Matinas BioPharma Holdings, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance-sheet comparisons are to December 31, 2016. Matinas is a clinical-stage biopharmaceutical company developing anti-infective products using its cochleate drug-delivery platform. It had no product sales and remains dependent on financing.
Key financial metrics
| Metric | Q1 2017 | Q1 2016 or comparison |
|---|---|---|
| Revenue | $15,000 | $0 |
| Research and development expense | $2.384 million | $0.922 million |
| General and administrative expense | $2.118 million | $1.316 million |
| Net loss | $4.496 million | $2.245 million |
| Net loss attributable to common shareholders | $21.237 million | $2.245 million |
| Loss per common share, basic and diluted | $0.25 | $0.04 |
| Net cash used in operations | $3.032 million | $1.543 million |
| Cash and cash equivalents | $15.835 million | $4.105 million at Dec. 31, 2016 |
| Working capital | $14.8 million | Not stated for the prior comparable date |
| Total liabilities | $3.172 million | $2.666 million at Dec. 31, 2016 |
The $16.741 million inducement charge from the warrant amendment and exercise increased the loss attributable to common shareholders; it was recorded as an equity-related charge, not an operating expense. Cash provided by financing was $14.761 million, primarily from warrant exercises. No investing cash flows were reported. No meaningful product gross margin was reported; contract research revenue was immaterial relative to expenses.
Material changes and business developments
- Revenue was grant-related contract research revenue for MAT2501, under a Cystic Fibrosis Foundation Therapeutics grant expected to continue into 2018; the company had not generated product revenue.
- R&D expense rose $1.462 million year over year, primarily due to clinical-study spending, laboratory costs and compensation. G&A expense increased $0.802 million, including higher professional fees. Share-based compensation increased to $1.372 million from $0.393 million.
- On January 13, 2017, the company completed a warrant tender offer: approximately 30.97 million warrants were tendered, generating about $13.5 million gross and $12.7 million net proceeds. Common shares outstanding increased substantially; 90.99 million were outstanding at quarter-end.
- MAT2203, an oral amphotericin B candidate, was in two Phase 2 studies. MAT2501, an oral amikacin candidate, had completed a Phase 1 single-escalating-dose study; the company reported no serious adverse events and low blood levels relative to injected amikacin safety levels.
Outlook, risks and unusual items
- Management estimated that March 31 cash would fund operations into June 2018, but cautioned that assumptions could prove wrong and additional capital would be required. The company reported a history of losses, a $39.7 million accumulated deficit and no committed external funding source.
- Management expected R&D spending to rise during 2017 and into 2018, citing further MAT2203 studies, planned Phase 3 work and MAT2501 Phase 2 studies; G&A spending was also expected to increase. The filing says FDA approval is not expected before 2021 at the earliest in one discussion, while another royalty discussion says approval is not expected before 2020, if ever.
- The company expected interim MAT2203 Phase 2a results and topline results from its vulvovaginal candidiasis study in the first half of 2017, with the MD&A specifying June. Clinical outcomes and timing remain uncertain.
- After quarter-end, the company filed a shelf registration statement permitting offerings of up to $150 million and entered into an at-the-market sales agreement allowing up to $30 million of common-stock sales, with a 3% agent commission. These are financing capacities, not proceeds already received.
- Series A preferred shares carry an 8% annual dividend payable in common shares upon conversion, a $7.95 million liquidation preference at quarter-end, and contingent royalty rights tied to MAT2203 and MAT2501. The preferred-stock royalty terms include 4.5% of net sales and 7.5% of licensing proceeds, subject to stated caps. Additional equity financing could dilute common shareholders.
- Key risks include clinical and regulatory failure, the need for additional financing, reliance on Rutgers-licensed technology and third-party manufacturers and research organizations, intellectual-property protection, and the ability to commercialize products. The company reported no legal proceedings and no material change to previously disclosed risk factors.
Most important facts for investors to verify
- Whether cash burn, planned clinical spending and the estimated June 2018 cash runway remain consistent with subsequent filings and actual trial progress.
- MAT2203 and MAT2501 trial results, milestones, regulatory plans and the differing approval-timing statements in this filing.
- Any use of the shelf or at-the-market facility, resulting dilution, and the remaining warrant and preferred-stock conversion overhang.
- The economic effect and accounting treatment of the warrant inducement charge, preferred dividends, liquidation preference and contingent royalties.