Tonix Pharmaceuticals Holding Corp. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The filing was signed August 12, 2019. Tonix is a clinical-stage biopharmaceutical company with no commercial products and no product revenue.
Financial performance and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $3.6 million | $4.1 million | $7.5 million | $9.2 million |
| General and administrative expense | $2.4 million | $2.1 million | $4.8 million | $3.9 million |
| Operating loss | $5.9 million | $6.1 million | $12.2 million | $13.1 million |
| Net loss | $5.8 million | $6.1 million | $12.1 million | $13.0 million |
| Net loss per share | $0.95 | $7.23 | $2.19 | $15.98 |
Amounts are rounded. The company reported no revenue or profit, so profit margins are not meaningful. Lower loss per share reflects a substantially higher weighted-average share count than in 2018; the filing also retrospectively reflects a 1-for-10 reverse stock split.
- Cash and cash equivalents were $12.2 million at June 30, 2019, down from $25.0 million at December 31, 2018. Including restricted cash, the period-end total was $12.25 million.
- Operating cash use was $13.4 million for the first half, versus $12.3 million in the prior-year period. Financing provided $0.5 million; capital expenditures used $10,000.
- Working capital was approximately $12.1 million. Current liabilities were $2.0 million; total liabilities were $2.2 million, including $0.6 million of operating lease liabilities. The filing reports no borrowings or other debt.
Material changes and business developments
- Second-quarter R&D expense fell 12% year over year, mainly because 2018 included higher clinical costs associated with the PTSD HONOR study. First-half R&D fell 18%, primarily reflecting the prior-year pharmacokinetic bridging study and HONOR ramp-up; 2019 TNX-601 formulation manufacturing costs partly offset the decline.
- G&A rose 14% in Q2 and 23% for the first half, with higher insurance premiums and patent-related legal costs among the cited drivers; first-half investor and public-relations costs also increased.
- The lead candidate, TNX-102 SL, was in Phase 3 development for PTSD, with the RECOVERY trial enrolling. The company also described development plans for fibromyalgia, Alzheimer’s-related agitation and alcohol use disorder, as well as other clinical and preclinical pipeline programs. Candidates remain investigational.
- In May 2019, Tonix licensed Columbia University technology related to a double-mutant cocaine esterase for its TNX-1300 program. Terms include a six-digit license fee, single-digit royalties, and up to $3 million in contingent development, regulatory and sales milestones. No milestones had been accrued or paid at quarter-end.
Outlook, risks and contingencies
- Management stated that June 30 resources were expected to fund projected operations through the end of 2019, but were insufficient for the one-year period from the filing date. The filing says this raises substantial doubt about the company’s ability to continue as a going concern.
- After quarter-end, Tonix completed a July public offering of 9.0 million shares at $0.60 per share, receiving approximately $4.8 million in net proceeds. The underwriters also had a 45-day option for up to 1.35 million additional shares. The filing does not state that the financing resolves the going-concern uncertainty.
- Tonix expects continuing operating losses and R&D spending and says additional capital will be needed. If financing is unavailable or unacceptable, it may delay, reduce or eliminate programs, or seek partners on terms that could require giving up rights. Additional equity could dilute shareholders.
- Clinical development, patient recruitment, efficacy and safety outcomes, regulatory review, competition, intellectual-property protection, reimbursement and reliance on third-party providers are identified as important uncertainties. The company had approximately $7.7 million of outstanding commitments for future contract-research work at June 30.
- The company adopted lease accounting standard ASC 842 in January 2019, recognizing right-of-use assets and lease liabilities; it said adoption did not materially affect operations or liquidity. Management assessed disclosure controls as effective, and reported no material change in internal control over financial reporting. No material legal proceedings were reported.
Investor verification priorities
- Verify the post-offering cash position, subsequent share count and expected cash runway; compare these with the stated going-concern uncertainty and projected spending.
- Track RECOVERY enrollment, trial timing and results, and any FDA feedback or changes to development plans.
- Reconcile actual cash burn with the $7.7 million research-contract commitments and other clinical obligations.
- Review potential dilution from the July issuance, outstanding warrants and options, and any additional financing needs.
- Confirm the Columbia license fee and contingent milestones, and monitor development progress and resulting obligations.