Savara Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. 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 commenced commercial operations.
Financial summary
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $8.2 million | $6.5 million | $20.3 million | $21.4 million |
| General and administrative expense | $2.4 million | $3.4 million | $7.7 million | $9.3 million |
| Operating expenses | $10.5 million | $10.0 million | $28.0 million | $30.8 million |
| Net loss | $10.4 million | $10.5 million | $27.9 million | $31.7 million |
| Basic and diluted loss per share | $0.07 | $0.07 | $0.18 | $0.25 |
As of September 30, 2022, cash and cash equivalents were $119.8 million and short-term investments were $14.2 million, or $134.1 million combined. Cash used in operating activities was $25.9 million for the first nine months, versus $30.7 million a year earlier. Investing activities provided $111.9 million, primarily from maturities and sales of short-term investments; financing activities provided $0.1 million. The company reported a $328.4 million accumulated deficit. No meaningful profit margin is applicable because the company has no revenue.
Long-term debt was $26.0 million, with no current portion reported. In April 2022, Savara refinanced its prior Silicon Valley Bank loan with a $26.5 million facility. The loan is interest-only through April 2026, with principal installments thereafter through April 2027, subject to an option to extend the interest-only period if specified cash conditions are met. Interest is floating-rate. The lender has a first-priority lien on company assets and the agreement includes covenants, including cash-balance requirements under specified circumstances.
Changes versus the prior comparable period
- Q3 operating expenses rose $0.6 million, as R&D increased $1.6 million—principally IMPALA-2 trial and chemistry, manufacturing and controls costs—partly offset by a $1.0 million decline in G&A, including lower consulting costs. Net loss improved slightly to $10.4 million.
- For the first nine months, operating expenses declined $2.9 million and net loss narrowed $3.9 million. Lower R&D costs from winding down vancomycin activities and lower administrative and compensation costs more than offset increased molgramostim development spending.
- Cash and cash equivalents increased from $34.0 million at year-end 2021; short-term investments fell from $127.2 million to $14.2 million, largely reflecting investment maturities, sales and purchases. The 2022 debt refinancing replaced the prior facility; it did not provide material net financing cash.
Outlook, risks and unusual items
- Management expects significant R&D and other expenses and operating losses to continue for at least several years as it advances molgramostim and seeks regulatory approval. It said available cash and investments were sufficient to fund operations for the 12 months following issuance of the financial statements, while noting that additional capital may be needed. Funding needs depend on clinical-development pace and results; financing may not be available on acceptable terms.
- The company is continuing Phase 3 IMPALA-2 development. Its Parexel work order and change orders estimate approximately $34.0 million of trial services, pass-through and investigator fees over the trial. Additional manufacturer milestone obligations totaling $3.09 million are contingent and were not recognized because they were not considered probable and reasonably estimable; sales-based royalties would also apply if products are approved and sold.
- COVID-19 could affect patient enrollment, site activity, treatment continuity and suppliers. The Russia-Ukraine conflict could disrupt supply chains or increase costs; management said it did not then expect a material impact on current operations, but the full impact remained uncertain.
- Key risks include clinical-trial outcomes, regulatory approval, manufacturing and supply, competition, and the need to raise capital. Savara reported no material pending litigation and no material changes to previously disclosed risk factors. Management reported effective disclosure controls and internal control over financial reporting.
- Potential dilution is notable: 38.8 million warrants were outstanding at September 30, 2022, and total shares reserved for issuance were 45.7 million, including options and restricted stock units. The filing reports 114.0 million common shares issued and outstanding at quarter-end; weighted-average shares used for loss-per-share calculations were approximately 152.8 million.
Important facts for investors to verify
- IMPALA-2 enrollment, timing, trial results and any resulting regulatory plans.
- Operating cash burn and whether management’s stated 12-month liquidity runway remains adequate as development and manufacturing costs evolve.
- Debt interest costs, covenant compliance and the cash conditions for any extension of the interest-only period.
- Progress, probability and timing of the $3.09 million contingent manufacturing milestones, and the status of the estimated $34.0 million IMPALA-2 services commitment.
- Potential dilution from outstanding warrants, options and other equity awards, including the difference between issued shares and weighted-average shares used in EPS.