Business context and reporting period
Issuer identification: The request names Savara Inc., but the supplied filing is Mast Therapeutics, Inc.’s Form 10-K for the fiscal year ended December 31, 2014. The summary below reflects the filing provided, not a Savara filing. It is an annual report; quarterly figures are included where disclosed.
Mast was a clinical-stage biopharmaceutical company with no product sales. Its lead candidate, vepoloxamer, was in Phase 3 development for sickle cell vaso-occlusive crisis and Phase 2 development for acute limb ischemia; a heart-failure Phase 2 study was planned. AIR001, acquired in February 2014, was being studied in institution-sponsored Phase 2a trials for heart failure with preserved ejection fraction (HFpEF).
Financial and operating results
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $19.4 million | $12.9 million |
| Selling, general and administrative expense | $9.5 million | $8.5 million |
| Total operating expenses / operating loss | $29.3 million | $21.5 million |
| Net loss | $28.7 million | $21.5 million |
| Net loss per share, basic and diluted | $0.23 | $0.28 |
| Operating cash used | $24.6 million | $17.8 million |
| Cash, cash equivalents and investment securities at year-end | $57.3 million | $44.4 million |
For Q4 2014, revenue was $0, operating loss was $7.4 million, and net loss was $7.3 million, versus a $5.7 million net loss in Q4 2013. Quarterly basic and diluted loss per share was $0.05 in Q4 2014 and $0.06 in Q4 2013.
Cash and cash equivalents were $35.8 million and investment securities were $21.5 million at December 31, 2014. Current assets were $58.4 million and current liabilities $8.4 million. Total liabilities were $11.8 million, including a $3.4 million deferred tax liability; the filing reports no borrowings or debt balance. Financing activities provided $34.3 million in 2014, principally from equity offerings and the at-the-market program. No profitability or meaningful product margins were reported. The independent auditor gave an unqualified opinion on the financial statements.
Material changes versus prior comparable period
- R&D expense rose 50.6% to $19.4 million, mainly due to EPIC enrollment, the ALI trial and vepoloxamer manufacturing and development costs; the completed QT/QTc study reduced some costs.
- Operating loss increased to $29.3 million from $21.5 million, and net loss increased to $28.7 million from $21.5 million. Loss per share narrowed because the weighted-average share count rose substantially.
- Year-end cash, cash equivalents and investments increased by $12.9 million. The company raised $19.7 million net in a November 2014 public offering and $14.6 million net through its ATM program.
- The Aires acquisition added AIR001 and $2.0 million of acquired in-process R&D; it generated a $0.5 million bargain-purchase gain. The acquisition consideration comprised 5.1 million shares.
- Common shares outstanding increased from 102.7 million to 159.5 million. At year-end, 79.1 million warrants were outstanding, in addition to options, creating substantial potential dilution.
Outlook, risks and unusual items
- Management expected year-end 2014 financial resources to fund planned operations for at least 12 months, but said additional capital would be needed to complete development and commercialization. The company warned that financing may be unavailable or dilutive.
- For 2015, management forecast operating expenses of $35–38 million, excluding share-based compensation; R&D expense was expected to increase 35–45% and SG&A 10–20%, also excluding share-based compensation.
- Management expected EPIC enrollment completion around year-end 2015 and top-line results in Q1 2016; these were estimates subject to enrollment and other uncertainties. The filing also planned a Phase 2 heart-failure study in Q3 2015 and anticipated preliminary AIR001 Phase 2a data in the second half of 2015.
- Key risks include clinical failure or delay, patient enrollment, uncertain regulatory approval, reliance on single-source manufacturers and suppliers, and need for further capital. The company had no product revenue and depended on external financing. Competitive therapies, reimbursement and pricing pressures, intellectual-property challenges, and NYSE MKT listing requirements were also identified risks.
- Vepoloxamer had orphan-drug designations for sickle cell disease and acute limb ischemia, and fast-track designation for sickle cell crisis; none assured approval. A prior 255-patient Phase 3 study did not meet statistical significance on its primary endpoint, although post-hoc analyses showed benefits in subgroups.
- There was no material pending litigation. The filing disclosed a subsequent severance obligation of approximately $0.4 million related to the February 2015 termination of the president and chief operating officer.
Important facts for investors to verify
- Confirm issuer and filing identity: this document is Mast Therapeutics’ 2014 Form 10-K, not a filing identified as Savara Inc.
- Review the audited financial statements and notes for cash and investment balances, accrued R&D liabilities, acquisition accounting, and subsequent events.
- Track actual financing, operating cash burn and runway against management’s 2015 expense and funding outlook.
- Verify clinical-trial enrollment, timing, safety findings and results against subsequent company filings and regulatory disclosures.
- Assess potential dilution from outstanding warrants, options, future milestone shares and additional equity financing.