Tonix Pharmaceuticals Holding Corp. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The company is a development-stage biopharmaceutical business that also began commercializing two migraine products acquired from Upsher-Smith on June 30. The filing reports no revenue line in its statements of operations; the acquired products had no effect on reported results because the acquisition closed on the final day of the quarter.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Research and development expense | $22.0 million | $16.6 million | $48.5 million | $35.0 million |
| General and administrative expense | $7.0 million | $6.8 million | $14.4 million | $14.8 million |
| Operating loss | $29.0 million | $23.3 million | $62.9 million | $49.8 million |
| Net loss | $28.4 million | $23.1 million | $61.4 million | $49.6 million |
| Net loss per common share | $2.68 | $7.64 | $5.88 | $17.28 |
Loss-per-share figures are presented as losses; comparisons are affected by the 1-for-6.25 reverse stock split and changes in weighted-average shares. Q2 weighted-average shares were 10.6 million versus 3.6 million in 2022. Interest and other income, net, was $0.6 million for Q2 and $1.5 million for the first half. The filing does not provide a clear reported gross margin; the newly acquired products’ sales are shown only in unaudited pro forma information.
- Cash and liquidity: Cash and cash equivalents were $25.6 million at June 30, down from $120.2 million at year-end 2022. Working capital was $32.9 million; total assets were $159.7 million.
- Cash flows, first half: $56.3 million used in operations, $27.8 million used in investing, and $10.5 million used in financing. Investing included $22.2 million paid for the Upsher-Smith acquisition and $5.6 million for property and equipment. Financing outflows were mainly $14.0 million of share repurchases.
- Debt and obligations: The balance sheet reports no borrowing debt. Lease liabilities totaled about $1.3 million, including current and long-term amounts. Contract research organization commitments were approximately $62.8 million for future work.
Changes from the prior comparable period
- Q2 net loss increased about 23% year over year; first-half net loss increased about 24%. R&D expense rose 33% in Q2 and 39% in the first half, reflecting clinical, staffing, facility, and other development costs.
- Cash used in operations increased to $56.3 million from $52.2 million in the first half of 2022. Financing shifted from $85.2 million of net inflows in the prior-year period to a $10.5 million outflow, principally because of repurchases and substantially lower equity proceeds.
- The June 30 Upsher-Smith acquisition added Zembrace SymTouch and Tosymra, $13.7 million of inventory, $10.1 million of developed-technology intangibles, and $1.0 million of goodwill. Preliminary total consideration was $26.5 million, including a $1.3 million inventory adjustment and a $3.0 million deferred payment.
- Unaudited pro forma results, assuming the acquisition occurred at the start of each period, show net product sales of $3.5 million for Q2 2023 and $7.6 million for the first half of 2023. These are not Tonix’s reported-period sales and are not necessarily indicative of future results.
Outlook, risks, and notable items
- Going concern: Management states that cash at June 30 plus subsequent equity-offering proceeds is expected to fund operating and capital requirements into Q4 2023, but not beyond. The filing says substantial doubt exists about the company’s ability to continue as a going concern and that it will need additional capital. Without funding, it may delay, reduce, or eliminate development programs.
- Subsequent financing: An offering closed August 1, 2023, generating approximately $6.2 million net. It included 2.53 million common shares, pre-funded warrants for up to 4.47 million shares, and common warrants for up to 7.0 million shares, creating potential dilution.
- Development outlook: Management expected topline results in Q3 2023 for TNX-102 SL in fibromyalgia-type Long COVID, and in Q4 2023 for TNX-102 SL in fibromyalgia, TNX-601 ER in major depressive disorder, and TNX-1900 in chronic migraine. A Phase 2 study of TNX-1300 and a Phase 1 study of TNX-1500 were expected to begin in Q3 2023. These candidates remain investigational.
- Acquisition transition costs: Upsher-Smith’s transition services carry base fees of $100,000 monthly for six months and $150,000 monthly for the next three months, plus additional service-category fees of up to $150,000 monthly. Purchase-price allocation remains preliminary.
- Other notable items: The company repurchased about $14.0 million of stock in the first half while reporting limited runway. A 1-for-6.25 reverse split took effect May 10, 2023; the company said it regained Nasdaq minimum-bid compliance on May 24. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether additional financing is available and on what terms, and the resulting cash runway after the August offering.
- Current shares outstanding and the status, exercise terms, and potential dilution from the pre-funded and common warrants.
- Actual post-acquisition sales, costs, and commercial performance of Zembrace and Tosymra; the filing’s pro forma sales are not reported Tonix revenue.
- Progress and results of the clinical programs against the timelines described, and any changes in development spending.
- Final Upsher-Smith purchase-price allocation, inventory-adjustment settlement, deferred payment, and transition-service costs.