Business context and reporting period
Filing identity: The supplied filing is Synthetic Biologics, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2017, not a filing under the name Theriva Biologics, Inc. Investors should verify the issuer and filing before relying on this summary.
Synthetic Biologics was a clinical-stage biotechnology company developing microbiome-focused therapeutics. Its lead programs were SYN-004 (ribaxamase) for prevention of C. difficile infection and related effects of antibiotics, and SYN-010 for IBS-C. The company reported no material product revenue and expected to fund development primarily through external capital.
Financial results and position
Amounts below are in U.S. dollars; balance-sheet and cash-flow figures are in millions. The income statement reports no revenue line and shows operating costs and expenses.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| General and administrative expense | $1.64m | $2.15m | $3.73m | $4.57m |
| Research and development expense | $4.83m | $7.16m | $10.89m | $15.32m |
| Operating loss | $(6.48)m | $(9.31)m | $(14.63)m | $(19.89)m |
| Net loss | $(4.32)m | $(5.76)m | $(7.37)m | $(16.84)m |
| Net loss per share, basic | $(0.03) | $(0.06) | $(0.06) | $(0.18) |
Operating cash use was $11.75m in the first half of 2017, versus $11.53m in the comparable 2016 period. Cash and cash equivalents were $13.38m at June 30, 2017, down from $19.06m at year-end 2016. Financing provided $6.08m in the first half, including $5.91m net proceeds from at-the-market (ATM) stock sales; investing used $0.01m. The company reported an accumulated deficit of $179.14m.
Current assets were $14.92m and current liabilities $12.33m; total liabilities were $12.78m, including $7.57m of warrant liabilities. The filing reports no conventional borrowings. Total stockholders’ equity was $2.96m, compared with $2.25m at year-end. No meaningful operating margin is applicable given the absence of reported revenue and continuing operating losses.
Material changes versus prior comparable periods
- Q2 operating expenses fell 30% year over year; first-half operating expenses fell 26%. Management attributed the R&D reduction mainly to lower SYN-004 costs, with lower SYN-010 and other program costs also contributing.
- Net loss narrowed, especially for the first half, partly because of a $7.25m noncash gain from the reduction in fair value of warrant liabilities. The gain is not operating revenue or cash generation.
- First-half operating cash use was broadly similar to 2016 despite the lower reported net loss. The company raised $5.91m net through the ATM in the first half, issuing about 10.1m shares.
- Common shares issued increased from 117.25m at December 31, 2016 to 127.83m at June 30, 2017. About 128.25m shares were outstanding at July 31.
Outlook, risks and unusual items
- Going concern and funding: Management stated that cash on hand was insufficient for its near-term plans and the next 12 months of operations as planned. The filing says substantial doubt exists about the company’s ability to continue as a going concern without additional capital. No third-party financing commitments were in place; management was pursuing equity, debt, strategic relationships and other funding. Failure to raise capital could delay or stop development programs.
- Clinical outlook: The company planned SYN-004 Phase 3 trial(s) in the first half of 2018 or later, contingent on financing and clinical infrastructure. It was planning a SYN-010 adaptive Phase 2b/3 pivotal study, also subject to financing. SYN-004 had received FDA Breakthrough Therapy Designation for prevention of C. difficile infection; the company had requested an FDA meeting to discuss the development plan.
- Clinical evidence: Management reported positive Phase 2b SYN-004 topline results, including two CDI cases in the treatment group versus seven in placebo and a reported 71.4% relative risk reduction. Further analyses were ongoing; results from clinical trials remain uncertain and do not establish regulatory approval or commercial success.
- Equity and listing risks: Continued ATM or other equity issuance could dilute existing holders. The filing notes equity of $2.96m against a stated NYSE American continued-listing threshold of $6.0m for issuers with sustained losses, and warns that failure to meet listing standards could result in delisting.
- Warrant valuation: Warrant liabilities are remeasured using valuation models with significant unobservable inputs. Changes in the company’s share price and assumptions can materially affect reported noncash income or expense.
- Other disclosures: No material legal proceedings or off-balance-sheet arrangements were reported. Management said contractual obligations had not materially changed. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Confirm the issuer: this source identifies Synthetic Biologics, Inc.; the request metadata names Theriva Biologics, Inc.
- Review the latest cash position, financing activity and expected cash needs; management said available cash was insufficient for planned operations and trials.
- Check whether additional capital was obtained and whether the planned SYN-004 and SYN-010 trials proceeded on schedule.
- Assess NYSE American listing compliance, particularly the disclosed $6.0m equity threshold versus reported $2.96m equity.
- Distinguish the noncash warrant revaluation gain from recurring operating performance and cash flow. The MD&A describes 2016 first-half other income as an expense, while the financial statements report $3.05m of other income; verify against the filed statements.