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Soligenix (SNGX): Conservative Cash Burn Coupled With Non-dilutive Financing

By Grant Zeng, CFA


Soligenix Reports
2Q14 Financials

On Aug. 11, 2014, Soligenix (SNGX) announced its financial results for the second quarter ended June 30, 2014.

Total revenue for 2Q14 was $1.4 million, as compared to $0.6 million for 2Q13. The $0.8 million in revenue increase was primarily related to contracts with the US Department of Health and Human Service's Biomedical Advanced Research and Development Authority (BARDA) and the National Institute of Allergy and Infectious Diseases (NIAID) in support of OrbeShield™ development in the treatment of gastrointestinal acute radiation syndrome (GI ARS).

R&D expenses were $1.2 million for 2Q14, as compared to $2.1 million for 2Q13.

General and administrative expenses for 2Q14 were $0.9 million as compared to $0.7 million for the quarter ended June 30, 2013.

Excluding the 2013 $1.5 million expense related to the Intrexon collaboration, operating expenses increased by $0.7 million for the quarter ended June 30, 2014. The increase in operating expenses related to the Company's Phase II clinical trials with SGX942 in the treatment of oral mucositis and orBec® in the treatment of chronic gastrointestinal Graft-versus-host disease (GI GVHD), increased professional fees, increased headcount and non-cash expenses for stock based compensation from stock options issued to existing and newly hired employees.

Net loss for 2Q14 was $0.9 million ($0.05 per share), as compared to net loss of $3.4 million ($0.28 per share) for 2Q13.

Conservative Cash Burn Coupled with Non-dilutive Financing

As of June 30, 2014, the Company's cash position was $5.0 million as compared to $5.9 million at December 31, 2013.

In November 2013, Soligenix signed a stock purchase agreement with Lincoln Park Capital Fund, LLC (LPC) providing an initial investment in Soligenix of $600,000 and the availability of additional periodic investments up to $10.0 million over a 36 month term.  At its sole discretion, Soligenix has the right to sell to LPC up to an additional $10.0 million of its common stock, in amounts as described in the agreement.

With this new flexible financing vehicle, Soligenix should be able to focus on advancing its clinical programs.

Management remains aggressive in the pursuit of government grants and contracts across its entire pipeline as a way to secure non-dilutive funding to support multiple development programs, while effectively managing its cash position.

As a result, On August 1, 2014, Soligenix was awarded additional $2.1 million in funding from the National Institute of Allergy and Infectious Diseases (NIAID) to advance the preclinical development of OrbeShieldTM. The 12-month option provides an additional $2.1 million to Soligenix to advance OrbeShield™ as a medical countermeasure (MCM) for the treatment of gastrointestinal acute radiation syndrome (GI ARS). NIAID granted an initial award of $2.1 million to Soligenix on September 18, 2013.  The total contract award is valued at up to $6.4 million over three years.

Soligenix’s GI ARS program is supported by contract awards from both the Biomedical Advanced Research Development Authority (BARDA) and NIAID, totaling up to approximately $32 million.  In addition to developing oral BDP as a MCM, the company is also pursuing oral BDP as a treatment for GI inflammation in pediatric Crohn’s disease, acute radiation enteritis and chronic Graft-versus-Host disease (cGVHD).

Soligenix Advances Development of a Heat Stable Rapidly Acting Anthrax Vaccine

On August 7, 2014, Soligenix announced results demonstrating the improved immunogenicity and rapid action of its anthrax vaccine, VeloThrax™.

VeloThrax™ is Soligenix’s proprietary vaccine based on a recombinant Protective Antigen (rPA) derivative intended for use against anthrax. Soligenix licensed VeloThrax™ (also known as DNI for dominant negative inhibitor) from Harvard College for a vaccine directed at the prevention of anthrax infection of humans.

Recent developments in the VeloThrax™ formulation have resulted in immune responses indicative of protection after no more than two administrations of the vaccine in a shortened (less than one month) vaccination regimen, in an animal model.   These results are indicative of a vaccine that can be given to humans in an abbreviated regimen, compared to the current vaccination that requires up to five administrations over a period of 18 months for full protective immunity in humans.

A rapidly acting form of VeloThrax™ has been developed by combining Soligenix’s proprietary vaccine thermostabilization platform technology, ThermoVax™, and a potent adjuvant compound to yield a vaccine that is stable to high temperatures and induces neutralizing antibodies in an animal model.  The enhanced DNI vaccine was formulated with a synthetic immunostimulatory adjuvant that activates toll-like receptor 4 (TLR-4), a receptor that is important in recognition of pathogens.  The immune responses indicative of protective immunity were observed in fewer doses than the vaccine that did not contain the additional immunostimulatory adjuvant.

The enhanced vaccine was also stable at 40 degrees Celsius (104 degrees Fahrenheit) for at least 3 months, indicating that the synthetic adjuvant component and the DNI antigen component were both stabilized.  Furthermore, even when VeloThrax™ was stored at 40 degrees Celsius for up to 3 months prior to administration, there was no evident loss of the ability to induce antibodies that neutralize anthrax toxin.  

We believe VeloThrax™ provides a distinct advantage over other anthrax vaccine technologies currently in development. Soligenix plans to continue VeloThrax™ development with the support of government grants and contracts.

Potential government procurement contracts could reach $500 million assuming development efforts are successful for VeloThrax™.

Soligenix Announces Positive Results for Combination Vaccine

On July 9, 2014, Soligenix (SNGX) announced positive results from a preclinical study of the combination of RiVax™ and VeloThrax™. The combination induces protective antibodies for both ricin toxin and anthrax toxin exposure.

Previously, Soligenix has demonstrated that each vaccine, when administered as a single vaccine, induced neutralizing antibodies for each toxin respectively.  In this preclinical study, Soligenix further demonstrated that the combination of  RiVax and VeloThrax induced neutralizing antibodies that were reactive against both toxins and these antibodies were detected until at least 200 days after the immunization regimens. Consequently, the combined vaccination provided protection to exposure to both ricin toxin and anthrax toxin that persisted for at least six months after 2 vaccinations.

This study is sponsored under $9.4 million cooperative grant from the National Institute of Allergy and Infectious Diseases (NIAID). The results suggest that long-term immunity upon simultaneous vaccination can be achieved. This is important because both vaccines are developed for military usage and emergency first responders.

Soligenix plans to develop the combination vaccine using the company’s proprietary ThermoVax™ platform for stabilizing vaccines for stockpiling and for distribution of vaccines outside of normal cold chain requirements.

Valuation Is Very Attractive

We maintain an Outperform rating for Soligenix and reiterate our 12-month price target of $4.50 per share.

Soligenix is a mid-stage development biopharmaceutical company focused on cancer supportive care and GI disorders, two large pharmaceutical markets both in the US and around the world. Soligenix also develops vaccines/oral therapeutics for biodefense.

Soligenix has built a diversified pipeline using three proprietary platform technologies: the SGX942 platform, the oral BDP platform and the ThermoVax platform. We are especially optimistic about its lead drug candidate SGX942 for the treatment of mucositis. SGX942 is currently under a Phase II study. Results will be available in 2H14, which, if positive, would be a significant de-risking event for Soligenix. SGX942 has a new mechanism of action and will command a significant market share of the oral mucositis market if approved in our view.

The Company’s oral BDP has the potential to target multiple GI disorders such as Crohn’s disease, radiation enteritis and GVHD as well as ARS.

Soligenix’s vaccines and biodefense therapeutics are being developed under specific FDA regulatory guidelines called the “Animal Rule.” We think the “Animal Rule” means a lot for Soligenix, because this can accelerate the development of the ricin and anthrax vaccines as well as OrbeShield. Once approved by the FDA, Soligenix will have the opportunity to negotiate a stock-pile contract with the US government.  These stock-pile or procurement contracts have been very lucrative for other companies supplying similar drugs to the US government and will provide significant cash flow to Soligenix.

Based on our analysis, we think Soligenix shares are undervalued at current market price. Currently shares of Soligenix are trading at around $2.00 per share, which values the Company at $40 million in market cap based on 19.8 million outstanding shares. This deeply undervalues Soligenix shares in our view.

Most small biotech companies of development stage are valued from $50 million to $1 billion depending on how advanced the pipeline is and which indications the company is targeting. Soligenix has two Phase II programs, and two more programs will move to Phase II/III study this year. Soligenix has multiple catalysts in the next 6 to 12 month or so.

Our price target of $4.50 per share values Soligenix at $90 million in market cap which we think is very conservative.


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