Tonix Pharmaceuticals Holding Corp. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; financial statements are unaudited. Tonix is a late clinical-stage pharmaceutical company. Its product candidates remain in development, and it has no commercial products or revenue.
Financial performance and liquidity
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $3.0 million | $10.7 million |
| General and administrative expense | $2.1 million | $3.3 million |
| Operating loss | $5.1 million | $14.0 million |
| Net loss | $5.1 million | $14.0 million |
| Basic and diluted loss per share | $1.27 | $7.41 |
| Cash used in operating activities | $4.8 million | $15.5 million |
At March 31, cash and cash equivalents were $19.9 million and marketable securities were $2.5 million, or $22.4 million combined. Working capital was $21.7 million. Total liabilities were $1.8 million; the filing reports no debt. Cash increased by $1.0 million during the quarter, including $1.1 million of net proceeds from common-stock sales and $4.7 million from maturities of marketable securities. Profit margins are not applicable because the company had no revenue.
Changes versus prior period
- Net loss decreased by $8.9 million, or 64%, year over year. R&D expense fell 72%, primarily after discontinuation of the episodic tension-type headache and fibromyalgia programs and a reduction in active trials.
- G&A expense fell 36%, primarily due to lower compensation costs and reduced personnel.
- Operating cash use declined by $10.7 million, reflecting reduced clinical, nonclinical, manufacturing, and compensation-related activity.
- Common shares outstanding increased to 4,160,814 at quarter-end from 3,918,147 at December 31, 2016. The company also effected a 1-for-10 reverse stock split in March; share and per-share amounts are presented on a retroactively split-adjusted basis.
Business outlook, risks, and notable items
- The lead candidate, TNX-102 SL, is in Phase 3 development for PTSD and has FDA Breakthrough Therapy designation. The HONOR study began in Q1, plans to enroll approximately 550 participants, and includes an interim analysis at about 275 participants. The FDA indicated that a single-study NDA approval may be possible if HONOR topline results are statistically persuasive.
- In the Phase 2 AtEase study, the 2.8 mg dose did not reach statistical significance on the primary endpoint; the 5.6 mg dose showed a statistically significant effect in the reported analysis. TNX-102 SL remains investigational and is not FDA-approved.
- Management expected ongoing operating losses and increasing R&D costs. It stated that cash and marketable securities at quarter-end, together with approximately $16.3 million of net proceeds from post-quarter stock sales, were sufficient to fund planned operations and R&D for at least 12 months. Management also said additional capital will be needed for future research and development; unavailable or unfavorable financing could force program delays, reductions, or partnerships involving relinquished rights.
- After quarter-end, the company completed an April public offering and over-allotment and sold additional shares through its ATM program. It reported approximately $16.3 million in combined net proceeds from these post-quarter financings and said the $15 million ATM program was fully used and terminated.
- At March 31, research and development contracts included approximately $6.1 million of commitments for future work. Future minimum office lease payments totaled approximately $1.0 million through 2019.
- Key risks include clinical efficacy and safety, recruitment and trial timing, regulatory approval, reliance on third parties, patent protection, competition, reimbursement, and the need for further financing. The company reported no material legal proceedings and no material changes in internal control over financial reporting.
Important facts for investors to verify
- HONOR enrollment, interim-analysis timing and outcome, and whether the trial supports a filing or approval.
- Cash runway assumptions, planned spending, and the timing and amount of future financing needs and potential dilution.
- Reconciliation of post-quarter financing proceeds and updated shares outstanding following the offerings and ATM sales.
- Progress, costs, and commitments across TNX-102 SL and the other development programs, including any changes in trial plans or regulatory expectations.