Pulmatrix, Inc. — Q2 2017 Form 10-Q
Business and period: Clinical-stage biotechnology company developing inhaled therapies using its iSPERSE dry-powder delivery platform. The filing covers the quarter and six months ended June 30, 2017; financial amounts below are in millions unless noted. The company had no approved products and no product-sales revenue.
Key financial metrics
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0.260 | $0 | $0.656 |
| Research and development expense | $3.363 | $2.441 | $5.035 | $5.871 |
| General and administrative expense | $2.066 | $2.214 | $3.706 | $4.623 |
| Net loss | $(5.597) | $(9.187) | $(9.080) | $(14.857) |
| Net loss per share | $(0.29) | $(0.62) | $(0.50) | $(1.01) |
| Operating cash used | Not presented separately | Not presented separately | $(6.649) | $(7.942) |
Margins are not meaningful given the absence of revenue. At June 30, cash and cash equivalents were $10.976 million, working capital was $5.838 million, and accumulated deficit was $165.026 million. Total assets were $23.520 million and total liabilities were $7.731 million. Term-loan principal outstanding was $4.639 million, with $2.745 million of net carrying value classified current and $1.804 million long term. The loan matures July 1, 2018 and is secured by substantially all company assets other than intellectual property.
Material changes and financing
- Q2 revenue fell to zero as Mylan-funded clinical-study work concluded. The six-month comparison also reflects the end of that reimbursement revenue.
- Q2 R&D expense rose by $0.922 million, primarily due to a $1.0 million upfront RespiVert license fee. Six-month R&D expense declined by $0.836 million, reflecting lower spending on PUR1900 and PUR0200, partly offset by that fee.
- Q2 net loss improved by $3.590 million, and six-month net loss improved by $5.777 million, compared with 2016. A key factor was the absence of the 2016 $4.575 million net write-off of intangibles; lower six-month G&A and R&D expenses also contributed.
- Six-month financing provided $13.456 million net: $14.467 million from common-stock issuance and $0.304 million from option exercises, less $1.315 million of term-loan principal payments. The company issued 5,130,273 shares for aggregate net proceeds of $14.467 million. Common shares outstanding were 20,124,411 at June 30.
Outlook, risks, and unusual items
- Management expects continuing losses and rising expenses as it advances its pipeline. It stated existing funds were expected to support PUR1900 through completion of a Phase IB trial in cystic fibrosis patients, PUR0200 chemistry/manufacturing work, and preclinical evaluation of PUR1500; funds would not cover additional clinical work for any pipeline program.
- The company says it will need additional capital within the next year. Its ability to continue as a going concern depends on obtaining equity or debt financing and, ultimately, generating revenue; the filing states these conditions raise substantial doubt about its ability to continue as a going concern. Financing may be unavailable or dilutive, and debt may impose restrictive covenants.
- The June 9 RespiVert agreement provides an exclusive worldwide license for narrow-spectrum kinase inhibitor IP. In addition to the $1.0 million upfront fee, it includes development and commercial milestones of $1 million to $80 million and royalties of 6%–10% of licensed-product sales. The next likely development milestone is $1 million upon first patient dosing in a Phase IIb trial. The upfront fee was accrued at June 30 and paid in July.
- Key risks include clinical and regulatory uncertainty, trial enrollment and costs, manufacturing scale-up, intellectual-property protection, competition, and dependence on future financing. The company reported no material change to risk factors from its latest Form 10-K, no material legal proceedings, and effective disclosure controls.
Investor verification points
- Confirm the timing and terms of additional financing needs, and whether the stated project runway assumptions remain achievable.
- Track PUR1900’s Phase IB progress and the development plans, timelines, and funding needs for PUR0200, PUR1500, and the RespiVert-licensed programs.
- Review remaining ATM offering capacity and the potential dilution from future equity issuance, options, warrants, and debt conversion provisions.
- Verify term-loan repayment and covenant status, and monitor the RespiVert milestone and royalty obligations as programs advance.