Tonix Pharmaceuticals Holding Corp. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Filed August 13, 2018. Tonix is a clinical-stage biopharmaceutical company with no products approved for sale and no revenue.
Financial results and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $4.1 million | $2.8 million | $9.2 million | $5.8 million |
| General and administrative | $2.1 million | $2.0 million | $3.9 million | $4.1 million |
| Net loss | $6.1 million | $4.8 million | $13.0 million | $9.8 million |
| Loss per share, basic and diluted | $0.73 | $0.65 | $1.60 | $1.74 |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $12.3 million | $9.2 million |
At June 30, cash and cash equivalents were $16.7 million, restricted cash was $0.1 million, working capital was approximately $15.6 million, and total liabilities were $2.5 million. The filing reports no debt. There is no meaningful gross margin because the company had no revenue. Six-month financing activities provided $3.5 million, primarily from common-stock sales; cash, cash equivalents and restricted cash declined by $8.8 million to $16.8 million.
Changes versus prior period
- Q2 R&D expense rose 46%, mainly from $1.1 million more clinical expense related to the PTSD program; the prior-year quarter also included a $0.2 million insurance refund.
- Six-month R&D expense rose 59%, reflecting a $3.4 million increase in clinical expenses. Six-month G&A declined 5%, primarily because of lower compensation costs after a personnel reduction.
- Six-month net loss increased from $9.8 million to $13.0 million. Loss per share improved from $1.74 to $1.60, with a higher weighted-average share count.
- Common shares outstanding increased to 8.82 million at June 30 from 7.83 million at year-end, due in part to equity financing.
Outlook, material developments and risks
- Tonmya (TNX-102 SL), the lead PTSD candidate, is in Phase 3 development and has FDA Breakthrough Therapy designation. After quarter-end, the company terminated the Phase 3 HONOR study following an interim analysis indicating inadequate separation from placebo on the week-12 primary endpoint; it reported meaningful improvement in overall PTSD symptoms at week 4. Management planned to meet with the FDA in October 2018 to discuss results and a proposed modified Phase 3 design.
- Other programs include TNX-102 SL for agitation in Alzheimer’s disease (FDA Fast Track; Phase 2 study planned), TNX-601, TNX-801, TNX-301 and TNX-701. All candidates remain in development, with no assurance of successful trials, approval or commercialization.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern. It states both that available resources are insufficient to meet operating requirements through August 2019 and, in MD&A, that cash resources are expected to cover requirements through June 30, 2019 but not for the one-year period from the report date. Additional financing may be needed; acceptable financing may not be available, and equity issuance could dilute shareholders.
- Management expected R&D expenses and outstanding commitments to decline near term after the orderly closing of HONOR. Research and development contracts carried approximately $10.1 million of commitments at June 30; the company expected these to decrease following the study’s closure.
- During Q2, equity sales generated net proceeds of $1.6 million through the ATM program and $1.8 million under the Lincoln Park agreement. After quarter-end, further sales generated approximately $1.9 million net under the ATM and $0.1 million gross under Lincoln Park.
- Future minimum operating lease payments totaled $0.4 million. The company reported no material legal proceedings and no material changes to internal control over financial reporting.
Key facts for investors to verify
- The precise cash runway: the filing’s going-concern note and MD&A give different endpoint statements.
- FDA feedback and any revised development plan for Tonmya after the HONOR results, including whether another Phase 3 study proceeds.
- Cash burn, the timing and cost of closing HONOR, and whether expected reductions in R&D spending materialize.
- Remaining availability and terms under the ATM and Lincoln Park facilities, subsequent share issuance, and resulting dilution.
- Progress, funding needs and regulatory status of the other pipeline programs; the filing provides no revenue or product-commercialization guidance.