Savara Inc quarterly report, Q1 FY2013

Business context and reporting period

This is Mast Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2013—not a filing under the name Savara Inc. The company changed its name from ADVENTRX Pharmaceuticals, Inc. to Mast Therapeutics in March 2013. Mast was a development-stage biopharmaceutical company focused primarily on MST-188, with no significant product revenue.

Financial and operating results

Cash, cash equivalents and short-term investments totaled approximately $32.0 million at quarter-end. No interest-bearing debt is reported on the balance sheet. Gross margin is not meaningful for the quarter because there were no revenues or cost of goods sold.

Material changes versus prior period

• R&D expense rose 55.8%, primarily reflecting EPIC and TQT clinical-study costs; these studies began during the quarter. Lower ANX-514 manufacturing activity partly offset the increase.
• Net loss increased by approximately $1.43 million year over year, while operating cash use was broadly unchanged.
• Cash and short-term investments declined by approximately $4.50 million from year-end. Investing activities provided $3.40 million, mainly reflecting investment maturities; there was no financing cash flow.

Outlook, risks and unusual items

• Management expected existing cash and investments to fund currently planned operations for at least 12 months, but said additional capital would be needed to support planned activities through successful development and commercialization. Future equity or debt financing, collaborations, licensing and government funding were possible sources; availability and terms were uncertain.
• EPIC, a pivotal Phase 3 study of MST-188 for sickle cell disease, was recruiting. The company planned approximately 388 subjects at roughly 70 sites and expected enrollment completion in 2015. Estimated external study costs were approximately $20 million.
• The company expected TQT results later in 2013; estimated study costs were approximately $2 million. It planned a Phase 2 acute limb ischemia study, subject to FDA input, for late 2013 or early 2014, with estimated external costs of approximately $2 million.
• Management anticipated significant and increasing losses for several years. Key risks include clinical and regulatory uncertainty, study delays or additional FDA requirements, dependence on third-party manufacturers and CROs, and inability to raise capital on acceptable terms or in time.
• After quarter-end, Mast agreed with its ANX-514 contract manufacturer on a disputed payment and assigned the manufacturer ownership of related equipment. The agreement reduced accrued liabilities as of March 31 by $0.2 million; equipment disposal occurred in April 2013.
• A $27,500 increase in the SynthRx acquisition-related contingent liability was recorded in Q1, based on the estimated 250,000 milestone shares and quarter-end share price. No goodwill or acquired in-process R&D impairment indicators were identified during the quarter.
• Management reported disclosure controls were effective as of March 31, 2013 and no material change in internal control over financial reporting during the quarter.

Important facts for investors to verify

• Confirm issuer identity and filing attribution: the supplied filing identifies Mast Therapeutics, Inc., not Savara Inc.
• Track EPIC enrollment, study costs, FDA requirements and whether the stated timelines remain achievable.
• Assess the cash runway against actual spending and planned trials; management’s estimate covered planned operations, not full development or commercialization.
• Monitor financing and partnering progress, including any changes to the company’s ability to obtain additional capital.
• Review the resolution of the ANX-514 manufacturer dispute and any further changes to accrued liabilities or contingent consideration.