Savara Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Savara is a clinical-stage biopharmaceutical company developing molgramostim, an inhaled biologic in Phase 3 development for autoimmune pulmonary alveolar proteinosis (aPAP). The company has no product revenue and has not begun commercial operations.
Financial performance and position
Amounts below are in millions of dollars unless otherwise noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $13.9 | $8.2 | $31.5 | $20.3 |
| General and administrative expense | $4.1 | $2.4 | $10.8 | $7.7 |
| Total operating expenses | $18.0 | $10.5 | $42.4 | $28.0 |
| Net loss | $16.6 | $10.4 | $38.6 | $27.9 |
| Net loss per share | $0.10 | $0.07 | $0.24 | $0.18 |
- Cash and liquidity: At September 30, cash and cash equivalents were $27.7 million and short-term investments were $140.6 million, totaling $168.3 million. Management said these resources were sufficient to fund operations for the 12 months following issuance of the financial statements and many planned activities; additional capital may still be needed.
- Cash flow: Operating activities used $35.5 million in the first nine months of 2023, versus $25.9 million in 2022. Investing activities used $63.7 million, primarily reflecting purchases of short-term investments net of maturities. Financing provided $74.9 million, primarily from the July offering.
- Debt: Long-term debt was $26.3 million, with no current portion reported. The loan bears a floating rate; the filing reports an 8.0% rate at September 30, 2023. Principal payments are scheduled after the interest-only period, which runs through April 2026, with maturity in April 2027.
- Other balance-sheet measures: Total assets were $182.1 million, total liabilities $35.5 million, and accumulated deficit $377.3 million. No meaningful operating margin or gross margin is reported because the company has no product revenue.
Material changes versus the prior comparable period
- Q3 operating expenses increased $7.5 million year over year. R&D rose $5.7 million, mainly from molgramostim chemistry, manufacturing and controls work, IMPALA-2 trial activity, quality assurance, and personnel. G&A rose $1.8 million, reflecting added personnel and commercial activities.
- For the first nine months, operating expenses increased $14.4 million and net loss increased $10.7 million year over year. R&D increased $11.3 million and G&A increased $3.1 million.
- Other income increased to $1.4 million in Q3 and $3.8 million for the nine-month period, primarily because of higher investment balances after the July offering and higher market interest rates.
- Cash and cash equivalents declined from $52.1 million at year-end 2022 to $27.7 million, while short-term investments increased from $73.8 million to $140.6 million.
Outlook, risks and unusual items
- Management expects substantial R&D spending and operating losses to continue for at least the next several years as molgramostim advances through development and regulatory review. The filing provides no specific financial or clinical guidance.
- The July 2023 registered direct offering generated approximately $74.9 million in net proceeds. It included 21.0 million common shares and pre-funded warrants for 5.67 million additional shares, creating potential dilution. Bain Capital affiliates acquired the pre-funded warrants.
- The company reported approximately $37.0 million in estimated Parexel service, pass-through and investigator fees over the course of the IMPALA-2 trial. It also disclosed $2.8 million of contingent manufacturing and nebulizer milestones that had not been accrued because the triggering activities had not been met or were not considered probable or reasonably estimable.
- The loan agreement includes financial liquidity requirements if cash and cash equivalents fall below $40.0 million, as well as customary covenants and a first-priority lien on company assets, with a negative pledge on intellectual property.
- Key risks include clinical-trial outcomes, regulatory approval, manufacturing and supply, future financing availability, and commercial acceptance. Management noted possible supply-chain, cost, and trial-participation effects from geopolitical conflicts, and uncertainty associated with a potential U.S. government shutdown. It reported no material pending litigation and no material changes to previously disclosed risk factors.
- Management stated that disclosure controls and internal control over financial reporting were effective as of September 30, 2023.
Important facts for investors to verify
- IMPALA-2 trial progress, timing and results, and the regulatory path for molgramostim.
- Whether the stated liquidity runway remains adequate as trial, manufacturing and potential launch-preparation spending increases.
- Future financing needs, dilution exposure from outstanding warrants and equity awards, and the implications of the loan’s liquidity covenants.
- The filing reports 135.34 million common shares outstanding as of November 9, 2023, but weighted-average shares for Q3 of 164.34 million. Review the share and pre-funded-warrant treatment and reconcile the figures.