TLOG TetraLogic Pharmaceuticals Corporation (CE)

TetraLogic Pharmaceuticals Corporation (Nasdaq:TLOG), a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule therapeutics in oncology and infectious diseases, today announced financial results for the third quarter ended September 30, 2015. These results are included in TetraLogic's Quarterly Report on Form 10-Q which has been filed with the Securities and Exchange Commission.

Summary of Key Development Programs, Updates and Anticipated Milestones

• Birinapant MDS Program: In June 2015, we announced encouraging preliminary data from the ongoing Phase 2a portion of our study of birinapant in combination with azacitidine in first line higher risk myelodysplastic syndromes (MDS). Enrollment continues in the Phase 2b portion of this randomized Phase 2 clinical trial in first line higher risk MDS patients and we expect interim data in early January 2016. 
• SHAPE CTCL Program: We have achieved our enrollment target in our randomized Phase 2 clinical trial of SHAPE, a topical HDAC inhibitor, in early stage Cutaneous T-cell Lymphoma (CTCL). We expect data in early January 2016.
• Birinapant/KEYTRUDA® Program: In April 2015, TetraLogic and Merck announced that the companies would collaborate on a Phase 1 study to evaluate the safety and efficacy of birinapant in combination with KEYTRUDA® (pembrolizumab), Merck's anti-PD-1 therapy, in patients with relapsed or refractory solid tumors. The study is expected to begin in December 2015.
• Birinapant HBV Program: As a follow-on to our discontinued multiple ascending dose study, in July 2015, we announced that we intend to re-initiate a program in HBV and conduct a combination single ascending dose/multiple ascending dose clinical trial, with birinapant as a single agent, in chronic HBV subjects who are naïve to antiviral medication. We have retained a clinical research organization to initiate this trial at multiple sites in India in the first half of 2016.   The application to commence the clinical trial is currently under review by the Indian regulatory authority. Timing of results will depend upon receiving approval to proceed, enrollment rates and the cohort in which activity, if any, is seen.
• SHAPE Alopecia Areata Program: On November 2, 2015, we announced that we have an open U.S. Investigational New Drug application in support of a Phase 2 clinical trial of SHAPE in patients with alopecia areata. The Phase 2 trial will be conducted in approximately forty patients.

Third Quarter 2015 Financial Highlights

• Cash, cash equivalents, and marketable securities totaled $29.5 million at September 30, 2015, as compared to $53.7 million at December 31, 2014.
• Research and Development expenses were $5.7 million for the third quarter of 2015, excluding $0.4 million in non-cash, stock based compensation expense, compared to $5.7 million for the same period in 2014, excluding $0.2 million in non-cash, stock-based compensation expense. Increases in spending on our MDS Phase 2 and SHAPE CTCL Phase 2 clinical trials were offset by decreases in spending on our ovarian and HBV clinical trials.
• General and Administrative expenses were $1.5 million for the third quarter of 2015, excluding $1.0 million in non-cash, stock-based compensation expense, compared to $2.0 million for the same period in 2014, excluding $0.6 million in non-cash, stock based compensation expense. This decrease primarily results from decreases in legal, personnel, and investor relations costs.
• Adjusted net loss for the third quarter of 2015 was $8.1 million, compared to an adjusted net loss of $8.6 million for the same period in 2014. Adjusted net loss excludes (i) non-cash stock-based compensation expense; (ii) non-cash interest expense; (iii) non-cash fair value adjustments to the Company's derivative liabilities; and (iv) non-cash fair value adjustments to the contingent consideration liability recognized as part of the Shape acquisition in April 2014.
• Shares issued and outstanding as of September 30, 2015 were 24.8 million, not including outstanding stock options to purchase 4.0 million shares and 6.5 million shares underlying the Company's outstanding convertible notes. This includes 1.4 million shares issued during the quarter under a purchase agreement with Lincoln Park Capital Fund, LLC for gross proceeds of $2.9 million.

Non-GAAP Financial Measures

In the attached press release, the Company discloses "Adjusted net loss," "Basic adjusted net loss per common share," and "Diluted adjusted net loss per common share" for certain historical periods, all of which are considered "non-GAAP financial measures" under Securities and Exchange Commission rules. A "non-GAAP financial measure" is defined as a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes (or includes) amounts, or is subject to adjustments that have the effect of excluding (or including) amounts, that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the Company's financial statements. Management does not intend the presentation of non-GAAP financial measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

For all periods presented, the Company reconciles net loss on a GAAP basis to adjusted net loss. Management believes that the presentation of these adjusted measures is useful to investors because it provides a means of evaluating the Company's operating performance and results from period to period on a comparable basis not otherwise apparent on a GAAP basis, since many non-cash, infrequent, or unusual charges, including items that may not affect the Company's operations, do not meet the strict GAAP definition of unusual non-recurring items. Furthermore, in preparing operating plans, budgets and forecasts, and in assessing historical performance, management relies, in part, on trends in the Company's historical results, exclusive of these items.   Finally, management believes that this presentation is useful in facilitating comparisons between the Company and other companies in its industry, many of whom exclude similar items.

About TetraLogic Pharmaceuticals Corporation

TetraLogic is a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule therapeutics in oncology and infectious diseases. TetraLogic has two clinical-stage product candidates in development: birinapant and SHAPE. Birinapant is currently being tested in Phase 1 and Phase 2 clinical trials for myelodysplastic syndromes (MDS) and solid tumors. SHAPE is currently being tested in a Phase 2 clinical trial for early-stage Cutaneous T-cell Lymphoma (CTCL).

Forward Looking Statements

Some of the statements in this release are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements relate to future events or TetraLogic's pre-clinical and clinical development of birinapant, SHAPE and other clinical programs, future expectations, plans and prospects. Although TetraLogic believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. TetraLogic has attempted to identify forward looking statements by terminology including ''believes,'' ''estimates,'' ''anticipates,'' ''expects,'' ''plans,'' ''projects,'' ''intends,'' ''potential,'' ''may,'' ''could,'' ''might,'' ''will,'' ''should,'' ''approximately'' or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including those discussed under the heading "Risk Factors" in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 26, 2015 and in our Form 10-Q filed with the SEC on November 4, 2015. Any forward looking statements contained in this release speak only as of its date. We undertake no obligation to update any forward-looking statements contained in this release to reflect events or circumstances occurring after its date or to reflect the occurrence of unanticipated events.

TetraLogic Pharmaceuticals Corporation
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
	Three months ended September 30,		Nine months ended September 30,
	2014	2015	2014	2015
Revenues	$ –	$ –	$ –	$ –
Expenses:
General and administrative	2,623,538	2,523,104	8,136,735	8,542,635
Research and development	5,968,181	6,096,424	13,955,119	20,252,415
Change in fair value of contingent consideration	984,000	1,123,000	1,902,000	3,252,000
Total expenses	9,575,719	9,742,528	23,993,854	32,047,050
Loss from operations	(9,575,719)	(9,742,528)	(23,993,854)	(32,047,050)
Change in fair value of derivative liabilities	1,799,501	431,358	1,637,381	2,073,581
Debt exchange expense	–	–	–	(818,541)
Interest and other income	41,375	21,614	72,571	82,754
Interest expense	(1,595,275)	(1,606,402)	(1,734,721)	(4,742,731)
Net loss	$ (9,330,118)	$ (10,895,958)	$ (24,018,623)	$ (35,451,987)
Per share information:
Net loss per common share:
Basic	$ (0.42)	$ (0.46)	$ (1.08)	$ (1.52)
Diluted	$ (0.42)	$ (0.46)	$ (1.10)	$ (1.52)
Weighted average shares outstanding:
Basic	22,307,138	23,830,978	22,280,232	23,329,464
Diluted	22,364,231	23,864,931	22,344,129	23,369,342
Net loss	$ (9,330,118)	$ (10,895,958)	$ (24,018,623)	$ (35,451,987)
Foreign currency gains/(losses)	(41,626)	(13,300)	(39,004)	19,482
Unrealized gains/(losses) on available-for-sale securities	1,635	3,796	(369)	9,645
Comprehensive loss	$ (9,370,109)	$ (10,905,462)	$ (24,057,996)	$ (35,422,860)

TetraLogic Pharmaceuticals Corporation
Reconciliation of GAAP Net Loss to Adjusted Net Loss
(Unaudited)
In accordance with Regulation G of the Securities and Exchange Commission, the table set forth below reconciles certain financial measures used in this press release that are not calculated in accordance with generally accepted accounting principles, or GAAP, with the most directly comparable financial measure calculated in accordance with GAAP.
	Three months ended September 30,				Nine months ended September 30,
	2014		2015		2014		2015
Net loss - GAAP	$ (9,330,118)		$ (10,895,958)		$ (24,018,623)		$ (35,451,987)
General and administrative adjustments	617,765	(1)	1,026,355	(1)	1,796,122	(1)	3,123,240	(1)
Research and development adjustments	226,580	(1)	385,376	(1)	690,355	(1)	1,202,335	(1)
Change in fair value of contingent consideration	984,000	(2)	1,123,000	(2)	1,902,000	(2)	3,252,000	(2)
Change in fair value of derivative liabilities	(1,799,501)	(3)	(431,358)	(3)	(1,637,381)	(3)	(2,073,581)	(3)
Interest expense	654,130	(4)	731,402	(4)	711,165	(4)	2,129,286	(4)
Debt exchange expense	--		--	(5)	--		818,541	(5)
	682,974		2,834,775		3,462,261		8,451,821
Adjusted net loss	$ (8,647,144)		$ (8,061,183)		$ (20,556,362)		$ (27,000,166)
Per share information:
Adjusted net loss per common share:
Basic and Diluted	$ (0.39)		$ (0.34)		$ (0.92)		$ (1.16)
Weighted average shares outstanding:
Basic and Diluted	22,307,138		23,830,978		22,280,232		23,329,464
Notes to Reconciliation of GAAP Net Loss to Adjusted Net Loss
(1) To exclude non-cash charges for stock compensation expense.
(2) To exclude the change in fair value of contingent consideration related to the acquisition of Shape Pharmaceuticals, Inc.
(3) To exclude the change in fair value of our warrant liabilities, and the change in fair value of the interest make-whole derivative related to our 8% Convertible Notes.
(4) To exclude the amortization of debt discount and the amortization of deferred financing costs related to our 8% Convertible Notes.
(5) In 2015, to exclude debt exchange expense as such exchanges are non-recurring in nature.

TetraLogic Pharmaceuticals Corporation
Consolidated Balance Sheets
	December 31,	September 30,
	2014	2015
Assets		(unaudited)
Current assets:
Cash and cash equivalents	$ 13,073,137	$ 15,909,751
Short-term investments	40,624,349	13,627,943
Deferred financing costs, short-term	375,808	346,458
Prepaid expenses and other current assets	1,784,069	1,468,767
Total current assets	55,857,363	31,352,919
Property and equipment, net	528,476	465,451
Intangible assets	41,575,516	41,575,516
Goodwill	16,902,466	16,902,466
Deferred financing costs, long-term	1,299,674	952,760
Other assets	2,127,551	1,814,102
Total assets	$ 118,291,046	$ 93,063,214
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$ 1,138,470	$ 621,761
Accrued expenses	3,727,784	4,579,176
Derivative liabilities	256,027	71,489
Total current liabilities	5,122,281	5,272,426
Convertible notes payable, net of discount	28,979,342	28,811,539
Derivative liabilities	2,400,000	345,000
Deferred taxes	16,879,659	16,879,659
Contingent consideration and other liabilities	31,507,588	34,754,287
Total liabilities	84,888,870	86,062,911
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized, 22,334,901 and 24,769,083 shares issued and outstanding at December 31, 2014 and September 30, 2015, respectively	2,234	2,477
Additional paid-in capital	159,308,307	168,329,051
Cumulative unrealized gain (loss) on investments	(8,117)	1,528
Cumulative translation adjustment	(69,031)	(49,549)
Accumulated deficit	(125,831,217)	(161,283,204)
Total stockholders' equity	33,402,176	7,000,303
Total liabilities and stockholders' equity	$ 118,291,046	$ 93,063,214

CONTACT: Company Contact:
         Pete A. Meyers
         Chief Financial Officer and Treasurer
         TetraLogic Pharmaceuticals Corporation
         (610) 889-9900, x103
         pete.meyers@tlog.com