Synthetic Biologics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2014. The supplied filing identifies the company as Synthetic Biologics, Inc.; this differs from the request metadata naming Theriva Biologics, Inc.
Business context and financial position
The company was a clinical-stage biotechnology business developing therapies for serious infections and other diseases, including SYN-004 for C. difficile infection prevention, SYN-010 for constipation-predominant IBS, SYN-005 for pertussis, and Trimesta for multiple sclerosis. It reported no revenue in the presented periods and relied principally on equity financing, grants, and partnering arrangements.
| Metric | Three months ended Sept. 30, 2014 | Nine months ended Sept. 30, 2014 | Prior comparable period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported in the statements |
| Research and development expense | $3.7 million | $9.2 million | $1.5 million and $3.8 million, respectively, in 2013 |
| General and administrative expense | $1.2 million | $4.2 million | $1.9 million and $4.3 million, respectively, in 2013 |
| Net loss | $4.9 million | $13.3 million | $3.4 million and $8.1 million, respectively, in 2013 |
| Loss per share | $0.08 | $0.23 | $0.08 and $0.18, respectively, in 2013 |
| Operating cash used | Not presented for the quarter | $11.3 million | $5.0 million in the first nine months of 2013 |
At September 30, 2014, cash and cash equivalents were $3.3 million, versus $14.6 million at December 31, 2013. Current assets were $4.7 million and current liabilities $1.0 million; total liabilities were $1.0 million. The filing reports no interest-bearing debt. No meaningful operating margin was reported because the company had no revenue. Accumulated deficit was $94.6 million.
Material changes and cash flows
- For the first nine months, R&D expense rose 144% year over year, primarily due to expanded research, development, and manufacturing activity in the C. difficile, C-IBS, and pertussis programs. Quarterly R&D expense increased 150% year over year.
- Nine-month G&A expense declined 3%; quarterly G&A declined 36%, largely reflecting a $763,000 bad-debt charge in 2013 relating to a note and interest receivable from the sale of Adeona Clinical Laboratory.
- Operating cash use increased to $11.3 million from $5.0 million. Investing cash use was $43,000 and financing cash provided was $4,000; cash declined by $11.3 million during the nine months.
- On October 10, 2014, after quarter-end, the company sold 14.06 million units for $20.7 million gross and $18.9 million net proceeds. Each unit included one common share and a warrant to buy 0.5 share at $1.75. The offering improved liquidity after the reported quarter but creates potential dilution.
Outlook, risks, and notable items
- Management planned to continue substantial research, clinical, and development spending and stated that additional financing would be needed. At September 30, the company had no committed financing sources and warned that funding might not be available on acceptable terms or at all; inability to raise capital could force it to curtail operations.
- Management expected SYN-004 Phase 1a/1b studies to begin in Q4 2014, with preliminary topline data by year-end; Phase 2a was planned for the first half of 2015. These were forward-looking plans, not reported outcomes.
- SYN-010 Phase 1 and Phase 2 activity was planned for 2015. For SYN-005, management anticipated an IND filing in 2015 and a Phase 1 trial in the second half of 2015; the candidate had received U.S. Orphan Drug designation. Trimesta’s Phase 2 follow-up was complete, and further MRI analyses were expected in Q1 2015; enrollment in a separate cognitive-dysfunction trial was ongoing.
- Reported Trimesta Phase 2 results included a 47% reduction in annualized relapse rate at 12 months versus the control arm and reported cognitive and disability improvements. These were investigator-reported clinical findings; additional MRI analysis remained pending.
- The company said its disclosure controls were effective as of September 30, 2014, and there had been no material change in internal control over financial reporting during the quarter. It reported no legal proceedings and no material changes to prior-year risk factors except those described in the filing.
- Unusual items include $1.8 million of stock-based compensation expense for the first nine months and $4.4 million of unrecognized option compensation expected to be expensed through September 2017. The filing also disclosed a Notice of Allowance for a SYN-004 composition-of-matter patent in October 2014.
Most important facts for investors to verify
- Confirm the issuer identity: the filing is for Synthetic Biologics, Inc., not Theriva Biologics, Inc.
- Assess cash runway using the September 30 cash balance, operating cash burn, and the subsequent $18.9 million net offering proceeds; the filing does not provide a clear post-offering runway estimate.
- Track actual clinical milestones and data against management’s stated timelines, particularly for SYN-004, SYN-010, SYN-005, and Trimesta.
- Evaluate the offering’s dilution: the units included 14.06 million shares and warrants for approximately 7.03 million additional shares, subject to exercise.
- Review the underlying clinical evidence, regulatory requirements, partner and grant funding, and the continuing need for additional capital.