Tonix Pharmaceuticals Holding Corp. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Tonix is a clinical-stage biopharmaceutical company; it had no approved or marketed products and generated no revenue.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None; the company reports it has not generated revenue. | |||
| Research and development expense | $16.6 million | $18.1 million | $35.0 million | $33.5 million |
| General and administrative expense | $6.8 million | $5.4 million | $14.8 million | $10.8 million |
| Net loss | $23.1 million | $23.6 million | $49.6 million | $44.2 million |
| Net loss available to common stockholders | $27.4 million | $23.6 million | $53.8 million | $44.2 million |
| Basic and diluted loss per share | $(1.22) | $(2.25) | $(2.76) | $(4.49) |
At June 30, 2022, cash and cash equivalents were $145.5 million, plus $31.5 million of restricted cash held in connection with preferred-stock redemption. Working capital was $144.3 million, excluding restricted cash. Total assets were $276.2 million and total liabilities were $16.4 million, including approximately $1.0 million of lease liabilities. The filing reports no material debt balance.
Operating cash use was $52.2 million for the first half, versus $40.2 million a year earlier; investing cash use was $34.7 million, primarily for property and equipment, versus $1.9 million. Financing provided $85.2 million, compared with $130.8 million. Cash, cash equivalents and restricted cash totaled $177.2 million at period-end. No gross margin is meaningful because there was no product revenue.
Material changes versus prior comparable periods
- Q2 R&D expense fell 9% year over year, principally reflecting lower nonclinical, manufacturing and clinical costs, partly offset by higher employee costs and lab supplies. First-half R&D rose 5%, mainly due to employee costs and lab supplies, partly offset by lower nonclinical and clinical costs.
- G&A expense increased 26% in Q2 and 37% for the first half, mainly from higher employee-related costs; management also cited increased travel.
- First-half net loss increased to $49.6 million from $44.2 million. Q2 net loss narrowed modestly to $23.1 million from $23.6 million. The common-stockholder loss also reflects a $4.3 million preferred-stock deemed dividend in 2022.
- Common shares issued and outstanding rose from 15.6 million at December 31, 2021 to 31.7 million at June 30, 2022. The company effected a 1-for-32 reverse split in May 2022 and later obtained shareholder approval to increase authorized common shares from 50 million to 150 million.
Outlook, financing and risks
- Management expects R&D spending to increase during 2022 as clinical programs advance and facilities are developed. It expects cash resources at June 30 plus subsequent equity proceeds to fund operations and capital needs into the second quarter of 2023, but not beyond. The filing also states that resources will not meet operating requirements for the one-year period from filing and identifies substantial doubt about the company’s ability to continue as a going concern. These statements indicate significant funding uncertainty.
- Subsequent to quarter-end, the company reported ATM sales of 9.6 million shares for approximately $16.2 million net and Lincoln Park sales of 1.8 million shares for approximately $2.2 million net. The filing separately describes approximately $18.9 million of subsequent gross equity proceeds. Further financing may dilute shareholders; without acceptable funding, Tonix may delay, scale back or discontinue development or other operations.
- A June private placement issued Series A and Series B redeemable convertible preferred stock for $28.5 million gross proceeds at a $9.50 purchase price per share and $10 stated value. Conversion is at $4.00 per common share, subject to adjustments. Holders could require cash redemption at 105% of stated value through September 22, 2022. Proceeds, together with a company deposit, were held in escrow; redemption was expected in 2022. Preferred stock was recorded as temporary equity at $31.5 million redemption value.
- Pipeline milestones described by management included a potentially confirmatory Phase 3 fibromyalgia study of TNX-102 SL, with interim data expected in Q1 2023; planned Long COVID and PTSD studies in Q3 2022; and planned studies for TNX-1300, TNX-1900, TNX-601 ER, TNX-801, TNX-1850 and TNX-1500 from late 2022 through 2023. These are forward-looking plans, not guaranteed outcomes. TNX-1300 had FDA Breakthrough Therapy Designation; TNX-2900 had Orphan Drug Designation.
- Tonix said in July 2022 it intended to terminate the OyaGen license, effective September 20, 2022, and discontinue development of TNX-3500. Its Frederick, Maryland and Dartmouth, Massachusetts facilities were expected to be fully functional in Q3 2022; the filing says the facilities were not yet ready for intended use at June 30.
- Outstanding commitments included approximately $62.5 million for future contract research organization work and $8.4 million for construction. Other risks include clinical and regulatory uncertainty, reliance on third parties, competition, intellectual-property risks, and potential impacts from COVID-19. The company reported no material legal proceedings and no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- Whether the preferred-stock redemption occurred, how much escrow was released, and the resulting cash available for operations.
- Actual cash burn, facility spending and financing needs relative to the stated runway and the filing’s conflicting runway disclosures.
- Subsequent share issuance, dilution, authorized-share capacity and the terms and availability of further financing.
- Progress and results of the clinical programs, including the timing of TNX-102 SL interim data and the status of planned trials.
- Whether the research and manufacturing facilities became operational as planned and how the CRO and construction commitments will be funded.