Tonix Pharmaceuticals Holding Corp. — Q3 2019 Form 10-Q
Business context and reporting period
Clinical-stage biopharmaceutical company with no commercial products or revenue. The unaudited quarter and nine-month periods ended September 30, 2019; comparisons are to the corresponding 2018 periods. Financial statement share and per-share amounts reflect the subsequent 1-for-10 reverse stock split effective November 1, 2019.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $5.1m | $3.3m | $12.5m | $12.5m |
| General and administrative expense | $2.8m | $2.3m | $7.6m | $6.2m |
| Net loss | $7.8m | $5.5m | $19.9m | $18.5m |
| Net loss per share, basic and diluted | $5.69 | $54.99 | $23.93 | $195.51 |
| Cash used in operating activities | Not stated for quarter | $20.0m | $17.1m |
At September 30, cash and cash equivalents were $10.0m, versus $25.0m at December 31, 2018; including restricted cash, cash totaled $10.1m. Working capital was $9.2m. Total assets were $12.3m and total liabilities $2.4m, including approximately $0.5m in operating lease liabilities. No conventional borrowings are reported. Gross margin is not applicable because the company had no revenue.
Material changes versus prior periods
- Q3 R&D expense rose 55%, mainly from RECOVERY trial clinical costs (+$1.0m), TNX-601 manufacturing (+$0.3m), and other pipeline work (+$0.3m). Nine-month R&D was essentially unchanged year over year, reflecting RECOVERY costs in 2019 versus the HONOR study in 2018.
- G&A increased 22% in Q3 and 23% for the nine-month period. Management cited higher patent legal costs, insurance premiums, and, for the nine-month period, investor and public relations spending.
- Net loss increased by $2.4m for the nine months. Operating cash use rose by $2.8m; the company cited HONOR close-out and RECOVERY trial costs and higher insurance payments.
- Common shares outstanding increased substantially during 2019, including a 900,000-share July offering and shares issued through other financing and employee plans. The July offering generated approximately $4.5m net. The 1-for-10 reverse split took effect after quarter-end.
Outlook, commentary, risks, and unusual items
- Management stated that available resources were insufficient to meet operating requirements for the year following the filing. The filing identifies substantial doubt about the company’s ability to continue as a going concern. Additional financing or strategic collaborations may be needed; acceptable funding may not be available. Without it, Tonix may delay, reduce, or discontinue development or other operations.
- The lead candidate, TNX-102 SL, was enrolling participants in the Phase 3 RECOVERY PTSD trial. The company also described TNX-102 SL development for fibromyalgia, Alzheimer’s agitation, and alcohol use disorder, plus other clinical and preclinical programs. No specific financial guidance or quantified development timetable was provided.
- Tonix acquired pyran-based compound assets from TRImaran and licensed related technology from Wayne State University. Consideration included $100,000 cash, assumed liabilities of $68,500, and potential milestone payments totaling approximately $3.4m to TRImaran and approximately $3.4m to WSU. No milestones had been accrued or paid at quarter-end.
- New Columbia University licenses included contingent milestones of up to $3.1m for TFF2 and $3.0m for the cocaine esterase program, plus royalties and other license terms. No milestone payments were accrued or paid at quarter-end.
- Outstanding commitments to contract research organizations for future work were approximately $7.2m. Clinical-trial timing and costs are uncertain; risks include trial efficacy or safety results, recruitment, regulatory decisions, third-party execution, competition, patent protection, and financing availability.
- Management reported disclosure controls effective at a reasonable assurance level and no material changes in internal control during the quarter. The company reported no material legal proceedings.
Important facts for investors to verify
- Current cash runway, subsequent financing, and the company’s plan to address the going-concern uncertainty.
- RECOVERY trial enrollment, milestones, results, and projected costs, along with spending across the broader pipeline.
- Potential dilution and remaining availability under equity purchase and offering arrangements; reconcile share counts for the reverse split.
- Terms and future obligations under the TRImaran, WSU, and Columbia agreements, including milestone triggers, royalties, and license fees.
- Whether the $7.2m of contracted research work and other commitments can be funded without materially curtailing development.