Pulmatrix, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance-sheet comparisons are with December 31, 2016. Unless noted otherwise, financial amounts below are in millions of dollars.
Business context
Pulmatrix is a clinical-stage biotechnology company developing inhaled therapies using its iSPERSE dry-powder delivery platform. It had no approved products and generated no product-sale revenue. Its pipeline included PUR1900 for cystic fibrosis, PUR0200 for COPD, and preclinical PUR1500 for idiopathic pulmonary fibrosis.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $0 | $0.396 million; down $0.396 million as the Mylan-funded clinical study concluded |
| Research and development | $1.672 million | $3.430 million; down $1.758 million |
| General and administrative | $1.640 million | $2.409 million; down $0.769 million |
| Total operating expenses | $3.312 million | $5.839 million |
| Operating loss | $3.312 million | $5.443 million |
| Interest expense | $0.187 million | $0.223 million |
| Net loss | $3.483 million | $5.669 million |
| Basic and diluted loss per share | $0.21 | $0.38 |
| Net cash used in operating activities | $2.992 million | $4.076 million |
| Cash and cash equivalents, March 31 | $10.541 million | $4.182 million at December 31, 2016 |
Gross margin is not meaningful given the absence of revenue in Q1 2017. The lower operating expenses reflected reduced project spending and lower stock-based compensation and consulting costs. Total assets were $22.794 million; working capital was $6.619 million. Loan carrying value was $5.183 million, comprising $2.661 million current and $2.522 million long-term; the term loan bears interest at a floating rate with a 9.50% floor and matures July 1, 2018.
Financing cash flow was $9.351 million, primarily from common-stock sales, partly offset by $0.651 million of term-loan principal payments. Cash increased by $6.359 million during the quarter. The company reported an accumulated deficit of $159.429 million.
Material changes, outlook, and risks
- R&D expense fell by $1.758 million, principally due to lower PUR1900, PUR0200, and PUR1500 spending as programs progressed through their respective development phases. G&A expense fell by $0.769 million, primarily from lower stock-based compensation and nonrecurring consultant costs.
- In February, Pulmatrix sold 2.95 million shares in registered direct offerings for $7.598 million net proceeds. Its March at-the-market offering generated $2.104 million net proceeds from 538,427 shares sold during the quarter. After quarter-end, it sold another 645,271 shares for approximately $2.211 million net proceeds.
- Management said available funds were expected to support PUR1900 through completion of a Phase 1B trial in cystic fibrosis patients, PUR0200 chemistry, manufacturing and controls work, and preclinical evaluation of PUR1500. Funds were not expected to cover additional clinical work across the pipeline. No specific revenue, earnings, or cash-flow guidance was provided.
- The company expects continued losses and increasing expenses and says it will need additional capital within the next year. The filing states that substantial doubt exists about its ability to continue as a going concern. Additional financing may be unavailable or dilutive; without it, Pulmatrix may need to delay, scale back, discontinue, or partner programs on less favorable terms.
- Other key risks include clinical and regulatory uncertainty, manufacturing and commercialization challenges, competition, intellectual-property protection, and dependence on external financing. Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. No material legal proceedings or material changes to previously reported risk factors were disclosed.
Important facts for investors to verify
- Current cash runway and financing needs, including whether additional capital is obtained on acceptable terms.
- Progress, timing, and costs for the PUR1900 Phase 1B trial and the PUR0200 and PUR1500 programs.
- Actual cash burn versus management’s planned use of funds, and the effect of subsequent ATM share sales on cash and dilution.
- Term-loan repayment schedule, covenants, and ability to meet obligations through the July 2018 maturity.
- Whether future collaborations, regulatory milestones, or other sources of revenue emerge, given Q1 2017 revenue was zero.