Tonix Pharmaceuticals Holding Corp. — Q3 2014 Form 10-Q
Reporting period: Three and nine months ended September 30, 2014. Financial statements are unaudited; dollar amounts below are in thousands unless otherwise stated. Tonix is a clinical-stage pharmaceutical company with no marketed products or revenue.
Financial performance and position
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $5,217 | $1,637 | $12,842 | $3,322 |
| General and administrative expense | $2,217 | $1,455 | $5,810 | $3,857 |
| Net loss | $(7,419) | $(3,090) | $(18,627) | $(7,177) |
| Net loss per share | $(0.71) | $(0.87) | $(1.92) | $(2.73) |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $(14,622) | $(4,986) |
With no sales, profit and operating margins are not meaningful. R&D growth reflected increased manufacturing, clinical and non-clinical work, principally for TNX-102 SL, plus acquired intellectual property and a change in employee cost classification. G&A increased with payroll, rent, professional services and public-company activities.
At September 30, 2014, cash was $46,227, working capital approximately $43,429, total assets $47,328 and total liabilities $3,551. Cash increased from $8,202 at December 31, 2013, largely due to $47,836 of net stock-sale proceeds and $5,358 from warrant exercises. There was no outstanding promissory-note debt at quarter-end; $280 of related-party notes was repaid during 2014.
Changes and financing
- Nine-month net loss widened to $18,627 from $7,177, as total operating expenses rose to $18,652 from $7,179. Quarterly net loss increased to $7,419 from $3,090.
- Operating cash use rose to $14,622 from $4,986 for the comparable nine-month period.
- The January public offering generated approximately $40.7 million net; a July registered direct offering generated approximately $7.2 million net. Warrant exercises provided a further $5.4 million.
- Common shares outstanding increased to 10,734,043 from 5,823,081 at year-end 2013; 10,771,690 shares were outstanding as of November 6, 2014.
Programs, outlook and risks
- TNX-102 SL for fibromyalgia: In the 205-patient Phase 2b BESTFIT trial, the primary pain endpoint did not reach statistical significance (p=0.172). A 30% pain-responder analysis and several secondary measures, including global improvement, fibromyalgia impact and sleep disturbance, were statistically significant. The company reported no serious adverse events; transient tongue or mouth numbness occurred in 42% of treated participants versus 1% on placebo. Management was seeking FDA guidance and expected to start a Phase 3 program in the first half of 2015. A 12-month open-label safety study was expected to finish in August 2015.
- TNX-102 SL for PTSD: Management expected to begin a Phase 2 trial in military-related PTSD in Q4 2014.
- TNX-201 for episodic tension-type headache: The company reported starting a Phase 1 study in November 2014 and expected a Phase 2 study in the first half of 2015.
- Additional programs include preclinical candidates for alcohol abuse and dependence, smallpox vaccines, and radiation/chemical protection. The smallpox and protective-agent intellectual property was acquired from entities controlled by the CEO; consideration included cash and shares.
- Management expected operating losses and significantly higher R&D spending, and stated existing cash was sufficient for at least 12 months. The company had no available credit or bank financing and might need additional equity or debt; unavailable or unfavorable financing could force program delays, reductions, or partnerships that require relinquishing rights.
- At quarter-end, research and development contracts carried approximately $13.1 million of commitments. Future minimum lease payments under two office leases totaled approximately $1.97 million. Clinical trial failure or delay, regulatory decisions, safety issues, recruitment, and financing needs could materially affect development plans and cash requirements.
Important facts for investors to verify
- FDA feedback and the design, timing, cost and funding of the planned TNX-102 SL fibromyalgia Phase 3 program, particularly given BESTFIT’s missed primary endpoint.
- Results and timing of the PTSD and TNX-201 trials, and whether projected study schedules remain achievable.
- Actual cash burn versus the stated 12-month runway, including the $13.1 million R&D commitments and lease obligations.
- Potential future dilution from equity financing, outstanding warrants and stock-based awards; warrants for 1,816,932 shares and options for 905,100 shares were outstanding at September 30, 2014.
- Terms, governance and valuation of related-party intellectual-property transactions and executive arrangements.