Soligenix, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Soligenix is a late-stage biopharmaceutical company with BioTherapeutics and Vaccines/BioDefense segments. Revenue primarily reflects government contracts and grants, not commercial product sales.
Key financial results
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $1.73 million | $0.99 million | $2.85 million | $2.32 million |
| Gross profit (margin) | $0.23 million (13%) | $0.31 million (32%) | $0.37 million (13%) | $0.56 million (24%) |
| Operating expenses | $1.82 million | $2.63 million | $4.36 million | $4.61 million |
| Net loss | $1.56 million | $2.31 million | $3.93 million | $4.05 million |
| Basic and diluted loss per share | $0.18 | $0.41 | $0.45 | $0.73 |
- At June 30, cash and cash equivalents were $4.24 million, down 46% from $7.81 million at December 31, 2017. Working capital was $2.37 million, down 62% from $6.19 million.
- Cash used in operating activities was $3.60 million for the six months, compared with $2.98 million in 2017. Investing activities used $1,924; financing activities provided $38,400.
- Total assets were $6.15 million and current liabilities were $3.53 million. The balance sheet reports no debt line item; liabilities were primarily accounts payable, accrued expenses, deferred revenue and accrued compensation.
- Accumulated deficit was $161.20 million. No income tax provision was recorded, reflecting losses and a full valuation allowance on deferred tax assets.
Changes versus prior comparable periods
- Q2 revenue increased 74% and first-half revenue increased 23%, mainly due to NIH grants awarded in 2017 for SGX301 and SGX942 and increased RiVax-related contract activity. Grant and contract revenue growth was accompanied by higher cost of revenues.
- Gross margin declined to 13% from 32% in Q2 and from 24% for the first half. Management attributed the lower margins to a smaller share of reimbursable costs eligible for fixed-overhead reimbursement and the absence of a RiVax milestone fee received in Q2 2017.
- Q2 research and development expense fell 34%, primarily because certain grant-reimbursable costs were recorded in cost of revenues. First-half R&D expense was nearly flat year over year. General and administrative expense declined 23% for Q2 and 14% for the first half, primarily due to lower professional fees.
- First-half net loss narrowed 3%; Q2 net loss narrowed 33%. Higher interest income partly offset operating losses.
Outlook, developments and risks
- Management said cash, including proceeds from the July offering, together with expected government funding and other available financing sources, should fund working capital and capital expenditures for at least 12 months from issuance of the statements. This depends in part on agency funding decisions and access to financing.
- On July 2, 2018, Soligenix closed a public offering of common stock and warrants; after the underwriters’ additional share purchase on July 9, gross proceeds were approximately $9.2 million before fees and expenses. The company planned to use proceeds for its SGX301 and SGX942 Phase 3 trials and working capital. The offering included substantial new shares and warrants, creating potential dilution.
- Management estimated approximately $11.9 million of R&D spending over the next 12 months before contract reimbursements, including $7.9 million for BioTherapeutics and $4.0 million for Vaccines/BioDefense; it anticipated about $5.9 million of contract revenue to offset Vaccines/BioDefense R&D costs.
- Near-term priorities included completing enrollment and reporting preliminary results from the SGX301 Phase 3 trial, continuing SGX942 Phase 3 enrollment and expansion to European sites, and advancing RiVax/ThermoVax with NIAID support. The filing anticipated SGX301 interim analysis in October 2018 and final results in the first half of 2019; SGX942 interim analysis was anticipated in the first half of 2019 and final results in the second half of 2019.
- A material license risk concerns the University of Colorado heat-stabilization technology: the university issued a termination notice after a development milestone was missed. The parties extended the termination date to October 31, 2018 while negotiating; no new terms had been agreed. Loss of the rights could halt ThermoVax development and delay RiVax.
- Up to $17.3 million of active government contract and grant funding remained available, subject to agency options and termination rights. BARDA had declined to extend its OrbeShield contract beyond its base period, and the related NIAID contract had ended in 2017. Additional government funding is uncertain.
- Other risks include clinical-trial success and timing, the need for additional capital or partnerships, and potential dilution. License and collaboration agreements include up to $7.9 million in clinical or commercialization milestone payments and royalties of up to 6% of covered-product net sales if applicable milestones or sales are achieved. A separate Hyperion-related agreement may require up to $10 million in success-based payments.
Most important facts for investors to verify
- Whether SGX301 and SGX942 enrollment, analysis and results meet the timelines stated in the filing.
- Whether the University of Colorado license was retained or replaced before the October 31, 2018 deadline.
- Actual cash burn and runway after the July offering, including net offering proceeds, trial costs and government reimbursements.
- Whether government contract options and grants are exercised, particularly funding supporting RiVax and other development programs.
- The full dilution from the July stock-and-warrant offering and the remaining availability and terms of the Lincoln Park equity facility.