AIM ImmunoTech Inc. (then Hemispherx Biopharma, Inc.) — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015. The company was a clinical-stage biopharmaceutical business centered on experimental Ampligen and FDA-approved Alferon N Injection, whose commercial sales were suspended pending manufacturing and FDA clearance.
Financial performance and position
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $47,000 | $36,000 | $83,000 | $112,000 |
| Operating loss | $4.901 million | $5.085 million | $9.824 million | $10.197 million |
| Net loss | $4.845 million | $4.956 million | $8.290 million | $8.792 million |
| Loss per share | $0.02 | $0.03 | $0.04 | $0.05 |
| R&D expense | $2.439 million | $2.330 million | $5.113 million | $4.656 million |
| General and administrative expense | $2.002 million | $2.497 million | $3.915 million | $5.036 million |
| Production costs | $507,000 | $294,000 | $879,000 | $617,000 |
- Revenue came entirely from the Ampligen open-label cost-recovery program; the filing reports no Alferon finished product available for commercial sale.
- Lower G&A costs, mainly reduced legal fees, helped narrow losses. Six-month results also included a $1.374 million gain from selling New Jersey tax net operating losses, versus $1.126 million in 2014.
- Cash used in operations was $9.237 million for the six months, compared with $6.206 million a year earlier. The company attributed the increase principally to payment of prior-year executive bonuses, a $1.009 million inventory build, and lower accrued legal fees.
- At June 30, cash and cash equivalents were $1.842 million and marketable securities were $13.872 million, totaling $15.714 million. Total assets were $29.866 million; stockholders’ equity was $26.764 million.
- Current liabilities were $3.102 million, including a $7,000 current capital-lease obligation. No material long-term debt is reported in the balance sheet.
- Six-month financing provided $9.293 million net from at-the-market share sales. Shares outstanding rose to 245.483 million at June 30 from 204.005 million at year-end. The company reported 246.887 million shares outstanding on August 1.
- Profit margins are not meaningful given the very small revenue base and continuing operating losses.
Changes, outlook and key risks
- Q2 net loss narrowed 2% year over year; the six-month net loss narrowed 6%. However, operating cash use increased 49%, and revenue for the first half declined 26%.
- Production costs rose with Alferon stability testing and pre-production work, Ampligen polymer production, and $117,000 of inventory spoilage or testing-related write-offs. Research and development spending increased while G&A declined.
- The FDA had declined the Ampligen chronic fatigue syndrome application in 2013, requesting at least one additional clinical trial, nonclinical studies and further data analyses. Management estimated a new well-controlled trial could take 18 months to three years after design acceptance; it said the required work exceeded available financial resources without additional funding.
- Alferon manufacturing validation was underway, but supplier and reagent issues were expected to delay the anticipated commercial return by at least six months. Resumption depends on FDA inspection, satisfactory stability and quality data, and release approval; the filing gives no assurance of timing or commercial success.
- The company warned it may need additional financing and that financing may be unavailable or dilutive. It could curtail discretionary spending, including some R&D, to conserve cash. No specific financial guidance was provided.
- Management described encouraging preclinical and laboratory findings for Ampligen and Alferon in Ebola and other research settings, while emphasizing that such results do not establish human safety or efficacy and that further studies would be needed.
- Unusual and contingent items include the NOL sale, inventory write-offs, a $147,000 additional accrual tied to the share-price guarantee on stock issued for legal fees, and ongoing litigation. The securities class action received final court approval in July 2015 and was paid by insurance; shareholder derivative and other matters remained pending or under appeal, with outcomes uncertain.
- Subsequent events: Dr. William A. Carter resigned as president on August 7, 2015, and Thomas K. Equels was appointed president. The company also entered post-quarter early-access and distribution arrangements for Ampligen in Europe and Turkey and Alferon in Australia and New Zealand; these arrangements do not establish regulatory approval or material revenue.
Most important facts for investors to verify
- Current unrestricted cash and marketable securities, operating cash burn, and how long available funding can support operations.
- Remaining capacity, pricing and dilution under the ATM offering, and any restrictions on issuing additional shares.
- FDA requirements and timing for the next Ampligen CFS trial and for Alferon manufacturing inspection and product release.
- Whether Alferon commercial sales resume, and whether the post-quarter access and distribution agreements generate meaningful revenue.
- Developments and potential financial exposure from pending litigation and manufacturing, clinical, regulatory and supply-chain risks.