Pulmatrix, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Unless otherwise noted, financial amounts below are in millions of dollars. Pulmatrix is a clinical-stage biotechnology company developing inhaled therapies using its iSPERSE platform; it has no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0.153 | $0 |
| Research and development | $4.013 | $3.363 | $7.234 | $5.035 |
| General and administrative | $2.115 | $2.066 | $4.161 | $3.706 |
| Operating expenses | $6.128 | $5.429 | $11.395 | $8.741 |
| Net loss | $6.188 | $5.597 | $11.409 | $9.080 |
| Net loss per share | $0.13 | $0.29 | $0.34 | $0.50 |
For the six months, revenue was reimbursement of clinical-study costs under a Cystic Fibrosis Foundation Therapeutics award supporting Pulmazole. No gross margin measure is presented. Operating cash use was $8.075 million, compared with $6.649 million in the prior-year period; investing cash use was $0.002 million. Financing provided $12.868 million, principally from equity issuance, partly offset by debt repayments. Cash and cash equivalents rose to $8.341 million from $3.550 million at year-end 2017. At June 30, working capital was $5.182 million; current assets were $8.960 million and current liabilities $3.778 million.
The Hercules term loan was repaid in full by June 30, including a $0.245 million end-of-term payment; no debt remained outstanding. Total assets were $20.576 million and accumulated deficit was $185.411 million.
Material changes versus prior periods
- Six-month operating expenses increased $2.654 million and net loss increased $2.329 million year over year. R&D rose $2.199 million, mainly from Pulmazole, PUR1800 and employment costs. G&A rose $0.455 million, primarily from employment and patent costs.
- Q2 net loss increased $0.591 million year over year, with R&D up $0.650 million; lower interest expense partly offset the increase.
- Six-month 2018 revenue of $0.153 million was new and reflected grant-related clinical cost reimbursement, not product sales.
- In April, the company completed a public offering of common and pre-funded units, generating approximately $16.0 million gross proceeds, and issued shares through its at-the-market program. It issued 25.9 million common shares during the six months; 52.6 million warrants were outstanding at June 30.
Outlook, risks and other notable items
- Management said additional capital would be needed by the end of 2018 to continue operations at current spending levels. The filing states substantial doubt about the company’s ability to continue as a going concern within one year of filing, dependent on additional financing and ultimately revenue generation.
- Management expected existing funds to support Pulmazole through the final report of its Phase Ib trial and preparation for a planned Phase II trial, plus completion of a PUR1800 toxicology study expected in Q4 2018. Available funds were not expected to cover additional clinical work across the pipeline.
- The company anticipates rising R&D and administrative expenses and continued losses for at least several years. If financing is unavailable on acceptable terms, it may delay or reduce development, seek earlier-stage collaborations, dispose of rights or assets, or curtail operations. Equity financing may materially dilute shareholders; debt could impose restrictive covenants.
- Key risks include clinical and regulatory setbacks, manufacturing and commercialization challenges, competition, intellectual-property protection, and reliance on future financing. Goodwill was assessed as not impaired at June 30. Management reported effective disclosure controls and no material change in internal control over financial reporting; it reported no material legal proceedings.
Important facts for investors to verify
- Cash runway and financing needs against actual operating cash burn, and whether new funding is secured on acceptable terms.
- Pulmazole Phase Ib reporting and Phase II preparation milestones, and the expected completion and results of the PUR1800 toxicology study.
- Potential dilution from the 52.6 million outstanding warrants, including Series A warrants exercisable at $0.65 and Series B warrants at $0.75, as well as outstanding options.
- Whether the $0.153 million grant reimbursement recurs and the timing and scale of any future non-dilutive funding or collaboration income.