Altimmune, Inc. — Q2 2020 Form 10-Q
Business context and reporting period. This unaudited filing covers the three and six months ended June 30, 2020. Altimmune is a clinical-stage biopharmaceutical company developing vaccines, immune-modulating therapies and treatments for liver disease. It had not generated product sales; reported revenue primarily came from government research grants and contracts.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0.72 million | $1.63 million | $2.93 million | $4.58 million |
| Research and development expense | $16.59 million | $2.95 million | $23.78 million | $6.16 million |
| General and administrative expense | $2.55 million | $2.23 million | $4.88 million | $4.30 million |
| Operating loss | $18.42 million | $3.55 million | $25.72 million | $5.88 million |
| Net loss | $16.77 million | $3.39 million | $20.65 million | $5.48 million |
| Net loss per share, basic and diluted | $0.94 | $0.26 | $1.25 | $0.52 |
Cash flow and balance sheet. Operating cash use was $11.52 million for the first half of 2020, versus $5.17 million in the prior-year period. Investing activities provided $12.66 million, primarily from short-term investment maturities; financing activities provided $54.64 million, mainly from warrant exercises and the at-the-market (ATM) share offering. Cash, cash equivalents and restricted cash totaled $64.78 million at June 30, with another $15.48 million in short-term investments. Total assets were $102.54 million, total liabilities $23.02 million, and stockholders’ equity $79.52 million. Current notes payable were $632,000; the company later repaid the PPP loan. No product gross margin was reported.
Management stated that June 30 cash, investments, expected contract revenue and tax refunds were sufficient to fund operations for at least 12 months from issuance of the financial statements. It also noted that longer-term plans, including clinical trials, may require additional financing, government funding or partnerships.
Material changes versus prior comparable periods
- Q2 revenue declined 56% year over year; first-half revenue declined 36%, chiefly because of timing of NasoShield development activity and, for the first half, completion of a prior NIAID contract. The company also reported a final NasoShield contract reconciliation and other revenue from flu virus vials.
- R&D expense rose 463% in Q2 and 286% for the first half. The largest item was a $11.9 million Q2 and $13.6 million first-half non-cash increase in the fair value of ALT-801-related contingent consideration. Other increases reflected ALT-801 and COVID-19 program development.
- Net losses widened substantially, partly offset by a $1.58 million Q2 and $4.82 million first-half income tax benefit related to CARES Act loss carrybacks and related tax estimates.
- Cash and cash equivalents increased from $8.96 million at year-end 2019 to $64.74 million at June 30, largely reflecting financing. The company sold 2.97 million shares through its ATM program for $22.8 million net and received $31.3 million net from warrant exercises during the first half.
Outlook, management commentary and risks
- In June, Altimmune was awarded $4.7 million by USAMRDC/MTEC for the T-COVID Phase 1/2 trial and related platform work; no contract cash had been received and no grant revenue recognized by June 30.
- Management said COVID-19 had not materially affected operations through June 30 and did not then anticipate material regulatory-timeline effects for NasoShield, T-COVID, AdCOVID or ALT-801. It expected the pandemic to delay initiation of the HepTcell Phase 2 trial and expected to update timing in the second half of 2020. Management cautioned that trial initiation, enrollment and completion could be disrupted and costs could rise.
- At the filing date, the T-COVID IND had been cleared, but its clinical trial had not started; an IND for AdCOVID had not yet been filed. The company highlighted development, regulatory, manufacturing, competition and pandemic-related uncertainties for its COVID-19 candidates.
- The Spitfire acquisition agreement provides for up to $88 million in contingent payments, including regulatory milestones and sales-based payments. The regulatory-milestone liability was remeasured to $16.39 million at June 30, up from $2.75 million at year-end, using significant unobservable assumptions. Up to $80 million of sales milestones would be payable if specified sales thresholds are achieved.
- After quarter-end, the company raised approximately $124 million net in a public offering, received additional proceeds from warrant exercises and ATM sales, and voluntarily repaid its $632,000 PPP loan on July 21. The filing reports approximately $136.2 million in aggregate net proceeds from post-quarter warrant exercises, ATM usage and the public offering.
- A Texas lawsuit alleging, among other matters, retention of lab notebooks and misuse of technology remained pending; the company said it believed the claims were without merit, intended to defend itself, and could not estimate any loss. No liability was accrued.
Most important facts for investors to verify
- Whether the reported cash runway assumptions remain valid, including expected tax refunds, grant receipts and the effect of post-quarter financing and repayment.
- Current trial and regulatory status for T-COVID, AdCOVID, HepTcell, ALT-801 and NasoShield, including any COVID-related delays or changes to stated timelines.
- Progress toward ALT-801 regulatory milestones and the sensitivity of the $16.39 million contingent-consideration valuation to share price and milestone probabilities.
- Actual receipt and recognition timing of the $4.7 million USAMRDC/MTEC award and continued BARDA funding, including whether BARDA exercises contract options.
- Developments in the pending litigation, and any changes in contingent obligations, financing needs or share dilution.