Soligenix, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Soligenix is a development-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments. Revenue primarily comes from government grants and contracts; the filing reports no product sales.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $186,198 | $608,811 | $548,615 | $2,038,653 |
| Gross profit (margin) | $19,933 (11%) | $222,170 (36%) | $55,673 (10%) | $459,168 (23%) |
| Research and development expense | $2.48 million | $1.27 million | $5.95 million | $6.14 million |
| General and administrative expense | $914,019 | $768,420 | $2.72 million | $2.42 million |
| Net loss | $3.59 million | $1.79 million | $7.85 million | $12.15 million |
| Basic and diluted loss per share | $0.09 | $0.06 | $0.20 | $0.45 |
| Cash used in operating activities | Not separately stated | Not separately stated | $8.68 million | $7.33 million |
At September 30, cash and cash equivalents were $28.87 million, working capital was $24.65 million, total assets were $29.72 million, and shareholders’ equity was $15.05 million. Cash increased 55% and working capital 84% from December 31, 2020, mainly due to equity sales, partly offset by operating cash use.
Debt included $10.0 million principal under a Pontifax convertible facility, reported net of debt discount at $9.85 million. The loan carries 8.47% interest, matures in 2025, is secured by substantially all assets other than intellectual property, and is convertible at $4.10 per share. The PPP loan was fully forgiven in June 2021, producing a $421,584 gain. Lease liabilities totaled approximately $136,000.
Changes versus the prior period
- Third-quarter revenue fell 69%, primarily because the RiVax government contract had been completed; nine-month revenue declined 73% for the same principal reason.
- Q3 net loss approximately doubled, as lower revenue and gross profit, higher HyBryte development spending, and Pontifax interest expense more than offset other income.
- Nine-month net loss improved 35%. The comparison benefited from the prior-year $5.0 million HyBryte milestone expense and 2021 PPP-loan forgiveness, despite reduced contract revenue and added interest expense.
- Research and development spending shifted: nine-month HyBryte expense increased to $3.31 million from $2.09 million, while SGX942 expense declined to $315,049 from $2.99 million. The company issued 11.93 million shares through its B. Riley at-the-market program during the nine months, at a weighted average $1.63 per share; shares outstanding rose from 30.64 million at year-end 2020 to 42.63 million at quarter-end.
Outlook, risks and contingencies
- Liquidity: Management believes available cash, expected grant and contract proceeds, potential Pontifax draws, ATM capacity and cash management will fund working capital and capital expenditures for at least 12 months from issuance of the statements. The company expects continued losses. Management cited up to $1.6 million of active grant funding available through November 2022, subject to agency termination rights, and up to $26.8 million remaining under the ATM as of November 11, 2021. Additional funding and partnership transactions are not assured.
- Spending outlook: Management estimated approximately $12.5 million of research and development expenditures over the next 12 months before reimbursements, and approximately $11.5 million of expected government contract and grant reimbursements. These are estimates, not guaranteed funding.
- HyBryte: The Phase 3 CTCL study met its primary endpoint; the company is pursuing an NDA. Delays at its commercial API manufacturer prevented the required accrued stability data from being available for the previously anticipated first-half 2022 filing. The filing now targets NDA submission in the second half of 2022 and potential FDA approval in the second half of 2023. Regulatory approval and timing remain uncertain.
- Other pipeline: A Phase 2a psoriasis study of SGX302 was planned to begin enrollment in late 2022. SGX942’s Phase 3 trial did not meet its prespecified statistical significance criterion on the primary endpoint, although the company reported a 56% reduction in median severe oral mucositis duration versus placebo; further analysis and discussions with regulators were planned. Several public-health programs remain dependent on government support.
- Legal and contractual matters: Soligenix is pursuing arbitration against Emergent BioSolutions and affiliates, seeking more than $19 million over alleged manufacturing, contractual and other failures involving RiVax. Emergent denies the allegations; recovery is uncertain. The company recorded no liability for approximately $331,000 of disputed Emergent invoices. Licensing commitments were approximately $425,000; agreements could require up to $7.9 million in milestones and royalties up to 6% of covered-product net sales. A separate $5.0 million Hy Biopharma milestone is payable if achieved.
- Other risks: COVID-19 had not materially affected reported results through September 30, 2021, but could disrupt manufacturing, sourcing and clinical operations. The filing also identifies clinical and regulatory uncertainty, dependence on contract manufacturers and external funding, potential dilution, and foreign-currency exposure. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the manufacturer can deliver the stability data needed for the revised HyBryte NDA timetable, and whether regulators accept the submission and evidence.
- Cash burn, grant reimbursements, remaining ATM capacity, and the availability and conditions of Pontifax tranches; the second $5 million draw option was exercisable through December 15, 2021, while the additional $5 million tranche depends on NDA filing and conditions.
- The dilution and financing cost associated with equity issuance, outstanding warrants and options, and any future capital raises.
- Further SGX942 trial analysis and any regulatory or development decisions, alongside funding and milestones for other pipeline programs.
- Progress and possible outcomes of the Emergent arbitration, including the disputed invoices and any future financial exposure.