Theriva Biologics, Inc. — 2018 Q2 Form 10-Q
Filing identity: The supplied filing is for Synthetic Biologics, Inc., not Theriva Biologics, Inc. It reports the quarter and six months ended June 30, 2018; financial statements are unaudited.
Business context and reporting period
Synthetic Biologics was a clinical-stage biotechnology company developing microbiome-focused therapeutics. Its lead candidates were SYN-004 (ribaxamase), aimed at preventing antibiotic-related gut microbiome damage and C. difficile infection, and SYN-010 for IBS-C. Other programs were preclinical. The company reported no meaningful revenue and did not expect product revenue in the near term.
Financial results and position
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No meaningful revenue expected near term |
| Research and development | $3.572 million | $6.942 million | $4.831 million and $10.891 million, respectively |
| General and administrative | $1.431 million | $3.051 million | $1.644 million and $3.734 million, respectively |
| Operating loss | $5.003 million | $9.993 million | $6.475 million and $14.625 million, respectively |
| Net loss attributable to common stockholders | $4.258 million; $0.03 per share | $6.634 million; $0.05 per share | $4.255 million and $7.101 million; $0.03 and $0.06 per share |
| Net cash used in operating activities | Not presented for quarter | $10.387 million | $11.748 million for six months |
Lower R&D spending reflected the absence of ongoing clinical trials; spending was mainly for planning future trials. Lower G&A reflected reduced salary, stock compensation, benefits, travel and consulting costs, partly offset by higher registration, investor-relations and legal costs. The six-month net loss improved year over year, partly because of lower operating costs and noncash gains from revaluing warrants; those gains are not operating cash flows.
| Balance-sheet / liquidity item | June 30, 2018 | December 31, 2017 |
|---|---|---|
| Cash and cash equivalents | $7.129 million | $17.116 million |
| Total current assets | $7.664 million | $17.943 million |
| Total current liabilities | $4.319 million | $9.793 million |
| Total liabilities | $4.672 million | $10.195 million |
| Warrant liabilities | $0.645 million | $4.083 million |
| Total stockholders’ deficit | $8.427 million | $3.410 million |
| Accumulated deficit | $200.803 million | $194.170 million |
Cash declined by $9.987 million in the first half: operating activities used $10.387 million and financing provided $0.400 million, primarily from at-the-market stock sales. The filing reports no material change in contractual obligations and no off-balance-sheet arrangements. It reports no conventional borrowings in the presented balance sheet; liabilities include operating accruals, deferred rent and warrant liabilities. No meaningful margin measure is available because revenue was not reported.
Material changes, outlook and risks
- Funding and going concern: Management said cash was insufficient for the next 12 months and for planned operations and trials. The filing states that 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. Failure to raise funds could delay trials or halt development; equity financing could dilute shareholders.
- Financing activity: The company received about $0.4 million net from ATM sales in the first half. After quarter-end, it reported selling about 2.7 million shares for approximately $0.605 million net. The ATM agreement provided for up to $40 million of aggregate sales, subject to restrictions and eligibility; the company cautioned that it might not be able to use the facility or obtain other financing on acceptable terms.
- Clinical outlook: The company reported preliminary FDA agreement on key elements of a proposed Phase 3 ribaxamase program, with an End-of-Phase-2 meeting anticipated in Q3 2018 and trial initiation targeted for the second half of 2019 or later, contingent on financing and clinical infrastructure. It said no currently planned trials would begin until it had funding for a significant portion of them. Planned SYN-010 Phase 2b/3 development was also financing-dependent.
- Ribaxamase designation: After reviewing additional Phase 2b data, the FDA determined the program no longer met Breakthrough Therapy Designation requirements, citing a mortality disparity between treatment groups that could not be fully evaluated given the limited safety database and study methods. The company voluntarily withdrew the designation. It said the FDA remained committed to working with it and that the proposed Phase 3 design would assess efficacy and safety as separate co-primary endpoints.
- Pipeline and intellectual property: The company reported issuance of a U.S. composition-of-matter patent for SYN-010, with protection through at least 2035. A second canine study reported that SYN-007 did not interfere with systemic absorption of tested oral antibiotics and diminished associated microbiome damage. It also reported supportive preclinical SYN-020 studies.
- Listing risk: NYSE American had notified the company of noncompliance with continued-listing standards. The exchange accepted a compliance plan through September 2, 2019, with periodic review. The company’s market capitalization was below the stated $50 million threshold, and delisting could impair share liquidity and access to financing. The board approved a 1-for-35 reverse split on July 31, 2018; the company expected to effect it in August and warned it might not restore compliance.
- Capital structure and unusual items: Series A preferred stock had $12 million stated issuance proceeds, a cumulative 2% annual dividend and conversion rights; the company recorded $0.120 million of dividends for the first half. Warrant fair-value changes produced $3.438 million of noncash income in the first half and are based on Level 3 valuation inputs. The company reported 132,969,743 common shares outstanding as of August 6, 2018, before the planned reverse split.
- Other disclosures: No material legal proceedings were reported. Management concluded disclosure controls were effective as of June 30, 2018 and reported no material change in internal control over financial reporting during the first half.
Important facts for investors to verify
- Whether the company obtained sufficient financing, on what terms, and whether subsequent ATM sales or other funding were enough to support planned operations and clinical trials.
- Whether the FDA meeting and proposed ribaxamase Phase 3 design proceeded as anticipated, and the status and financing of SYN-010 development.
- Whether the NYSE American compliance plan was met, and the actual timing and effects of the reverse split.
- The potential dilution and payment obligations associated with the Series A preferred stock, warrants, options and future equity issuance.
- The effect of warrant fair-value assumptions on reported earnings, and the company’s actual cash burn relative to available liquidity.