Soligenix, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. The unaudited filing describes Soligenix as a late-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments. Revenue was primarily from government grants and contracts; the company reported no product sales.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $228,640 | $214,824 | $416,703 | $362,417 |
| Gross profit (margin) | $35,336 (15%) | $10,507 (5%) | $131,186 (31%) | $35,740 (10%) |
| Operating expenses | $3,430,632 | $2,999,166 | $7,718,868 | $5,258,006 |
| Operating loss | $(3,395,296) | $(2,988,659) | $(7,587,682) | $(5,222,266) |
| Net loss | $(2,386,760) | $(1,897,068) | $(6,735,781) | $(4,259,546) |
| Basic and diluted loss per share | $(0.06) | $(0.05) | $(0.16) | $(0.11) |
- At June 30, cash and cash equivalents were $20.16 million, down $5.89 million (23%) from December 31, 2021. Working capital was $11.99 million, down $8.29 million (41%).
- Six-month operating cash use was $5.77 million, compared with $5.64 million a year earlier. Investing cash use was $13,073; there was no financing cash flow in the period. Cash declined by $5.89 million overall.
- Total assets were $21.31 million; total liabilities were $17.11 million; shareholders’ equity was $4.21 million. The company had an accumulated deficit of $212.50 million.
- Convertible debt had $10.0 million principal outstanding: $2.0 million classified current and $7.88 million noncurrent, net of debt discount. The loan bears 8.47% interest, matures June 2025, and requires quarterly $1.0 million principal payments beginning in Q1 2023. The lender may convert at $4.10 per share. The debt is secured by substantially all assets other than intellectual property.
Material changes versus comparable periods
- Six-month net loss increased 58%; Q2 net loss increased 26%. Management attributed the six-month increase chiefly to legal and consulting costs for the Emergent arbitration and higher R&D spending for HyBryte NDA preparation. Q2 expenses also reflected arbitration-related costs; the comparison period included a $421,584 PPP loan forgiveness gain.
- Six-month R&D expense rose 17% to $3.79 million, including $3.11 million for HyBryte, versus $2.58 million in the prior-year period. Six-month general and administrative expense increased 95% to $3.92 million, primarily due to arbitration-related legal and consulting costs.
- Revenue rose 15% for the first half, and gross margin improved to 31% from 10%. The filing attributes this chiefly to licensing revenue, a greater share of trial work on CiVax and SGX943, and higher contract margins.
- Common shares outstanding increased to 43.05 million from 42.87 million at year-end. The company issued 176,800 shares to vendors during the first half. No shares were sold under the ATM program in the period.
Outlook, management commentary, risks and unusual items
- Management said available cash, expected grant and contract proceeds, and potential ATM proceeds should fund working capital and capital expenditures for at least 12 months from issuance of the financial statements. It also disclosed continuing losses and dependence on spending controls, grants, partnerships and financing to meet liquidity needs.
- Management estimated approximately $9.1 million of R&D expenditures over the next 12 months before reimbursements, including $8.1 million for Specialized BioTherapeutics and $1.0 million for Public Health Solutions. It anticipated about $1.1 million of related contract/grant reimbursements and licensing revenue for Public Health Solutions.
- HyBryte had completed its Phase 3 FLASH study. The company planned to file an FDA NDA in Q4 2022 and stated potential approval could occur in the second half of 2023. It cited manufacturing-related delays in obtaining required stability data. In June, the FDA cleared the SGX302 Phase 2a psoriasis trial; enrollment was expected to begin in Q4 2022.
- For SGX942 in oral mucositis, UK regulatory feedback indicated a second Phase 3 trial would be needed to support marketing authorization. The company planned to design the study and seek a partner. SGX203 Phase 3 development was contingent on additional funding or partnership.
- The company reported up to $1.0 million of active government grant funding available at June 30, subject to agency continuation, and $26.8 million remaining under the B. Riley ATM agreement as of August 5, 2022. Additional grants, partnerships and financing were not assured; ATM or other equity financing could dilute shareholders.
- On July 6, 2022, an arbitration panel found that Emergent had committed contract breaches but awarded no monetary damages, despite Soligenix seeking more than $19 million. Soligenix was reviewing options to challenge the result; recovery was uncertain. This dispute arose from manufacturing issues that led to suspension of the RiVax Phase 1c trial in 2020.
- Other exposures include potential milestone payments of up to approximately $13.2 million and royalties under licensing agreements, plus a possible $5.0 million payment in restricted shares if a HyBryte-related milestone is achieved. The company also cited regulatory and clinical-development uncertainty, manufacturing and supply risks, reliance on government funding, foreign exchange exposure, and potential COVID-19-related disruption. It said COVID-19 had not materially affected results or cash flows through June 30.
- The company recognized a $1.15 million income tax benefit associated with New Jersey NOL sales in the six-month period. Management noted future availability and scale of the state program were uncertain. Disclosure controls were reported effective, with no material change in internal control over financial reporting identified.
Most important facts for investors to verify
- Progress, timing and FDA requirements for the HyBryte NDA, including resolution of API manufacturing and stability-data matters.
- Cash burn, grant and contract receipts, actual R&D spending, and whether management’s stated 12-month liquidity outlook remains supportable.
- Any ATM or other financing activity, related dilution, and the terms of any new debt or partnership funding.
- Plans, funding and partner prospects for the second SGX942 Phase 3 trial and other pipeline programs.
- Any challenge or further outcome in the Emergent arbitration, and implications for RiVax development and manufacturing.
- Potential milestone, royalty and lease obligations, as well as the availability of New Jersey NOL-sale proceeds.