Tonix Pharmaceuticals Holding Corp. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. Tonix is a clinical-stage CNS pharmaceutical company; it had no approved commercial products or revenue. All amounts are in U.S. dollars.
Financial performance and liquidity
- Revenue and margins: No revenue or cost of goods sold in the three- or six-month periods. Gross and operating margins are therefore not meaningful.
- Q2 results: R&D expense was $7.5 million, down 16% from $8.9 million; G&A was $2.3 million, down 26% from $2.9 million. Net loss was $9.8 million, versus $11.8 million; basic and diluted loss per share was $0.50, versus $0.73.
- Six-month results: R&D expense rose 16% to $18.2 million from $15.7 million; G&A declined 2% to $5.7 million from $5.8 million. Net loss increased to $23.8 million from $21.4 million; loss per share was $1.23 versus $1.44.
- Cash flow: Operating activities used $23.5 million in the first half, compared with $18.3 million in the prior-year period. Investing activities provided $7.5 million, mainly from maturities of marketable securities; financing provided $11.8 million from stock sales. Cash and cash equivalents fell to $14.9 million from $19.2 million at year-end.
- Liquidity and obligations: Cash, cash equivalents and marketable securities totaled $31.2 million; working capital was $29.5 million. Total liabilities were $4.3 million, including $4.2 million current liabilities. The filing reports no borrowings or debt balance. Contractual R&D commitments were $17.5 million and operating lease obligations $1.8 million.
- Equity financing: The June public offering raised approximately $9.1 million net and ATM sales raised $2.7 million net. The underwriters’ option generated a further approximately $1.4 million net in July. Shares issued and outstanding rose to 25.1 million at June 30 from 18.8 million at year-end; the filing reports 25.9 million outstanding as of August 4.
Material changes and business developments
- Q2 R&D expense declined primarily following completion of the AtEase PTSD study and reduced TNX-201 work. First-half R&D increased because of TNX-102 SL formulation, manufacturing, safety, efficacy and pharmacokinetic work.
- First-half operating cash use increased by $5.2 million year over year, while net financing proceeds were lower than in the prior-year period ($11.8 million versus $29.0 million).
- In May 2016, Tonix reported AtEase Phase 2 PTSD results: the 2.8 mg dose did not meet the primary endpoint; the 5.6 mg dose was statistically significant under the specified MMRM with multiple-imputation analysis (p=0.031). The study was not presented as a pivotal Phase 3 result.
- Tonix completed enrollment in the first Phase 3 fibromyalgia trial, AFFIRM, in May and said it expected topline results in September 2016. It began enrolling in the second Phase 3 fibromyalgia trial, RE-AFFIRM, in July.
Outlook, risks and contingencies
- Management said existing funds, including available resources and subsequent July financing, were expected to fund operations and ongoing trials for at least 12 months. It also expected R&D spending to rise significantly over the next 12–24 months and said additional equity or debt financing would be needed to complete development and commercialization.
- Management’s runway estimate depends on spending, trial progress and financing needs. If additional financing is unavailable or unacceptable, Tonix may need to reduce or delay programs, cut operations, or seek partnerships that could require relinquishing product rights. Further equity financing could dilute shareholders.
- For PTSD, management planned two Phase 3 trials of TNX-102 SL 5.6 mg, subject to FDA acceptance of study design and additional financing; planned starts were 2017. The FDA meeting discussion was preliminary pending official minutes.
- TNX-301 for alcohol use disorder remained pre-IND; FDA requested certain nonclinical studies before an IND-supported first-in-human study. Smallpox and radiation-protection programs remained in nonclinical development.
- Key development risks include trial efficacy and safety outcomes, recruitment, regulatory review, development costs and timing, and the possibility that products may never be approved or commercially viable. Tonix reported accumulated losses and negative operating cash flows since inception.
- No material legal proceedings were reported. Management stated disclosure controls were effective at a reasonable assurance level and reported no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether AFFIRM’s expected September 2016 results were reported and whether the trial met its primary endpoint.
- Whether RE-AFFIRM enrollment and the proposed PTSD Phase 3 plans proceeded, and the final FDA requirements for those programs.
- Cash burn, remaining ATM capacity, subsequent financing, and whether the stated 12-month runway remains adequate as trial spending increases.
- Full clinical-trial commitments, timing and cancellation terms, plus potential dilution from outstanding options, warrants and future share issuances.
- That TNX-102 SL and other candidates were investigational and had not been approved; the filing’s efficacy and safety descriptions are not evidence of regulatory approval.