Altimmune, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 27, 2020. The filing reports annual results, not standalone fourth-quarter results. Altimmune is a clinical-stage biopharmaceutical company with no approved products or product-sale revenue.
Business context
The pipeline included ALT-801 for NASH, HepTcell for chronic hepatitis B, ALT-702 for cancer, and intranasal vaccine candidates NasoShield for anthrax and NasoVAX for influenza. AdCOVID, a COVID-19 vaccine candidate, was announced in February 2020 after year-end. Revenue to date was primarily from U.S. government research grants and contracts, principally BARDA and NIAID.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $5.8 million | $10.3 million |
| Research and development expense | $17.8 million | $18.5 million |
| General and administrative expense | $8.5 million | $9.8 million |
| Impairment charges | $1.0 million | $24.9 million |
| Operating loss | $21.5 million | $42.8 million |
| Net loss | $20.5 million | $39.2 million |
| Net cash used in operating activities | $9.6 million | $9.4 million |
- Revenue fell 44%, primarily from lower BARDA activity and the completion of the NIAID-funded SparVax-L program. All revenue was generated in the United States.
- Net loss narrowed substantially, largely because 2018 included $24.9 million of impairment charges versus $1.0 million in 2019. The 2019 impairment followed abandonment of SparVax-L. R&D expense included acquisition-related in-process research and development charges associated with Spitfire.
- Cash, cash equivalents, restricted cash and short-term investments totaled $37.3 million at year-end 2019, compared with $34.4 million of cash and restricted cash at year-end 2018. The 2019 balance included $28.3 million of short-term investments.
- Cash flows were $(9.6) million from operations, $(28.3) million from investing activities—primarily purchases of short-term investments—and $12.5 million from financing activities, principally the March 2019 equity offering.
- Total assets were $54.1 million and total liabilities were $8.5 million at year-end. Notes payable were zero; liabilities included $1.7 million of operating lease obligations and $2.75 million of contingent consideration. No meaningful product gross margin was reported because the company had no product sales.
- Management said available funds and expected government-contract revenue were sufficient for at least 12 months from the financial statements’ issuance date, but not to complete the clinical development and commercialization of candidates. Accumulated deficit was $137.4 million.
Material changes and notable items
- Revenue declined as BARDA revenue decreased by approximately $2.9 million and NIAID revenue by approximately $1.9 million; NIAID work on SparVax-L ended in the third quarter of 2019, with no further funding expected.
- Altimmune acquired Spitfire Pharma in July 2019, issuing 1,887,250 shares as upfront consideration. The agreement provides for up to $88 million in additional milestone payments, including regulatory and sales milestones.
- Altimmune raised approximately $12.7 million net through a March 2019 registered direct offering. Common shares outstanding increased from 9.1 million at year-end 2018 to 15.3 million at year-end 2019; 10.4 million warrants were outstanding at year-end 2019.
- The company repaid its BPI France notes during 2019. Its current BARDA base period provided approximately $27.8 million of funding through December 2020; further funding depends on BARDA exercising contract options.
Outlook, risks and contingencies
- Management planned to advance ALT-801 into Phase 1, HepTcell into Phase 2, and NasoShield into a Phase 1b trial in 2020; NasoShield results were expected in the fourth quarter of 2020. These are forward-looking plans, not reported outcomes.
- NasoShield’s 2018 Phase 1 study met safety endpoints but did not show an appreciable immune response. The planned Phase 1b trial was to test modified intranasal administration. BARDA funding beyond the base period is discretionary and contingent on program progress.
- AdCOVID was in early development, with animal testing and manufacturing planned before a proposed Phase 1 study in the third quarter of 2020. The filing cautions that development could fail or divert resources from other programs; the COVID-19 outbreak could also disrupt trials, suppliers, and operations.
- Altimmune remains dependent on external financing and government contracts, has no product revenue, and expects continued losses. Clinical, regulatory, manufacturing, patient-enrollment, competition, intellectual-property, and dilution risks are significant; the company relies on third-party manufacturers and clinical contractors.
- A former employee’s lawsuit alleges, among other claims, intellectual-property and other misconduct. The company said it believed the claims were without merit; motions were pending, and the company could not estimate a possible loss or had accrued a liability.
- The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor was not engaged to opine on internal-control effectiveness.
Investor verification priorities
- Confirm current cash, investment balances, operating cash use, and financing needs against subsequent filings; the stated 12-month runway was management’s estimate as of the filing date.
- Track BARDA option exercises, funding conditions, and the clinical and immunogenicity results for NasoShield.
- Verify progress, trial timing, and financing for ALT-801, HepTcell, NasoVAX, ALT-702, and AdCOVID, including any changes to development priorities.
- Review share and warrant overhang, future capital-raising terms, and the contingent payments associated with the Spitfire acquisition.
- Monitor the Tang litigation and any material change in the company’s estimate of legal exposure.