Atossa Therapeutics, Inc. — 2022 Form 10-K Summary
Business context and reporting period
Atossa Therapeutics is a clinical-stage biopharmaceutical company focused on oncology, particularly breast cancer and other breast conditions. Its lead candidate is oral (Z)-endoxifen, under development for neoadjuvant treatment of ER+/HER2- breast cancer and reduction of mammographic breast density. The filing covers the fiscal year ended December 31, 2022, and was filed March 22, 2023.
- The company has no marketed products and no sustainable revenue source.
- The Karisma Phase 2 breast-density study was ongoing in Sweden and expected to enroll approximately 240 participants, with enrollment targeted for completion by the end of 2023.
- The FDA authorized the IND for the EVANGELINE Phase 2 neoadjuvant breast-cancer study in October 2022; the first patient was enrolled in February 2023.
- In late 2022, the company shifted AT-H201 away from COVID-19 toward potential cancer-treatment-related lung injury, but did not expect to advance the program in 2023.
Financial condition and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No sustainable revenue |
| Research and development expense | $15.083 million | $9.210 million | Up 64% |
| General and administrative expense | $12.608 million | $11.311 million | Up 11% |
| Total operating expenses | $27.691 million | $20.521 million | Up 35% |
| Operating loss | $27.691 million | $20.521 million | Increased |
| Net loss | $26.960 million | $20.606 million | Increased 31% |
| Net loss per share | $0.21 | $0.18 | Higher loss per share |
| Interest income | $0.877 million | $0.006 million | Higher cash balances and rates |
| Cash used in operating activities | $20.760 million | $16.472 million | Increased 26% |
| Cash, cash equivalents and restricted cash | $111.000 million | $136.487 million | Decreased $25.487 million |
| Working capital | $112.629 million | Not clearly provided | — |
| Total liabilities | $5.568 million | $3.126 million | Increased |
| Investment in equity securities | $4.700 million | $0 | New investment |
| Accumulated deficit | $156.194 million | $129.234 million | Increased |
Gross and operating margins are not meaningful because the company had no revenue. The filing does not identify material interest-bearing debt; reported liabilities were primarily accounts payable, accrued expenses, payroll liabilities and other current liabilities.
Material changes versus the prior comparable period
- R&D expense increased by $5.873 million, primarily from higher clinical and nonclinical trial activity, manufacturing expenses and preclinical toxicology work.
- Clinical trial expense increased by $5.569 million.
- G&A expense increased by $1.297 million, including higher compensation, stock-based compensation and legal expenses, partly offset by lower professional fees.
- Stock-based compensation increased to $6.788 million from $5.267 million.
- Operating cash burn increased by $4.288 million.
- The company made no financing transactions in 2022, compared with $113.304 million of net financing cash inflows in 2021.
- Investing cash outflows increased primarily because of the $4.700 million investment in Dynamic Cell Therapies, Inc. The investment represented approximately 19% of DCT’s outstanding capital stock and was not impaired at year-end.
- Cash and cash equivalents declined from $136.377 million to $110.890 million, while total cash, cash equivalents and restricted cash declined from $136.487 million to $111.000 million.
Guidance, outlook, risks and unusual items
- Management stated that available funding was expected to support operations for at least one year from issuance of the financial statements, based on the current plan. The company expects continuing operating losses and will need substantial additional capital in the future.
- Potential future funding sources include equity offerings, debt, collaborations, licensing arrangements and other financing alternatives. The company cautioned that financing may be unavailable or may cause dilution or unfavorable terms.
- Fewer than five million common shares were authorized but unreserved for specific purposes, which management stated could limit future capital-raising flexibility.
- Atossa received a Nasdaq notice on October 5, 2022, for noncompliance with the $1.00 minimum bid-price requirement. The company had until April 3, 2023, to regain compliance or request additional time; delisting could adversely affect liquidity, stock price and financing access.
- The company relies substantially on third-party manufacturers, clinical research organizations, medical institutions and suppliers. Delays, quality problems, supply shortages or regulatory noncompliance could delay trials or prevent commercialization.
- Reduction in breast density may not be an approvable indication unless Atossa demonstrates a reduction in breast-cancer incidence, potentially requiring additional studies.
- Clinical-stage risks include failure to demonstrate safety or efficacy, insufficient enrollment, trial delays, regulatory holds, changing regulatory requirements and differences between preliminary and final study results.
- COVID-19, inflation, interest rates, economic conditions, supply-chain disruption and geopolitical events could affect trial enrollment, operations and access to capital. As of March 16, 2023, the company had not experienced a significant enrollment or drug-supply disruption in ongoing studies.
- The $4.700 million DCT investment was carried at cost less impairment using significant estimates; management concluded it was not impaired at December 31, 2022, but future impairment remains possible.
- The company had approximately $110.647 million of cash deposits above FDIC insurance limits at December 31, 2022.
- The company had no material legal proceedings reported and management concluded its disclosure controls and internal control over financial reporting were effective as of December 31, 2022.
Most important facts for investors to verify
- Current cash runway, quarterly cash-burn rate and the timing and terms of any future capital raise.
- Nasdaq listing status and whether the minimum bid-price deficiency was cured or extended after April 3, 2023.
- Enrollment progress, timelines and interim or final results for the Karisma and EVANGELINE studies.
- Whether regulators will require evidence that (Z)-endoxifen reduces breast-cancer incidence for a breast-density indication.
- Clinical safety, efficacy and manufacturing data supporting (Z)-endoxifen and the adequacy and concentration of third-party suppliers.
- Valuation, financing status and potential impairment of the DCT investment.
- Potential dilution from future equity offerings, outstanding options and approximately 21.515 million warrants outstanding at December 31, 2022.