Filing Summary
Issuer and period: The supplied filing is PlasmaTech Biopharmaceuticals, Inc.’s Form 10-Q for the quarter ended September 30, 2014, filed November 14, 2014. It identifies the company as formerly Access Pharmaceuticals, Inc.; it does not identify Abeona Therapeutics Inc. Investors should verify that this is the intended filing.
Business Context and Developments
PlasmaTech was an emerging biopharmaceutical company developing products using nanopolymer and drug-delivery technologies, and had recently licensed plasma-protein extraction technology. MuGard, its oral mucositis product, was marketed through licensees; ProctiGard received FDA 510(k) clearance in July 2014. LexaGard and plasma-derived product candidates remained in development or process validation.
- In August 2014, the company licensed MuGard in Europe to Norgine, with up to $10 million in milestone payments and escalating double-digit royalties; Norgine anticipated a 2015 launch. An Australia and New Zealand license was signed after quarter-end, on October 27.
- In September, the company licensed worldwide rights to Plasma Technologies LLC’s plasma-protein extraction methods. The agreement provides for a $5 million license fee, subject to specified events, an FDA-approval milestone payable in shares, and royalties.
- A 1-for-50 reverse stock split took effect October 24, 2014; the company also changed its name to PlasmaTech that day. Reported share and per-share figures reflect the split.
Financial Results and Liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total revenue | 2014: $236,000; 2013: $189,000 | 2014: $691,000; 2013: $1.880 million |
| Operating expenses | 2014: $869,000; 2013: $885,000 | 2014: $3.355 million; 2013: $5.000 million |
| Operating loss | 2014: $633,000; 2013: $696,000 | 2014: $2.664 million; 2013: $3.120 million |
| Net income (loss) attributable to common stockholders | 2014: loss of $2.209 million; 2013: loss of $899,000 | 2014: loss of $17.026 million; 2013: income of $3.322 million |
- Quarterly revenue growth reflected licensing revenue of $152,000 and MuGard royalties of $84,000. Nine-month revenue fell because the company had no MuGard product sales in 2014 after licensing U.S. rights to AMAG; 2013 included $1.542 million of product sales.
- Nine-month R&D declined to $298,000 from $756,000, and SG&A declined to $3.055 million from $4.117 million. The nine-month 2014 results included an $11.810 million noncash loss from revaluing the preferred-stock derivative liability, versus an $8.471 million gain in 2013. This was a major driver of the year-over-year change in reported net results.
- Cash and cash equivalents were $165,000 at September 30, down from $424,000 at December 31, 2013. Nine-month operating cash flow was negative $509,000; financing provided $250,000 from a short-term note. Management reported net cash expenditures of approximately $30,000 per month.
- Working capital deficit was $12.372 million, compared with $8.386 million at year-end 2013. Total liabilities were $30.635 million, including $9.277 million of dividends payable, a $13.000 million preferred-stock derivative liability, and $5.019 million of long-term deferred revenue. Stockholders’ deficit was $30.355 million.
- The $250,000 unsecured grid note bears 8% interest and matures August 31, 2015, but must be repaid upon a financing of at least $5 million. The company said it had drawn the full amount by November 14.
- Gross margins are not meaningful to assess from the filing’s limited product-sales activity; the company reported no MuGard product sales or product costs in 2014.
Outlook, Risks, and Contingencies
- Management expected available resources, royalties, financing strategy, and anticipated license receipts to fund the then-current operating level into the first quarter of 2015. It stated that additional funding would be required and that it might need financing within 12 months; it could not assure continued operations as a going concern without adequate capital or licensing proceeds.
- The filing reports a history of operating losses, an accumulated deficit of $283.447 million, and substantial doubt about the company’s ability to continue as a going concern. Sustained profitability was not assured.
- Management disclosed an unremediated material weakness in internal control over financial reporting related to accounting oversight and lack of segregation of duties. It concluded disclosure controls were not effective as of quarter-end.
- A shareholder lawsuit was remanded for further proceedings after the Third Circuit reversed the district court’s dismissal on October 17, 2014. The company said it would continue contesting the claims; no other material pending legal proceedings were reported.
- At September 30, the company had accrued $9.277 million of preferred dividends and $857,000 in liquidated damages related to registration obligations. The filing also identifies dilution risk from future equity financing and preferred-stock conversions.
Important Facts for Investors to Verify
- Confirm the issuer: this filing is for PlasmaTech Biopharmaceuticals, not Abeona Therapeutics.
- Assess the near-term funding position, stated Q1 2015 cash runway, and ability to secure additional capital or license receipts.
- Review the preferred-stock terms, accrued dividends, derivative valuation, potential dilution, and note repayment trigger.
- Verify milestone conditions and launch timing under the MuGard licenses, and the payment obligations tied to the plasma-technology license.
- Monitor the remanded litigation and remediation of the disclosed internal-control material weakness.