Matinas BioPharma Holdings, Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. Matinas is a clinical-stage biopharmaceutical company developing anti-infective candidates using its cochleate drug-delivery platform. It had no approved products and generated no product revenue.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $44,906 | $0 | $104,781 | $0 |
| Research and development | $2.01 million | $0.84 million | $6.71 million | $2.40 million |
| General and administrative | $1.44 million | $1.00 million | $5.26 million | $3.29 million |
| Net loss | $3.39 million | $1.84 million | $11.86 million | $5.71 million |
| Net loss attributable to common shareholders | $4.00 million | $6.23 million | $29.21 million | $10.10 million |
| Loss per common share | $0.04 | $0.11 | $0.33 | $0.18 |
Revenue was contract research revenue from a Cystic Fibrosis Foundation grant supporting preclinical MAT2501 research; the grant was expected to continue into 2018. The company reported no product revenue. The substantial difference between nine-month net loss and loss attributable to common shareholders primarily reflects a $16.74 million warrant-inducement charge and $608,343 of preferred dividends.
- Cash and cash equivalents: $9.00 million at September 30, 2017, versus $4.11 million at December 31, 2016. Working capital was approximately $8.3 million; accumulated deficit was $47.6 million.
- Cash flow, nine months: $9.54 million used in operating activities and $824,000 used in investing activities; $15.26 million provided by financing activities. Net increase in cash was $4.90 million.
- Financing and dilution: The January warrant tender and exercises generated approximately $14.8 million net in total, including $12.7 million from the tender offer. ATM sales generated approximately $642,000 net through September 30. Common shares outstanding rose to 92.95 million from 58.16 million at year-end 2016.
- Debt and obligations: Current note payable was $298,000, related to insurance financing; total liabilities were $3.74 million. The company reported approximately $2.9 million of minimum lease payments through 2021 and a new facility lease with approximately $6.4 million of rent over its full term.
Material changes versus the prior period
- Nine-month operating expenses increased $6.28 million year over year, led by higher R&D spending, up $4.31 million, and G&A, up $1.97 million. Management attributed increases to clinical and preclinical work, added staff and stock compensation, laboratory operations, and professional fees.
- Operating cash use increased from $4.00 million to $9.54 million. The company also invested $824,000 in leasehold improvements, versus no investing outflow in the prior period.
- Warrant exercises materially increased common shares outstanding and cash. At September 30, 5.96 million warrants remained outstanding, and 1.51 million Series A preferred shares remained outstanding.
- The company began using its new laboratory and manufacturing facility in August 2017, increasing rent and facility costs.
Outlook, clinical developments, and risks
- Management estimated existing cash would fund planned operations through May 2018 and stated that additional financing is necessary to continue operations. No financing was committed; the company cautioned that funding may not be available on acceptable terms or at all. It had authority under a Cantor sales agreement to sell up to $30 million of common stock and a shelf registration statement covering up to $150 million of securities.
- Management expected substantial losses and increasing expenses for the foreseeable future, including as clinical programs advance. The filing states that FDA approval was not expected until 2022 at the earliest. Failure to raise capital could require the company to delay, reduce, or discontinue development or license product rights.
- MAT2203: Management reported positive safety and response observations in a small NIH Phase 2a study in two patients with chronic refractory mucocutaneous candidiasis. In a 137-patient Phase 2 vulvovaginal candidiasis study, the reported clinical cure rates in the modified intent-to-treat population were 52% and 55% for the 200 mg and 400 mg doses, respectively, versus 75% for fluconazole. The company described the study as not designed or powered to support a VVC indication and planned to discuss a development path with the FDA, including prevention of invasive fungal infections in ALL patients.
- MAT2501: The company reported that its Phase 1 single-ascending-dose study in healthy volunteers had no serious adverse events and that blood levels were below cited safety levels for injected amikacin. Further development, including clinical studies, remained planned.
- Series A preferred shares accrue an 8% annual dividend payable in common shares upon conversion. Holders also have contingent royalty rights tied to MAT2203 and MAT2501 net sales or licensing proceeds, subject to contractual caps. These obligations could affect future economics and common-shareholder value.
- Other significant risks include clinical-trial and regulatory uncertainty, dependence on third-party manufacturers and research organizations, reliance on licensed Rutgers technology, manufacturing capability, intellectual-property protection, and continued access to capital. The filing reported no legal proceedings and no material change to previously disclosed risk factors.
Important facts for investors to verify
- Whether the cash runway estimate through May 2018 remains achievable given operating cash use and planned clinical spending.
- Progress, full data, and FDA feedback for MAT2203, including the proposed ALL prevention program; separately, the next clinical steps for MAT2501.
- Potential dilution from future equity sales, preferred-stock conversion and dividends, outstanding options, and remaining warrants.
- The terms and potential value of Series A royalty rights, as well as lease, clinical-trial, and other contractual commitments.
- The filing gives different amounts for unrecognized share-based compensation in separate disclosures ($5.4 million in a note and approximately $5.0 million in MD&A); investors may wish to confirm the applicable figure.