Matinas BioPharma Holdings, Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Matinas is a clinical-stage biopharmaceutical company developing MAT9001 and lipid nanocrystal (LNC) delivery candidates, including MAT2203 and MAT2501. It had no product revenue and had not received regulatory approval for any product candidate.
Financial performance and position
| Metric | Q3 2018 / September 30, 2018 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 for Q3; $119,750 for nine months | Q3 2017: $44,906; nine months 2017: $104,781 |
| Net loss | $2.94 million for Q3; $10.47 million for nine months | Q3 2017: $3.39 million; nine months 2017: $11.86 million |
| Net loss per common share | Q3: $0.03; nine months: $0.12 | Q3 2017: $0.04; nine months 2017: $0.32 |
| Research and development | $1.38 million for Q3; $5.10 million for nine months | Q3 2017: $2.01 million; nine months 2017: $6.71 million |
| General and administrative | $1.57 million for Q3; $5.50 million for nine months | Q3 2017: $1.44 million; nine months 2017: $5.26 million |
| Cash and cash equivalents | $6.63 million | $7.31 million at December 31, 2017 |
| Operating cash flow | $(7.70) million for nine months | $(9.54) million for nine months 2017 |
| Working capital | Approximately $4.9 million | Prior comparable value not provided |
| Total liabilities | $4.11 million | $3.74 million at December 31, 2017 |
Revenue was from a Cystic Fibrosis Foundation grant supporting MAT2501 research, not product sales. Gross margin is not meaningful for the company’s reported activity. At September 30, cash, cash equivalents and restricted cash totaled $7.27 million. The balance sheet reported a $319,746 current note payable and $205,919 in current and long-term lease liabilities.
Changes versus prior periods
- Nine-month net loss narrowed by about $1.4 million, while common-share loss fell substantially from $29.1 million to $11.1 million. The 2017 common-share loss included a $16.7 million warrant inducement charge.
- Nine-month R&D expense declined by about $1.6 million, primarily because clinical study spending, including MAT2203 work, was lower; a major human study had ended in the prior year. G&A increased by about $240,000, partly due to compensation and severance costs.
- The company raised approximately $7.1 million net in its June 2018 Series B preferred financing and $739,000 net through its at-the-market (ATM) common-stock program through September 30.
- Common shares outstanding were 97.7 million at September 30, compared with 93.4 million at December 31, 2017. The filing reports 112.4 million shares outstanding as of November 6, 2018.
Outlook, liquidity and risks
- Management stated that September 30 cash was expected to fund planned operations into April 2019. Subsequent ATM sales added approximately $8.5 million net proceeds; the filing gives differing later runway estimates, including September and November 2019.
- The company has sustained losses and negative operating cash flow since inception. Its accumulated deficit was approximately $62.3 million, and the filing states that substantial doubt exists about its ability to continue as a going concern. Continued operations depend on expense control and additional financing; there is no committed external source of funds.
- Management expected continued substantial losses and anticipated higher spending as development advances. Planned work included enhancing MAT2203 formulation and pursuing further clinical studies; the company was evaluating MAT9001 development pathways after Amarin’s REDUCE-IT announcement. No quantified financial guidance was provided.
- Key risks include clinical and regulatory uncertainty, manufacturing and third-party dependencies, protection of LNC-related intellectual property, and the availability and terms of future financing. Equity financing may dilute shareholders; other financing or partnerships could impose restrictive terms or require rights concessions.
- Series A preferred shares carry an 8% annual stock dividend and potential royalties on MAT2203 and MAT2501 sales or licensing proceeds if applicable conditions are met. Series B preferred shares can convert into common stock and carry staged stock dividends. These securities create potential dilution and claims on future value.
- Disclosure controls were deemed ineffective due to an unremediated material weakness involving accounting for stock-based compensation on modified consultant awards. Management had introduced compensating controls, but they had not operated long enough to conclude the weakness was remediated.
- The former CFO retired effective September 30, 2018; CEO Jerome Jabbour also assumed the CFO role, with a third-party accounting consultant engaged for transition support. No legal proceedings were reported.
Important facts for investors to verify
- Resolve the conflicting cash-runway statements: the filing cites funding into April 2019, September 2019, and November 2019 in different passages, alongside post-quarter ATM proceeds.
- Reconcile the reported nine-month net loss: the statements of operations show $10.466 million, while the cash-flow statement and equity statement show $10.457 million.
- Confirm the post-quarter ATM share issuance, proceeds, and resulting share count; the filing reports 112.4 million shares outstanding on November 6.
- Monitor progress and funding needs for MAT2203, MAT9001 and MAT2501, including trial plans, regulatory milestones, and any partnership or financing developments.
- Track remediation of the stock-based-compensation control weakness and any subsequent conclusions about disclosure-control effectiveness.