Synthetic Biologics(TOVX) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2021 financials show significant cash and asset growth from financing, shifting equity to surplus Condensed Consolidated Balance Sheets By March 31, 2021, the company's financial position significantly strengthened, with cash and assets increasing and equity shifting from deficit to surplus Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $76,887 | $6,227 | +$70,660 | | Total Current Assets | $78,636 | $7,934 | +$70,702 | | Total Assets | $79,054 | $8,410 | +$70,644 | | Liabilities & Stockholders' Equity | | | | | Total Current Liabilities | $2,122 | $2,966 | -$844 | | Total Liabilities | $2,230 | $3,152 | -$922 | | Total Stockholders' Equity (Deficit) | $76,824 | $(7,540) | +$84,364 | Condensed Consolidated Statements of Operations Q1 2021 net loss improved due to decreased R&D, but net loss attributable to common stockholders significantly increased from non-cash deemed dividends Condensed Consolidated Statements of Operations (in thousands, except per share data) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :--- | :--- | :--- | :--- | | General and administrative | $1,419 | $1,393 | +1.9% | | Research and development | $1,118 | $1,635 | -31.6% | | Loss from Operations | $(2,537) | $(3,028) | +16.2% | | Net Loss | $(2,537) | $(2,990) | +15.2% | | Net Loss Attributable to Common Stockholders | $(11,459) | $(3,430) | -234.1% | | Net Loss Per Share - Basic and Dilutive | $(0.13) | $(0.20) | +35.0% | Condensed Consolidated Statements of Cash Flows Q1 2021 saw improved operating cash flow and substantial financing inflows from stock issuances and warrant exercises, significantly boosting cash Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(3,328) | $(4,960) | | Net Cash Used in Investing Activities | $(14) | $0 | | Net Cash Provided by Financing Activities | $74,002 | $0 | | Net increase (decrease) in cash | $70,660 | $(4,960) | | Cash and cash equivalents at end of period | $76,887 | $10,085 | Notes to Condensed Consolidated Financial Statements Notes detail the company's clinical-stage business, significant Q1 financing, preferred stock conversions, and COVID-19 risks - The company's lead clinical candidates are SYN-004 (ribaxamase) for preventing GI damage from antibiotics and SYN-020 (IAP) for treating GI and systemic diseases[27] - During Q1 2021, all outstanding shares of Series A Convertible Preferred Stock were converted into approximately 9.0 million shares of common stock following an amendment that lowered the conversion price to $1.50 This induced conversion resulted in a $7.4 million deemed dividend[90] - All remaining shares of Series B Preferred Stock were converted to common stock in Q1 2021, resulting in a deemed dividend of $1.5 million for the amortization of the discount upon conversion[79] - In Q1 2021, the company sold approximately 78.7 million shares of common stock through its At Market Issuance Sales Agreement, receiving net proceeds of approximately $66.0 million[93] - During Q1 2021, 11,655,747 warrants were exercised for cash proceeds of $8.0 million[59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses GI therapeutic development, Q1 2021 financial performance, and improved liquidity expected to fund operations through Q1 2023 Overview and Clinical Programs The company is advancing lead GI candidates SYN-004 and SYN-020, with ongoing Phase 1/2 trials and anticipated data readouts - The first patient was dosed in the Phase 1b/2a clinical trial of SYN-004 in adult HCT recipients in Q2 2021 A data readout for the first cohort is anticipated in Q4 2021[119][127] - Enrollment commenced in the Phase 1a single-ascending-dose (SAD) study of SYN-020, with three of four cohorts dosed Topline data is expected in Q3 2021[120][132] - A Phase 1 multiple-ascending-dose (MAD) study for SYN-020 is planned to start in Q3 2021, with a topline data readout anticipated in Q1 2022[132] - The company is considering future trials for SYN-020 in celiac disease and non-alcoholic fatty liver disease (NAFLD) following the completion of Phase 1 studies[130][132] Results of Operations Q1 2021 saw increased G&A and decreased R&D due to COVID-19 delays, resulting in a significantly higher net loss attributable to common stockholders from non-cash deemed dividends Expense Comparison (in millions) | Expense Category | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | General and Administrative | $1.42 | $1.39 | +2% | | Research and Development | $1.1 | $1.6 | -32% | - The decrease in R&D expenses was primarily due to lower indirect program costs, reduced manufacturing costs for SYN-020, and clinical trial delays caused by the COVID-19 pandemic[139] - Net loss attributable to common stockholders for Q1 2021 included a $7.4 million deemed dividend for a Series A preferred stock price adjustment and a $1.5 million deemed dividend for Series B preferred stock conversions[143] Liquidity and Capital Resources Cash significantly improved to $76.9 million by March 31, 2021, from Q1 financing, expected to fund operations through Q1 2023, but additional funding is needed for later-stage trials - Cash and cash equivalents increased to $76.9 million as of March 31, 2021[145] - In Q1 2021, the company raised approximately $74.0 million from the exercise of warrants and sales of common stock in "at the market offerings"[145] - The current cash position is believed to be sufficient to fund operations through at least the end of Q1 2023[145][150] - Future clinical trials beyond the currently planned Phase 1 and 2 studies will require additional funding, which is not yet secured[151][163] Quantitative and Qualitative Disclosures About Market Risk Market risk is limited to short-term, low-risk cash and cash equivalents, with no significant impact expected from interest rate changes - The company's primary market risk exposure is limited to its cash and cash equivalents, which are invested in short-term treasury securities[156] - The company does not engage in hedging activities against interest rate changes and does not anticipate significant impact from sudden changes in market interest rates[156] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2021, with no material changes to internal controls during the quarter - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective[157] - No material changes were made to the company's internal control over financial reporting during the first quarter of 2021[158] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, or operating results - As of the report date, the company is not involved in any material legal proceedings[160] Risk Factors Key business risks include the need for additional capital for future trials, stock price volatility, and potential stockholder dilution - The company will need to raise additional capital for future clinical programs beyond the currently funded trials, and failure to do so could negatively impact business plans[162][163] - The company's common stock price has been and may continue to be highly volatile, subject to fluctuations from market conditions, clinical trial results, and other factors, including the recent trend of "short squeezes" affecting certain stocks[164][167] - Future capital raises through equity offerings will likely be dilutive to existing stockholders The company may need to increase its authorized shares to facilitate future financing and strategic transactions[168][169] Unregistered Sales of Equity Securities and Use of Proceeds The only unregistered equity sale was 531,614 common shares issued on February 9, 2021, from Series A Preferred Stock conversion, with no Series A shares remaining - On February 9, 2021, the company issued 531,614 shares of common stock upon the conversion of 4,764 shares of Series A Convertible Preferred Stock All Series A shares have now been converted[171]