Actinium Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; unaudited. Comparisons are with Q1 2016 unless otherwise noted. Actinium is a pre-revenue biopharmaceutical company developing targeted radiotherapies; none of its candidates is approved for sale.
Financial performance and liquidity
| Metric | Q1 2017 / March 31, 2017 | Comparable / prior period |
|---|---|---|
| Revenue | $0 | $0 in Q1 2016 |
| Research and development expense | $4.50 million | $3.77 million |
| General and administrative expense | $3.28 million | $2.22 million |
| Total operating expenses | $7.81 million | $6.00 million |
| Net loss | $8.06 million; $0.14 per share | $4.40 million; $0.10 per share |
| Net cash used in operations | $5.37 million | $4.76 million |
| Cash and cash equivalents | $17.09 million | $20.52 million at December 31, 2016 |
| Current assets / current liabilities | $18.12 million / $5.37 million | $22.39 million / $4.52 million at December 31, 2016 |
| Total liabilities | $5.37 million | $4.52 million at December 31, 2016 |
There was no revenue or meaningful operating margin; the company reported operating and net losses. No debt balance was reported at March 31, 2017. Financing cash flow was $1.92 million, principally net proceeds from ATM share sales. Cash declined by $3.43 million during the quarter. Management believed available cash would fund operations for the next 12 months, but also stated that further capital would be needed to develop its candidates.
Material changes and notable items
- Operating expenses increased approximately 30% year over year. R&D rose about $0.7 million, mainly from higher Iomab-B manufacturing costs, partly offset by lower Actimab-A manufacturing costs. G&A rose about $1.1 million, largely from salaries, stock compensation, professional services and related costs.
- Net loss increased by approximately $3.66 million. In addition to higher operating expenses, other income/expense shifted from $1.60 million of income in Q1 2016 to $0.26 million of expense in Q1 2017, primarily due to the change in fair value of warrant derivative liabilities. The derivative revaluation is noncash and can materially affect reported results.
- The company recorded $0.58 million of Level 3 derivative liabilities, up from $0.30 million at year-end. It also disclosed warrant modifications and extensions; one modification generated $64,091 of incremental expense.
- During Q1, Actinium issued 1.34 million shares through its ATM for approximately $2.0 million gross proceeds ($1.92 million net). After quarter-end it sold a further 1.29 million shares for approximately $1.97 million gross proceeds. Shares outstanding were 58.45 million on May 15, 2017.
Business, outlook and principal risks
- Pipeline: Iomab-B was in a randomized, controlled, 150-patient Phase 3 trial for relapsed or refractory AML patients aged 55 and older. The primary endpoint is durable complete remission; one-year overall survival is secondary. Management expected enrollment to continue in 2017 and estimated direct trial-completion costs at approximately $25 million, with completion anticipated in 2019.
- Actimab-A was in a 53-patient Phase 2 trial for newly diagnosed AML patients aged 60 and older. Actimab-M entered a Phase 1 investigator-initiated multiple myeloma trial in February 2017. Management said it was considering breakthrough therapy designation for Iomab-B and/or Actimab-A; no application or designation was reported as granted.
- Management expected R&D and G&A costs to increase as development advances. Its stated strategy is to develop candidates and seek partnerships; it has no commercial operations or recurring revenue source. Management’s 12-month cash estimate is not assurance of funding through trial completion or commercialization.
- Risks include clinical-trial enrollment, efficacy and safety uncertainty; regulatory approval; reliance on contract manufacturers and timely release of HuM195 antibody; and access to Ac-225. The ORNL supply contract ran through year-end 2017 and required renewal. The filing also states Iomab-B lacks patent protection and flags potential intellectual-property constraints for Actimab-A.
- Contractual commitments include future license milestones and royalties, clinical and manufacturing agreements, and office-space obligations. The filing reports no legal proceedings and no material off-balance-sheet arrangements. Management concluded disclosure controls were effective as of March 31, 2017 and reported no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether cash, ATM proceeds and any subsequent financing are sufficient for the stated operating runway and planned clinical programs; compare actual burn with management’s estimate.
- Progress, enrollment, safety and endpoint results for the Iomab-B Phase 3 and Actimab-A Phase 2 trials, including whether projected timelines and costs remain achievable.
- Continuity and quality of HuM195 manufacturing and renewal or alternative supply arrangements for Ac-225.
- Potential dilution from further equity issuance, and the effect of warrant derivative revaluations and warrant modifications on reported earnings.
- License economics, milestone obligations and intellectual-property rights—particularly Iomab-B’s stated lack of patent protection and the terms required for potential commercialization partnerships.