Business context and reporting period
The filing is Mast Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2013—not a filing under the name Savara Inc. The company described itself as a development-stage biopharmaceutical business focused primarily on MST-188, including a Phase 3 sickle cell disease study. It reported no product sales or significant revenue.
Financial results and liquidity
| Metric | Q3 2013 / September 30, 2013 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $0 in Q3 2012 |
| Research and development expense | $3.10 million for Q3; $9.38 million for nine months | $1.66 million and $5.98 million, respectively |
| Selling, general and administrative expense | $2.16 million for Q3; $6.37 million for nine months | $1.82 million and $5.73 million, respectively |
| Operating loss | $5.27 million for Q3; $15.82 million for nine months | $3.22 million and $11.61 million, respectively |
| Net loss | $5.25 million for Q3 ($0.05 per share); $15.78 million for nine months ($0.23 per share) | $3.20 million ($0.07 per share) and $11.56 million ($0.24 per share), respectively |
| Operating cash used | $12.93 million for nine months | $10.57 million for nine months in 2012 |
| Cash, cash equivalents and investments | $49.36 million | $36.51 million at December 31, 2012 |
| Total liabilities | $6.59 million; no borrowings are shown on the balance sheet | $5.18 million at December 31, 2012 |
R&D increased 57% for the nine-month period, mainly from clinical-study costs for EPIC and the TQT study; lower ANX-514 manufacturing activity partly offset the increase. SG&A rose 11%, primarily due to consulting and legal costs. There were no revenues in either comparable period, so operating margins are not meaningful. The company’s investment securities were FDIC-insured certificates of deposit.
Material changes and financing
In June 2013, the company sold 56.2 million common shares and warrants to purchase up to 28.1 million additional shares. The offering generated $28.1 million gross and approximately $25.7 million net proceeds. Common shares issued increased to 102.7 million at September 30 from 47.7 million at December 31, 2012. The warrants have a $0.65 exercise price and could provide up to $18.3 million; exercise is not assured. The September 30 closing share price was $0.44, below that exercise price.
Net loss increased year over year, while loss per share was lower in absolute terms, reflecting the substantially larger weighted-average share count. The company settled the SynthRx-related contingent liability in May 2013 and issued 250,000 milestone shares. Annual impairment testing at September 30 found no impairment of acquired in-process R&D or goodwill.
Outlook, commentary and risks
Management said available cash and investments were expected to fund the currently planned level of operations for at least 12 months, but not through successful development and commercialization. It expected significant and increasing losses for several years and anticipated needing additional capital; future financing may not be available on acceptable terms, on time, or at all.
- EPIC Phase 3 sickle cell study: planned enrollment of 388 subjects at about 70 centers; enrollment completion was expected in late 2015. Estimated external clinical-study costs were approximately $20 million.
- Acute limb ischemia Phase 2 study: expected to begin in early 2014, with about 60 patients and estimated external study costs of $3.5 million.
- Additional plans included sickle cell disease sub-studies, a nonclinical sickle cell mouse study expected to conclude in early 2015, and a heart-failure nonclinical study with results anticipated in early 2014. A positive heart-failure result could lead to a Phase 2 study in 2014.
- The July 2013 TQT study met its primary endpoint; MST-188 did not show an adverse effect on cardiac repolarization and was generally well tolerated in 64 subjects at therapeutic and supratherapeutic doses.
Key risks include clinical-study enrollment, safety and efficacy outcomes, regulatory requirements, manufacturing and supplier dependence, third-party performance, and the need to raise further capital. Management cautioned that development timing, costs and liquidity estimates depend on assumptions and could differ materially from actual outcomes.
Facts investors should verify
- Confirm the issuer identity: this source identifies Mast Therapeutics, Inc., while the request identifies Savara Inc.
- Review subsequent EPIC enrollment, results, regulatory interactions and actual study costs against the stated plans.
- Assess cash use and financing needs against the company’s stated 12-month operating runway; additional capital was expected to be necessary.
- Check actual warrant exercises, proceeds and resulting dilution; the $0.65 exercise price exceeded the reported September 30 share price.
- Evaluate the assumptions underlying the no-impairment conclusions and the development and commercialization value assigned to MST-188.