Theriva Biologics, Inc. quarterly report, Q3 FY2021

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Theriva Biologics, Inc. (filing issuer: Synthetic Biologics, Inc.) — Q3 2021 Form 10-Q

Reporting period: Quarter and nine months ended September 30, 2021. The filing identifies the company as Synthetic Biologics, Inc.; it describes a clinical-stage GI therapeutics business, not a commercial revenue-generating operation. Unless otherwise stated, financial figures below are in U.S. dollars, millions.

Financial performance and position

  • Revenue: No revenue is reported in the statements of operations; management says it expects no product revenue in the near term.
  • Q3 results: Operating expenses were $3.275 million (2020: $2.111 million), including R&D of $1.972 million (up 116%) and G&A of $1.303 million (up 9%). Net loss was $3.273 million versus $2.111 million; loss per share was $0.02 versus $0.14.
  • Nine-month results: Operating expenses were $9.009 million (2020: $8.028 million). Net loss was $9.005 million versus $7.984 million. Loss attributable to common stockholders was $17.926 million versus $9.438 million, or $0.15 versus $0.52 per share. The 2021 common-stockholder loss includes a $7.402 million noncash deemed dividend related to inducement of Series A preferred conversion and $1.496 million of Series B preferred discount accretion.
  • Cash flow: Operating activities used $8.080 million in the first nine months, compared with $9.036 million in 2020; investing activities used $0.014 million. Financing provided $74.002 million, comprising approximately $65.960 million from ATM stock sales and $8.042 million from warrant exercises. Cash increased by $65.908 million to $72.135 million.
  • Liquidity and liabilities: Current assets were $73.557 million and current liabilities $3.160 million at September 30. Total liabilities were $4.561 million, including $1.576 million of operating lease liabilities ($0.175 million current). The filing reports no material finance leases and no off-balance-sheet arrangements; it does not identify conventional borrowings.
  • Equity and dilution: Stockholders’ equity was $70.560 million, compared with a $7.540 million deficit at year-end 2020. Common shares outstanding were 132.043 million at September 30, versus 29.250 million at December 31, 2020. The increase largely reflects ATM issuance and conversions of preferred shares; 11.656 million warrants were exercised during the nine months.
  • Margins: Not meaningful because the filing reports no revenue.

Material changes and business developments

  • R&D expense rose 116% in Q3, primarily due to clinical-trial activity for SYN-004 and higher indirect program costs, including SYN-020 manufacturing. Nine-month R&D increased 21%, with clinical costs partly offset by lower indirect costs.
  • The company raised substantial equity capital in Q1 2021 through ATM sales and warrant exercises. The Series A preferred shares were converted into common stock in January and February after the conversion price was reduced; the conversion inducement generated the $7.402 million deemed dividend. All Series B preferred shares were also converted by September 30.
  • The SYN-004 Phase 1b/2a study in adult allogeneic HCT recipients began dosing in Q2 2021 and remained enrolling. A first-cohort data readout was anticipated in Q1 2022.
  • SYN-020 completed a Phase 1 single-ascending-dose study, with preliminary results described as favorable for safety and tolerability. A multiple-ascending-dose Phase 1 study was underway; a topline readout was anticipated in Q2 2022. These are management expectations, not guaranteed outcomes.
  • The SYN-010 Phase 2b study had been discontinued in 2020 after a futility analysis, and its license and clinical-trial agreements were terminated.

Outlook, risks and contingencies

  • Management estimated September 30 cash would fund operations through at least the end of Q1 2023, including ongoing SYN-004 and SYN-020 programs and a potential SYN-020 Phase 2a trial. It expects R&D spending to rise as trials enroll and says later-stage programs will require additional capital. No committed funding source for future trials was disclosed.
  • Management cautioned that a broad Phase 3 SYN-004 program is not feasible without a partner under current capital constraints. Additional equity financing could materially dilute shareholders; debt, if available, could impose restrictive terms.
  • At the 2021 annual meeting, shareholders did not approve an increase in authorized common shares. The company warned that its remaining authorized shares could constrain future financings or strategic transactions.
  • COVID-19 had delayed clinical activity, and further disruption could affect trial timelines, costs and operations. Management said it was monitoring the situation; the full impact remained uncertain.
  • The company reported no legal proceedings expected to have a material adverse effect. It regained compliance with NYSE American continued-listing standards in May 2021, but warned that continued compliance is not assured and highlighted stock-price volatility and delisting risks.
  • Management reported disclosure controls and procedures were effective as of September 30, 2021, with no material quarterly change in internal control over financial reporting.

Important facts for investors to verify

  1. Whether cash burn and trial spending remain consistent with management’s stated runway through Q1 2023, and what financing is needed thereafter.
  2. Enrollment, safety and data timing for the SYN-004 and SYN-020 trials, including the anticipated Q1 and Q2 2022 readouts.
  3. Potential dilution and financing capacity, given prior large ATM issuance, outstanding warrants and the failed vote to increase authorized shares.
  4. Whether the $17.926 million nine-month loss attributable to common stockholders is understood in context of the $7.402 million noncash deemed dividend and preferred-stock accretion.
  5. Progress on a partner or funding strategy for later-stage trials, especially a potential SYN-004 Phase 3 program.