Flex Pharma, Inc. (NASDAQ: FLKS),
today announced its financial results for the three months and
fiscal year ended December 31, 2018.
On January 3, 2019, Flex Pharma (the "Company") and Salarius
Pharmaceuticals, LLC ("Salarius") entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which, among
other things, Falcon Acquisition Sub, LLC, a wholly owned
subsidiary of the Company, will merge with and into Salarius, with
Salarius continuing as a wholly owned subsidiary of the Company and
the surviving company. On February 14, 2019, the Company filed a
registration statement on Form S-4 with the Securities and Exchange
Commission that provides additional information related to the
merger. The merger is expected to close in the first half of 2019.
The Company continues to sell HOTSHOT, its consumer product that
helps to prevent and treat exercise associated muscle cramps.
The Merger Agreement (i) values Flex Pharma at $10.5 million,
subject to adjustment, on a dollar-for-dollar basis, based on Flex
Pharma's net cash balance at the closing of the merger compared to
a target net cash of $3.3 million, and (ii) values Salarius at
$36.6 million, subject to adjustment, on a dollar-for-dollar basis,
based on the sale of Series A Preferred Units pursuant to
subscription agreements that Salarius entered into prior to the
Merger Agreement compared to the target sale of $7.0 million of
Series A Preferred Units.
Under the Merger Agreement, immediately following the effective
time of the merger, Flex Pharma’s current stockholders will own
approximately 19.9% of the combined company, on a partially-diluted
basis, and Salarius’ current members will own approximately 80.1%
of the combined company, on a partially-diluted basis.
In addition, at or prior to the closing of the merger, Flex
Pharma will pay a dividend of or distribute one right per share of
the Company’s common stock to its stockholders of record as of a
date and time determined by the Company’s board of directors. Each
right will entitle such stockholders to receive a warrant to
purchase shares of Flex Pharma’s common stock (“Warrant”) six
months and one day following the closing date of the merger.
The aggregate value of all of the Warrants to be issued to Flex
Pharma's stockholders generally represents the difference between
(i) Flex Pharma’s value and (ii) the value of Flex Pharma’s common
stock that Flex Pharma’s current stockholders will have in the
combined company.
"We continue to make progress towards completing the merger with
Salarius with the recent filing of our Registration Statement on
Form S-4," stated William McVicar, Ph.D., Flex Pharma's President
and Chief Executive Officer. "We continue to believe that a merger
with Salarius is the best opportunity for significant near- and
long-term value creation for Flex stockholders. Salarius’ lead
compound, Seclidemstat, is currently enrolling patients in an
open-label Phase 1 dose escalation/dose expansion study in Ewing
sarcoma and Salarius is also preparing to initiate additional
studies in advanced solid tumors, including prostate, breast and
ovarian cancers. We believe that Salarius could be poised to
address significant unmet needs in oncology and we look forward to
completing the merger with Salarius."
Fourth Quarter & Full Year 2018 Financial Results
- Cash Position: As of December
31, 2018, Flex Pharma had cash and cash equivalents of $9.8
million. The Company held no marketable securities at December 31,
2018. During the three months ended December 31, 2018, cash and
cash equivalents decreased by $3.1 million.
- Total Revenue: Total revenue for
the three months ended December 31, 2018 was approximately
$163,000. Total revenue for the year ended December 31, 2018 was
approximately $0.8 million, including approximately approximately
$11,000 of other revenue.
- Cost of Product Revenue: Cost of
product revenue for the three months ended December 31, 2018 was
approximately $75,000. There were no inventory write-offs during
the three months ended December 31, 2018. Cost of product for the
twelve months ended December 31, 2018 was approximately $431,000
and included inventory write offs of approximately $85,000.
- R&D Expense: Research and
development expense for the three months ended December 31, 2018
was $0.2 million and $11.9 million for the year ended December 31,
2018. Research and development expense for these time periods
primarily included costs associated with the Company’s clinical
operations and wind-down of FLX-787 Phase 2 clinical studies,
personnel costs (including salaries, termination-related costs,
retention-related costs and stock-based compensation costs) and
external consultant costs.
- SG&A Expense: Selling,
general and administrative expense for the three months ended
December 31, 2018 was $1.9 million and $10.6 million for the year
ended December 31, 2018. Selling, general and administrative
expense for this period primarily included personnel costs
(including salaries, retention-related costs and stock-based
compensation costs), fulfillment costs related to HOTSHOT, legal
and professional costs, and external consultant costs.
- Net Loss and Cash Flow: Net loss
for the three months ended December 31, 2018 was ($2.0) million, or
($0.11) per share and included $0.2 million of stock-based
compensation expense. For the year ended December 31, 2018, net
loss was ($21.9) million, or ($1.22) per share and included $1.9
million of stock-based compensation expense. As of December 31,
2018, Flex Pharma had 18,067,392 shares of common stock
outstanding. The net loss for the fourth quarter of 2018, as well
as for the year ended December 31, 2018, was primarily driven by
the Company’s operating expenses related to its research and
development efforts, costs associated with HOTSHOT, and general and
administrative costs.
About Flex Pharma
Flex Pharma, Inc. is a clinical-stage biotechnology company
founded by National Academy of Science members Rod
MacKinnon, M.D. (2003 Nobel Laureate), and Bruce Bean, Ph.D.,
recognized leaders in the fields of ion channels and
neurobiology.
Forward-Looking Statements
This press release contains forward-looking statements for
purposes of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include statements regarding our intentions, beliefs, projections,
outlook, analyses or current expectations concerning, among other
things, the proposed transaction with Salarius and other related
transactions (including statements relating to the expected
ownership of the combined company and the anticipating timing and
effects of the transaction, including as to value creation and
growth opportunities). These forward-looking statements are usually
identified by the use of words such as “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “may,” “plans,” “projects,”
“seeks,” “should,” “will,” and variations of such words or similar
expressions. These forward-looking statements are based on
management's expectations and assumptions as of the date of this
press release and are subject to numerous risks and uncertainties,
which could cause actual results to differ materially from those
expressed or implied by such statements. These risks and
uncertainties include, without limitation: inability to complete
the proposed transaction and other contemplated transactions; costs
and potential litigation associated with the proposed transaction;
failure or delay in obtaining required approvals by the SEC, Nasdaq
or any other governmental or quasi-governmental entity necessary to
consummate the proposed transaction, which may also result in
unexpected additional transaction expenses and operating cash
expenditures on the parties; failure to obtain the necessary
stockholder and member approvals or to satisfy other conditions to
the closing of the proposed transaction and the other contemplated
transactions; a superior proposal being submitted to either party;
the ability of the proposed transaction to increase stockholder
value; an inability or delay in obtaining required regulatory
approvals for product candidates, which may result in unexpected
cost expenditures; risks inherent in drug development in general;
uncertainties in obtaining successful clinical results for product
candidates and unexpected costs that may result therefrom; failure
to realize any value of certain product candidates developed and
being developed in light of inherent risks and difficulties
involved in successfully bringing product candidates to market;
inability to develop new product candidates and support existing
products; the approval by the FDA and any other similar foreign
regulatory authorities of other competing or superior products
brought to market; risks resulting from unforeseen side effects;
risk that the market for the combined company’s products may not be
as large as expected; inability to obtain, maintain and enforce
patents and other intellectual property rights or the unexpected
costs associated with such enforcement or litigation; inability to
obtain and maintain commercial manufacturing arrangements with
third-party manufacturers or establish commercial scale
manufacturing capabilities; loss of or diminished demand from one
or more key customers or distributors; unexpected cost increases
and pricing pressures; continuing or deepening economic recession
and its negative impact on customers, vendors or suppliers;
uncertainties of cash flows, expenses and inability to meet working
capital needs; cost reductions that may not result in anticipated
level of cost savings or cost reductions prior to or after the
consummation of the proposed transaction; risks associated with the
possible failure to realize certain benefits of the proposed
transaction, including future financial, tax, accounting treatment
and operating results; failure to maintain the combined company’s
management team or board of directors; and other risks and
uncertainties detailed in the risk factors section of Flex Pharma’s
registration statement on Form S-4, Form 10-K and Forms 10-Q filed
with the SEC, as well as other filings Flex Pharma makes with the
SEC from time-to-time. You are encouraged to read our filings with
the SEC, available at www.sec.gov, for a discussion of
these and other risks and uncertainties. Any forward-looking
statements that we make in this press release speak only as of the
date of this press release. We assume no obligation to update our
forward-looking statements whether as a result of new information,
future events or otherwise, after the date of this press release
except as required by law.
Additional Information and Where to
Find It
This communication may be deemed to be solicitation material in
respect of the proposed transaction. On February 14, 2019, in
connection with the proposed transaction, Flex Pharma filed with
the Securities and Exchange Commission (SEC) a registration
statement on Form S-4 containing a proxy
statement/prospectus/information statement. Flex Pharma will mail
the proxy statement/prospectus/information statement to Flex Pharma
stockholders and members of Salarius, and the securities may not be
sold or exchanged until the registration statement becomes
effective. FLEX PHARMA URGES INVESTORS AND EQUITYHOLDERS OF
FLEX PHARMA AND SALARIUS TO READ THE PROXY
STATEMENT/PROSPECTUS/INFORMATION STATEMENT REGARDING THE PROPOSED
TRANSACTION, AS WELL AS OTHER DOCUMENTS FILED OR THAT WILL BE FILED
WITH THE SEC, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT FLEX PHARMA, SALARIUS AND THE PROPOSED
TRANSACTION. This communication is not a substitute for
the registration statement, definitive proxy
statement/prospectus/information statement or any other documents
that Flex Pharma has filed or may file with the SEC or send to Flex
Pharma or Salarius equity holders in connection with the proposed
transaction. Before making any voting decision, investors and
equity holders are urged to read the registration statement, proxy
statement/prospectus/information statement and all other relevant
documents filed or that will be filed with the SEC in connection
with the proposed transaction as they become available because they
will contain important information about the proposed transaction
and related matters.
You may obtain free copies of the registration statement, proxy
statement/prospectus/information statement and all other documents
filed or that will be filed with the SEC regarding the proposed
transaction at the website maintained by the
SEC, www.sec.gov. Once they are filed, copies of the
registration statement and proxy statement/prospectus/information
statement will be available free of charge on Flex Pharma’s website
at www.flex-pharma.com or by contacting John McCabe
at jmccabe@flex-pharma.com.
Participants in
Solicitation
Flex Pharma, Salarius and their respective directors or managers
and executive officers may be deemed to be participants in the
solicitation of proxies from the holders of Flex Pharma common
stock in connection with the proposed transaction. Information
about Flex Pharma’s directors and executive officers is set forth
in Flex Pharma’s Annual Report on Form 10-K for the
period ended December 31, 2017, which was filed with the SEC
on March 7, 2018, and its proxy statement for its 2018 annual
meeting of stockholders, which was filed with the SEC on
April 23, 2018. Other information regarding the interests of
such individuals, as well as information regarding Salarius’
managers and executive officers and other persons who may be deemed
participants in the proposed transaction, is set forth in the proxy
statement/prospectus/information statement, which is included in
Flex Pharma’s registration statement. You may obtain free copies of
these documents as described in the preceding paragraph.
Non-Solicitation
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No public offer of
securities in connection with the merger shall be made except by
means of a prospectus meeting the requirements of Section 10
of the Securities Act of 1933, as amended.
- Financial Tables to Follow -
Flex Pharma, Inc. Unaudited Selected Consolidated
Balance Sheet Information (in thousands)
December 31,2018
December 31,2017
Assets: Cash and cash equivalents $ 9,830 $ 19,186 Marketable
securities — 14,130 Accounts receivable 10 10 Inventory 187 432
Prepaid expenses and other current assets 289 777 Property and
equipment, net 74 331 Other assets — 127 Total assets $
10,390 $ 34,993 Liabilities and stockholders' equity:
Accounts payable and accrued expenses $ 1,107 $ 5,717 Deferred
revenue — 72 Other liabilities — 98 Stockholders’ equity 9,283
29,106 Total liabilities and stockholders’ equity $ 10,390
$ 34,993
Unaudited Condensed Consolidated
Statements of Operations (in thousands, except loss per
share amounts)
Three MonthsEndedDecember 31,2018
Three MonthsEndedDecember 31,2017
Twelve MonthsEndedDecember 31,2018
Twelve MonthsEndedDecember 31,2017
Net product revenue $ 162 $ 283 $ 827 $ 1,261 Other revenue 1
— 11 14 Total revenue 163 283 838 1,275
Costs and expenses: Cost of product revenue 75 133 431 507 Research
and development 188 4,259 11,908 16,990 Selling, general and
administrative 1,921 3,984 10,573 18,504
Total costs and expenses 2,184 8,376 22,912 36,001
Loss from operations (2,021 ) (8,093 ) (22,074 ) (34,726 ) Interest
income, net 12 64 152 292 Net loss $
(2,009 ) $ (8,029 ) $ (21,922 ) $ (34,434 ) Net loss per
share-basic and diluted $ (0.11 ) $ (0.46 ) $ (1.22 ) $ (1.99 )
Weighted-average number of common shares outstanding (1)
18,067 17,643 18,017 17,261 (1) In 2014, the Company
issued approximately 5.4 million shares of restricted stock that
vested over four years, through February 2018. These shares were
considered outstanding for purposes of computing weighted average
shares as they vested. All of these shares have vested and are
considered outstanding as of December 31, 2018.
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version on businesswire.com: https://www.businesswire.com/news/home/20190306005126/en/
John McCabeChief Financial OfficerFlex Pharma,
Inc.jmccabe@flex-pharma.com617-874-1821
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