Tonix Pharmaceuticals Holding Corp. — 2018 Q3 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Unaudited consolidated results. Tonix is a clinical-stage biopharmaceutical company with no commercial products and no product revenue.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No revenue reported | No revenue reported |
| Research and development expense | $3.3 million | $3.9 million | $12.5 million | $9.7 million |
| General and administrative expense | $2.3 million | $1.9 million | $6.2 million | $6.0 million |
| Net loss | $5.5 million | $5.8 million | $18.5 million | $15.6 million |
| Net loss per share, basic and diluted | $0.57 | $0.77 | $2.15 | $2.49 |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $17.1 million | $14.2 million |
At September 30, 2018, cash and cash equivalents were $14.7 million, restricted cash was $0.1 million, and working capital was approximately $13.5 million. Total assets were $16.1 million, total liabilities $2.3 million, and stockholders’ equity $13.7 million. No debt is reported on the balance sheet. The filing does not present gross margin as the company reported no revenue.
Cash and cash equivalents declined from $25.5 million at December 31, 2017. Nine-month financing provided $6.4 million net from common-stock sales, compared with $17.4 million in the prior-year period. Shares issued and outstanding were 10.48 million at September 30; 14.20 million were outstanding as of November 8, 2018.
Material changes versus prior periods
- Q3 R&D expense declined 15%, principally because the HONOR PTSD study was terminated, reducing clinical and manufacturing costs.
- Nine-month R&D expense rose 29%, mainly due to higher clinical expense from continued PTSD program work during the first half of 2018.
- Nine-month net loss increased by $2.9 million, while Q3 net loss was modestly lower year over year.
- Nine-month operating cash use increased by $2.9 million, reflecting higher clinical activity.
- G&A rose 21% in Q3, primarily from higher patent prosecution and investor-relations costs. Nine-month G&A increased 3%, with legal and investor-relations increases partly offset by lower compensation-related costs.
Outlook, risks, and notable items
- Going concern: The company reported recurring operating losses and negative operating cash flows, and stated that available resources were insufficient to meet operating requirements through November 2019. Management said additional financing is needed; the filing identifies substantial doubt about the company’s ability to continue as a going concern. Financing may not be available on acceptable terms, potentially requiring program delays, reductions, or discontinuation.
- PTSD program: Tonmya (TNX-102 SL) is the lead candidate and has FDA Breakthrough Therapy designation. The Phase 3 HONOR study was terminated after interim analysis showed inadequate separation from placebo on the Week 12 primary endpoint, although improvement in overall PTSD symptoms was observed at Week 4. After an October FDA meeting and preliminary acceptance of the proposed protocol, the company planned a new Phase 3 study beginning in Q1 2019, with Week 4 CAPS-5 improvement as the primary endpoint. This is a plan, not a reported trial start.
- Other pipeline: TNX-102 SL is also being developed for agitation in Alzheimer’s disease; the FDA had cleared a Phase 2 study design and designated the program Fast Track. The pipeline also includes TNX-601, TNX-801, TNX-301, and TNX-701.
- Financing and dilution: During the nine months, the company raised net proceeds of $4.1 million through its ATM offering and $2.3 million under its 2017 Lincoln Park purchase agreement. Subsequent to quarter-end, it sold 3.3 million shares through the ATM for approximately $2.2 million net and 99,602 shares to Lincoln Park for approximately $58,000. The 2017 Lincoln Park agreement reached its share limit absent stockholder approval. A new October 18 agreement permits sales of up to $15 million to Lincoln Park, subject to limitations; 350,000 commitment shares were issued. Availability is not assured proceeds.
- Commitments: Approximately $8.2 million of future work was committed under R&D contracts at September 30. Minimum operating lease payments totaled $302,000.
- Other disclosures: Management stated disclosure controls were effective at a reasonable assurance level and reported no material internal-control changes during the quarter. The company reported no material legal proceedings. Adoption of the new lease accounting standard in 2019 could materially affect the balance sheet; the impact was still being assessed.
Most important facts for investors to verify
- Current cash runway, actual monthly cash burn, and whether subsequent financing provides sufficient runway beyond the stated shortfall.
- Progress and FDA alignment for the planned new Tonmya PTSD Phase 3 trial, including start date, enrollment, endpoint, and funding needs.
- Whether the Alzheimer’s agitation study advances and what its design and expected costs are.
- Shares issued after September 30, remaining ATM capacity, the terms and practical availability of the new Lincoln Park agreement, and resulting dilution.
- Timing and payment obligations for the $8.2 million of R&D commitments and the eventual balance-sheet effect of lease-standard adoption.