Altimmune, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Altimmune is a clinical-stage immunotherapeutics and vaccine developer; it has not generated product-sales revenue. Results include PharmAthene, acquired in May 2017, whereas Q1 2017 results included only Altimmune, limiting comparability.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Total revenue | $2.691 million | $0.300 million |
| Research and development expense | $5.747 million | $2.786 million |
| General and administrative expense | $2.448 million | $2.031 million |
| Operating loss | $5.995 million | $4.517 million |
| Net loss | $3.174 million | $4.579 million |
| Net loss attributable to common stockholders | $5.065 million | $4.697 million |
| Operating cash used | $3.559 million | $3.343 million |
Revenue was primarily research grants and contracts: $2.686 million versus $0.295 million, up 798% overall. The increase reflected roughly $1.6 million more BARDA revenue related to NasoShield and about $771,000 from the NIAID contract acquired with PharmAthene. There was no material change in license revenue. The company reported no product-sales revenue.
Net loss narrowed, but the improvement included a $1.548 million noncash gain from the change in fair value of warrant liabilities, a $992,000 income tax benefit, and $258,000 of cash received from a prior claim settlement. Operating loss increased 33% as expenses rose. No gross margin was reported; a meaningful product margin is not available because revenue is primarily contract and grant-related.
At March 31, 2018, cash and cash equivalents were $4.560 million and restricted cash was $3.534 million, for total cash, cash equivalents and restricted cash of $8.094 million, down from $12.304 million at year-end 2017. Current assets were $19.921 million, including $6.622 million in tax refunds receivable; current liabilities were $5.155 million. Total liabilities were $14.372 million. Notes payable were $49,702 current and BPI France notes were $616,371 long-term; redeemable convertible preferred stock was separately reported at $5.955 million. The company used $3.559 million in operating cash and spent $668,000 on investing activities; financing provided only $18,000.
Material changes and unusual items
- R&D expense increased 106%, reflecting NasoShield and NasoVAX activity, SparVax-L and HepTcell costs, and general R&D spending. G&A increased 21%, including higher public-company costs, partly offset by lower merger-related costs.
- A $491,000 goodwill impairment charge arose from a purchase-price allocation adjustment reducing acquired tax refunds receivable; no goodwill remained at quarter-end.
- During the quarter, 5,219 Series B redeemable preferred shares converted into common stock, with $5.219 million of carrying value transferred. Common shares outstanding increased from 18.104 million at December 31, 2017 to 22.250 million at March 31, 2018; 25.802 million were outstanding May 14, 2018.
- The company had 2.350 million common stock warrants and 1.706 million stock options outstanding at quarter-end, in addition to remaining preferred-stock conversion potential.
Outlook, risks and contingencies
- Going concern: Management stated that available resources, expected tax refunds and contract revenue were insufficient to fund the operating plan for 12 months from the expected issuance date of the statements. Recurring losses and the need for additional financing raise substantial doubt about the company’s ability to continue as a going concern. Financing may not be available on acceptable terms or at all.
- Preferred-stock installments: The company’s stock had traded below the $1.50 threshold required to satisfy an equity condition for share settlement. Without holder waivers, cash redemption could require $1.740 million for each remaining installment, potentially pressuring liquidity and R&D plans.
- Programs: NasoVAX Phase 2 initial data released in March indicated tolerability and 100% protection at the two higher doses; final data were expected in Q3 2018, with a quadrivalent candidate anticipated for clinical evaluation in early 2019. NasoShield Phase 1 began in Q1, with topline data expected in Q3. HepTcell initial results were inconclusive; six-month follow-up was expected in Q3 to inform further development. SparVax-L’s lyophilized formulation showed improved shelf life and encouraging preclinical results.
- Contract funding: The BARDA contract has a potential total value up to $127.5 million, but later funding depends on BARDA exercising options. Its initial base period provided about $21.6 million through July 2018; approximately $8.7 million had been received by March 31. NIAID funding for the assumed contract was reported as committed at $15.3 million.
- The company disclosed ordinary-course contractual disputes and potential claims but did not expect them to materially affect its financial position or results. It reported no legal proceedings. Management reported effective disclosure controls and no material change in internal control over financial reporting.
The filing provides no quantitative full-year financial guidance. Management cautioned that forward-looking plans are subject to substantial risks and may not be achieved.
Important facts for investors to verify
- Progress and timing of the stated Q3 2018 NasoVAX and NasoShield data, and the HepTcell follow-up decision.
- Whether Altimmune obtained financing and preferred-holder waivers, and whether installment obligations had to be paid in cash.
- BARDA option exercises, actual contract funding and cash receipts, and the timing of expected tax refunds.
- Cash runway and spending relative to clinical plans, including any need to delay, reduce or terminate programs.
- Potential dilution from preferred-stock conversions, warrants and options; the filing reported 25.802 million common shares outstanding as of May 14, 2018.