Altimmune, Inc. — Q2 2019 Form 10-Q
Business context and reporting period. The unaudited filing covers the three and six months ended June 30, 2019. Altimmune is a clinical-stage biopharmaceutical company developing therapies and vaccines. It had no product-sale revenue; reported revenue was primarily government research-contract and grant revenue.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $1.63 million | $2.42 million | $4.58 million | $5.11 million |
| Research and development expense | $2.95 million | $4.92 million | $6.16 million | $10.67 million |
| General and administrative expense | $2.23 million | $2.93 million | $4.30 million | $5.38 million |
| Operating loss | $3.55 million | $5.44 million | $5.88 million | $11.43 million |
| Net loss | $3.39 million | $9.14 million | $5.48 million | $12.31 million |
| Net loss per share, basic and diluted | $0.26 | $10.29 | $0.52 | $18.24 |
Cash and balance sheet at June 30, 2019: Cash and cash equivalents were $41.67 million, plus $34,174 restricted cash; current assets were $46.11 million and current liabilities $3.48 million. Total assets were $61.98 million and stockholders’ equity $56.23 million. Notes payable totaled approximately $416,626 ($163,724 current and $252,902 long term). Operating lease liabilities were $1.86 million. The filing does not present a gross margin measure.
Cash flows, six months: Operating activities used $5.17 million, compared with $3.21 million used in 2018; investing activities used $17,100, versus $839,151; financing activities provided $12.54 million, primarily from the March registered direct offering. Cash, cash equivalents and restricted cash increased $7.35 million to $41.71 million.
Material changes versus prior comparable periods
- Q2 revenue declined 32.7%; first-half revenue declined 10.3%. Management attributed lower NIAID revenue to SparVax-L activities winding down; quarterly BARDA revenue also decreased with NasoShield spending.
- R&D expense fell 40.1% in Q2 and 42.2% for the first half, mainly reflecting the timing of NasoVAX and HepTcell clinical and manufacturing work and lower SparVax-L costs. The 2019 periods included about $618,000 in Spitfire acquisition transaction costs.
- Lower operating expenses and substantially smaller warrant fair-value losses contributed to lower net losses. The 2018 comparisons also included income tax benefits and, for the first half, a $491,000 goodwill impairment; 2019 had no income tax benefit.
- In March 2019, the company raised approximately $12.67 million net through a registered direct offering. The offering issued common shares and warrants and triggered a reduction in the exercise price of certain earlier warrants, recorded as a $452,925 deemed dividend for the first half.
Outlook, commentary, risks and unusual items
- Management said cash on hand at June 30 and expected 2019 operating needs and government-contract revenue were sufficient to fund operations for at least 12 months from issuance of the financial statements. The company continued to report accumulated losses of $122.3 million and negative operating cash flow, and said longer-term needs may require additional financing, government funding, partnerships or asset monetization.
- The BARDA contract has a stated maximum value of up to $130 million, but future options are discretionary and not assured; the initial base period runs through November 2019. NIAID work on SparVax-L was substantially complete, with the contract period extended through September 2019. Management said no further funding for the program had been identified as of the filing.
- After quarter-end, Altimmune agreed to acquire and, on July 12, 2019, completed its acquisition of Spitfire Pharma, a preclinical NASH company. Consideration included 1,887,250 Altimmune shares, representing $5 million less specified adjustments, and up to $88 million in contingent regulatory, clinical and sales milestone payments. The company expected to expense the upfront consideration as in-process R&D in Q3 2019. The acquisition and share issuance were subsequent events, not reflected in the June 30 balance sheet.
- Key risks include clinical and regulatory development uncertainty, dependence on government contracts and future financing, and the risk of failing to integrate Spitfire or realize the expected value of its intellectual property. The filing reports no material legal proceedings; ordinary-course disputes and potential claims were not expected by management to materially affect results or financial position.
- Altimmune had 10.39 million warrants outstanding at June 30, 2019, a potential source of dilution. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether BARDA exercises future contract options and whether replacement or additional funding is secured as NIAID work concludes.
- Actual cash burn and financing needs relative to management’s stated 12-month liquidity expectation.
- Spitfire integration, development progress and potential milestone obligations, including the terms of the contingent payments.
- Potential dilution from outstanding warrants, options, and shares issued for the Spitfire acquisition.