Soligenix, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Soligenix is a development-stage biopharmaceutical company with Specialized BioTherapeutics and Public Health Solutions segments. Revenue is primarily from government contracts and grants, not commercial product sales.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Total revenue | $1.255m | $1.381m | $3.945m | $4.227m |
| Gross profit (margin) | $0.289m (23%) | $0.144m (10%) | $0.964m (24%) | $0.517m (12%) |
| Research and development | $2.267m | $1.395m | $5.763m | $4.377m |
| General and administrative | $0.789m | $0.668m | $2.433m | $2.041m |
| Net loss | $2.721m | $1.862m | $6.484m | $5.795m |
| Basic and diluted loss per share | $0.14 | $0.11 | $0.34 | $0.50 |
- For the nine months, operating cash use was $4.866m, versus $4.569m in 2018. Cash declined by $2.432m to $6.552m from $8.984m at December 31, 2018.
- Working capital was $2.376m, down from $6.131m at year-end 2018. Total assets were $8.332m; total liabilities were $5.654m, including $0.161m of current and non-current lease liabilities. The filing reports no conventional borrowings.
- The company recorded a $0.611m New Jersey net operating loss sale tax benefit in the first nine months. Gross profit also benefited from $0.374m of RiVax milestone fee income and a higher share of reimbursable costs eligible for fixed-overhead recovery.
- Accumulated deficit was $172.654m at September 30, 2019. The company raised $2.554m through its at-the-market (ATM) offering before $0.102m of related costs; it also issued shares to vendors. Shares outstanding rose to 20.458m from 17.683m at year-end 2018.
Changes and management commentary
- Revenue fell 9% in Q3 and 7% year to date. Year-to-date gross profit rose 87%, while net loss increased 12%, chiefly because of higher clinical-trial spending. R&D expense rose 63% in Q3 and 32% year to date, primarily to support the pivotal SGX301 and SGX942 trials. G&A increased 18% in Q3 and 19% year to date, mainly due to professional fees.
- Management reported positive interim recommendations from data monitoring committees for both pivotal trials, with no safety concerns reported. SGX301 enrollment was to continue with approximately 40 additional subjects; final results were expected in Q1 2020. For SGX942, the recommendation was to add approximately 70 subjects, increasing enrollment to 260; final results were expected in Q2 2020.
- Management expected approximately $10.0m of R&D expenditures over the next 12 months before reimbursements, including $6.9m for Specialized BioTherapeutics and $3.1m for Public Health Solutions, with approximately $3.2m of contract and grant reimbursements anticipated.
- The company reported up to $8.0m of active government contract and grant funding available as of September 30, subject to agencies exercising options and not terminating awards. It also reported $6.3m remaining under its ATM agreement as of November 7, 2019.
Outlook, risks and contingencies
Management expects continued losses and states that additional capital is needed. The filing says the company’s ability to continue as a going concern depends on raising additional capital; management could not assure that funding would be available when needed or on acceptable terms. Possible funding sources include government awards, the ATM facility, partnerships, and public or private debt or equity financing. The financial statements contain no adjustments that might be required if the company cannot continue as a going concern.
- Development remains subject to clinical and regulatory outcomes, continued government funding, and the ability to secure financing. SGX203 and SGX201 further development was contingent on additional funding.
- Commitments included approximately $450,000 for licensing agreements and potential success-based milestones of up to $7.9m and royalties of up to 6% of covered-product net sales. A separate SGX301-related agreement could require up to $10.0m in future milestone payments if specified milestones are achieved.
- The company had $104.1m of federal, $14.0m of state, and $0.7m of foreign NOLs at December 31, 2018, plus $8.3m of tax credits. Utilization may be substantially limited under IRC Section 382; the company had not completed a Section 382 analysis.
- Disclosure controls and procedures were assessed as effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
Key facts for investors to verify
- Whether SGX301 and SGX942 enrollment, trial results, and expected timelines proceeded as planned.
- Actual cash burn and the timing and availability of government reimbursements, grant options, and contract funding.
- Ability to raise capital, remaining ATM capacity, and the potential dilution from further equity issuance.
- Whether trial and development spending tracks management’s $10.0m next-12-month estimate and $3.2m reimbursement expectation.
- Potential effects of NOL limitations, success-based milestone obligations, and other development and financing risks.