Amylyx Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Financial statements are unaudited. Amylyx is a commercial-stage biotechnology company whose marketed product AMX0035 is sold as RELYVRIO in the U.S. and ALBRIOZA in Canada, both for ALS.
Financial performance and liquidity
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 |
|---|---|---|---|
| Net product revenue | $98.2 million | $169.6 million | None reported |
| Cost of sales | $5.6 million | $10.9 million | None reported |
| Research and development | $29.0 million | $53.2 million | $24.3 million / $45.7 million |
| Selling, general and administrative | $43.4 million | $87.4 million | $30.0 million / $56.3 million |
| Operating income (loss) | $20.2 million | $18.1 million | $(54.3) million / $(102.1) million |
| Net income (loss) | $22.1 million | $23.6 million | $(54.1) million / $(101.9) million |
| Net income (loss) per diluted share | $0.31 | $0.34 | $(0.93) / $(1.85) |
- Margins: Reported cost of sales implies gross margin of approximately 94.3% for Q2 and 93.6% for the six-month period. These figures exclude certain pre-approval inventory costs charged to R&D; management expects cost of sales to rise and gross margin to decline as that inventory is depleted.
- Cash and investments: $357.3 million at June 30, comprising $247.8 million cash and cash equivalents and $109.5 million short-term investments, versus $346.9 million at December 31, 2022.
- Cash flow: Operating activities provided $3.5 million in the first half, compared with $87.1 million used in the prior-year period. The 2023 result included working-capital investment, notably $32.6 million in inventory and $18.2 million in receivables, partly offset by higher payables. Investing activities provided $179.2 million, largely from investment maturities; financing activities provided $2.4 million.
- Debt and liquidity: No borrowings are reported; liabilities primarily include payables, accruals and operating leases. Current assets were $427.4 million and current liabilities $64.1 million. Management believes existing resources and U.S. and Canadian sales will fund planned needs for at least 12 months after filing, but cautions that assumptions could prove wrong.
Material changes and business developments
- Revenue began after the 2022 launches of ALBRIOZA in Canada and RELYVRIO in the U.S.; there was no product revenue in the 2022 comparison periods. Gross Q2 product revenue was $108.4 million, reduced by $10.2 million of gross-to-net adjustments to $98.2 million net revenue.
- Operating expenses rose year over year: Q2 R&D increased 20% and SG&A 45%; first-half R&D increased 16% and SG&A 55%. Management attributed increases mainly to personnel, commercial activity and public-company costs, with additional PSP development spending.
- Q2 and first-half net income replaced substantial prior-year losses, reflecting commercial revenue and higher interest income, alongside increased operating expenses. Interest income was $3.9 million for Q2 and $7.6 million for the first half.
- At June 30, inventory was $42.6 million, including $17.7 million classified as long-term; $12.0 million of inventory acquired before approvals had already been expensed to R&D. Amylyx had $86.8 million of manufacturing and raw-material purchase commitments due through 2025 at quarter end. An August 2023 supplier agreement subsequently raised total commitments to approximately $223.3 million, payable through 2028.
Outlook, risks and notable items
- Regulatory: In June 2023, the EMA’s CHMP issued a negative opinion on the EU conditional marketing application for AMX0035. Amylyx requested re-examination in July; a final recommendation was expected in fall 2023. The outcome remained uncertain.
- Clinical pipeline: The Phase 3 PHOENIX ALS trial completed enrollment of 664 participants; topline results were anticipated in mid-2024. The Phase 2 HELIOS Wolfram syndrome trial began dosing in April, with results anticipated in 2024. Amylyx planned to start the pivotal Phase 3 ORION PSP trial by year-end 2023.
- Commercial outlook: In Canada, Amylyx completed negotiations and signed a Letter of Intent with the pan-Canadian Pharmaceutical Alliance; it was working toward public-plan product listing agreements by year-end 2023. Management expects patient assistance and interim access product costs to continue into 2024 and, to a lesser degree, beyond.
- Key risks: Continued commercial success, reimbursement and market acceptance; PHOENIX results and possible effects on U.S. and Canadian approvals; EMA review; post-marketing obligations; reliance on contract manufacturers and supply chains; and the need for additional capital if plans or revenue underperform. A failed PHOENIX result could lead to regulatory restrictions or withdrawal, or voluntary withdrawal, of marketed products.
- Commitments and contingencies: No material legal proceedings were reported. ALS-related grant royalties generated $3.1 million of first-half cost of sales; no further royalties remained to accrue under the ALS Association and ALS Finding a Cure agreements. Separate Alzheimer’s grant royalty obligations may arise if specified future conditions occur.
- Other: Management said disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the first half. The company expected to lose emerging growth company status on December 31, 2023, bringing additional compliance requirements.
Most important facts for investors to verify
- Sales trends, gross-to-net deductions, reimbursement access and whether commercial revenue can cover rising operating costs.
- PHOENIX topline results and their implications for the FDA approval and Canadian conditional authorization, as well as the EU re-examination outcome.
- Cash consumption and the assumptions supporting management’s 12-month liquidity estimate; distinguish operating cash flow from investment maturities.
- The expected gross-margin decline as pre-approval inventory is used up, and the scale, timing and terms of the increased supplier commitments disclosed after quarter end.
- Execution and costs of HELIOS and ORION, post-marketing studies, manufacturing capacity and supply continuity.