Matinas BioPharma Holdings, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. This is an annual filing, not a quarterly report. Matinas is a clinical-stage biopharmaceutical company with no product sales; it is developing cochleate drug-delivery candidates, principally MAT2203 and MAT2501.
Financial results and liquidity
| Metric | 2017 | 2016 | Change / context |
|---|---|---|---|
| Revenue | $0.150 million | None | Grant-funded contract research revenue; no product revenue. |
| Research and development expense | $9.010 million | $3.948 million | Increased about 128%, primarily from clinical and preclinical work, facilities, and staffing. |
| General and administrative expense | $7.642 million | $4.309 million | Increased about 77%, including stock compensation, professional fees, and insurance. |
| Operating loss | $16.502 million | $8.257 million | Operating expenses roughly doubled. |
| Net loss | $15.486 million | $7.599 million | Does not include the separate preferred dividend and warrant inducement charge shown below. |
| Net loss attributable to common shareholders | $32.836 million | $11.993 million | Includes a $16.741 million warrant inducement charge and $0.608 million preferred dividend in 2017; 2016 included a $4.394 million preferred-stock deemed dividend. |
| Basic and diluted loss per common share | $(0.36) | $(0.21) | Weighted-average shares rose to 90.5 million from 57.7 million. |
| Cash used in operating activities | $11.459 million | $6.119 million | Cash burn increased substantially. |
| Cash and cash equivalents at year-end | $7.307 million | $4.105 million | Management estimated funds would last into September 2018. |
At December 31, 2017, current assets were $7.964 million and current liabilities were $2.225 million, implying working capital of approximately $5.739 million. Total assets were $14.424 million and total liabilities were $3.742 million. The balance sheet reported $170,000 of current notes payable, plus lease liabilities; no material conventional long-term borrowings are shown. The filing does not present meaningful product margins because there were no product sales.
Financing provided $15.603 million of net cash in 2017, primarily from a warrant tender offer and exercises, plus approximately $1.1 million raised through an at-the-market equity program. Investing cash use was $0.942 million, mainly for laboratory and facility build-out. The company reported an accumulated deficit of $51.275 million.
Business, development progress, and outlook
- MAT2203: Oral cochleate amphotericin B, initially targeting prevention of invasive fungal infections in acute lymphoblastic leukemia (ALL) patients. The NIH Phase 2a study reported clinical responses in all three enrolled patients with refractory mucocutaneous candidiasis; the small sample does not establish efficacy for the planned prevention indication. In a separate 91-patient vulvovaginal candidiasis study, the safety endpoint was met, but the study was not designed to establish efficacy for that indication.
- After a January 2018 FDA meeting, Matinas planned an adaptive Phase 2 study, expected to begin in the first half of 2019, with a possible limited-use prevention indication in ALL. Management described a potential approval pathway by 2022; elsewhere the filing says product approval is not expected before 2023, if ever. These are expectations, not assured milestones.
- MAT2203 had FDA QIDP and Fast Track designations for specified fungal indications; the company had applied for orphan designation. Management cited potential combined orphan and QIDP exclusivity of up to 12 years if the relevant designations and approval requirements are satisfied.
- MAT2501: Oral cochleate amikacin for NTM and other resistant bacterial infections. Its 2017 Phase 1 single-ascending-dose trial in healthy volunteers reported no serious adverse events and blood levels below the cited safety levels for injected amikacin. The next planned step was a multiple-ascending-dose Phase 1 study; timing was not specified. MAT2501 had QIDP and orphan designations for NTM.
- Management expected R&D and public-company costs to rise in 2018. The company had no sales and marketing organization and expected to rely on partners for some commercialization opportunities.
Risks, contingencies, and unusual items
- Going concern and financing: The auditor included a going-concern explanatory paragraph; recurring losses and operating cash outflows raise substantial doubt about the company’s ability to continue as a going concern. Management expected year-end cash to fund operations only into September 2018 and said additional financing was needed. Financing may be unavailable or dilutive; the company had no committed external funding source.
- Dilution and preferred-stock terms: At year-end, 1.503 million Series A preferred shares were outstanding, convertible at the then-current terms into approximately 15.029 million common shares. They accrue 8% annual paid-in-kind dividends and carry liquidation preferences. Their holders also have contingent royalty rights tied to MAT2203 and MAT2501 sales or licensing proceeds, subject to stated caps. Options, warrants, and potential acquisition milestone shares add further dilution risk.
- Warrant inducement: The 2017 warrant amendment and exercise generated approximately $13.5 million gross cash proceeds, but the company recorded a $16.741 million inducement charge in the calculation of loss attributable to common shareholders. Common shares outstanding increased materially during the year.
- Development and execution: Candidates remain investigational; clinical results may not predict later-stage outcomes. Regulatory review, patient enrollment, manufacturing scale-up, third-party suppliers and CROs, and the licensed Rutgers technology could delay or prevent development. The company had not secured long-term supply agreements for key active ingredients.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to a material weakness involving stock-based compensation accounting for modified awards. The company began remediation and expected completion before year-end 2018. The auditor did not express an opinion on internal-control effectiveness.
- Other obligations and events: Future minimum lease payments totaled $3.389 million. The filing disclosed that CEO Roelof Rongen left effective March 15, 2018, with 15 months of base salary as severance; Jerome Jabbour became CEO. This disclosure appears alongside a note stating there were no subsequent events, so the filing’s treatment should be checked. No material pending legal proceedings were reported.
Most important facts for investors to verify
- Current cash runway, subsequent financing, and whether the company’s disclosed September 2018 funding estimate was met.
- The actual regulatory-agreed design, start date, enrollment, and results of the planned MAT2203 ALL prevention trial, and how management reconciles its 2022 and “not before 2023” approval timelines.
- Whether MAT2203’s small Phase 2 findings translate to the intended indication, and the complete safety and efficacy data for both MAT2203 and MAT2501.
- The status of the stock-based compensation control remediation and any later financial-statement corrections.
- Fully diluted share count and the economic impact of preferred-stock dividends and royalty rights, outstanding securities, and contingent acquisition shares.