Soligenix, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; financial statements are unaudited. Soligenix is a clinical-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments. Revenue is primarily from government grants and contracts; the company has no product sales reported here.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $206,929 | $228,640 | $464,107 | $416,703 |
| Gross profit (margin) | $22,908 (11%) | $35,336 (15%) | $54,046 (12%) | $131,186 (31%) |
| Operating expenses | $1,653,232 | $3,430,632 | $3,835,059 | $7,718,868 |
| Operating loss | $(1,630,324) | $(3,395,296) | $(3,781,013) | $(7,587,682) |
| Net loss | $(1,612,024) | $(2,386,760) | $(2,658,133) | $(6,735,781) |
| Basic and diluted loss per share | $(0.22) | $(0.83) | $(0.52) | $(2.35) |
Cash and cash equivalents were $13.16 million at June 30, 2023, versus $13.36 million at December 31, 2022. Six-month operating cash use was $4.09 million, compared with $5.77 million in the prior-year period; financing provided $3.88 million, including public-offering and at-the-market proceeds, partly offset by $7.0 million of debt principal repayments. Working capital was $7.71 million, versus a $2.66 million deficit at year-end 2022.
At June 30, convertible debt had $3.0 million principal and approximately $2.84 million carrying value/fair value, of which $750,000 was current and $2.094 million non-current. The amended Pontifax loan provides an interest-only period through June 30, 2024, quarterly principal payments of $750,000 thereafter, and conversion terms tied partly to the stock price. The debt is secured by substantially all assets other than intellectual property.
Material changes and financing
- Revenue rose 11% for the six-month period, but gross profit fell 59%, mainly because 2022 included higher-margin licensing revenue and 2023 included lower-margin grant reimbursement. Q2 revenue declined 9%, partly reflecting the conclusion of a grant supporting SGX943.
- Operating expenses declined substantially year over year: R&D fell 55% for six months, mainly due to lower HyBryte NDA-related manufacturing and regulatory costs; G&A fell 46%, principally due to reduced Emergent-related legal and consulting costs.
- The six-month net loss improvement also reflects a $1.16 million New Jersey NOL-sale tax benefit in 2023; Q2 2023 had no income tax benefit, whereas Q2 2022 included $1.15 million.
- In May, the company raised approximately $8.5 million gross through an offering of common shares and warrants. It also sold 851,130 shares under its at-the-market program for approximately $3.09 million gross during the first half. The offering included 4.237 million pre-funded warrants and 6.539 million common warrants, creating potential dilution.
- Common shares outstanding increased from 2.91 million at December 31, 2022 to 9.84 million at June 30, 2023. A one-for-fifteen reverse stock split took effect in February; reported share and per-share figures reflect the split.
Outlook, developments and risks
- HyBryte: After the FDA issued a refusal-to-file letter on the December 2022 NDA, the agency said a second positive Phase 3 pivotal study is required for an acceptable U.S. filing. Protocol discussions were ongoing, with outcomes anticipated before year-end. The company was also evaluating a European approval pathway based on the completed FLASH study. The additional trial’s feasibility, design, funding and timing remain uncertain.
- Other programs: The SGX302 psoriasis Phase 2a study was expanded after a biological effect was observed in the first five subjects; additional study data were anticipated before year-end. Further SGX942 development would require another Phase 3 study and a partner. SGX203’s Phase 3 start is contingent on additional funding. Public Health Solutions programs remain dependent on government support.
- Runway and spending: Management said cash, expected operating outflows and government contract and grant proceeds should cover working capital and capital expenditures for at least 12 months from issuance of the statements. It projected approximately $4.8 million of R&D spending over the next 12 months before reimbursements, with about $0.5 million expected in contract/grant reimbursements and licensing revenue. Up to $1.1 million in active grant funding remained at June 30, subject to agency terms. Additional financing, grants and partnerships are not assured.
- Listing: Nasdaq confirmed compliance with the shareholders’ equity requirement in May, but notified the company on June 23 that it again failed the $1.00 minimum bid-price requirement. The stated compliance deadline was December 20, 2023; failure to cure could lead to delisting proceedings. A one-year Panel Monitor also applies.
- Debt accounting: The April amendment resulted in a $394,000 loss on extinguishment and a $460,000 noncash gain from the subsequent fair-value change. The valuation uses a Monte Carlo model with significant unobservable inputs.
- Related party: Soligenix paid $50,000 and issued 31,646 shares for an option to acquire Silk Road Therapeutics’ pentoxifylline assets for Behçet’s disease. The option expired August 25, 2023; certain Soligenix directors have ownership and executive roles at Silk Road.
- Legal matter: In July 2023, the Delaware Court of Chancery confirmed the arbitration decision in favor of Emergent, leaving Soligenix without the more than $19 million in damages it had sought.
- Controls: Management concluded disclosure controls and procedures were ineffective at June 30 because of a material weakness in accounting for complex financial instruments, which delayed financial statement completion and led the company to use a filing extension. Remediation steps were underway.
- Other risks include continuing losses, clinical and regulatory uncertainty, dependence on grants and financing, potential dilution, clinical/manufacturing delays, and cash balances above FDIC-insured limits. The company reported no material COVID-19 impact on results or financial condition during the period, while noting future effects remain uncertain.
Investor verification priorities
- Track FDA protocol discussions and the feasibility, cost, funding and timing of the required second HyBryte Phase 3 study; verify any European regulatory progress.
- Reassess cash runway against actual operating cash use, planned R&D spending, available grants, and the company’s limited near-term ATM sale capacity under Form S-3 restrictions.
- Review the potential dilution from outstanding warrants, convertible debt conversion terms, and any further equity financing.
- Monitor Nasdaq minimum bid-price compliance and any consequences of the Panel Monitor or potential delisting process.
- Follow remediation of the material weakness and confirm whether future filings are completed on time.
- Verify the outcome of the Silk Road option and assess the related-party process and terms, along with any further costs or consequences from the Emergent dispute.