Tonix Pharmaceuticals Holding Corp. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; financial statements are unaudited. Tonix is a clinical-stage pharmaceutical company developing CNS treatments and had no commercial products or revenue.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $6.829 million | $3.550 million; up 94% |
| General and administrative expense | $2.867 million | $1.619 million; up 82% |
| Total operating expenses / operating loss | $9.696 million | $5.169 million |
| Net loss | $9.681 million | $5.164 million |
| Basic and diluted loss per share | $0.71 | $0.59 |
| Cash used in operating activities | $9.053 million | $4.064 million |
| Cash at period-end | $58.181 million | $38.184 million at Dec. 31, 2014 |
With no revenue, profit and operating margins are not meaningful. At March 31, 2015, working capital was approximately $56.5 million and total liabilities were $3.584 million, primarily current payables and accruals. The balance sheet reports no borrowings or other debt. The company raised approximately $29.1 million net in a February public stock offering, issuing 5,318,700 shares during the quarter. Shares outstanding rose from 10,805,220 at year-end to 16,137,898 at quarter-end.
Changes and operating developments
Net loss increased about 87% year over year as R&D spending rose with product development, clinical studies, manufacturing and added personnel. G&A growth reflected compensation, professional services and other public-company and operating costs. Operating cash use also more than doubled. The company reported $1.348 million of stock-based compensation in Q1 2015 versus $0.553 million a year earlier.
Tonix reported that the FDA accepted a 30% pain-responder analysis as the primary efficacy endpoint for its planned Phase 3 fibromyalgia study of TNX-102 SL. The filing says the BESTFIT Phase 2b study did not meet its primary pain endpoint (p=0.172), although certain responder and secondary measures were statistically significant. TNX-102 SL’s Phase 2 PTSD study began in January 2015; TNX-201 had completed a Phase 1 study and was planned for a Phase 2 headache study. The company also described preclinical alcohol-dependence and biodefense programs.
Outlook, risks and commitments
Management said existing funds were expected to cover operating expenses and planned clinical trials for at least 12 months. It expected R&D expenses to increase significantly over the next 12–24 months and cash used in operations to rise as trials advance. Management may seek additional equity or debt financing if current funds prove insufficient; additional equity could dilute shareholders, while unavailable financing could force program delays, reductions or discontinuation.
Key risks include clinical-trial efficacy and safety outcomes, recruitment or regulatory delays, failure to obtain approval or commercialize candidates, and the need for further financing. The company had approximately $26.7 million of outstanding commitments for future R&D contract work and $1.759 million of future minimum lease payments. It reported no material legal proceedings and no material changes to the risk factors in its 2014 Form 10-K.
Management stated that disclosure controls were effective at a reasonable-assurance level and that no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Whether the planned clinical studies began on schedule and whether subsequent results support efficacy and safety; in particular, note that BESTFIT missed its primary endpoint.
- Whether the reported cash balance and management’s 12-month funding assessment remain adequate as trial spending and R&D commitments progress.
- The potential dilution and financing implications of future capital needs, stock-based awards and outstanding warrants and options.
- Regulatory requirements, trial milestones and commercialization assumptions for TNX-102 SL, TNX-201 and other pipeline candidates.