Aptevo Therapeutics Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Aptevo is a clinical-stage biotechnology company developing immuno-oncology candidates using its ADAPTIR and ADAPTIR-FLEX platforms. Its clinical-stage candidates are APVO436 and ALG.APV-527; its other named candidates are preclinical.
Financial performance and position
| Metric | Q3 2023 | Nine months 2023 | Comparable 2022 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 Q3; $3.114 million nine months |
| Research and development expense | $3.887 million | $13.516 million | $4.477 million Q3; $13.208 million nine months |
| General and administrative expense | $2.674 million | $8.978 million | $3.307 million Q3; $10.863 million nine months |
| Operating loss | $6.561 million | $22.494 million | $7.784 million Q3; $20.957 million nine months |
| Net loss from continuing operations | $6.334 million | $12.454 million | $7.809 million Q3 loss; $12.177 million nine-month income |
| Net loss/income | $6.334 million loss | $11.508 million loss | $7.644 million Q3 loss; $12.669 million nine-month income |
| Net cash used in operating activities | $6.477 million | $15.083 million for nine months |
At September 30, 2023, cash and cash equivalents were $19.110 million, total current assets $21.126 million, and current liabilities $6.836 million. Total assets were $27.129 million and stockholders’ equity was $14.718 million. Aptevo had no outstanding debt; operating lease liabilities were $5.575 million long term and $0.7 million current. No meaningful operating margin is available because the company reported no revenue in 2023.
Material changes and unusual items
- Nine-month net results shifted from income in 2022 to a loss in 2023. The 2022 period included a $37.182 million gain from extinguishing the HCR royalty-sale liability; the 2023 period did not.
- In March 2023, Aptevo sold XOMA rights to specified future Medexus deferred payments and a portion of potential IXINITY milestones for $9.6 million plus a $0.05 million post-closing payment. It recognized approximately $9.65 million as other income. Aptevo retains eligibility for a portion of future milestones.
- Aptevo repaid its remaining MidCap debt in March 2023, using part of the XOMA proceeds; the repayment included $0.3 million in exit fees.
- Operating cash use declined to $6.477 million from $15.083 million year over year. Financing activities provided $2.952 million, principally from stock and pre-funded warrant issuance, partly offset by debt repayment. Cash decreased $3.525 million during the nine months.
- Shares outstanding increased from 6.466 million at December 31, 2022 to 14.466 million at September 30, 2023, primarily reflecting the August offering and warrant exercises. The filing reports 17.617 million shares outstanding as of November 14, 2023.
Outlook, management commentary, and risks
Management expects existing cash and potential financing and milestone sources to fund projected operating requirements for at least 12 months from the filing date. This expectation depends in part on warrant exercises, potential HCR and Medexus payments, and access to equity financing. The company reports recurring losses and negative operating cash flow, expects continued operating losses, and says it will need substantial additional funding to complete development of its candidates. It warns that unavailable or unfavorable financing could force it to delay, reduce, or terminate development activities.
- The ALG.APV-527 Phase 1 dose-escalation trial continued enrolling and dosing patients. Planning was underway for APVO436 Phase 2 studies in relapsed/refractory and frontline AML; the described program is intended to evaluate a combination with venetoclax and azacitidine.
- On November 9, 2023, certain holders agreed to exercise up to 16.013 million existing warrants for cash at $0.233 per share. As of the filing, some holders had exercised 8.755 million warrants, generating $2.0 million gross proceeds. Aptevo said it anticipated up to $3.7 million from the agreement and issued new warrants that could provide up to a further $7.5 million if exercised. These amounts are conditional and may cause substantial dilution.
- Potential milestone receipts are uncertain: Aptevo remains eligible for an additional $10 million HCR sales milestone and up to $5.8 million in remaining Medexus milestones, subject to specified conditions. Management notes its dependence on Pfizer’s RUXIENCE sales and Medexus’s IXINITY commercialization.
- Nasdaq notified Aptevo in September 2023 that its bid price had been below $1 for 30 consecutive business days. The filing states a March 11, 2024 compliance deadline and describes a possible additional compliance period and potential reverse stock split.
- Other key risks include clinical-trial outcomes and enrollment, regulatory approval, reliance on third-party manufacturers and trial providers, competition, macroeconomic conditions, and potential future capital needs. Management reported disclosure controls were effective as of September 30, 2023, with no material change in internal control over financial reporting during the quarter. The filing reports no pending legal matter believed likely to have a material adverse effect.
Important facts for investors to verify
- Whether cash burn and planned development spending remain consistent with management’s stated 12-month runway, and what financing will be needed thereafter.
- Whether the HCR and Medexus milestone conditions are met, and the timing and amount of any resulting payments.
- Actual proceeds and share issuance from the November warrant inducement, including exercise of the newly issued warrants and resulting dilution.
- Progress, enrollment, safety, and data timelines for ALG.APV-527 Phase 1 and the planned APVO436 Phase 2 program.
- Nasdaq bid-price compliance and any related reverse stock split or other listing actions.