Atossa Therapeutics, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
Atossa is a clinical-stage biopharmaceutical company focused on oncology and infectious diseases, primarily breast cancer, mammographic breast density and COVID-19. The filing covers the fiscal year ended December 31, 2021, with comparative results for 2020. The company has no marketed products and remains pre-revenue.
- Endoxifen: Oral candidate under development for neoadjuvant treatment of ER+/HER2- breast cancer and for reducing mammographic breast density.
- AT-H201: Inhaled COVID-19 candidate for moderate to severely ill hospitalized patients; Phase 1/2a enrollment began in Australia in September 2021.
- AT-301: At-home nasal spray candidate for recently diagnosed, non-hospitalized COVID-19 patients; additional preclinical work is planned before a proposed U.S. Phase 2 study.
Financial performance and condition
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No sustainable revenue |
| Research and development expense | $9.210 million | $6.608 million | Up 39% |
| General and administrative expense | $11.311 million | $7.999 million | Up 41% |
| Total operating expenses | $20.521 million | $14.607 million | Up 40% |
| Net loss | $20.606 million | $17.828 million | Higher loss |
| Loss per common share | $0.18 | $1.97 | Improved due primarily to share issuance |
| Cash used in operating activities | $16.472 million | $11.570 million | Use increased 42% |
| Cash and cash equivalents at year-end | $136.377 million | $39.554 million | Up materially |
| Working capital | $138.114 million | Not clearly provided in the filing text | Not comparable from disclosed data |
Cash, cash equivalents and restricted cash totaled $136.487 million at December 31, 2021. Financing activities provided $113.304 million, including $69.668 million of net proceeds from common stock and warrant offerings, $43.818 million from warrant exercises and $0.391 million from employee option exercises, partially offset by $0.573 million of taxes on net option exercises.
Total liabilities declined to $3.126 million from $15.671 million, primarily because the $13.003 million common stock warrant liability was reclassified to equity upon early adoption of ASU 2020-06. The company had no debt balance disclosed at year-end. Stockholders’ equity was $138.136 million, compared with $27.168 million at December 31, 2020.
Material changes versus the prior comparable period
- Operating expenses increased $5.914 million, reflecting higher clinical and preclinical activity, manufacturing expenses, regulatory and professional fees, insurance and compensation.
- R&D spending increased $2.602 million. The increase included higher clinical and nonclinical trial spending, $1.000 million related to an oncology program exclusivity negotiation, and increased stock-based compensation.
- G&A spending increased $3.312 million, including higher stock-based compensation, employee compensation, insurance and proxy-related professional fees.
- Stock-based compensation increased to $5.267 million from $3.019 million.
- The company completed two equity financings in January and March 2021, generating approximately $69.7 million in combined net proceeds, and issued 37.451 million shares through warrant exercises for $43.8 million.
- Common shares outstanding increased to 126.624 million at December 31, 2021, from 47.550 million at December 31, 2020, creating substantial dilution for existing holders.
- In December 2021, the company began the approximately 240-participant Karisma-Endoxifen Phase 2 breast-density study and completed an FDA pre-IND meeting for a planned multi-center Phase 2 neoadjuvant breast cancer study.
- The company completed the first part of the AT-H201 Phase 1/2a study in December 2021; enrollment in the second part began in February 2022.
Guidance, outlook, commentary and risks
Management expects continued operating losses and negative operating cash flow for the foreseeable future. It believes available funding is sufficient to finance operations for at least one year from the issuance date of the financial statements, but expects to require substantial additional capital over the next several years. No revenue guidance was provided, and the company does not anticipate revenue until its drug programs are developed, approved and commercialized.
- The FDA indicated that reducing mammographic breast density alone may not be an approvable indication unless Endoxifen is also shown to reduce breast cancer incidence, potentially requiring additional studies.
- The prior topical Endoxifen breast-density program is not currently being further developed after skin rashes and local irritation affected approximately 72 participants.
- The seven-patient Australian neoadjuvant Endoxifen study reported an average 65% reduction in Ki-67 tumor-cell proliferation, but the small sample size limits the evidentiary strength of the result.
- COVID-19 case declines could make enrollment in COVID-19 clinical studies more difficult, while the pandemic may disrupt supply chains, regulatory interactions, clinical enrollment and access to capital.
- AT-H201 may require additional sites for its final study phase, and timing depends partly on COVID-19 infection rates and regulatory approvals.
- All programs remain subject to clinical failure, safety findings, manufacturing challenges, regulatory delays or non-approval, competition and uncertain commercial demand.
- The company relies heavily on third-party manufacturers, clinical research organizations, research institutions and other service providers.
- A $1.000 million fee paid for the right to negotiate two oncology R&D programs was expected to be returned after negotiations ended in February 2022 without a definitive agreement.
- The company held 22.277 million warrants outstanding at December 31, 2021, with exercise prices ranging from $1.00 to $4.05, creating potential future dilution.
- Management reported that disclosure controls and internal control over financial reporting were effective at year-end. A prior material weakness involving complex financing and warrant accounting was reported as remediated.
Important facts for investors to verify
- Verify the latest cash balance, quarterly cash burn and estimated operating runway because management expects additional financing.
- Track enrollment, interim data, safety and regulatory status for the Karisma-Endoxifen, neoadjuvant Endoxifen and AT-H201 studies.
- Confirm whether the proposed U.S. Phase 2 AT-301 study has received FDA authorization and whether additional preclinical requirements were satisfied.
- Review outstanding warrants, options and authorized-share capacity for potential dilution and financing flexibility.
- Assess whether the FDA’s position on mammographic breast-density reduction could require larger or additional cancer-incidence studies.
- Review subsequent filings for the return of the $1.000 million oncology negotiation fee and the impact of February 2022 executive option grants.
- Evaluate the company’s dependence on third-party manufacturers and clinical providers, as well as COVID-19-related enrollment and supply-chain risks.