Matinas BioPharma Holdings, Inc. — Q2 2015 Form 10-Q
Reporting period: Three and six months ended June 30, 2015. The company is a development-stage biopharmaceutical business; it reported NIH contract research revenue, but no product sales.
Business context and development programs
Following its January 29, 2015 acquisition of Aquarius Biotechnologies, Matinas focused on developing therapeutics using Aquarius’s cochleate oral-delivery platform, licensed from Rutgers University. Programs included MAT2203, an oral amphotericin B candidate (Phase 1 single-dose study completed; Phase 2a planned for 2015 with NIAID/NIH); MAT2501, an oral amikacin candidate in formal toxicology testing; MAT9001, a lipid-based candidate for severe hypertriglyceridemia; and the MAT8800 discovery program for non-alcoholic fatty liver disease.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Contract research revenue | $77,000 | $0 | $134,636 | $0 |
| Research and development expense | $1,354,728 | $1,118,251 | $2,803,141 | $2,192,031 |
| General and administrative expense | $1,124,066 | $1,302,236 | $2,301,907 | $2,357,483 |
| Total operating expenses | $2,478,794 | $2,420,487 | $5,105,048 | $4,549,514 |
| Net loss | $2,404,532 | $2,425,872 | $4,974,643 | $4,564,895 |
| Loss per share, basic and diluted | $0.04 | $0.08 | $0.11 | $0.14 |
There was no product gross margin reported. Q2 operating loss was $2.40 million; six-month operating loss was $4.97 million. Six-month R&D expense rose $611,000, primarily with increased clinical studies, lab supplies and stock compensation; G&A declined $55,000. Management attributed the quarterly G&A decrease chiefly to lower marketing-data, professional-service and consulting costs, partly offset by higher insurance costs.
Cash, liquidity and capitalization
- At June 30, 2015, cash and cash equivalents were $6.61 million, versus $2.59 million at December 31, 2014. Current assets were $6.88 million and current liabilities $1.14 million; working capital was approximately $5.74 million.
- Six-month operating cash outflow was $4.54 million, compared with $3.94 million in 2014. Investing activities provided $32,000, including cash acquired in the Aquarius acquisition. Financing provided $8.52 million net, mainly from the 2015 private placement.
- The company raised $10 million gross and approximately $8.5 million net in March–April 2015 by issuing 20 million shares and 20 million five-year warrants, generally exercisable at $0.75 per share. It also issued placement-agent warrants.
- Total liabilities were $3.23 million, including a $10,000 current note payable, $33,580 current capital-lease obligation, $1.25 million deferred tax liability and $843,674 contingent consideration. No long-term capital-lease obligation remained at quarter-end.
- Shares outstanding were 56,967,690 at June 30; 39.25 million warrants were outstanding, in addition to 6.76 million options. The filing reported 56,967,690 shares outstanding as of July 31, 2015.
- Six-month stock-based compensation was $734,000. Future minimum lease payments totaled approximately $978,000.
Material changes, outlook and risks
The Aquarius acquisition added $3.02 million of in-process research and development and $1.38 million of goodwill, and resulted in a $1.25 million deferred tax liability. Matinas issued 4,608,020 shares at closing; up to 3 million additional shares may be issued upon specified clinical and regulatory milestones. Management reported no impairment or change in the estimated fair value of contingent consideration during the six-month period.
Management expected contract research revenue to remain approximately level through 2015 and anticipated a lower monthly cash burn in the second half, partly because the MAT9001 human study had been completed. It also expected R&D spending to increase as programs advanced. The company estimated that June 30 cash would fund operations and capital requirements only through approximately March 2016; additional financing would be needed, with no assurance it would be available on acceptable terms or at all. The filing states that recurring losses and the need for financing raise substantial doubt about the company’s ability to continue as a going concern. Management did not expect FDA approval of a product candidate before 2018 at the earliest and anticipated substantial losses for the foreseeable future.
Management reported that a 42-patient MAT9001 comparative PK/PD study completed in June showed superiority to Vascepa on measured lipids, triglycerides, apolipoproteins and PCSK9 levels; the summary filing text does not provide numerical results. Key risks include clinical and regulatory uncertainty, manufacturing and third-party dependence, protection of licensed intellectual property, integration of Aquarius and the need to raise capital. The 2015 offering warrants carry potential dilution; failure to maintain the related resale registration statement could trigger cash liquidated damages subject to stated limits. The company reported no legal proceedings, defaults under senior securities or off-balance-sheet arrangements. Disclosure controls were assessed as effective at a reasonable-assurance level, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether additional financing was obtained after the filing and how it affects cash runway, dilution and going-concern risk.
- Progress, enrollment, timing and results for MAT2203, MAT2501 and MAT9001, including the underlying data for the reported MAT9001 comparison.
- Whether planned clinical and regulatory milestones were achieved and whether any contingent Aquarius shares became issuable.
- Actual cash use versus management’s forecast, including the expected lower second-half burn and projected March 2016 runway.
- Potential dilution from outstanding warrants and options, and compliance with registration-rights obligations and related penalties.