Business context and reporting period
The filing is a Form 10-Q for the quarter and six months ended June 30, 2016. Although the request identifies Savara Inc., the filing names Mast Therapeutics, Inc. as the registrant. Mast was a clinical-stage biopharmaceutical company with no product sales or significant revenue, developing vepoloxamer for sickle cell disease and heart failure and AIR001 for heart failure with preserved ejection fraction (HFpEF).
Key financial metrics
| Metric | Q2 2016 / June 30, 2016 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $0 in Q2 2015 and first half 2015 |
| Operating expenses | $10.2 million for Q2; $21.0 million for six months | $10.2 million for Q2 2015; $19.8 million for six months 2015 |
| Net loss | $10.7 million for Q2 ($0.05 per share); $21.9 million for six months ($0.12 per share) | $10.2 million for Q2 2015 ($0.06 per share); $19.8 million for six months 2015 ($0.12 per share) |
| Cash and investments | $35.1 million, including $24.5 million cash and $10.6 million investment securities | $41.0 million at December 31, 2015 |
| Working capital | $10.5 million | Not stated for the comparison date |
| Cash used in operations | $19.0 million for six months | $15.9 million for six months 2015 |
| Debt | $15.0 million carrying value at June 30; $14.1 million principal balance reported at August 5 | Debt facility was entered into in 2015 |
No meaningful revenue-based margin is reported because the company had no revenue. Accumulated deficit was $296.9 million; stockholders’ equity was $16.4 million at June 30.
Changes versus prior comparable period
- First-half R&D expense increased 13.4% to $15.6 million from $13.8 million, mainly reflecting higher clinical-study and vepoloxamer NDA-preparation costs. Q2 R&D was broadly unchanged at $7.8 million.
- First-half SG&A declined 11.9% to $5.3 million from $6.0 million; the prior-year period included $0.7 million of severance and related stock-compensation expense.
- First-half net loss widened to $21.9 million from $19.8 million, primarily with higher R&D and debt interest expense. Interest expense was $1.0 million versus approximately $1,000 in first-half 2015.
- Operating cash use increased to $19.0 million from $15.9 million. Financing activities provided $13.0 million, largely from the February 2016 equity-and-warrant offering and ATM sales.
- Cash and investments fell from $41.0 million at year-end 2015 to $35.1 million at June 30, 2016. Common shares outstanding rose from 163.6 million at year-end to 208.3 million at June 30.
Outlook, risks and unusual items
- Management stated that available funds would not support currently planned operations for the next 12 months and disclosed substantial doubt about the company’s ability to continue as a going concern. It planned to seek additional capital through its ATM program, other financings, and collaborations or licensing, with no assurance of success.
- If EPIC results were positive and supported an NDA, management estimated remaining-2016 operating expenses of $14–$15 million, excluding share-based compensation. Cost-saving measures were expected to reduce 2016 R&D expense excluding share-based compensation by about 5%–10% versus 2015; SG&A excluding share-based compensation was expected to be flat to about 5% lower.
- Top-line results from the Phase 3 EPIC study of vepoloxamer in sickle cell disease were expected in September 2016. If results were negative, or if the company could not raise sufficient capital, management planned further and potentially more drastic operating cuts. Under reduced operations, June 30 funds were expected to last into the first quarter of 2017.
- The debt agreement required a $10 million principal prepayment by October 14, 2016 unless Hercules accepted the EPIC results as positive. Unfavorable announced results could trigger payment within three business days. The loan is secured by substantially all assets, with intellectual property subject to restrictive covenants. A July 2016 amendment extended certain payment terms if the prepayment condition was met and no default occurred.
- Clinical and regulatory risks include whether EPIC supports an NDA, potential FDA requests for further studies or manufacturing changes, and uncertain development and commercialization timelines. AIR001’s Phase 2 INDIE-HFpEF study dosed its first patient in July 2016; an earlier 30-patient Phase 2a study had met its primary endpoint.
- The February 2016 offering generated approximately $7.3 million net and included 29.1 million warrants at $0.42 per share. As of June 30, approximately 105.2 million warrants were outstanding, creating potential dilution. No material pending litigation was reported; disclosure controls were assessed as effective.
Important facts for investors to verify
- Confirm the registrant and corporate identity: this supplied filing is for Mast Therapeutics, Inc., not Savara Inc.
- Review the September 2016 EPIC results and subsequent FDA feedback, including whether additional studies or manufacturing work would be needed.
- Check whether the company raised sufficient capital and whether it avoided or made the conditional $10 million debt prepayment.
- Assess subsequent cash burn, financing dilution, debt balances and the resulting operating runway.
- Track clinical progress and spending priorities for vepoloxamer and AIR001, including any changes to the stated timelines or cost-reduction plans.