Theriva Biologics, Inc. quarterly report, Q1 FY2018

Synthetic Biologics, Inc. — Form 10-Q Summary

Reporting period: Quarter ended March 31, 2018. The filing is unaudited and identifies the issuer as Synthetic Biologics, Inc.

Business context

The company was a clinical-stage therapeutics developer focused on microbiome-related treatments. Its lead candidates were SYN-004 (ribaxamase), aimed at protecting the gut microbiome during certain IV antibiotic treatment, and SYN-010 for IBS-C. Other programs were preclinical. The company reported no meaningful revenue and did not expect product revenue in the near term.

Financial performance and position

MetricQ1 2018Q1 2017 or prior date
RevenueNone reportedNone reported
Operating costs and expenses$4.990 million$8.149 million
Research and development$3.370 million$6.059 million
General and administrative$1.620 million$2.090 million
Net loss attributable to common stockholders$2.375 million; $0.02 per share$2.846 million; $0.02 per share
Net cash used in operating activities$6.079 million$6.008 million
Cash and cash equivalents$11.037 million$17.116 million at December 31, 2017
Total current liabilities$5.087 million$9.793 million at December 31, 2017
Total liabilities$5.464 million$10.195 million at December 31, 2017
Accumulated deficitApproximately $196.5 million$194.2 million at December 31, 2017

Margins are not meaningful because the company reported no revenue. The filing does not disclose conventional borrowings or a debt balance; reported liabilities include accounts payable, accrued expenses, warrant liabilities and deferred rent. Stockholders’ deficit was $5.109 million, and Series A preferred stock of $12.112 million was presented as temporary equity.

Changes versus the prior-year quarter

  • Operating expenses fell 39%, with R&D down 44%. Management attributed the R&D decline mainly to no clinical trials being underway in the quarter; spending focused on planning future trials.
  • G&A fell 23%, mainly due to lower salary, stock compensation, benefits, travel, consulting and legal costs, partly offset by higher registration fees. Management cited the CEO’s resignation.
  • Net loss attributable to common stockholders narrowed, while reported loss per share remained $0.02.
  • Other income included $2.655 million of noncash warrant fair-value gains, compared with $5.090 million in Q1 2017. These gains reduced reported net loss but did not provide operating cash.
  • Cash declined by $6.079 million during the quarter. There were no financing proceeds in Q1 2018, and no shares were sold under the at-the-market agreement.

Outlook, risks and unusual items

  • Going concern and financing: Management stated cash was insufficient for the next 12 months and for planned operations, and the filing says there is substantial doubt about the company’s ability to continue as a going concern. No committed third-party financing was in place. Management was pursuing equity, debt, strategic partnerships and other funding; failure to obtain financing could delay trials or curtail development.
  • Clinical plans: After quarter-end, the company reported preliminary FDA agreement on a proposed Phase 3 ribaxamase trial synopsis. It anticipated an End-of-Phase-2 meeting in the second half of 2018 and a Phase 3 start in 2019 or later, subject to financing and infrastructure. The company voluntarily withdrew ribaxamase’s Breakthrough Therapy Designation after FDA review of Phase 2b data; the FDA indicated this would not affect ongoing interactions.
  • NYSE American listing: The company received a noncompliance notice and submitted a compliance plan on April 3, 2018, with a stated deadline of September 2, 2018. The filing warned that delisting could impair liquidity and access to capital.
  • Other post-period development: On May 1, 2018, the USPTO issued a U.S. patent covering SYN-010-related composition of matter, with protection stated to extend to no later than 2035.
  • Potential dilution and valuation: Additional equity financing could dilute shareholders. Warrant liabilities are measured using Level 3 assumptions, and their fair-value movements can materially affect reported earnings. Series A preferred stock carries a cumulative 2% dividend and conversion and redemption provisions.
  • The company reported no material legal proceedings, no material changes to contractual obligations, and no off-balance-sheet arrangements.

Key facts investors should verify

  • Whether the company secured sufficient financing to fund operations and planned clinical trials, and the resulting dilution or debt terms.
  • Whether the FDA finalized the ribaxamase Phase 3 design and whether the trial began, including timing, funding and required manufacturing preparation.
  • Whether the company regained NYSE American listing compliance by the stated deadline and retained access to registered or at-the-market financing.
  • The cash runway and operating cash burn in subsequent filings, separating noncash warrant gains from cash performance.
  • The potential conversion, dividend and redemption effects of the Series A preferred stock, and the dilution exposure from outstanding options and warrants.