Market Overview

Flex Pharma Reports Fourth Quarter and Fiscal 2018 Financial Results

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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
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