Business context and reporting period
Mast Therapeutics, Inc. (the registrant named in this filing; not identified as Savara in the filing) filed this unaudited Form 10-Q for the quarter ended September 30, 2014. It was a clinical-stage biopharmaceutical company with no product sales or significant revenue. Its lead programs were MST-188, including a pivotal Phase 3 sickle cell disease study, and AIR001 for pulmonary hypertension associated with left heart disease. The company acquired Aires Pharmaceuticals in February 2014.
Financial performance and position
- Revenue: None in the three or nine months ended September 30, 2014 or the comparable 2013 periods.
- Losses: Third-quarter 2014 net loss was $7.9 million ($0.06 per share), versus $5.3 million ($0.05 per share) in Q3 2013. Nine-month net loss was $21.4 million ($0.19 per share), versus $15.8 million ($0.23 per share) in 2013.
- Expenses: R&D was $5.4 million for Q3 and $14.5 million for nine months, up 74% and 55%, respectively, year over year. Nine-month operating expenses totaled $21.9 million; operating loss was also $21.9 million.
- Cash flow: Operating cash use was $18.6 million for the first nine months, compared with $12.9 million in 2013. Financing provided $14.0 million, principally from the ATM share offering. Cash and cash equivalents rose by $0.3 million to $26.0 million.
- Liquidity and debt: Cash, cash equivalents and investment securities totaled $43.1 million at September 30, including $17.1 million of investment securities. Current assets were $44.1 million and current liabilities $7.5 million. The filing does not report debt balances. Management expected available funds to support planned operations for at least 12 months.
- Equity and other items: Shares outstanding were 127.5 million at quarter-end, versus 102.7 million at December 31, 2013. The Aires acquisition generated a $0.5 million bargain-purchase gain; the acquisition added $2.0 million of AIR001 in-process R&D.
Profit margins are not meaningful because the company had no revenue.
Material changes versus the prior comparable period
For the first nine months, R&D expense increased $5.1 million, mainly from the EPIC study, the MST-188 acute limb ischemia study, manufacturing, and AIR001 study wind-down costs; lower spending on a completed MST-188 study partly offset the increases. SG&A rose $0.7 million. Net loss increased by $5.6 million, although loss per share declined due to a higher weighted-average share count. The Aires acquisition and ATM issuance expanded the pipeline and funded operations, while increasing the share count.
Outlook, risks and unusual items
- Management expected to complete EPIC enrollment by the end of 2015 and estimated approximately $17 million of external clinical costs from October 2014 through completion. These are forward-looking estimates, not guarantees.
- The company expected to complete enrollment in the MST-188 acute limb ischemia Phase 2 study in the second half of 2016, with estimated external clinical costs of approximately $4 million.
- A Phase 2 MST-188 heart-failure study was planned for the first half of 2015. AIR001 was to advance through three institution-sponsored Phase 2a studies in Group 2 pulmonary hypertension; estimated combined external study costs were approximately $1 million.
- The company anticipated continuing losses and said it would need additional capital to support development and potential commercialization. Financing may not be available on acceptable terms or when needed; management’s 12-month runway estimate depended on significant assumptions.
- Key risks include clinical or regulatory setbacks, enrollment delays, manufacturing and third-party execution risks, competition, intellectual-property challenges, and further dilution or inability to raise funds. The filing reported no material change in internal control over financial reporting and no specific material legal proceeding.
Important facts for investors to verify
- Confirm the entity: this filing is for Mast Therapeutics, Inc., despite the request metadata naming Savara Inc.
- Track EPIC enrollment, timing, costs and regulatory requirements, as well as results from the other MST-188 studies.
- Assess AIR001’s development evidence and plans following the reported preliminary Phase 2 results.
- Reconcile cash burn and the stated runway against actual subsequent financing and operating needs.
- Review potential dilution from the ATM program, outstanding warrants and acquisition-related shares.