Flex Pharma, Inc. (NASDAQ: FLKS), today announced its financial
results for the three months ended March 31, 2019.
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. The Company has filed a registration
statement on Form S-4 with the Securities and Exchange Commission
(the "SEC") that provides additional information related to the
merger. The Company is holding a special meeting of its
stockholders on June 14, 2019, in order to obtain the necessary
stockholder approvals to complete the merger and related matters.
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 per the Merger Agreement 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 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," stated William McVicar, Ph.D., Flex Pharma's President
and Chief Executive Officer.
First Quarter 2019 Financial Results
- Cash Position: As of March 31,
2019, Flex Pharma had cash and cash equivalents of $7.3 million.
The Company held no marketable securities at March 31, 2019. During
the three months ended March 31, 2019, cash and cash equivalents
decreased by $2.5 million.
- Total Revenue: Total revenue for
the three months ended March 31, 2019 was approximately
$105,000.
- Cost of Product Revenue: Cost of
product revenue for the three months ended March 31, 2019 was
approximately $47,000. There were no inventory write-offs during
the three months ended March 31, 2019.
- R&D Expense: Research and
development expense for the three months ended March 31, 2019 was
approximately $2,000.
- SG&A Expense: Selling,
general and administrative expense for the three months ended March
31, 2019 was $2.3 million, including merger related costs of $1.2
million. Selling, general and administrative expense for this
period also included personnel costs (including salaries 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 March 31, 2019 was ($2.2) million, or
($0.12) per share and included $0.2 million of stock-based
compensation expense. As of March 31, 2019, Flex Pharma had
18,068,017 shares of common stock outstanding. The net loss for the
first quarter of 2019, was primarily driven by the Company’s
operating expenses related to its merger related costs, 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 Food and Drug Administration 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, and as
amended on March 26, 2019 and April 18, 2019, in connection with
the proposed transaction, Flex Pharma filed a registration
statement with the SEC on Form S-4 containing a proxy
statement/prospectus/information statement. On April 30,2019, Flex
Pharma filed a definitive proxy statement/prospectus/information
statement with the SEC. Flex Pharma will mail the definitive proxy
statement/prospectus/information statement to Flex Pharma
stockholders of record as of the close of business on April 17,
2019 and members of Salarius. FLEX PHARMA URGES INVESTORS
AND EQUITYHOLDERS OF FLEX PHARMA AND SALARIUS TO READ THE
DEFINITIVE 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,
definitive 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,
definitive 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 definitive 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, 2018, which was filed with the SEC
on March 6, 2019, and amended on April 16, 2019. 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 definitive proxy
statement/prospectus/information 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)
March 31,2019
December 31,2018
Assets: Cash and cash equivalents $ 7,297 $ 9,830 Accounts
receivable 9 10 Inventory 165 187 Prepaid expenses and other
current assets 675 289 Property and equipment, net 38 74
Total assets $ 8,184 $ 10,390 Liabilities and
stockholders' equity: Accounts payable and accrued expenses $ 911 $
1,107 Stockholders’ equity 7,273 9,283 Total liabilities and
stockholders’ equity $ 8,184 $ 10,390
Unaudited Condensed
Consolidated Statements of Operations(in thousands, except
loss per share amounts)
Three Months EndedMarch 31,2019
Three Months EndedMarch 31,2018
Net product revenue $ 104 $ 177 Other revenue 1 2
Total revenue 105 179 Costs and expenses: Cost of product revenue
47 84 Research and development 2 4,680 Selling, general and
administrative 2,299 3,697 Total costs and expenses
2,348 8,461 Loss from operations (2,243 )
(8,282 ) Interest income, net 13 59 Net loss $ (2,230
) $ (8,223 ) Net loss per share-basic and diluted $ (0.12 )
$ (0.46 ) Weighted-average number of common shares
outstanding (1) 18,068 17,894
(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 March 31,
2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190501005098/en/
John McCabeChief Financial OfficerFlex Pharma,
Inc.jmccabe@flex-pharma.com617-874-1821
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