Tonix Pharmaceuticals Holding Corp. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated results; amounts below are in U.S. dollars unless stated otherwise.
Business context
Tonix is a clinical-stage biopharmaceutical company with no commercial products and no product revenue. Its pipeline spans immunology and infectious disease, including COVID-19 vaccine and antiviral candidates, and central nervous system conditions. Its most advanced CNS candidate, TNX-102 SL, was in mid-Phase 3 development for fibromyalgia.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $13.1m | $8.8m | $46.5m | $24.1m |
| General and administrative expense | $5.5m | $3.2m | $16.3m | $9.4m |
| Operating loss | $18.5m | $12.0m | $62.8m | $33.5m |
| Net loss | $18.5m | $12.0m | $62.7m | $33.4m |
| Basic and diluted loss per share | $0.05 | $0.09 | $0.19 | $0.49 |
Margins are not meaningful because the company had no revenue. Operating expenses rose substantially, reflecting expanded research, manufacturing and nonclinical work, as well as higher employee-related and administrative costs.
- Cash and liquidity: Cash and cash equivalents were $183.0m at September 30, 2021, versus $77.1m at December 31, 2020. Working capital was approximately $183.1m; total current liabilities were $12.0m.
- Cash flows, nine months: Operating cash use was $53.1m (prior year $34.7m); investing cash use was $9.7m (prior year $4.0m); financing provided $168.7m (prior year $83.2m). Financing was principally from common-stock sales.
- Debt and obligations: The balance sheet reports no borrowings or other debt; lease liabilities totaled $1.1m. The company had approximately $41.2m of outstanding commitments for future CRO work.
- Capital and dilution: Common shares outstanding rose to 403.7m at quarter end from 206.0m at year-end 2020; 439.6m were outstanding November 5, 2021. Nine-month financing included $65.0m net from the February offering, $36.9m net from the January offering, and proceeds from ATM and Lincoln Park share sales.
Material changes and notable items
- Year-to-date R&D expense increased 93% and G&A expense increased 73% versus 2020. R&D increases were primarily attributed to nonclinical and manufacturing costs; clinical expense declined by $2.6m.
- In July 2021, an interim analysis indicated the RALLY Phase 3 fibromyalgia trial was unlikely to meet its primary endpoint. Tonix stopped enrolling new participants, allowed those already enrolled to complete the study, and expected topline results in Q4 2021. The filing says the company planned to use the results to inform future trial design. The prior RELIEF Phase 3 study had reported positive results in December 2020.
- Tonix licensed sangivamycin technology from OyaGen for antiviral development and issued 2.75m shares valued at $3.0m; the shares were recorded as R&D expense. The company also expanded investment in vaccine and development infrastructure.
- Capital spending increased: property and equipment, net, was $18.2m versus $8.6m at year-end 2020, largely reflecting construction in progress at the Massachusetts development center. The $17.5m Maryland facility purchase closed October 1, 2021; a $2.9m Massachusetts property purchase was expected to close in Q4.
Outlook, risks and contingencies
- Going concern: The company reported recurring losses and operating cash outflows and stated that substantial doubt exists about its ability to continue as a going concern. It estimated quarter-end cash plus post-quarter equity proceeds would fund operating and capital requirements through September 30, 2022, but not beyond; additional capital would be needed. The filing’s MD&A also says the company “will not have enough resources” to meet requirements for one year from the filing date, which appears inconsistent with the stated September 2022 runway estimate.
- Post-quarter financing: Through the filing, Tonix reported $11.8m net from 21.9m ATM shares and $7.6m net from 14.0m Lincoln Park shares sold after quarter end, approximately $19.4m combined.
- Development outlook: Management expected R&D expense to increase in 2022. It anticipated a Phase 1 study of TNX-1800 in the second half of 2022, a Phase 2 TNX-102 SL Long COVID study in the first half of 2022 subject to IND clearance, and other studies subject to regulatory and preclinical progress. These are forward-looking plans, not assured outcomes.
- Listing risk: Nasdaq notified Tonix in September 2021 that its share price did not meet the $1 minimum bid requirement. The initial compliance period ran through March 2, 2022; failure to regain compliance could lead to delisting, subject to possible additional compliance time.
- Key risks include further financing needs and shareholder dilution, clinical-trial and regulatory uncertainty, dependence on third-party research and manufacturing, patent risks, competition, reimbursement uncertainty and potential effects of COVID-19. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether Tonix’s cash runway and going-concern disclosures reconcile, and how subsequent cash use and financing affect runway.
- RALLY topline results and their implications for the next TNX-102 SL fibromyalgia study, given the unfavorable interim assessment and earlier positive RELIEF result.
- Actual proceeds, share issuance and remaining availability under ATM and Lincoln Park arrangements, and the resulting dilution.
- Progress, costs and timing for the Maryland and Massachusetts facilities and the $41.2m CRO commitment.
- Nasdaq bid-price compliance status and any impact on continued listing.