Matinas BioPharma Holdings, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. Matinas is a clinical-stage biopharmaceutical company developing anti-infective drug candidates using its licensed cochleate delivery platform. It had no product revenue and reported no commercial products.
Financial highlights
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $0 | $77,000 | $0 | $134,636 |
| Research and development | $642,576 | $1,354,728 | $1,564,287 | $2,803,141 |
| General and administrative | $977,653 | $1,124,066 | $2,293,430 | $2,301,907 |
| Net loss | $1,623,885 | $2,404,532 | $3,868,495 | $4,974,643 |
| Net loss per share, basic and diluted | $0.03 | $0.04 | $0.07 | $0.11 |
Revenue was contract research revenue from NIH arrangements that ended in 2015; the company did not expect revenue during the remainder of 2016. Gross margin is not meaningful because the filing reports no revenue in 2016 and no corresponding cost-of-revenue measure. Lower R&D spending, especially on clinical studies associated with MAT9001, and cost-saving measures contributed to reduced losses.
For the six months, operating cash use was $2.64 million, investing cash use was $31,064, and financing provided $19,036. Cash fell by $2.65 million to $578,313 at June 30; restricted cash was $55,557. At June 30, total assets were $5.56 million, total liabilities $2.57 million, and stockholders’ equity $3.00 million. Current assets were $773,510 versus current liabilities of $1.34 million. The balance sheet included $30,297 of current and long-term lease liabilities; no material conventional borrowing balance was reported. The company reported $27.1 million of accumulated deficit.
Changes, outlook, and risks
- Compared with the first half of 2015, revenue fell to zero and net loss narrowed to $3.87 million from $4.97 million. R&D expense declined by $1.24 million; G&A was essentially flat.
- Management expected R&D expense to remain relatively flat or rise slightly in the near term, with increases over time as development programs advance. G&A was expected to remain flat through 2016. The company anticipated no revenue for the rest of 2016.
- Management estimated that cash on hand, including proceeds from the July 2016 financing, would fund operating expenses and capital needs only through approximately January 2017. The company stated it would need additional financing and that recurring losses and funding needs raised substantial doubt about its ability to continue as a going concern. No committed external funding source was identified.
- On July 29, 2016, after quarter-end, the company sold 880,058 Series A preferred shares for $4.4 million gross and approximately $3.8 million net proceeds. The shares carry an 8% annual dividend payable in common shares upon conversion, convert initially at $0.50 per common share subject to adjustment, and have liquidation preferences. They also convey rights to specified royalties on MAT2203 and MAT2501 sales or licensing/disposition proceeds, subject to stated terms. The financing creates potential dilution and additional economic claims on future product value.
- MAT2203 had completed Phase 1a; the company reported screening and enrollment in a Phase 2a study with NIH/NIAID and anticipated results during 2016, subject to study timelines. MAT2501 had an open IND and the company planned to begin Phase 1 studies in 2016. Both candidates remained subject to clinical, regulatory, manufacturing, and financing risks.
- Other exposures include reliance on Rutgers-licensed technology, third-party manufacturers and clinical research organizations, patent protection, and future capital markets. The company reported no material change to previously disclosed risk factors, no legal proceedings, and no off-balance-sheet arrangements. Future minimum lease payments totaled $834,596.
Most important facts for investors to verify
- Current cash runway and subsequent cash use against management’s estimate of funding through January 2017, and the company’s ability to raise further capital.
- Terms, closing status, dilution, dividend accrual, liquidation preference, and royalty rights associated with the July 2016 preferred-stock financing.
- MAT2203 Phase 2a enrollment and results, and MAT2501’s actual clinical-trial start and progress.
- Whether planned development spending can be sustained while revenue remains absent and whether expense reductions affect program timelines.
- Potential dilution from outstanding warrants to purchase 39.25 million shares and options to purchase approximately 8.27 million shares, in addition to the preferred shares’ conversion features.