Tonix Pharmaceuticals Holding Corp. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Tonix is a clinical-stage biopharmaceutical company with no commercial products or revenue. Its lead candidate, TNX-102 SL (Tonmya), was in Phase 3 development for PTSD; the company was also developing candidates for Alzheimer’s-related agitation and other indications.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $5.17 million | $2.99 million; up 73% |
| General and administrative expense | $1.82 million | $2.10 million; down 14% |
| Operating loss | $6.99 million | $5.09 million |
| Net loss | $6.94 million | $5.06 million; loss increased 35% |
| Net loss per share, basic and diluted | $0.88 | $1.27 |
| Cash used in operating activities | $6.77 million | $4.79 million |
| Cash and cash equivalents, March 31 | $19.25 million | $25.50 million at December 31, 2017 |
| Working capital, March 31 | $18.3 million | Not stated for the prior comparable period |
| Total liabilities, March 31 | $2.37 million | $2.14 million at December 31, 2017 |
There was no reported product revenue or profit, so operating margins are not meaningful. The filing reports no debt balance. Cash, cash equivalents and restricted cash totaled $19.34 million at quarter-end. Cash declined by $6.24 million during the quarter; financing proceeds from common-stock sales were $0.53 million. Total assets were $20.98 million and stockholders’ equity was $18.61 million at March 31.
Changes and key developments
- R&D spending rose by $2.18 million, primarily from continued PTSD development and increased active clinical studies; management also cited higher clinical, nonclinical and manufacturing costs.
- G&A declined by $0.28 million, mainly because of lower compensation costs and reduced personnel.
- Net loss widened by $1.87 million. Loss per share decreased from $1.27 to $0.88, while weighted-average shares increased from 3.99 million to 7.85 million; the lower per-share loss should be considered alongside this share-count increase.
- In Q1, Tonix sold 180,000 shares under its Lincoln Park purchase agreement, raising approximately $0.6 million gross. Through May 10, it had sold 878,340 shares under the agreement, including the initial purchase, for approximately $3.0 million gross.
- On May 1, 2018, after quarter-end, Tonix filed a shelf registration statement permitting up to $75 million of securities offerings and entered into an at-the-market sales agreement for up to $9.5 million of common stock. Cowen’s commission is 3% of sales.
Outlook, risks and commitments
- Going concern: Management expected available resources to fund projected operations through the end of 2018 but stated that resources were insufficient for the one-year period from the filing date. The filing says this raises substantial doubt about the company’s ability to continue as a going concern.
- Tonix expects ongoing operating losses and increasing R&D expenses, including costs of additional clinical trials. It said G&A was expected to decrease in the near term as it sought to preserve cash through at least the end of the Phase 3 HONOR study in military-related PTSD.
- Additional capital will be needed. Financing may be unavailable or unacceptable; equity issuance could dilute shareholders, while lack of funding could force the company to delay, reduce or discontinue development or relinquish product rights.
- Outstanding commitments for future work under R&D contracts were approximately $9.8 million at March 31. Minimum office lease payments were $0.52 million through 2019.
- Development, trial enrollment, safety or efficacy results, regulatory review, competition, intellectual-property protection and third-party dependence could delay or prevent development and approval. The company reported no material legal proceedings and no off-balance-sheet financing arrangements.
Important facts for investors to verify
- Whether financing after May 10, 2018, and any subsequent cash burn provide adequate runway beyond the stated end-of-2018 estimate.
- Current status, timing, costs and results of the HONOR Phase 3 PTSD study and other clinical programs.
- Actual shares issued and remaining capacity under the Lincoln Park agreement, shelf registration and at-the-market program, including resulting dilution.
- Timing and amounts of the approximately $9.8 million in contracted R&D work and other operating commitments.
- Whether subsequent filings update the going-concern assessment or disclose new financing, clinical, regulatory or liquidity developments.