Matinas BioPharma Holdings, Inc. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2022 and in other reports we file with the Securities and Exchange Commission, particularly those under “Risk Factors.” Dollars in tabular format are presented in thousands, except per share data, or otherwise indicated. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, including risks and uncertainties related to the impact of COVID-19, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to: ● our ability to raise additional capital to fund our operations and to develop our product candidates; ● our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product approvals; ● our history of operating losses in each year since inception and the expectation that we will continue to incur operating losses for the foreseeable future; ● our dependence on product candidates which are still in an early development stage; ● our reliance on our proprietary lipid nanocrystal (LNC) platform delivery technology, which is licensed to us by Rutgers University; ● our ability to manufacture GMP batches of our product candidates which are required for preclinical and clinical trials and, subsequently, if regulatory approval is obtained for any of our products, our ability to manufacture commercial quantities; ● our ability to complete required clinical trials for our lead product candidate and other product candidates and obtain approval from the FDA or other regulatory agents in different jurisdictions; ● our dependence on third parties, including third parties to manufacture our intermediates and final product formulations and third-party contract research organizations to conduct our clinical trials; ● our ability to maintain or protect the validity of our patents and other intellectual property; ● our ability to retain and recruit key personnel; 16 ● our ability to internally develop new inventions and intellectual property; ● interpretations of current laws and the passages of future laws; ● our lack of a sales and marketing organization and our ability to commercialize products, if we obtain regulatory approval, whether alone or through potential future collaborators; ● our ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to, our product candidates; ● the accuracy of our estimates regarding expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing; ● developments and projections relating to our competitors or our industry; ● our operations, business and financial results may be adversely impacted by COVID-19; and ● the factors listed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, elsewhere in this report and other reports that we file with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward- looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished. Overview We are a clinical-stage biopharmaceutical company focused on delivering groundbreaking therapies using our lipid nanocrystal (LNC) platform delivery technology (LNC Platform) to maximize global clinical impact and patient access. The Company is developing an internal portfolio of products and strives to be the partner of choice for leading pharmaceutical companies seeking to develop novel formulations that capitalize on the unique characteristics of the LNC Platform to facilitate, enhance and optimize the delivery of complex nucleic acids. Our current internal pipeline consists of MAT2203 (oral amphotericin B), a highly potent antifungal drug which we have successfully made oral, safe, and well-tolerated for patients. We also have internal discovery programs ongoing in the formulation and delivery of small oligonucleotides, namely antisense oligonucleotides (ASOs) and silencing or short interfering RNAs (siRNAs). We are also intent on expanding the application of our LNC Platform through collaborations with well-respected pharmaceutical companies whose molecules and compounds benefit from the unique capabilities of our delivery technology, which can provide oral bioavailability and facilitate non-toxic and efficient intracellular delivery of nucleic acids, particularly in the fields of mRNA and DNA. Key elements of our strategy include: ● Advancing our LNC Platform and expanding the utilization of this promising technology into areas of innovative medicine beyond small molecules, including nucleic acids (e.g., mRNA, DNA, ASOs) and proteins. ● Positioning MAT2203 for an NDA filing for various indications for the treatment of serious IFIs, including cryptococcal meningitis. We are seeking non-dilutive funds from prospective third-party pharmaceutical partners and various governmental sources of capital, such as the Biomedical Advanced Research and Development Authority (BARDA) and the NIH to continue the development of MAT2203 into Phase 3. We are also seeking the input and guidance of the FDA for an additional Phase 3 study of various IFIs. 17 ● Building an external pipeline of collaborations focused on our LNC Platform with leading pharmaceutical companies like Genentech and National Resilience to provide delivery solutions for their complex nucleic acid drug products. For the nine month periods ended September 30, 2023 and 2022, our net loss was $17,628 and $17,363, respectively. We have incurred losses for each period from our inception and expect to incur additional losses for the foreseeable future. We believe the cash, cash equivalents and marketable debt securities on hand are sufficient to fund planned operations into the third quarter of 2024, but not beyond. We will seek to fund our operations through public or private equity offerings, debt financing, government or other third-party funding, collaborations and licensing arrangements. These financing alternatives may not be available to us on acceptable terms, or at all. As a result, substantial doubt exists about our ability to continue as a going concern. Financial Operations Overview Revenue During the three and nine months ended September 30, 2023, we generated $0 and $1,096, respectively, in contract research revenue resulting from the research collaborations with BioNTech SE and Genentech Inc., and $1,063 and $2,125 during the three and nine months ended September 30, 2022, respectively, from the research collaboration with BioNTech SE. Our ability to generate product revenue, which we do not expect to occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our early-stage product candidates. Research and Development Expenses Research and development expenses consist of costs incurred for the development of product candidate MAT2203 and advancement of our LNC platform delivery technology, which include: ● the cost of conducting pre-clinical work; ● the cost of acquiring, developing and manufacturing pre-clinical and human clinical trial materials; ● costs for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities and regulatory operations; ● expenses incurred under agreements with contract research organizations, or CROs, including the National Institutes of Health (NIH), that conduct our pre-clinical or clinical trials; and ● employee-related expenses, including salaries and stock-based compensation expense for those employees involved in the research and development process. The table below summarizes our direct research and development expenses for our product candidates and development platform for the three and nine months ended September 30, 2023 and 2022. Our direct research and development expenses consist principally of external costs, such as fees paid to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically use our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol development and overseeing outside vendors. Included in “Internal staffing, overhead and other” below is the cost of laboratory space, supplies, research and development (R&D) employee costs (including stock-based compensation), travel and medical education. Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Direct research and development expenses: Manufacturing process development $ 349 $ 417 $ 942 $ 1,988 Preclinical trials 101 86 350 711 Clinical development 314 492 1,183 1,702 Regulatory 133 160 463 562 Internal staffing, overhead and other 2,398 2,552 7,886 7,848 Total research and development $ 3,295 $ 3,707 $ 10,824 $ 12,811 18 Research and development activities are central to our business model. We expect our research and development expenses to increase over time because product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage human trials. However, we anticipate that our research and development expenses during 2023 will be lower than expenses incurred in 2022 as we pause the development of MAT2501 to focus our existing resources on MAT2203 and advancement of our LNC platform delivery technology. General and Administrative Expenses General and administrative expense for the three and nine months ended September 30, 2023 were $2,839 and $8,151, respectively, and for the three and nine months ended September 30, 2022 were $2,818 and $8,424, respectively. General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other general and administrative expenses include facility costs, insurance, investor relations expenses, professional fees for legal, patent review, consulting and accounting/audit services. We anticipate that our general and administrative expenses during 2023 will remain relatively consistent with expenses incurred during 2022. Sale of Net Operating Losses (NOLs) & Tax Credits Income obtained from selling unused net operating losses (NOLs) and research and development tax credits under the New Jersey Technology Business Tax Certificate Transfer Program was $0 and $1,734 for the nine month periods ended September 30, 2023 and 2022, respectively. Other Income, net Other income, net is largely comprised of interest income/(expense) and dividends. Application of Critical Accounting Policies and Accounting Estimates A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies ” in our 2022 Form 10-K. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: (i) Stock-based compensation, (ii) Fair value measurements, (iii) Research and development costs, and (iv) Goodwill and other intangible assets. Recent Accounting Pronouncements Refer to “Note 3 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and their expected impact on our financial positions and results of operations. Current Operating Trends Our current R&D efforts are focused on advancing our lead LNC product candidate, MAT2203, through clinical development toward an initial indication for the treatment of CM and expanding application of our LNC Platform through both internal efforts and collaborations with third parties. Our R&D expenses consist of manufacturing work and the cost of active pharmaceutical ingredients and excipients used in such work, fees paid to consultants for work related to clinical trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that significant investment in product development is a competitive necessity, and we plan to continue these investments to be in a position to realize the potential of our product candidates and proprietary technologies. 19 We expect that most of our R&D expenses in the near-term future will be incurred in support of our current and future preclinical and clinical development programs. These expenditures are subject to numerous uncertainties relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology, and efficacy. At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants, contracts, or other agreements. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products to focus our resources on more promising products. Completion of clinical trials may take several years, and the length of time varies substantially according to the type, complexity, novelty and intended use of a product candidate. The commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows from the relevant drug or program would be delayed or would not occur. Results of Operations Comparison of the three months ended September 30, 2023 to the three months ended September 30, 2022 The following tables summarize our revenues and operating expenses for the periods presented: Three Months Ended September 30, 2023 2022 Revenues $ — $ 1,063 Expenses: Research and development $ 3,295 $ 3,707 General and administrative 2,839 2,818 Operating Expenses $ 6,134 $ 6,525 Revenues. During the three months ended September 30, 2023 and 2022, we generated revenue of $0 and $1,063. The amount earned during the prior year resulted from the exclusive research collaborations with BioNTech SE. Research and Development expenses. Research and Development (R&D) expense for the three months ended September 30, 2023 and 2022 was $3,295 and $3,707, respectively. The decrease in R&D expense was primarily attributable to the decrease in manufacturing costs of clinical trial materials, in clinical trial consulting costs and in headcount costs. General and Administrative expenses. General and administrative expense for the three months ended September 30, 2023 and 2022 was relatively consistent at $2,839 and $2,818, respectively, as higher legal fees were offset by lower stock based compensation, insurance premiums and consulting costs. 20 Comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022 The following tables summarize our revenues and operating expenses for the periods presented: Nine Months Ended September 30, 2023 2022 Revenues $ 1,096 $ 2,125 Expenses: Research and development $ 10,824 $ 12,811 General and administrative 8,151 8,424 Operating Expenses $ 18,975 $ 21,235 Sale of New Jersey net operating losses (NOLs) and tax credits $ — $ 1,734 Revenues. During the nine month periods ended September 30, 2023 and 2022, we generated revenue of $1,096 and $2,125. The amount earned during the current year consists of contract research revenue resulting from the research collaboration with BioNTech SE and Genentech Inc., while the amount earned during the prior year resulted from the research collaboration with BioNTech SE. Research and Development expenses. Research and Development (R&D) expense for the nine month periods ended September 30, 2023 and 2022 was $10,824 and $12,811, respectively. The decrease in R&D expense was primarily attributable to decreases in manufacturing costs of clinical trial materials and in clinical trial consulting costs, partially offset by an increase in headcount costs. General and Administrative expenses. General and administrative expense for the nine month periods ended September 30, 2023 and 2022 was $8,151 and $8,424, respectively. The decrease in general and administrative expense between periods was primarily due to decreases in consulting fees, insurance premiums and stock based compensation expense, partially offset by increases in legal fees and headcount costs. Sale of New Jersey net operating losses (NOLs) & tax credits. The Company recognized $0 and $1,734 for the nine month periods ended September 30, 2023 and 2022, respectively, in connection with the sale of state net operating losses and research and development tax credits to third parties under the New Jersey Technology Business Tax Certificate Transfer Program. Liquidity and capital resources Sources of Liquidity We have funded our operations since inception through private placements and public offerings of our equity securities. As of September 30, 2023, we have raised a total of $156.7 million in gross proceeds and $143.9 million, net, from sales of our equity securities. As of September 30, 2023, we had cash, cash equivalents and marketable debt securities totaling $18,216. Cash Flows The following table sets forth the primary sources and uses of cash, cash equivalents and restricted cash for each of the periods set forth below: Nine Months Ended September 30, 2023 2022 Cash used in operating activities $ (10,699 ) $ (14,857 ) Cash provided by investing activities 10,282 4,919 Cash (used in)/provided by financing activities (6 ) 84 Net decrease in cash and cash equivalents and restricted cash $ (423 ) $ (9,854 ) 21 Operating Activities Net cash used in operating activities was $10,699 and $14,857 for the nine month periods ended September 30, 2023 and 2022, respectively. Net losses of $17,628 and $17,363 for the nine month periods ended September 30, 2023 and 2022, respectively, were partially offset by working capital adjustments due to the timing of receipts and payments in the ordinary course of business. Investing Activities Net cash provided by investing activities was $10,282 and 4,919 for the nine month periods ended September 30, 2023 and 2022, respectively. The increase of cash provided by investing activities of $5,363 was primarily due to the $9,481 decrease in purchases of marketable debt securities, the $632 decrease in purchases of leasehold improvements and equipment, offset by the $4,750 decrease in maturities of marketable debt securities. Financing Activities Net cash (used in)/provided by financing activities was ($6) and $84 for the nine month periods ended September 30, 2023 and 2022, respectively. The decrease of $90 is primarily due to the decrease in the receipt of proceeds of $99 from the exercise of stock options. Funding Requirements and Other Liquidity Matters We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we: ● conduct further preclinical and clinical studies of MAT2203, our lead product candidate, even if such studies are primarily financed with non-dilutive funding from the NIH; ● seek to discover and develop additional product candidates; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control and scientific personnel; and ● add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public company. We expect that our existing cash, cash equivalents and marketable debt securities will be sufficient to fund our operating expenses and capital expenditures requirements into the third quarter of 2024, but not beyond. As a result, substantial doubt exists about the Company’s ability to continue as a going concern. Until such time, if ever, that we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, collaborations, and licensing arrangements. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates. 22 If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply chain disruptions, global trade disputes and/or political instability. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. Additionally, rising inflation rates may affect us by increasing operating expenses, such as employee-related costs and clinical trial expenses, negatively impacting our results of operations. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.