Tonix Pharmaceuticals Holding Corp. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual filing, not a standalone fourth-quarter report. Tonix is a clinical-stage biopharmaceutical company with no approved products and no product revenue.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $18.2 million | $17.6 million |
| General and administrative expense | $10.6 million | $8.8 million |
| Operating loss | $28.8 million | $26.3 million |
| Net loss | $28.6 million | $26.1 million |
| Net cash used in operating activities | $26.7 million | $24.0 million |
| Net cash provided by financing activities | $12.9 million | $23.5 million |
Margins are not meaningful because the company had no product revenue. At year-end, cash and cash equivalents were $11.2 million, working capital was $8.8 million, total assets were $14.6 million, total liabilities were $5.1 million, and stockholders’ equity was $9.4 million. Cash, cash equivalents and restricted cash totaled $11.3 million. Reported liabilities included lease obligations; the filing does not identify material conventional borrowings.
Cash and cash equivalents fell from $25.0 million at year-end 2018. The company reported an accumulated deficit of $217.1 million. The auditor’s report and management both disclosed substantial doubt about the company’s ability to continue as a going concern. Management stated year-end resources were expected to support operations through 2020, but were insufficient for the one-year period from the filing date.
Material changes and developments
- Research and development expense rose 3% year over year, primarily reflecting increased work on TNX-601 and the pipeline. General and administrative expense increased 20%, chiefly from higher professional, legal and insurance costs.
- Net loss increased by $2.5 million. Operating cash use rose by $2.7 million, while financing proceeds declined by $10.6 million compared with 2018.
- Stockholders’ equity declined from $23.7 million to $9.4 million. A $2.5 million non-cash deemed dividend related to the November 2019 preferred-stock financing increased the loss attributable to common stockholders; it was not an operating cash expense.
- The company completed two 1-for-10 reverse stock splits, in November 2018 and November 2019. Share and per-share figures in the financial statements reflect these splits.
Pipeline, outlook and risks
- TNX-102 SL: Phase 3 RELIEF for fibromyalgia began enrolling in December 2019. The filing anticipated interim results in Q3 2020 and topline results in the first half of 2021, subject to FDA agreement and possible COVID-19-related delays. The separate PTSD Phase 3 RECOVERY trial was stopped for futility in February 2020 after an interim review; new enrollment ceased, and existing participants were to be followed. This post-year-end development materially weakens the PTSD program’s near-term prospects. TNX-102 SL is investigational and not approved.
- Other programs: TNX-1300, licensed in 2019, was in Phase 2 development for cocaine intoxication. TNX-601 CR was pre-IND, with an ex-U.S. depression efficacy study planned for 2021. TNX-1800 and TNX-801 were preclinical vaccine candidates. The company also had earlier-stage programs in other indications.
- COVID-19 program: The company announced TNX-1800 development and a Southern Research collaboration in 2020, after the reporting year. The candidate remained preclinical; its potential efficacy, safety, development timeline and commercial prospects were uncertain.
- Funding: Tonix stated it would need additional capital and might need to delay, scale back or eliminate programs if funding were unavailable on acceptable terms. The filing reports approximately $29 million from equity financings and warrant exercises after year-end, but still says resources were insufficient to cover a full year from filing. Financing may dilute shareholders; some warrants have repricing provisions.
- Nasdaq listing: The company received a notice in November 2019 for falling below the $10 million stockholders’ equity requirement. After subsequent financings and warrant exercises, it believed it met the standard and submitted a compliance plan in March 2020; acceptance and continued compliance were not assured.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, dependence on external manufacturers and research organizations, competition, intellectual-property challenges, reimbursement uncertainty, and disruption from the COVID-19 pandemic. The company had $14.6 million of outstanding future commitments under research and development contracts at year-end.
Important facts for investors to verify
- Current cash runway and going-concern status, including the net proceeds actually retained from post-year-end financings and warrant exercises.
- Nasdaq’s decision on the company’s compliance plan and its ongoing stockholders’ equity and share-price status.
- Full results from the RECOVERY PTSD trial and the company’s resulting development plans.
- RELIEF trial enrollment, FDA agreement on interim analysis, and any schedule or operational effects from COVID-19.
- Potential dilution from outstanding warrants, repricing terms, equity plans and further capital needs.
- Progress, funding requirements and regulatory plans for TNX-1800, TNX-801 and other pipeline programs.