AmpliPhi Biosciences Corporation — FY 2018 Form 10-K
Entity and period: The supplied filing identifies the registrant as AmpliPhi Biosciences Corporation, not Armata Pharmaceuticals, Inc. It reports the fiscal year ended December 31, 2018; filed March 25, 2019. The filing describes a clinical-stage biotechnology company developing bacteriophage therapies for antibiotic-resistant infections.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $0 | $115,000 |
| Research and development expense | $4.9 million | $2.9 million |
| General and administrative expense | $5.7 million | $7.6 million |
| Impairment charges | $1.9 million | $5.8 million |
| Loss from operations | $12.5 million | $16.2 million |
| Net loss | $12.1 million | $12.8 million |
| Net loss per share, basic | $0.64 | $2.01 |
| Cash and cash equivalents at year-end | $8.2 million | $5.1 million |
| Working capital at year-end | $5.8 million | $3.4 million |
| Total assets / liabilities at year-end | $11.9 million / $3.4 million | $11.1 million / $3.4 million |
Margins are not meaningful given no FY 2018 revenue. Net cash used in operating activities was $9.4 million, versus $9.2 million in 2017; investing cash use was $44,000. Financing provided $12.5 million, principally from equity offerings. The balance sheet showed $22,000 of derivative liabilities and $819,000 of deferred tax liabilities; no note payable was reported at year-end. Management said cash was expected to fund planned operations into mid-2019, excluding any merger-related financing. The auditor and management disclosed substantial doubt about the company’s ability to continue as a going concern.
Changes and operating developments
- Revenue fell to zero after termination of a sublicense agreement. R&D expense rose by about $2.0 million as reported, partly reflecting Australian tax incentive payments; before those offsets, R&D costs were $6.1 million versus $4.9 million.
- G&A expense declined by $1.9 million, including lower severance, stock compensation, and professional fees. Operating loss narrowed, but net loss improved only modestly, in part because the derivative-liability fair-value gain fell to $86,000 from $2.0 million.
- In Q4, the company prioritized AB-SA01 for S. aureus infections and paused AB-PA01 development, fully impairing the latter’s in-process R&D asset by approximately $1.9 million. The remaining IPR&D carrying value was $2.8 million for the Staphylococcal program.
- FY 2018 financing included January and March stock offerings and an October offering. The October transaction generated $5.8 million net proceeds and included 14.875 million shares, 2.125 million pre-funded warrants, and warrants to buy 17.5 million shares. Shares outstanding increased from 9.5 million at 2017 year-end to 32.3 million at 2018 year-end; substantial additional warrant dilution was possible.
Outlook, risks, and unusual items
- The FDA generally agreed with proposed Phase 1/2 trial designs for AB-SA01 in S. aureus bacteremia and prosthetic-joint infection, with approximately 100 patients proposed for each trial. Management anticipated advancing AB-SA01 into Phase 2 in 2019, subject to funding; the filing does not establish that trials had begun.
- Expanded-access results were preliminary and uncontrolled: 16 of 19 patients in the modified intent-to-treat group (84%) were assessed by treating physicians as having treatment success at the end of therapy. AB-SA01 was reported well tolerated in 15 treated patients; one of six AB-PA01 patients discontinued after mild adverse events. These observations do not establish efficacy or predict controlled-trial outcomes.
- On January 3, 2019, the company agreed to merge with private biotechnology company C3J, subject to closing conditions and shareholder approval. Former C3J holders were expected to own about 70% of the combined company; certain C3J shareholders agreed to a separate $10 million investment at closing. The merger deadline was extended to June 1, 2019. These were post-year-end proposals, not completed FY 2018 transactions.
- Key risks include the going-concern uncertainty and need for additional capital; clinical, manufacturing, and regulatory execution; the novel and unapproved nature of phage therapy; potential dilution; and the possibility the merger or related financing would not close. Failure to obtain funding could force program reductions or cessation of operations.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for AmpliPhi Biosciences Corporation, despite the request metadata naming Armata Pharmaceuticals, Inc.
- Check subsequent filings for the company’s cash runway, financing, and resolution of the going-concern uncertainty.
- Verify whether the C3J merger and $10 million investment closed, and review the resulting ownership, reverse split, and dilution.
- Track whether AB-SA01 trials were funded, initiated, and progressed, and whether any controlled data support the expanded-access observations.
- Review outstanding warrants and other potential share issuance, including exercise-price adjustments and fully diluted share counts.