Soligenix, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance sheet compared with December 31, 2016. Soligenix is a development-stage biopharmaceutical company with BioTherapeutics and Vaccines/BioDefense segments. Revenue is primarily from government grants and contracts, not product sales.
Key financial results
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Contract revenue | $1.331 million | $2.631 million; down 49% |
| Gross profit (margin) | $244,000 (18%) | $399,000 (15%) |
| Research and development | $1.218 million | $1.428 million; down 15% |
| General and administrative | $764,000 | $876,000; down 13% |
| Operating loss | $1.738 million | $1.906 million |
| Net loss | $1.733 million | $1.149 million |
| Basic and diluted loss per share | $0.32 | Basic $0.37; diluted $0.59 |
| Net cash used in operations | $1.627 million | $638,000 |
Cash and cash equivalents were $7.144 million at quarter-end, down $1.629 million (19%) from year-end 2016. Working capital was $5.682 million, down $1.562 million (22%). Total assets were $8.409 million and shareholders’ equity was $5.816 million. Current liabilities were $2.593 million; the balance sheet reports no notes payable at March 31, 2017. Operating cash use was the main cause of the cash decline.
Material changes and operating developments
- Revenue fell chiefly because the NIAID OrbeShield contract was completed and BARDA did not extend its contract beyond the base period. Contract and grant revenue was reported in Vaccines/BioDefense; BioTherapeutics had no revenue.
- The higher net loss year over year largely reflects the absence of $760,000 of non-cash warrant-liability fair-value income recorded in Q1 2016. Those warrants were reclassified to equity in 2016. Lower R&D and G&A expenses partly offset the revenue decline.
- Management said spending supported long-term follow-up for the SGX942 Phase 2 trial and the pivotal SGX301 Phase 3 trial. R&D expense was $1.218 million; SGX942 and SGX301 accounted for $570,000 and $457,000, respectively.
Outlook, funding and risks
- Management expected available resources to fund working capital and capital expenditures through at least June 30, 2018, based on its budget and assumptions about cash outflows, government funding, the Lincoln Park equity facility and New Jersey tax-certificate proceeds. It also described cash as sufficient for at least the next 12 months.
- The filing cited up to $15.8 million of active government contract and grant funding, subject to agency options and no termination, and $10.3 million available under an equity facility expiring March 2019. These are potential sources, not guaranteed proceeds. Further equity or debt financing and partnerships may be sought; availability and pricing are uncertain, and equity issuance may dilute shareholders.
- Planned development included completing SGX301 Phase 3 enrollment and reporting preliminary results, initiating Phase 3 studies of SGX942 and SGX203, and continuing RiVax/ThermoVax work. The filing expected SGX301 data in the second half of 2017, SGX942 data in the second half of 2018, and SGX203 data in the second half of 2019.
- OrbeShield development beyond the completed contract period depends on additional government funding. The company also identified clinical, regulatory, financing, and government-funding uncertainties and said it expects losses to continue.
- Expected R&D spending for the next 12 months was approximately $10.8 million before reimbursements; management anticipated about $4.8 million in Vaccines/BioDefense contract reimbursements.
- Contractual commitments included $475,000 for licensing agreements and $165,250 in lease obligations, for $640,250 total scheduled obligations through 2021. Separate agreements could require up to $7.9 million of milestones and royalties up to 6% of net sales if conditions are met; the Hy Biopharma agreement could require up to $10 million in success-based payments. No such milestone or royalty amounts had been paid or accrued at quarter-end.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether government agencies provide additional funding or exercise contract options, particularly following BARDA’s decision not to extend the OrbeShield contract.
- Actual cash burn, milestone spending and financing needs compared with management’s runway and R&D estimates.
- Enrollment, timing and results of SGX301 Phase 3, and the planned starts and funding for SGX942 and SGX203 Phase 3 trials.
- Availability and terms of Lincoln Park equity-facility proceeds, potential partnership funding, and associated dilution.
- Share count: 5,472,532 shares were outstanding at March 31, 2017; 5,672,657 were reported outstanding as of May 8, 2017.