Business context and reporting period
This is Hemispherx Biopharma, Inc.’s Form 10-K for the fiscal year ended December 31, 2015, filed March 29, 2016. The filing describes a clinical-stage specialty pharmaceutical company developing immune-based therapies. Its lead products were experimental Ampligen and Alferon N Injection, which was FDA-approved for a limited genital-wart indication but had no finished goods available for commercial sale. Alferon LDO was also in development. The supplied filing identifies the registrant as Hemispherx Biopharma, Inc.; investors should verify its relationship to the AIM Immunotech name in the request metadata.
Key financial metrics
- Revenue: $133,000 in 2015, all from the Ampligen open-label cost-recovery treatment program, versus $197,000 in 2014. The company reported no Alferon commercial product sales.
- Profit and margins: Net loss was $15.230 million, or $0.06 per share, versus a $17.450 million loss, or $0.09 per share, in 2014. Operating loss was $16.650 million. Revenue was immaterial relative to operating costs, so commercial margins were not meaningful.
- Expenses: Total costs and expenses were $16.783 million, down from $19.296 million. R&D was $8.038 million versus $8.988 million; general and administrative expense was $7.147 million versus $9.057 million; production costs rose to $1.598 million from $1.251 million.
- Cash flow: Operating activities used $16.053 million, compared with $13.964 million in 2014. Investing activities provided $6.352 million, mainly from marketable-security maturities and sales; financing activities provided $9.660 million, primarily from at-the-market share sales. Capital expenditures were $240,000.
- Liquidity and assets: Cash and cash equivalents were $2.115 million and marketable securities were $6.795 million, totaling $8.910 million, down 45% from year-end 2014. Working capital was $8.138 million versus $12.071 million. Total assets were $22.804 million; current liabilities were $2.433 million.
- Debt and equity: The balance sheet reported no debt; the remaining capital-lease liability was approximately $1,000. Stockholders’ equity was $20.371 million. Shares outstanding rose to 247.56 million from 204.00 million, primarily reflecting equity financing.
Material changes versus the prior comparable period
- Net loss narrowed by $2.220 million, mainly with lower general and administrative and R&D expenses. Lower interest and other income partly offset the improvement. The $1.374 million gain from selling New Jersey tax-loss carryforwards was a significant non-operating item.
- Operating cash use increased by $2.089 million. The filing attributes the increase in part to payment of prior-year executive bonuses and a $1.326 million increase in inventory.
- Cash and marketable securities fell by $7.198 million despite $9.681 million of net proceeds from 2015 ATM share sales. Shares issued at the market totaled 40.996 million.
- The $8 million manufacturing-facility enhancement was completed in 2015; property and equipment rose to $11.237 million from $4.601 million as construction in progress was transferred into completed assets.
Outlook, commentary, risks and unusual items
- Ampligen: The FDA had issued a Complete Response Letter in 2013 declining approval for chronic fatigue syndrome. It requested at least one additional clinical trial, further nonclinical studies and data analyses, and manufacturing controls. Management estimated a new study could take 18 months to three years after design acceptance, but said costs exceeded available resources without additional funding.
- Alferon manufacturing: Commercial sales remained dependent on production of new batches, FDA pre-approval inspection and FDA release of finished product. Supplier and process issues interrupted validation. A January 5, 2016 flood damaged the upstream processing cleanroom containing the bioreactor; manufacturing was on hold with no definitive restart timetable. The filing cautions that delayed or failed remediation and FDA approval could materially affect operations.
- Funding and strategy: Management described a financial austerity plan, asset sales, international early-access sales efforts and a search for senior co-development partners. The company warned that it might need additional financing and that availability was uncertain; further equity financing could dilute shareholders. It reported approximately 1,200 vials of clinical-grade natural interferon being considered for early-access sales.
- Research claims: The filing reports laboratory and animal findings involving Ampligen and Ebola and in-vitro findings involving Alferon and MERS. These are not evidence of human clinical efficacy; the company states human studies would be needed. Ampligen’s influenza-vaccine study was on hold, and the Alferon LDO Phase II study had been delayed.
- Listing and governance: On March 15, 2016, NYSE MKT notified the company of low-price continued-listing noncompliance and required sustained price improvement or a reverse split by September 15, 2016. Management planned to seek shareholder approval for a reverse split. Dr. Carter was terminated in February 2016; Thomas Equels became CEO and Adam Pascale became CFO. Carter subsequently sued the company.
- Legal matters: A securities class-action settlement was finally approved in 2015 and paid by insurance, with no company funds used. Several derivative actions and other disputes remained pending or subject to settlement discussions. The company recorded no loss contingency for the described matters and said outcomes could not be predicted.
- Audit and controls: RSM US LLP issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and no identified material weaknesses in internal control over financial reporting.
Most important facts for investors to verify
- Current cash, marketable securities, operating cash burn and financing capacity, including the extent of any further equity issuance and dilution.
- Repair and revalidation status of the flooded New Brunswick facility, FDA inspection and product-release requirements, and any updated Alferon production timetable.
- FDA feedback on the remaining Ampligen requirements, the design and financing of any additional trial, and regulatory status in foreign markets.
- Whether early-access or international arrangements have produced sales, and the quantity, quality and saleability of available inventory.
- NYSE MKT listing compliance and any reverse-split action, along with the status and potential costs of pending litigation.
- The company’s identity and corporate continuity between the Hemispherx registrant named in this filing and AIM Immunotech.