Mast Therapeutics, Inc. — Form 10-Q Summary
Period: Quarter and six months ended June 30, 2014; filed August 11, 2014. The filing identifies the registrant as Mast Therapeutics, Inc., not Savara Inc.; verify the company identity associated with the request metadata.
Business context
Mast was a clinical-stage biopharmaceutical company with no product sales or significant revenue. Its lead candidate, MST-188, was being developed for serious diseases, including sickle cell disease and acute limb ischemia. In February 2014, Mast acquired Aires Pharmaceuticals, adding AIR001, a sodium nitrite inhalation candidate for pulmonary vascular disorders.
Financial results and liquidity
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 | Comparable 2013 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $4.8 million | $9.1 million | $2.8 million; $6.3 million |
| Selling, general and administrative expense | $2.4 million | $4.6 million | $2.1 million; $4.2 million |
| Operating loss | $7.2 million | $14.0 million | $5.0 million; $10.5 million |
| Net loss | $7.2 million | $13.5 million | $4.9 million; $10.5 million |
| Net loss per share | $0.06 | $0.12 | $0.09; $0.21 |
| Operating cash used | Not stated for quarter | $13.3 million | $9.2 million for six months |
At June 30, 2014, cash and cash equivalents were $26.4 million and current investment securities were $20.1 million, for combined liquidity of $46.4 million. Current liabilities were $5.7 million; total liabilities were $9.1 million. The filing reports no borrowings or debt balance. No meaningful operating margin is available because the company had no revenue.
Changes and notable items
- Six-month R&D expense increased 44.9% year over year, mainly from the EPIC sickle cell study, the acute limb ischemia study, AIR001 program wind-down costs, clinical-material manufacturing, and added personnel.
- Six-month net loss increased by about $3.0 million year over year, while loss per share decreased, primarily reflecting a substantially higher weighted-average share count.
- The Aires acquisition was accounted for at an estimated purchase price of about $3.3 million. Mast recorded a preliminary $0.5 million bargain-purchase gain; acquired AIR001 in-process research and development was valued at $2.0 million.
- Mast raised $11.9 million net through its at-the-market equity program in the first half of 2014, issuing 16.1 million shares. Common shares outstanding were 119.8 million at June 30 and 121.6 million on August 6.
Outlook, risks, and contingencies
- Management expected available cash and investments to fund planned operations for at least 12 months from June 30, 2014, but emphasized that this estimate depended on assumptions and that additional capital would be needed to complete development and commercialization. Future equity, debt, or collaboration financing might not be available on acceptable terms or at all.
- Mast expected 2014 R&D expense to be significantly higher than in 2013 and SG&A to increase moderately. It expected continuing significant losses for several years.
- Management targeted EPIC enrollment completion by year-end 2015, with estimated remaining external clinical-study costs of approximately $14 million. It also targeted completion of the approximately 60-patient acute limb ischemia phase 2 study by year-end 2015, with estimated remaining external study costs of approximately $4 million.
- A phase 2 heart-failure study was planned for the first half of 2015, with an estimated cost of approximately $7 million; timing, size, and cost could change. The company was still determining AIR001’s development strategy and expected its costs and plans to evolve.
- Key risks include clinical-study enrollment, safety and efficacy results, regulatory requirements or delays, manufacturing and third-party provider reliance, intellectual-property matters, and the need to raise additional capital. Study timelines, costs, and runway are forward-looking estimates, not guarantees.
Important facts for investors to verify
- Confirm whether this Mast Therapeutics filing is the intended filing for the Savara Inc. request.
- Review subsequent filings for EPIC and acute limb ischemia enrollment, study results, and updated timelines and costs.
- Check subsequent disclosures on AIR001 strategy and the preliminary Aires purchase-price allocation.
- Monitor cash burn, financing activity, share dilution, and whether management’s 12-month liquidity estimate remained valid.
- Assess any later changes to the planned heart-failure program and related funding requirements.