Savara Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023. Savara is a clinical-stage biopharmaceutical company developing treatments for rare respiratory diseases. Its lead candidate, inhaled molgramostim, is 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
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $8.9 million | $6.4 million | $17.6 million | $12.1 million |
| General and administrative expense | $3.3 million | $3.0 million | $6.7 million | $5.3 million |
| Total operating expenses | $12.2 million | $9.4 million | $24.3 million | $17.4 million |
| Net loss | $11.4 million | $9.2 million | $22.0 million | $17.5 million |
| Loss per share, basic and diluted | $0.07 | $0.06 | $0.14 | $0.11 |
As of June 30, 2023, cash and cash equivalents were $22.7 million and short-term investments were $82.4 million, totaling $105.2 million in cash and investments. Total assets were $119.8 million, total liabilities were $32.1 million, and stockholders’ equity was $87.7 million. Long-term debt was $26.2 million, with no current portion reported. The debt bears a floating rate; the filing reports a rate of 7.75% on June 30, 2023.
Operating cash use was $22.3 million for the first half of 2023, versus $17.7 million in the prior-year period. Investing activities used $7.1 million, largely reflecting purchases and maturities of short-term investments. The company reported no material product gross margin; the filing does not provide a meaningful operating margin measure for this pre-revenue business.
Material changes versus prior period
- Q2 research and development expense increased $2.5 million, or 38.8%, primarily from molgramostim manufacturing and chemistry, manufacturing and controls work, IMPALA-2 trial activity, and higher personnel costs.
- First-half research and development expense rose $5.5 million, or 45.8%; general and administrative expense rose $1.4 million, or 25.6%, reflecting personnel additions, including commercialization-related hires.
- First-half net loss increased $4.5 million. Higher interest income from cash and investments partly offset increased operating expenses.
- Cash and cash equivalents declined from $52.1 million at December 31, 2022, while short-term investments rose from $73.8 million. The combined balance declined from $125.9 million to $105.2 million.
Outlook, risks and unusual items
- Management said cash and short-term investments at June 30, 2023 were sufficient to fund operations for the 12 months following issuance of the financial statements. It also stated that additional capital may be needed for continued development, regulatory approval and potential commercialization.
- On July 17, 2023, Savara completed a registered direct offering of 21.0 million common shares and pre-funded warrants for 5.67 million shares. Net proceeds were approximately $74.7 million. The company said proceeds would support working capital and general corporate purposes, including molgramostim development and commercialization preparation.
- The IMPALA-2 trial remains a key development activity. A Parexel work order and change orders estimate approximately $33.4 million in trial services, pass-through and investigator fees over the trial. The filing provides no specific trial completion date or financial guidance.
- Potential manufacturing-related milestone commitments totaled $2.8 million at June 30, 2023; they were contingent, not accrued, and not then payable. Certain royalties would apply if products are approved and sold.
- The debt agreement includes cash-related covenants if cash and cash equivalents fall below $40.0 million, including minimum liquidity requirements. The company reported monitoring the lender’s transition following Silicon Valley Bank’s failure and did not expect a material impact.
- Key risks include clinical-trial failure or delay, regulatory non-approval, manufacturing and supply constraints, the need for further financing, and potential disruptions from COVID-19, international conflict, or financial-market conditions. Savara reported no material changes to risk factors in its prior annual report and no material pending litigation.
Important facts for investors to verify
- IMPALA-2 enrollment, execution, timing and clinical results, and any updates to the regulatory pathway for molgramostim.
- Cash burn relative to available liquidity and the company’s stated 12-month runway, including how the July offering proceeds extend funding capacity.
- Potential dilution from the July 2023 offering and the substantial equity awards and warrants reserved for issuance; shares outstanding were 135,173,441 as of August 10, 2023.
- Progress and costs for clinical supply, second-source manufacturing, and contingent milestone obligations.
- Compliance with debt covenants and the effect of the floating interest rate on future interest expense.