PharmAthene, Inc. — Form 10-Q Summary
Entity note: The filing is for PharmAthene, Inc., not Altimmune, Inc. It covers the quarter and nine months ended September 30, 2014; filed November 6, 2014.
Business context
PharmAthene develops biodefense countermeasures, including SparVax anthrax vaccine, rBChE nerve-agent treatment, and Valortim anthrax antibody. Revenue primarily comes from U.S. government contracts. The statements are unaudited.
Financial performance and position
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $0.96 million | $3.49 million | $8.36 million | $14.26 million |
| Operating expenses | $4.96 million | $6.69 million | $15.93 million | $20.03 million |
| Operating loss | $4.00 million | $3.20 million | $7.57 million | $5.77 million |
| Net loss | $4.63 million | $3.95 million | $7.33 million | $7.29 million |
| Basic and diluted loss per share | $0.08 | $0.08 | $0.13 | $0.15 |
- Revenue fell 71% in Q3 and 41% over nine months year over year, mainly following BARDA’s reduction of the SparVax contract and lower rBChE work.
- Research and development expense declined 35% in Q3 and 33% for nine months. General and administrative expense declined 22% in Q3 and 5% for nine months.
- Q3 net loss increased year over year despite lower operating expenses, while nine-month net loss was broadly flat. The nine-month comparison benefited from a $0.46 million gain in derivative fair value, versus a $1.18 million loss in 2013.
- Cash and equivalents were $19.62 million at September 30, 2014, versus $10.48 million at year-end 2013. Current assets were $20.59 million and current liabilities $3.88 million. Accumulated deficit was $217.65 million.
- Operating cash use was $4.95 million for the first nine months, compared with $0.91 million in 2013. Investing cash use was $0.08 million; financing provided $14.18 million, primarily from equity sales.
- Long-term debt was approximately $0.99 million, all current; the revolving credit facility had no amount drawn and approximately $0.1 million available. The GE Capital term loan bears 10.14% interest and matures in September 2015. The company disclosed a possible default assertion related to the BARDA contract reduction, but had received no default notice.
Material changes, outlook, and risks
- BARDA partially terminated and de-scoped the SparVax contract, including removal of the planned Phase 2 trial. PharmAthene expected remaining closeout activities in Q4 2014 and no significant additional BARDA funding for SparVax.
- A September 2014 NIAID agreement provided approximately $5.2 million in initial, incrementally funded support for a next-generation anthrax vaccine. Its potential value is up to approximately $28.1 million over about five years only if milestones are met and all options are exercised at NIAID’s discretion.
- The company expected current cash plus collections under existing contracts to fund operations through 2015, but anticipated future losses and potentially lower operating cash generation. It said additional capital might be needed in 2015; further equity issuance could dilute shareholders.
- PharmAthene formed a strategic alliance with Nanotherapeutics to pursue biodefense product development. It also expected delivery in Q4 2014 under an approximately $1.0 million BARDA order for Valortim.
- In the SIGA litigation, the Delaware Court of Chancery ruled that PharmAthene was entitled to lump-sum expectation damages, prejudgment interest, and certain legal fees; the amount remained to be calculated and approved, and was subject to appeal. SIGA filed for Chapter 11 protection. SIGA estimated a potential award of at least $180 million and possibly $232 million or more, but those were SIGA’s estimates, not a final court award. Collection, timing, and ultimate outcome were uncertain.
- Other significant risks include dependence on government contracts and appropriations, product-development and regulatory uncertainty, possible government contract termination, debt acceleration risk, and the uncertain ability to raise capital. The filing reported no off-balance-sheet arrangements and management considered disclosure controls effective.
- After quarter-end, PharmAthene sold 1,325,863 shares for approximately $2.2 million net proceeds; approximately $3.0 million of gross offering capacity remained.
Key facts investors should verify
- Confirm the correct issuer: the supplied filing identifies PharmAthene, Inc., despite the request metadata naming Altimmune, Inc.
- Track the final SIGA damages judgment, appeals, bankruptcy proceedings, and actual collectability; the filing provides no clear final award value.
- Check subsequent government-contract funding, NIAID option exercises, and the level of revenue after the SparVax de-scope.
- Monitor cash burn, equity issuance and dilution, and repayment or any default action under the GE Capital facility.