Soligenix, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. Soligenix is a development-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments. Its programs include SGX301 for cutaneous T-cell lymphoma (CTCL), SGX942 for oral mucositis, and government-funded vaccine and biodefense candidates.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Total revenue | $1.545 million | $1.726 million | $2.690 million | $2.845 million |
| Gross profit / margin | $458,150 / 30% | $231,869 / 13% | $675,014 / 25% | $372,721 / 13% |
| Operating expenses | $2.623 million | $1.821 million | $5.140 million | $4.356 million |
| Net loss | $2.124 million | $1.556 million | $3.763 million | $3.934 million |
| Basic and diluted loss per share | $0.12 | $0.18 | $0.21 | $0.45 |
| Cash used in operating activities | — | — | $2.808 million | $3.601 million |
- Cash and cash equivalents were $6.986 million at June 30, down $1.997 million (22%) from December 31, 2018. Working capital was $3.311 million, down 46% from $6.131 million.
- Total liabilities were $5.557 million, primarily current liabilities of $5.500 million; reported lease liabilities totaled approximately $193,000. The filing reports no conventional borrowing balance.
- Management reported an accumulated deficit of $169.9 million and stated that substantial doubt exists about the company’s ability to continue as a going concern without additional capital. It expects continued losses.
Changes versus the prior-year period
- Q2 revenue declined 10%; six-month revenue declined 5%. Lower contract revenue was partly offset by higher grant revenue.
- Gross margin improved to 30% for Q2 and 25% for the half year, from 13% in both prior-year periods. Management attributed the improvement to a $251,212 RiVax milestone fee and a greater share of reimbursable costs eligible for fixed-overhead recovery.
- Q2 net loss increased 36%, mainly due to greater clinical-trial spending. Six-month net loss narrowed 4%, reflecting a $610,676 New Jersey NOL-sale tax benefit and the RiVax milestone fee, offset by higher trial costs.
- Six-month R&D expense rose 18% to $3.497 million, chiefly from the SGX301 and SGX942 Phase 3 programs. G&A expense rose 19% to $1.643 million, primarily due to professional fees.
- Weighted-average shares for the six-month period increased to 18.3 million from 8.7 million. The company issued shares through its at-the-market offering and to vendors; 1.059 million shares were outstanding at June 30 versus December 31.
Outlook, management commentary and risks
- Management estimated approximately $11.1 million of R&D spending over the next 12 months before contract and grant reimbursements, with about $4.3 million expected to be reimbursed. It reported up to $12.4 million in active government contract and grant funding available, contingent on agency options and continuation.
- Potential liquidity sources include government funding, partnerships, New Jersey NOL sales and equity or debt financing. The FBR at-the-market agreement had up to $6.6 million remaining as of August 8, 2019; subsequent to quarter-end, the company sold 1,525,594 shares for gross proceeds of $1.568 million. Management cautioned that additional funding may not be available on acceptable terms or when needed.
- SGX301’s Phase 3 interim review was positive in October 2018, with no safety concerns reported; enrollment continued, and final results were expected in Q1 2020. SGX942 reached the enrollment threshold for its planned interim efficacy analysis in April 2019; the interim report was anticipated in Q3 2019 and final results in H1 2020.
- RiVax Phase 2 was planned for the second half of 2019. The filing describes the program as dependent on government funding and development progress; contract options are not assured.
- Material risks include clinical and regulatory failure, reliance on government grants and contracts, need for additional capital and potential dilution, and uncertainty around partnerships and commercialization. Certain licensing arrangements could require up to $7.9 million in milestones and royalties up to 6% of covered-product net sales upon qualifying success; a separate hypericin asset agreement provides for up to $10 million in success-based payments.
- The company adopted the new lease accounting standard in 2019, recognizing right-of-use assets and lease liabilities. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether available cash, government reimbursements and financing can fund planned operations and Phase 3 trials, given the going-concern warning.
- Timing and results of the SGX942 interim analysis and final Phase 3 readouts for SGX942 and SGX301.
- Actual government contract and grant awards, options exercised, and whether expected reimbursements and the remaining FBR offering capacity are realized.
- Further share issuance, dilution and cash proceeds following the reported post-quarter ATM sales.
- Whether R&D spending and trial timelines remain consistent with management’s 12-month estimates and stated outlook.