Tonix Pharmaceuticals Holding Corp. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. The unaudited filing covers a late clinical-stage pharmaceutical company whose product candidates are all in development; Tonix reported no product revenue.
Key financial results
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $2.8 million | $7.5 million | $5.8 million | $18.2 million |
| General and administrative expense | $2.0 million | $2.3 million | $4.1 million | $5.7 million |
| Net loss | $4.8 million | $9.8 million | $9.8 million | $23.8 million |
| Net loss per share, basic and diluted | $0.65 | $4.97 | $1.74 | $12.31 |
| Operating cash used | Not presented by quarter | $9.2 million | $23.5 million |
Per-share figures and share counts were retrospectively adjusted for the March 2017 1-for-10 reverse stock split. Gross margins are not meaningful because the company had no revenue. Net interest income was $42,000 for Q2 and $69,000 for the six-month period in 2017.
At June 30, 2017, cash and cash equivalents were $34.4 million, with no marketable securities remaining; total current assets were $35.5 million and current liabilities were $1.8 million. Working capital was approximately $33.7 million. Total liabilities were $1.9 million; the filing reports no debt. Cash increased by $15.4 million during the six months, reflecting $17.4 million of net equity financing and $7.2 million of cash from investment maturities, offset in part by operating cash use.
Changes versus prior periods
- Q2 R&D expense fell 63%; six-month R&D expense fell 68%. Management attributed the reductions mainly to discontinuing fibromyalgia development, and, for the six-month comparison, episodic tension-type headache development as well. Lower clinical, manufacturing, nonclinical, and personnel costs also contributed.
- G&A expense declined 13% for Q2 and 28% for the six-month period, principally due to lower compensation and reduced personnel.
- Net losses narrowed versus 2016, in line with lower expenses. Weighted-average shares rose substantially, reflecting equity issuance; the reverse split also affects year-over-year per-share comparisons.
- Cash and cash equivalents rose from $18.9 million at December 31, 2016 to $34.4 million at June 30, 2017. The company raised approximately $17.4 million net from common-stock sales during the first half.
Business, outlook, and risks
- Lead program: TNX-102 SL (proposed trade name Tonmya) is in Phase 3 development for PTSD and had FDA Breakthrough Therapy designation. The ongoing HONOR study planned to enroll approximately 550 participants, with one active dose, a CAPS-5 entry score of at least 33, and an interim analysis at about 275 randomized participants. The FDA indicated that a single-study NDA could be possible if HONOR results are statistically persuasive. No HONOR results were reported in this filing.
- The prior Phase 2 AtEase study did not show statistical significance for the 2.8 mg dose on its primary endpoint; the 5.6 mg dose showed a statistically significant effect in the reported analysis (p=0.031). These findings are not confirmation of Phase 3 success. Reported adverse events included oral numbness and other local effects, as well as somnolence, dry mouth, headache, and sedation.
- Other disclosed programs include pre-IND TNX-601 for PTSD, TNX-801 vaccine development, TNX-301 for alcohol use disorder, and TNX-701 for radiation injury. Management said near-term R&D would focus on current and future programs and anticipated continued operating losses and increased R&D expense.
- Management stated that available cash and marketable securities were sufficient for planned operations and the clinical trial for at least 12 months from the filing date, and that cost reductions were intended to preserve cash through at least the end of HONOR. The company expects to need additional capital for future R&D; unavailable or unfavorable financing could lead to delays, reduced programs, or relinquishing product rights.
- At June 30, the company had approximately $9.7 million in commitments for future R&D contract work and $898,000 in future minimum operating lease payments. These commitments are not presented as debt.
- After quarter-end, Tonix entered a new ATM sales agreement for up to $9.0 million of common stock, subject to a 3% sales commission; no shares had been sold under it as of the filing. The first-half financings increased common shares outstanding and further equity sales could dilute holders.
- Tonix received U.S. patent 9,636,408 in May 2017 and stated that it expects the patent to provide TNX-102 SL U.S. market exclusivity until 2034. This is the company’s expectation, not an assurance of commercial success or approval.
Investor verification priorities
- Check HONOR enrollment, interim-analysis timing and findings, trial continuation decisions, and eventual topline results; none are provided here.
- Assess whether the stated cash runway remains adequate against operating cash use, trial costs, and the $9.7 million R&D contract commitments.
- Verify subsequent ATM sales, other financing needs, and resulting share-count dilution.
- Review the FDA’s requirements for an NDA and whether the single-study pathway remains applicable after HONOR data are available.
- Monitor candidate safety and efficacy, recruitment and regulatory risks, and the company’s ability to advance pipeline programs without materially increasing cash needs.