Matinas BioPharma Holdings, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The company filed the annual report on March 30, 2016. Matinas is a clinical-stage biopharmaceutical company developing anti-infective candidates using cochleate drug-delivery technology licensed exclusively worldwide from Rutgers. It acquired Aquarius Biotechnologies on January 29, 2015.
Financial results and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $194,000 contract research | None |
| Research and development expense | $5.29 million | $5.18 million |
| General and administrative expense | $4.81 million | $5.29 million |
| Operating loss | $9.91 million | $10.46 million |
| Net loss | $9.14 million | $10.22 million |
| Net loss per share, basic and diluted | $0.18 | $0.32 |
| Cash used in operating activities | $7.81 million | $7.96 million |
| Cash and cash equivalents at year-end | $3.23 million | $2.59 million |
Revenue was from contract research, not product sales; those contracts ended during 2015, and the company did not anticipate revenue in 2016. The company reported no product-sales revenue and said product approval was not expected before 2020 at the earliest, if ever. Profitability and operating margins are not meaningful for this development-stage business; it has incurred losses since inception.
FY 2015 operating expenses totaled $10.11 million. The net loss was partly offset by a $756,000 benefit from selling New Jersey net operating losses and tax credits. At year-end, current assets were $3.56 million and current liabilities $1.13 million; restricted cash was $100,000. Total liabilities were $2.33 million, including a $1.21 million deferred tax liability arising from the Aquarius acquisition. The filing reports no material off-balance-sheet arrangements and no significant conventional debt; an acquired $10,000 note was repaid in 2015.
Cash provided by financing was $8.46 million, principally from the 2015 private placement, which raised $10 million gross and approximately $8.5 million net. The company estimated that year-end cash would fund operations and capital requirements only through July 2016. The auditor’s report includes a going-concern explanatory paragraph, citing limited liquidity, recurring losses and negative operating cash flows; management stated that additional financing was necessary.
Material changes and business developments
- After acquiring Aquarius, Matinas shifted its strategic focus from cardiovascular development toward cochleate-platform anti-infectives. R&D expense was broadly flat year over year, but spending moved away from MAT9001 and manufacturing process development toward clinical, preclinical, regulatory and infrastructure work. G&A fell by $475,000, primarily due to lower vendor stock-based compensation.
- MAT2203: Oral amphotericin B candidate for fungal infections. A Phase 1a study in 48 healthy volunteers was described as generally well tolerated, with no serious adverse events or reported renal-function abnormalities. An NIH/NIAID-supported Phase 2a study was screening and enrolling patients; the company anticipated results in 2016, subject to NIH timelines.
- MAT2501: Oral amikacin candidate initially targeting nontuberculous mycobacterial (NTM) infections. The FDA cleared the company to begin Phase 1 studies in January 2016; initiation was planned for 2016. The filing cites FDA QIDP and orphan-drug designations for NTM.
- MAT9001 and MAT8800: The company was seeking strategic partners for MAT9001, its omega-3 candidate for very high triglycerides, and described MAT8800 as a discovery program. A 2015 MAT9001 crossover study reported greater reductions than Vascepa on several lipid measures; the company was no longer prioritizing its independent development.
Outlook, risks and unusual items
Management expected R&D spending and operating losses to increase as it advanced MAT2203 and MAT2501 and pursued other platform candidates. It anticipated G&A would be broadly flat in 2016, reflecting cost savings offset by public-company compliance costs. In April 2016, after the reporting year, the company also disclosed temporary 10% salary reductions for certain executives through year-end.
The principal risks are the need to raise capital on acceptable terms; early-stage clinical and regulatory uncertainty; dependence on NIH, CROs and third-party suppliers; limited long-term cGMP manufacturing capacity; reliance on the Rutgers license and protection of intellectual property; and the lack of a sales and marketing organization. Additional financing could dilute shareholders or require the company to delay, reduce or relinquish development rights. The filing also warns that FDA designations do not assure approval or faster review, and that anticipated exclusivity depends on maintaining eligibility and obtaining approval.
The 2015 financing included 20 million common shares and 20 million five-year warrants, alongside placement-agent fees and warrants. Year-end shares outstanding were 57.18 million. The company also disclosed up to 3 million additional shares payable to former Aquarius shareholders upon specified clinical and regulatory milestones.
Management said disclosure controls and internal control over financial reporting were effective at the reasonable-assurance level as of December 31, 2015. Earlier material weaknesses in financial closing and segregation of duties were reported as remediated; the auditor did not express an opinion on internal-control effectiveness.
Key facts for investors to verify
- Whether financing was secured after the filing and whether the stated July 2016 cash runway and going-concern uncertainty were resolved.
- MAT2203 Phase 2a results and timing, including the NIH’s role and the clinical evidence supporting safety and efficacy.
- Whether MAT2501 Phase 1 began as planned, and subsequent clinical, manufacturing and regulatory milestones.
- The scope and status of MAT2203 and MAT2501 FDA designations: the filing describes different MAT2203 indications in different sections, so the precise designation coverage should be confirmed.
- Potential dilution from warrants, options and Aquarius milestone shares. The filing gives inconsistent option totals: 6.093 million in one disclosure and 6.903 million elsewhere; reconcile against the detailed equity records.
- The ability to secure durable manufacturing capacity, API supply and continued rights under the Rutgers license, plus the terms of any MAT9001 partnership.