Tonix Pharmaceuticals Holding Corp. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unless otherwise noted, financial amounts below are in U.S. dollars; the filing presents most statement figures in thousands.
Business context
Tonix is a biopharmaceutical company developing drug and vaccine candidates and, since acquiring two migraine products from Upsher-Smith Laboratories (USL) on June 30, 2023, also generates product sales. Zembrace SymTouch and Tosymra are approved for acute migraine in adults. The rest of the disclosed pipeline remains investigational.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net product revenue | $4.0m | None | $4.0m | None |
| Cost of revenue | $2.4m | None | $2.4m | None |
| Research and development | $21.1m | $22.2m | $69.5m | $57.2m |
| Selling, general and administrative | $8.7m | $7.4m | $23.1m | $22.2m |
| Operating loss | $28.1m | $29.6m | $91.1m | $79.4m |
| Net loss | $28.0m | $29.0m | $89.3m | $78.5m |
| Basic and diluted loss per share | $1.83 | $4.24 | $7.40 | $18.58 |
Revenue came from Zembrace ($3.3m) and Tosymra ($0.7m). Their combined gross profit was approximately $1.6m, or a 40.5% gross margin. Tonix had no marketed products or product revenue in the prior-year periods. Q3 net loss narrowed by about 3% year over year, while nine-month net loss increased about 14%; per-share figures reflect substantially higher weighted-average shares and the filing’s retrospective adjustment for a 1-for-6.25 reverse split.
At September 30, cash and cash equivalents were $6.9m, inventory $13.3m, receivables $1.6m, working capital $13.6m, and total assets $139.3m. Total liabilities were $18.4m, including $1.2m of operating lease liabilities; the filing reports no borrowings. Accumulated deficit was $573.3m. Nine-month operating cash use was $79.7m, investing cash use $28.6m, and financing cash use $4.2m. Cash, cash equivalents and restricted cash ended at $7.9m.
Changes, financing and notable items
- The USL acquisition had preliminary purchase consideration of $26.5m, including $22.2m closing cash consideration, a $1.3m inventory adjustment liability and a $3.0m deferred payment. It added $13.3m of inventory, $10.1m of developed-technology intangibles and $1.0m of goodwill. The acquisition also carries transition-service fees, tiered sales earn-outs, royalties and potential sales milestone payments.
- Nine-month R&D expense rose 22%, mainly due to higher clinical, employee, office and lab costs, partly offset by lower manufacturing expense. Q3 R&D declined 5%. Nine-month SG&A increased 4%; Q3 SG&A increased 18%, including sales and marketing and USL transition-service costs.
- Tonix raised approximately $6.3m net in the July financing. A public offering that closed October 3, after quarter-end, raised approximately $4.0m net and included 4.05m common shares, pre-funded warrants for 4.95m shares and warrants for up to 18m shares at $0.50. As of November 9, 23.85m common shares were outstanding. The July financing also included warrants for 7m shares at $1.00.
- The company repurchased approximately $14.0m of common stock in Q1 2023, despite significant operating cash use. No repurchases occurred in Q3.
Outlook, risks and contingencies
- Going concern: Management stated that cash at September 30 and subsequent equity-offering proceeds would not meet operating and capital requirements through Q4 2023. The filing says this raises substantial doubt about Tonix’s ability to continue as a going concern for the year following filing. Additional financing or strategic collaborations are needed; unavailable or unacceptable financing could force cuts, delays, relinquishment of product rights or cessation of operations.
- Pipeline milestones: Management expected topline results from the potentially confirmatory Phase 3 TNX-102 SL fibromyalgia study in late December 2023 and from the TNX-1900 chronic migraine Phase 2 study in early December 2023. A Phase 2 TNX-1300 study was expected to start in Q4 2023. These were forward-looking expectations, not reported outcomes.
- Other commitments and risks: Outstanding CRO commitments were approximately $33.4m. Commercialization depends on product uptake, reimbursement and gross-to-net estimates, among other factors; the company also identifies clinical, regulatory, intellectual-property and financing risks. Four customers accounted for 83% of receivables at quarter-end, and four customers accounted for 78% of product revenue in the reported periods.
- Nasdaq: Tonix received notice that it did not meet the $1 minimum bid-price requirement and was given 180 days to regain compliance, with a possible additional compliance period subject to conditions. The filing gives April 14 and April 15, 2024 as the initial-period deadline in different sections; the precise date should be verified.
Important facts for investors to verify
- Available cash, subsequent financing proceeds and the company’s updated runway against its going-concern warning.
- Commercial sales trends, gross-to-net deductions, inventory recoverability and customer concentration for Zembrace and Tosymra.
- Potential dilution from outstanding and subsequent-offering warrants, pre-funded warrants, and future equity financing.
- Actual clinical-trial results and milestones versus management’s stated expectations, plus the $33.4m CRO commitments.
- Nasdaq compliance status and deadline, and the final acquisition valuation and related earn-out, royalty and milestone obligations.