Business context and reporting period
The filing is Hemispherx Biopharma, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2016. The request identifies AIM Immunotech Inc.; the filing itself names Hemispherx Biopharma, Inc. as registrant. The company was developing Ampligen, an unapproved therapeutic, and seeking to restore commercial production of FDA-approved Alferon N Injection. It reported minimal revenue and no Alferon finished goods available for commercial sale.
Financial results and position
Amounts are in thousands of dollars, except per-share data.
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $15 | $47 | $54 | $83 |
| Operating loss | $(2,814) | $(4,901) | $(6,493) | $(9,824) |
| Net loss | $(1,303) | $(4,845) | $(3,467) | $(8,290) |
| Net loss per share | $(0.01) | $(0.02) | $(0.01) | $(0.04) |
| Research and development | $900 | $2,439 | $1,902 | $5,113 |
| General and administrative | $1,639 | $2,002 | $4,087 | $3,915 |
Revenue came from the Ampligen cost-recovery/open-label treatment program. Revenue was too small for margins to be meaningful. Net losses improved year over year, mainly as R&D and production spending fell; Q2 also included a $1,436 net insurance settlement benefit. Six-month results included a $1,561 gain from selling tax attributes, compared with $1,374 in the prior year.
For the six months, operating cash use was $2,292, versus $9,237 in 2015; investing activities provided $1,553, principally from securities sales and maturities; financing provided $162, versus $9,278 in 2015, when substantial ATM equity proceeds were raised. Cash and cash equivalents were $1,538 at June 30, and marketable securities were $4,974. The company separately reported $1,750 in escrow for litigation settlement. Total current assets were $10,730; current liabilities were $4,429; total assets were $21,918; and stockholders’ equity was $17,489. No material debt balance was reported; the current capital-lease portion was zero. Accumulated deficit was $296,466.
Material changes versus prior comparable periods
- Six-month net loss narrowed by $4,823, or 58%, while operating cash use declined by $6,945. Management attributed much of the lower spending to austerity measures and reduced R&D activity.
- Six-month G&A increased $172, or 4%, including an $850 executive severance charge and $305 of legal fees, partly offset by lower compensation and professional fees.
- Six-month shares sold under the Chardan at-the-market program generated $163 net proceeds from 1,270,233 shares; the corresponding 2015 period had generated $9,293 net proceeds under the prior ATM program. Weighted-average shares rose to 247.8 million from 225.0 million.
- Accrued expenses increased to $3,038 from $1,219 at December 31, 2015, largely reflecting higher professional fees and compensation/severance accruals.
Outlook, commentary, risks and unusual items
- Funding and liquidity: Management said additional funding may be needed for manufacturing-facility revalidation and operations. It warned that financing may not be available and that low share prices limit equity fundraising. No quantified revenue or earnings guidance was provided.
- Alferon manufacturing: A January 2016 flood damaged the New Jersey facility’s upstream processing cleanroom. Repairs were ongoing, manufacturing was on hold, and there was no definitive restart timetable. FDA inspection/reaffirmation and approval of new product lots were still required before U.S. commercial sales could resume. Management anticipated needing additional funds for revalidation.
- Ampligen: The FDA had declined the CFS application in 2013 and requested at least one additional clinical trial, nonclinical work and data analyses. Management estimated a new well-controlled study could take about 18 months to three years after design acceptance, and said the work exceeded current financial resources without additional funding.
- Partners and supply: The company was pursuing co-development partners and international access. A May 2016 agreement reinstated an early-access program with myTomorrows for the EU and Turkey; international sales were anticipated in 2016. A July 2016 agreement with Avrio added a contract manufacturer for Ampligen, but supply and production remained subject to execution and regulatory risks.
- Listing and governance: NYSE MKT notified the company that its share price did not meet continued-listing standards; the deadline to demonstrate compliance was September 15, 2016. The company planned to seek shareholder approval for a reverse split. Executive leadership changes included the termination of former CEO William Carter and appointment of Thomas Equels as CEO.
- Litigation and unusual items: The company recorded $3,536 of insurance proceeds and $2,100 of settlement expenses, producing the $1,436 net benefit. Shareholder litigation settlements remained subject to court approval, with hearings scheduled for September 2016. A separate former-CEO lawsuit was reported settled and dismissed. Management had not recorded gain or loss contingencies for the other matters and said outcomes remained uncertain.
- Other risks: The company had no established significant product revenue, reported continuing accumulated losses, and faced regulatory, clinical-trial, manufacturing, supplier, commercialization and dilution risks. The filing states disclosure controls were effective as of June 30, 2016, and no material change in internal control over financial reporting occurred during the six months.
Most important facts for investors to verify
- Confirm the registrant identity and corporate naming: this 2016 filing is for Hemispherx Biopharma, Inc., while the request names AIM Immunotech Inc.
- Track unrestricted cash and securities separately from the $1,750 litigation escrow, and assess cash burn, financing needs and available ATM capacity.
- Verify the facility repair, revalidation, FDA inspection and product-release milestones for Alferon, including expected cost and funding source.
- Check the status, design, funding and regulatory requirements of any additional Ampligen CFS trial, and distinguish early-access activity from approved commercial sales.
- Review subsequent developments in the NYSE MKT listing matter, proposed reverse split, shareholder settlements, and the former CEO settlement.