Theriva Biologics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Theriva is a clinical-stage biotechnology company with no product revenue. Following its 2022 acquisition of Theriva Biologics, S.L. (VCN), its strategic focus shifted toward oncology and the VCN-01 oncolytic-virus program; it is exploring licensing or partnering options for legacy GI assets SYN-004 and SYN-020. Financial figures below are in U.S. dollars; balance-sheet and cash-flow amounts are as of or for the six months ended June 30 unless stated otherwise.
Key financial metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating costs and expenses | $5.82 million | $5.03 million | $11.00 million | $9.28 million |
| Operating loss | $5.82 million | $5.03 million | $11.00 million | $9.28 million |
| Net loss attributable to common stockholders | $5.08 million | $4.48 million | $9.56 million | $8.75 million |
| Loss per share, basic and diluted | $0.34 | $0.28 | $0.63 | $0.59 |
| Net cash used in operating activities | Not separately presented | Not separately presented | $9.50 million | $9.26 million |
- Cash and liquidity: Cash and cash equivalents were $34.25 million at June 30, down from $41.79 million at December 31, 2022. Including restricted cash, the cash-flow statement reports $34.35 million at June 30. Management reported $32.8 million cash in early August and estimated it could fund planned operations through the third quarter and into the fourth quarter of 2024.
- Assets and liabilities: Total assets were $65.45 million and total liabilities were $17.70 million. The balance sheet included $10.75 million in contingent consideration ($4.98 million current and $5.77 million non-current), $220,000 in loans payable, and $2.14 million in operating lease liabilities. The contingent consideration is milestone- and other payment-dependent, not conventional funded debt.
- Cash flows and financing: Investing activities used $17,000; financing activities provided $2.08 million, including $2.16 million net ATM proceeds, partly offset by $75,000 of debt payments. Cash, cash equivalents and restricted cash decreased $7.54 million in the first half.
- Margins: Revenue was zero, so revenue-based margins are not meaningful. No gross profit was reported.
Material changes versus comparable periods
- Q2 operating expenses rose 16% year over year, while six-month expenses rose 19%. Q2 G&A increased 80% to $2.69 million, with the filing citing contingent-consideration fair-value expense and higher audit, consulting, travel, and VCN administrative costs.
- R&D was $3.13 million in Q2, down 11% year over year; first-half R&D was broadly flat at $6.11 million versus $6.08 million. First-half VCN-01 direct R&D costs increased to $3.31 million from $1.53 million, while SYN-004 and SYN-020 costs declined.
- Higher interest income contributed to $746,000 of other income for the first half, compared with $4,000 of other expense in the prior-year period. Despite this, the six-month common-stockholder loss increased to $9.56 million from $8.75 million.
- The company sold approximately 1.9 million common shares through its ATM in Q2 for about $2.2 million net proceeds, increasing dilution. Operating cash use was slightly higher year over year.
Outlook, commentary, risks and unusual items
- Clinical outlook: VIRAGE, a Phase 2b study of VCN-01 with standard-of-care chemotherapy in metastatic pancreatic cancer, began dosing in January 2023. On August 2, after quarter-end, Theriva reported U.S. dosing had begun, with four U.S. and eight Spanish sites open, and said enrollment remained on track for Q1 2024. The U.S. dosing milestone triggered a $3.25 million payment to Grifols, due within 60 days. VCN-01 received FDA orphan drug designation for pancreatic cancer in June 2023.
- Spending and financing: Management expects R&D expense to increase as VCN-01 trials and manufacturing advance. The company expects continuing losses and says larger or later-stage trials will require substantial additional funding or a partnership. It has no committed financing for future trials; equity financing could dilute shareholders, and funding may not be available on acceptable terms or at all.
- Acquisition obligations: The VCN purchase agreement provides for up to $70.2 million of additional cash payments upon specified milestones and other terms. The reported contingent-consideration fair value was $10.75 million at June 30; the company also disclosed the $3.25 million post-quarter milestone payment.
- Portfolio strategy: Theriva is exploring out-licensing or partnership opportunities for SYN-004 and SYN-020. The filing says a broad SYN-004 Phase 3 program is not feasible without a partner under current capital constraints.
- Controls and reporting: Management concluded disclosure controls were not effective as of June 30. Disclosed material weaknesses concern review and accounting for non-routine transactions and tax effects, IT access and program-change controls, and documentation and precision of management control reviews. Remediation steps were planned; effectiveness was not yet demonstrated.
- Other risks and items: The company reported no material legal proceedings and no off-balance-sheet arrangements. It cited potential supply-chain, inflation, foreign-exchange, and geopolitical disruptions. The filing reported no impairment trigger in the first half of 2023 for goodwill or acquired in-process R&D.
Important facts for investors to verify
- Whether the stated cash runway through late 2024 remains realistic after the $3.25 million milestone payment and planned clinical and manufacturing spending.
- VIRAGE enrollment progress, the Q1 2024 enrollment target, and the timing, costs, and funding plan for subsequent VCN-01 trials.
- Whether Theriva secures a partner or other funding for later-stage trials and for continued development of SYN-004 or SYN-020.
- The potential timing and amount of additional VCN acquisition milestone, royalty, and sublicensing-related obligations, including assumptions underlying the $10.75 million fair-value estimate.
- ATM availability and future equity issuance, including the effects of dilution; also monitor the outstanding preferred stock, options, and warrants.
- Whether management remediates the disclosed material weaknesses and establishes effective financial-reporting and disclosure controls.