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, 2023 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, 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 possible retention of an advisor to assist with a potential transaction involving MAT2203 and the evaluation of other alternatives including but not limited to winddown and dissolution of the Company; ● our reduction by 80% of our workforce and the cessation of all product development activities; ● 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, and certain related patents which are exclusively 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; and ● the factors listed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, 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. In October 2024, we announced that negotiations under a previously disclosed non-binding term sheet regarding global rights to our MAT2203 (oral amphotericin B) product candidate have been terminated following notification from the prospective partner. As a result, we implemented an 80% workforce reduction and ceased all product development activities to conserve cash. We may retain an advisor to assist us with a potential transaction involving MAT2203, and will evaluate other alternatives including but not limited to winddown and dissolution of the company. Prior to ceasing product development activities, we were focused on delivering groundbreaking therapies using our lipid nanocrystal (LNC) platform delivery technology (LNC Platform) and sought to develop an internal pipeline of products utilizing the LNC Platform to successfully encapsulate small molecules and small oligonucleotides and facilitate targeted and extrahepatic delivery to desired cell tissues without toxicity. Key elements of our strategy included: ● Advancing MAT2203 into the ORALTO trial for the treatment of invasive aspergillosis in patients with limited treatment options by securing a development and/or commercial partner. This initial indication is designed to be a gateway indication to establish the pharmacodynamic bridge necessary to expand the use of MAT2203 into other indications to treat deadly invasive fungal infections (e.g., mucormycosis, candidiasis and the endemic mycoses) through limited additional clinical work under a 505(b)(2) pathway, thereby making MAT2203 a pipeline in a product. ● Expanding the utilization of our LNC Platform with other small molecules and small oligonucleotides into inflammation and oncology in order to develop an internal pipeline of differentiated drug candidates. Oral, extrahepatic and non-toxic intracellular delivery of these molecules would represent a significant advancement. 17 ● Building an external pipeline of collaborations focused on our LNC Platform with leading pharmaceutical companies to provide delivery solutions for their complex small molecules and small oligonucleotides, including ASOs and siRNAs. For the nine month periods ended September 30, 2024 and 2023, our net loss was $15,818 and $17,628, respectively. We have incurred losses for each period from our inception and expect to incur additional losses for the foreseeable future. We do not believe the cash, cash equivalents and marketable debt securities on hand are sufficient to fund planned operations beyond the next twelve months from the filing date of these financial statements. We 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, 2024, we did not generate any 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. 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, 2024 and 2023. 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. 18 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Direct research and development expenses: Manufacturing process development $ 203 $ 349 $ 753 $ 942 Preclinical trials 171 101 1,034 350 Clinical development 104 314 375 1,183 Regulatory 62 133 233 463 Internal staffing, overhead and other 1,699 2,398 6,662 7,886 Total research and development $ 2,239 $ 3,295 $ 9,057 $ 10,824 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 2024 will be lower compared with expenses incurred during 2023 until such time as we are able to secure additional funding to support initiation of our ORALTO trial for 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, 2024 were $2,142 and $7,067, respectively, and the three and nine months ended September 30, 2023 were $2,839 and $8,151, 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 2024 will decrease slightly compared to expenses incurred during 2023. Other Income, net Other income, net is largely comprised of interest income/(expense) and dividends. Reverse Stock Split On August 30, 2024, we effected a 1-for-50 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each of our stockholders received one share of our common stock for every 50 shares such stockholder held immediately prior to the effective time of the Reverse Stock Split. Unless otherwise noted, all shares of common stock, common stock per share data and shares of common stock underlying stock-based awards and warrants convertible into shares of common stock included in these condensed consolidated financial statements, including the exercise or conversion price of such equity instruments, as applicable, have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented. 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 2023 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) Research and development costs, and (ii) 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. 19 Current Operating Trends In October 2024, we announced implementation of an 80% workforce reduction (the “October RIF”) and ceased all product development activities to conserve cash. We may retain an advisor to assist us with a potential transaction involving MAT2203, and will evaluate other alternatives including but not limited to winddown and dissolution of the company. While this evaluation is ongoing, we expect our R&D expenses will be limited to costs associated with supporting the Company’s MAT2203 Compassionate/Expanded Use Access Program and other costs necessary to maintain compliance with certain regulatory requirements. Prior to the October RIF, our R&D efforts had been 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 consisted 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. Results of Operations Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023 The following tables summarize our revenues and operating expenses for the periods presented: Three Months Ended September 30, 2024 2023 Revenues $ — $ — Expenses: Research and development $ 2,239 $ 3,295 General and administrative 2,142 2,839 Operating Expenses $ 4,381 $ 6,134 Revenues. During the three months ended September 30, 2024 and 2023, we did not generate any revenue. Research and Development expenses. Research and Development (R&D) expense for the three months ended September 30, 2024 and 2023 was $2,239 and $3,295, respectively. The decrease in R&D expense was primarily attributable to lower headcount related expenses, and lower manufacturing and clinical trial expenses. General and Administrative expenses. General and Administrative (G&A) expense for the three months ended September 30, 2024 and 2023 was $2,142 and $2,839, respectively. The decrease in G&A expense was primarily attributable to lower consulting fees and lower headcount related expenses. Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023 20 The following tables summarize our revenues and operating expenses for the periods presented: Nine Months Ended September 30, 2024 2023 Revenues $ — $ 1,096 Expenses: Research and development $ 9,057 $ 10,824 General and administrative 7,067 8,151 Operating Expenses $ 16,124 $ 18,975 Revenues. During the nine month periods ended September 30, 2024 and 2023, we generated revenue of $0 and $1,096. The amount earned during the prior year consists of contract research revenue resulting from the research collaboration with BioNTech SE and Genentech Inc. Research and Development expenses. R&D expense for the nine month periods ended September 30, 2024 and 2023 was $9,057 and $10,824, respectively. The decrease in R&D expense was primarily attributable to lower stock based compensation expense, a decrease in other payroll related costs due to decreased headcount and the decrease in manufacturing and clinical trial expenses. General and Administrative expenses. G&A for the nine month periods ended September 30, 2024 and 2023 was $7,067 and $8,151, respectively. The decrease in G&A expense was primarily attributable to lower stock based compensation expense, consulting fees and decreased insurance premiums. Liquidity and capital resources Sources of Liquidity We have funded our operations since inception primarily through private placements and public offerings of our equity securities. As of September 30, 2024, we have raised a total of $166,907 in gross proceeds and $153,445, net, from sales of our equity securities. As of September 30, 2024, we had unrestricted cash, cash equivalents and marketable debt securities totaling $10,795. 2024 Registered Direct Offering On April 5, 2024, the Company closed a registered direct offering of 666,667 shares of its common stock and warrants to purchase up to an aggregate of 666,667 additional shares of common stock, at a combined purchase price of $15.00 per share and accompanying warrant. The Company generated gross proceeds of approximately $10,000 and net proceeds of approximately $9,190, after deducting underwriting discounts and commissions and other offering expenses. 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, 2024 2023 Cash used in operating activities $ (12,375 ) $ (10,699 ) Cash provided by investing activities 8,708 10,282 Cash provided by/(used in) financing activities 9,175 (6 ) Net increase/(decrease) in cash and cash equivalents and restricted cash $ 5,508 $ (423 ) 21 Operating Activities Net cash used in operating activities was $12,375 and $10,699 for the nine month periods ended September 30, 2024 and 2023, respectively. Net losses of $15,818 and $17,628 for the nine month periods ended September 30, 2024 and 2023, respectively, were partially offset by working capital adjustments due to the timing of receipts and payments in the ordinary course of business and adjustments for non-cash stock based compensation expense. Investing Activities Net cash provided by investing activities was $8,708 and $10,282 for the nine month periods ended September 30, 2024 and 2023, respectively. The decrease of cash used in investing activities was primarily due to a $8,437 purchase of marketable securities offset by a $6,645 increase in maturities of marketable debt securities and a $218 decrease in the purchases of leasehold improvements and equipment. Financing Activities Net cash provided by/(used in) financing activities was $9,175 and ($6) for the nine month periods ended September 30, 2024 and 2023, respectively. The increase in cash provided by financing activities is primarily due to the net proceeds received from the sale of our common stock in the registered direct offering, $9,125, and the net proceeds received from the sale of our common stock under the ATM with BTIG, LLC, $54. Funding Requirements and Other Liquidity Matters We expect to continue to incur administrative expenses and operating losses as we seek a potential transaction involving MAT2203, and continue to evaluate other alternatives including but not limited to winddown and dissolution of the company. We anticipate that our expenses will increase substantially if we secure additional funding allowing us to resume product development activities and: ● conduct further preclinical and clinical studies of MAT2203, our lead product candidate; ● 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 do not expect that our existing cash, cash equivalents and marketable debt securities will be sufficient to fund our operating expenses and capital expenditure requirements beyond the next twelve months from the filing date of these financial statements. 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 would 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.