Soligenix, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2019. Soligenix is a late-stage biopharmaceutical company developing treatments for rare diseases and operates BioTherapeutics and Vaccines/BioDefense segments. Its programs are substantially dependent on clinical progress and government funding.
Financial results and condition
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Total revenue | $1.145 million | $1.120 million; up 2% |
| Gross profit / margin | $217,000 / 19% | $141,000 / 13% |
| Research and development | $1.643 million | $1.803 million; down 9% |
| General and administrative | $874,000 | $732,000; up 19% |
| Operating loss | $2.300 million | $2.394 million |
| Net loss | $1.640 million; $0.09 per share | $2.377 million; $0.27 per share |
| Cash used in operations | $2.293 million | $1.459 million |
| Cash and cash equivalents | $7.200 million at March 31 | $8.984 million at December 31, 2018 |
| Working capital | $4.980 million at March 31 | $6.131 million at December 31, 2018 |
Q1 revenue comprised $640,000 of contract revenue and $505,000 of grant revenue. Gross margin improved mainly because a greater share of reimbursable costs qualified for fixed-overhead reimbursement. Net loss narrowed principally due to a $611,000 New Jersey net operating loss (NOL) sale tax benefit; the receivable was collected in April 2019. Interest income was $45,000, compared with $17,000 a year earlier.
Total assets were $9.521 million and total liabilities $4.240 million at March 31. Liabilities included $225,000 of current and non-current lease liabilities; the filing does not disclose conventional borrowings. Cash declined $1.783 million during the quarter. Financing activities provided $505,000 net, primarily from at-the-market stock sales. The company issued 446,369 shares under that agreement and 60,000 shares to a vendor. Common shares outstanding were 18,189,208 at quarter-end, versus 17,682,839 at year-end. Potentially dilutive warrants and options totaling 7.389 million shares were excluded from diluted loss per share as anti-dilutive.
Material changes and operating developments
- Revenue increased 2%, while cost of revenue fell 5%, lifting gross profit by $76,000.
- R&D expense decreased $161,000, primarily due to higher clinical-site fees in the prior-year quarter. G&A increased $143,000, primarily due to professional fees.
- Cash and working capital fell 20% and 19%, respectively, from year-end, reflecting spending on pivotal Phase 3 trials of SGX301 and SGX942.
- Effective January 1, 2019, the company adopted the lease accounting standard and recognized right-of-use assets and lease liabilities. It also adopted updated accounting for share-based payments to nonemployees; management reported no material impact.
Outlook, risks and contingencies
- Funding and going concern: Management expects continued losses and states that the company’s ability to continue as a going concern depends on raising additional capital. The filing identifies substantial doubt within the applicable one-year assessment period. Funding options include grants and contracts, partnerships, NOL sales, the FBR at-the-market facility, and debt or equity financing; there is no assurance funds will be available on acceptable terms.
- Liquidity sources: The company reported up to $13.3 million in active government contract and grant funding remaining at March 31, conditional on agencies exercising options and not terminating awards. Up to $8.3 million remained available under the FBR agreement as of May 8, 2019.
- Spending outlook: Budgeted R&D expenditures for the next 12 months were approximately $11.3 million before reimbursements, with anticipated contract reimbursements of approximately $5.5 million. Planned R&D spending was $7.0 million for BioTherapeutics and $4.3 million for Vaccines/BioDefense.
- Clinical milestones: SGX301’s Phase 3 interim analysis was positive in October 2018; the company planned to complete enrollment and expected final results in Q1 2020. SGX942’s Phase 3 interim analysis was anticipated in Q3 2019, with final results expected in the first half of 2020. The company said it reached the enrollment threshold for that interim analysis in April 2019. RiVax Phase 2 was planned for the second half of 2019. These are forward-looking expectations, not assured outcomes.
- Program funding: Further development of SGX203 and SGX201 is contingent on additional funding. Government awards may be reduced or terminated, and partnership transactions are not assured.
- Commitments: The company disclosed approximately $450,000 of licensing commitments and potential milestone payments up to $7.9 million and royalties up to 6% under certain agreements, contingent on clinical or commercial success. A separate Hy Biopharma agreement provides for up to $10.0 million in success-based payments; none had been paid or accrued at March 31.
- Other risks: Clinical and regulatory uncertainty, competition, dependence on key personnel and intellectual property, foreign currency exposure, and limitations on use of tax attributes. The company noted NOLs may be substantially limited under tax rules. It reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether financing, government awards, or partnerships can cover operating needs, given the going-concern warning, cash use, and falling working capital.
- Enrollment, interim analyses, safety and efficacy results, and timing for the SGX301 and SGX942 Phase 3 trials.
- Whether the projected $5.5 million of reimbursements and remaining government funding are obtained and available on schedule.
- The extent of future share issuance under the FBR facility and resulting dilution, including the effect of outstanding warrants and options.
- Whether contingent licensing, milestone, royalty, and lease obligations change materially as programs advance.