Theriva Biologics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparative period is the three months ended March 31, 2022. Theriva is a clinical-stage biotechnology company that shifted its strategic focus toward oncology following its 2022 acquisition of Theriva Biologics S.L. (formerly VCN Biosciences). Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| General and administrative expense | $2.201 million | $1.655 million |
| Research and development expense | $2.977 million | $2.597 million |
| Operating loss | $5.178 million | $4.252 million |
| Net loss attributable to common stockholders | $4.478 million | $4.273 million |
| Net loss per share | $0.30 | $0.31 in the financial statements; MD&A states $0.32 |
| Cash used in operating activities | $5.610 million | $4.902 million |
With no revenue, gross margin and operating margin are not meaningful. Other income was $370,000, primarily $364,000 of interest income; the quarter also included a $330,000 income tax benefit. R&D expense rose 15%, mainly due to VCN-01 clinical trial costs, while G&A rose 29%, reflecting increased personnel and administrative costs and the contingent consideration fair-value adjustment.
At March 31, 2023, cash and cash equivalents were $36.076 million (plus $100,000 restricted cash), versus $41.786 million at December 31, 2022. Current assets were $40.299 million and current liabilities $8.619 million. Total liabilities were $17.300 million. Government loans totaled $226,000, with maturities through 2028; operating lease liabilities were $2.239 million. VCN acquisition contingent consideration had a fair value of $10.319 million, divided between $4.911 million current and $5.408 million non-current.
Business developments and outlook
- VCN-01 is the lead oncology candidate, an oncolytic adenovirus being studied in several cancer settings. The VIRAGE Phase 2b trial in metastatic pancreatic cancer dosed its first patients in January 2023; the filing describes a planned enrollment of 92 patients at approximately 25 U.S. and European sites. A Phase 1 study in high-grade brain tumors also dosed its first patient.
- Management is exploring partnering or out-licensing opportunities for legacy GI candidates SYN-004 and SYN-020 as it prioritizes oncology. SYN-004’s HCT study continued, with Cohort 2 underway; the filing anticipated potential Cohort 2 and 3 data in the first halves of 2024 and 2025, respectively, subject to enrollment progress.
- Management expects R&D spending to increase as VCN-01 trials and manufacturing advance. It estimated cash would fund planned operations through the second quarter and into the third quarter of 2024; it reported approximately $35 million cash in early May. Management cautioned that further trials, particularly later-stage trials, will require additional financing or a partner. No financing for future trials was committed.
- The VCN acquisition included a commitment to fund specified programs and related costs within an approximately $27.8 million budget over three years, and potential milestone, royalty and sublicensing payments. The purchase agreement provides for up to $70.2 million in additional cash milestone payments; the recorded fair value is not the maximum potential obligation.
- There were no material legal proceedings reported. Subsequent to quarter-end, the company entered a separation and consulting arrangement with COO Frank Tufaro, including $196,875 in separation payments over six months, benefits reimbursement and accelerated option vesting.
Key risks and unusual items
- The company has a substantial accumulated deficit ($295.447 million) and expects continued losses. A failure to obtain capital could delay, reduce or stop development programs; future equity financing could dilute shareholders. Management’s runway estimate is forward-looking and depends on spending, trial progress and financing needs.
- Material weaknesses in internal controls remained unremediated at quarter-end: controls over non-routine transactions and related tax accounting, IT access and program-change controls, and documentation and precision of management review controls. Management concluded disclosure controls and procedures were not effective and described remediation plans.
- The $10.319 million contingent consideration valuation uses Level 3 assumptions, including milestone probabilities and discount rates, and can change as estimates or development prospects change. The filing recorded a $135,000 fair-value increase in Q1.
- Clinical, regulatory, manufacturing, recruitment, supply-chain, inflation, foreign-exchange and geopolitical risks could affect development timelines and costs. The filing reported no impairment trigger in Q1 for goodwill or acquired in-process R&D; both remain material assets subject to future impairment testing.
Important facts for investors to verify
- Reconcile the reported 2022 loss per share: the financial statements show $0.31, while MD&A says $0.32.
- Track actual cash burn and trial spending against management’s projected runway through Q2 and into Q3 2024, and assess financing availability and potential dilution.
- Verify enrollment, timelines, safety and efficacy updates for VIRAGE and other VCN-01 studies, and the expected timing and funding of later-stage trials.
- Assess the assumptions and potential payment timing behind the $10.319 million contingent consideration valuation and the agreement’s up-to-$70.2 million milestone exposure.
- Monitor remediation and independent testing of the disclosed material weaknesses; the filing says they are not considered remediated until controls operate effectively for a sufficient period.