Synthetic Biologics, Inc. — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2020. The filing was signed November 10, 2020. The company described itself as a clinical-stage therapeutics developer; the filing does not report material product revenue.
Business context and pipeline
The company’s lead programs were SYN-004, an oral enzyme candidate intended to protect the gut microbiome during IV beta-lactam antibiotic treatment, and SYN-020, an oral intestinal alkaline phosphatase candidate. SYN-010, developed with Cedars-Sinai Medical Center (CSMC) for IBS-C, was discontinued after an interim futility analysis indicated it was unlikely to meet its primary endpoint, despite being well tolerated. On November 9, 2020, the company and CSMC also terminated the SYN-010 license and related clinical trial agreements; the associated patent rights remain with CSMC.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | No material revenue reported | No material revenue reported |
| Operating expenses | 2020: $2.111 million; 2019: $5.242 million | 2020: $8.028 million; 2019: $12.453 million |
| Research and development | 2020: $0.914 million; 2019: $4.144 million | 2020: $4.152 million; 2019: $9.156 million |
| General and administrative | 2020: $1.197 million; 2019: $1.098 million | 2020: $3.876 million; 2019: $3.297 million |
| Net loss attributable to common stockholders | 2020: $2.686 million, or $0.14 per share; 2019: $5.253 million, or $0.31 per share | 2020: $9.438 million, or $0.52 per share; 2019: $12.933 million, or $0.79 per share |
| Cash used in operating activities | Not separately reported for the quarter | 2020: $9.036 million; 2019: $10.268 million |
At September 30, 2020, cash and cash equivalents were $6.005 million, down from $15.045 million at December 31, 2019. Current assets were $6.662 million and current liabilities $3.010 million. Total liabilities were $3.271 million, primarily lease liabilities; the filing reports no outstanding debt. Stockholders’ deficit was $8.801 million, compared with a $1.057 million deficit at year-end 2019. Accumulated deficit was approximately $245 million.
The company reported no financing cash flows during the first nine months of 2020. Common shares outstanding were 19,842,955 at September 30, versus 16,806,430 at December 31, 2019, largely reflecting conversions of Series B preferred stock. Series B conversions and preferred-stock dividends also increased the loss attributable to common stockholders.
Changes versus prior period
- Third-quarter R&D expense fell 78% year over year; nine-month R&D fell 55%. Management attributed the decrease mainly to COVID-19-related trial delays and reduced activity, and to the discontinuation of SYN-010. It expects further reductions in development expense in the remainder of 2020.
- G&A expense increased 9% in the quarter and 18% for the nine months, with higher insurance, registration and legal costs among the cited drivers.
- Common-stockholder losses narrowed year over year, while cash declined by $9.040 million during the first nine months.
Outlook, risks and unusual items
- Going concern: Management said available capital was insufficient to fund operations for the 12 months following the report’s issuance, and the financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management estimated that cash available in early November could fund operations through at least the end of Q1 2021. The company had no committed third-party financing and was pursuing equity, debt and strategic funding; availability and terms were uncertain. Further financing may dilute shareholders or impose restrictive terms.
- Clinical plans: FDA cleared the SYN-004 Phase 1b/2a program to proceed, but Washington University’s study in allogeneic HCT recipients was deferred to Q1 2021, pandemic conditions permitting. The SYN-020 Phase 1 single-ascending-dose study was also planned for 2021 after FDA issued a study-may-proceed letter. A future SYN-004 Phase 3 program and later-stage SYN-020 trials depend on additional resources or partners.
- COVID-19: The pandemic disrupted enrollment, site initiation and partner activities, delaying trials and reducing spending. Further effects on trial timelines, operations, suppliers, financing and business prospects remained uncertain.
- Listing risk: NYSE American had notified the company of continued-listing deficiencies, including stockholders’ equity requirements. The company reported an $8.801 million stockholders’ deficit at September 30, 2020 and disclosed risk of delisting if it failed to regain compliance. The filing described a November 25, 2020 compliance-plan deadline.
- Other: No material litigation, off-balance-sheet arrangements or impairment charges were reported. The company reported no material market-risk exposure beyond cash and cash equivalents.
Important facts for investors to verify
- Whether the company raised sufficient capital after the filing to address the going-concern uncertainty and fund planned studies.
- Whether the SYN-004 and SYN-020 trials started on schedule, and the resulting timelines, costs and data.
- The final CSMC review and publication of SYN-010 trial findings, and any financial or contractual effects of terminating the program.
- Whether NYSE American listing deficiencies were resolved by the stated deadline and whether listing status or access to financing changed.
- The extent of potential dilution from preferred-stock conversions, warrants and any subsequent financing.