Altimmune, Inc. — Form 10-Q Summary
Business context and reporting period
Unaudited results for the three and six months ended June 30, 2017. Altimmune is a clinical-stage immunotherapeutics and vaccine developer with no product-sales revenue to date. On May 4, 2017, it completed its merger with PharmAthene; Altimmune was the accounting acquirer, and PharmAthene’s results are included only from the merger date. Accordingly, year-over-year comparisons are affected by the merger.
Financial results and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue, grants and contracts | $3.04 million | $0.75 million | $3.34 million | $1.25 million |
| Research and development expense | $5.25 million | $1.38 million | $8.04 million | $2.44 million |
| General and administrative expense | $1.79 million | $0.97 million | $3.83 million | $2.01 million |
| Operating loss | $4.01 million | $1.60 million | $8.53 million | $3.21 million |
| Net loss | $3.11 million | $1.62 million | $7.69 million | $3.23 million |
| Loss per share, basic and diluted | $0.26 | $0.25 | $0.82 | $0.49 |
- Six-month operating cash use was $11.15 million, versus $2.97 million in the comparable 2016 period. Investing cash inflow was $13.77 million, mainly from $13.68 million of cash acquired in the merger; financing cash inflow was $2.85 million.
- At June 30, cash and cash equivalents were $8.37 million, plus $34,174 restricted cash. Current assets were $17.00 million and current liabilities $5.53 million. Total debt was approximately $620,000; the convertible notes’ principal and accrued interest converted to equity at merger closing.
- Total assets were $90.84 million, including $37.65 million of acquired in-process research and development and $35.40 million goodwill. Stockholders’ equity was $75.98 million.
- Revenue remained primarily grant- and contract-based; license revenue was just $9,876 for the first half. No product revenue was reported. A $993,709 income tax benefit reflects anticipated refunds from carrying back estimated 2017 tax losses.
Material changes versus the prior comparable period
- First-half revenue and grants rose 167%, mainly due to increased BARDA work and revenue from PharmAthene’s NIAID contract after the merger.
- First-half R&D expense increased 229%, reflecting greater NasoShield, HepTcell and NasoVAX development and manufacturing activity, plus acquired SparVax-L costs. G&A rose 90%, primarily due to merger-related legal and professional expenses and acquired costs.
- First-half net loss increased to $7.69 million from $3.23 million, and operating cash use increased substantially. The merger also materially expanded reported assets, including goodwill and IPR&D.
Outlook, commentary and risks
- Management expected the NasoVAX Phase 2 program to start in Q3 2017, with initial data approximately six months after enrollment began. Initial HepTcell Phase 1 results were expected by year-end 2017. A NasoShield Phase 1 trial was anticipated in Q1 2018, subject to continued BARDA support.
- The BARDA NasoShield contract has a maximum value of up to $127.5 million, but only about $21.6 million was provided for the initial July 2016–July 2018 period; later funding depends on BARDA exercising options. The NIAID contract’s expected final committed funding was $15.1 million after NIAID indicated it would exercise only one remaining option.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern and says additional debt or equity financing is needed. It also contains an apparent liquidity inconsistency: the going-concern note says available resources would be insufficient for at least twelve months, while MD&A says cash, expected refunds, committed financing and contract revenue were adequate through June 2018.
- Goodwill and long-lived assets were not impaired at June 30, 2017, but management reported that a hypothetical 10% downward adjustment to the top of its control-premium range could have produced $2.2 million of goodwill impairment. Sustained share-price declines could lead to a material future impairment.
- The PharmAthene purchase-price allocation was preliminary and could change during the measurement period. The acquired IPR&D valuation used Level 3 assumptions, including a 23% discount rate. Ordinary-course disputes and potential claims were disclosed; management did not expect them to materially affect financial position or results.
Important facts for investors to verify
- Reconcile the conflicting statements about whether available resources cover at least twelve months, and confirm actual cash runway and financing availability.
- Verify the status and terms of the conditional $5.0 million second closing under the convertible-note agreement and any other committed financing.
- Check subsequent BARDA and NIAID funding, option exercises, and clinical-trial timing against the stated expectations.
- Monitor cash burn, government-contract receivables and collections, expected tax refunds, and the continued absence of product-sales revenue.
- Track share price and acquisition-accounting updates for potential goodwill or IPR&D impairment and final purchase-price allocation changes.