Atossa Therapeutics, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
Atossa is a clinical-stage biopharmaceutical company focused on oncology, breast cancer and other breast conditions. Its lead program is oral (Z)-endoxifen, under development for neoadjuvant treatment of breast cancer and reduction of mammographic breast density. The company has no marketed products or sustainable revenue. The filing covers the three months ended March 31, 2023, compared with the same period in 2022. Financial amounts are in thousands, except per-share data.
- EVANGELINE Phase 2 trial enrolled its first patient in February 2023.
- A separate (Z)-endoxifen study within the I-SPY 2 trial began in March 2023.
- The company expects to focus on (Z)-endoxifen and does not expect to advance AT-H201 further in 2023.
- Atossa owns approximately 19% of Dynamic Cell Therapies, Inc. following a $4,700 investment completed in December 2022.
Financial Condition and Results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $3,508 | $1,499 | +$2,009, or 134% |
| General and administrative expense | $3,590 | $3,248 | +$342, or 11% |
| Total operating expenses | $7,098 | $4,747 | +$2,351, or 50% |
| Operating loss | $(7,098) | $(4,747) | Loss increased |
| Interest income | $850 | $1 | +$849 |
| Net loss | $(6,281) | $(4,786) | Loss increased by $1,495 |
| Basic and diluted loss per share | $(0.05) | $(0.04) | Loss increased |
| Net cash used in operating activities | $(7,022) | $(4,878) | Cash use increased by 44% |
Operating expense growth was primarily driven by an $1,048 increase in clinical and non-clinical trial costs, including (Z)-endoxifen activities, active pharmaceutical ingredient purchases and formulation work. Q1 2022 R&D expense also benefited from a $1,000 refund related to an exclusivity agreement that did not recur.
Gross margin and operating margin are not meaningful because the company had no revenue. Net loss reflects ongoing development spending, partially offset by higher interest income from cash invested in money market accounts. Stock-based compensation was $1,573 in Q1 2023 versus $1,806 in Q1 2022.
Liquidity, Capital Resources and Debt
| Balance-sheet metric | March 31, 2023 | December 31, 2022 |
|---|---|---|
| Cash and cash equivalents | $103,868 | $110,890 |
| Restricted cash | $110 | $110 |
| Total current assets | $110,869 | $118,197 |
| Total current liabilities | $2,944 | $5,568 |
| Working capital | $107,925 | Not clearly provided |
| Total assets | $116,200 | $123,532 |
| Accumulated deficit | $(162,475) | $(156,194) |
- Cash, cash equivalents and restricted cash totaled $103,978 at March 31, 2023, down from $111,000 at year-end 2022.
- There were no financing cash flows in Q1 2023 and no capital expenditures.
- The filing does not disclose outstanding debt; reported liabilities consist primarily of accounts payable, accrued expenses, payroll liabilities and other current liabilities.
- Management believes available funding is sufficient to finance operations for at least one year from issuance of the financial statements, but expects to raise substantial additional capital over the next several years.
Material Changes, Outlook and Risks
- The company expects continuing operating losses and negative operating cash flows because it has no ongoing revenue source.
- Potential future funding sources include equity offerings, debt financing, collaborations, licenses and other strategic arrangements. Financing may be unavailable or dilutive, and failure to obtain funding could require curtailment or suspension of business plans.
- As of March 31, 2023, Atossa had approximately $103,712 of cash and cash equivalents above FDIC insurance limits, creating concentration and bank-failure exposure.
- The $4,700 DCT investment was subject to impairment indicators, including the investee’s negative operating cash flows and going-concern concerns. Management’s valuation concluded that no impairment was required at March 31, 2023, but the investment could be impaired in a future period.
- The company had an estimated non-cancellable CRO commitment of $1,146, plus $13 in 2024; $111 had been incurred under the contract as of March 31, 2023.
- Atossa received a Nasdaq deficiency notice for failure to maintain a $1.00 minimum bid price. The compliance deadline was extended to October 2, 2023, requiring a closing bid price of at least $1.00 for 10 consecutive business days. Failure could result in delisting and impair access to capital.
- The Australian R&D rebate program remains subject to government review. Previously collected rebates of approximately $2,028 could be subject to recall, with penalties and interest, if qualifying activities are disallowed.
- Key operating risks include clinical-trial delays or failures, regulatory non-approval, reliance on third-party manufacturers and CROs, intellectual-property challenges, competition, cybersecurity and data-privacy risks, macroeconomic conditions and dilution from future financings.
- Management reported effective disclosure controls and procedures as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter.
Most Important Facts to Verify
- Cash burn relative to the company’s stated expectation that available funding covers at least 12 months of operations.
- Progress, enrollment and safety data for the EVANGELINE, Karisma and I-SPY 2 (Z)-endoxifen studies.
- Whether Atossa regained Nasdaq’s $1.00 minimum bid-price compliance by October 2, 2023.
- Future financing requirements, dilution risk and the availability of authorized shares for capital raising.
- Valuation and potential impairment of the DCT investment.
- Potential liability associated with the Australian R&D rebates and the non-cancellable CRO commitment.
- Whether clinical, regulatory, manufacturing or intellectual-property developments alter the expected timing and cost of commercialization.