 30, the filing excluded 48.7 million potentially issuable shares from diluted loss per share as anti-dilutive.
- The terms and potential future impact of Series A royalty rights, NIH commitments, and other contractual obligations; also whether the one-time NOL-sale proceeds recur.