AIM ImmunoTech Inc. (then Hemispherx Biopharma, Inc.) — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. The filing reports Hemispherx Biopharma, Inc. and subsidiaries, a clinical-stage pharmaceutical company developing Ampligen and Alferon products.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $84,000 | $39,000; up $45,000 |
| Operating loss | $3.241 million | $3.679 million |
| Net loss | $2.821 million | $2.164 million; loss increased $657,000, or 30% |
| Net loss per share | $0.11 | $0.10 |
| Operating cash used | $2.993 million | $1.043 million |
| Cash and marketable securities | $3.749 million at March 31 | $5.868 million at December 31, 2016 |
| Total assets | $16.863 million | $18.873 million at December 31, 2016 |
| Current liabilities | $2.636 million | $2.435 million at December 31, 2016 |
Revenue came from clinical treatment programs: $23,000 in the U.S. and $61,000 in Europe. The company reported no Alferon finished goods available for commercial sale. Revenue was immaterial relative to costs; production costs were $270,000, so the filing does not indicate a meaningful positive product margin.
Research and development expense rose 39% to $1.391 million, including increased Ampligen stability/compliance testing and AMP-511 clinical work. General and administrative expense fell 32% to $1.664 million, mainly because the prior-year period included a one-time executive severance charge. The prior-year net loss benefited from a $1.561 million sale of tax losses and research credits; there was no comparable gain in 2017. Q1 2017 also included a $393,000 noncash gain from revaluing redeemable warrants.
Cash fell by $1.632 million during the quarter. Investing activities provided $486,000, including $500,000 from sales of marketable securities; financing activities provided $875,000 net from a February stock-and-warrant offering. The balance sheet lists no conventional borrowings at March 31; redeemable warrants were recorded as a $1.279 million liability. No margin guidance was provided.
Business developments, outlook, and risks
- The company reported an accumulated deficit of approximately $303.3 million and said it had not generated significant product revenue. Management stated that restructuring, cost reductions, international clinical-material sales efforts, a planned building sale, and pursuit of co-development partners had alleviated substantial doubt about continuing as a going concern; it also planned to seek further public-market capital.
- Ampligen had Argentine approval for severe ME/CFS, but commercial launch remained dependent on matters including reimbursement, manufacturing preparations, and funding. In the U.S., the FDA had declined the Ampligen ME/CFS application and called for at least one additional clinical trial, further nonclinical studies, analyses, and manufacturing controls. Management estimated a new trial could take approximately 18 months to three years after study design acceptance, with costs beyond current resources without additional funding.
- The European early-access program was extended to pancreatic cancer patients in the Netherlands; 50 patients had been approved, with a funding mechanism to remunerate the company. The filing cautions that the program may not lead to marketing authorization or substantial sales.
- Alferon U.S. commercial sales remained suspended pending production, FDA pre-approval inspection, and release of acceptable quality and stability data. The facility had no definitive restart timetable, and the company expected it would need additional funds for revalidation.
- After quarter-end, the company issued 328,020 shares to executives and employees for $185,000. It also entered into a secured, two-year bridge funding line of up to $4 million, subject to lender conditions, at an interest rate of at least 12%; the filing describes up to $1.8 million in monthly advances subject to approval and additional advances at the lender’s discretion.
- Key risks include limited liquidity and continued financing needs, possible dilution, regulatory and clinical uncertainty, manufacturing delays, the ability to secure partners, and NYSE MKT listing compliance. Management reported disclosure controls were effective as of March 31, 2017, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current available cash, the actual pace of cash use, and whether the bridge line was drawn and on what terms.
- Progress and funding requirements for the FDA-requested Ampligen work and the U.S. Alferon manufacturing restart.
- Whether Argentine and European access programs generate meaningful, recurring revenue and whether additional approvals are obtained.
- Potential dilution from equity sales, warrants, employee share issuances, and future capital raising.
- The planned sale of the underutilized building and any effect of secured borrowing on company assets and operations.