Atossa Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Atossa is a clinical-stage biopharmaceutical company focused on oncology, primarily breast cancer and lung injury caused by cancer treatments. Its principal programs are oral (Z)-Endoxifen and inhaled AT-H201. The filing covers the three and nine months ended September 30, 2022, and was filed November 7, 2022. The company is not marketing products and generated no revenue in either comparable period.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2022 and 2021 | $0 in 2022 and 2021 |
| Operating expenses | $8.205 million vs. $5.158 million | $19.553 million vs. $15.693 million |
| Net loss | $8.011 million vs. $5.197 million | $19.469 million vs. $15.774 million |
| Net loss per share | $0.06 loss vs. $0.04 loss | $0.15 loss vs. $0.14 loss |
| Net cash used in operating activities | Not separately presented | $16.237 million vs. $12.807 million |
Research and development expense was $5.160 million in the third quarter and $10.097 million for the first nine months, while general and administrative expense was $3.045 million and $9.456 million, respectively. Stock-based compensation was $1.666 million in the third quarter and $5.243 million year to date.
At September 30, 2022, cash and cash equivalents were $117.367 million, restricted cash was $0.110 million, working capital was $120.527 million, and total assets were $126.724 million. Total liabilities were $2.868 million, with no debt reported. Stockholders’ equity was $123.856 million and the accumulated deficit was $148.703 million.
Cash, cash equivalents and restricted cash declined by $19.010 million during the first nine months, to $117.477 million. Investing cash use was $2.719 million, primarily a $2.700 million deposit related to the planned CAR-T Company investment. There were no financing activities in 2022, compared with $113.303 million of financing cash inflows in the first nine months of 2021.
Material changes versus the prior comparable period
- Third-quarter operating expenses increased 59%, primarily because R&D expense increased 134% due to higher clinical and nonclinical trial, drug formulation and analysis costs.
- Nine-month operating expenses increased 25%; R&D increased 37% and G&A increased 14%.
- Nine-month operating cash burn increased 27%, reflecting higher clinical and nonclinical trial costs and increased prepaid development expenses.
- The company had no 2022 financing proceeds, whereas 2021 included equity and warrant issuance proceeds and warrant exercises totaling substantial financing inflows.
- Prepaid expenses increased to $5.107 million from $2.488 million, primarily reflecting prepaid R&D costs.
Guidance, outlook, commentary, and unusual items
- Management expects continuing operating losses and states that additional capital will be needed through equity, debt, collaborations, licensing or other arrangements. Management believes available funding is sufficient for at least one year from issuance of the financial statements.
- In October 2022, the FDA authorized the IND for the Phase 2 EVANGELINE study of (Z)-Endoxifen in premenopausal women with ER+/HER2- breast cancer; the company planned to commence the study in the fourth quarter of 2022.
- The Phase 2 Karisma-(Z)-Endoxifen breast-density study was enrolling approximately 240 participants in Sweden.
- AT-H201 Phase 1/2a dosing in healthy Australian participants was completed in July 2022. The company decided not to proceed with the COVID-19 patient cohort and shifted development toward lung injury caused by cancer treatments.
- Development of AT-301 for COVID-19 was discontinued in October 2022 to focus resources on other programs.
- The company did not reach a definitive agreement to acquire the CAR-T Company by November 1, 2022. It therefore expected to pay an additional $2.000 million for a preferred equity interest representing 19.99% of that company in the fourth quarter of 2022.
- COVID-19 had not caused a significant reported delay in clinical enrollment or drug supply as of November 7, 2022, but potential effects on supply, trials, regulatory activity and capital access remain risks.
- On October 5, 2022, Nasdaq notified the company that its common stock was below the $1.00 minimum bid requirement for 30 consecutive business days. The company had until April 3, 2023, to regain compliance or request additional time.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2022, and reported no material change in internal control over financial reporting during the quarter.
Principal risks and contingencies
- The company has no product revenue, a history of losses and negative operating cash flow, and depends on future financing. Failure to raise capital could delay, reduce or terminate development programs or operations.
- Clinical trials may fail, be delayed, suffer enrollment or manufacturing problems, or produce results that differ from preliminary findings. Regulatory approval is not assured.
- The company relies extensively on third-party manufacturers, contract research organizations, clinical sites and other service providers.
- Potential impacts include COVID-19, inflation, rising interest rates, foreign exchange volatility, economic slowdown and geopolitical instability.
- Clinical, regulatory, intellectual-property, product-liability, data-security and privacy risks could materially affect operations and prospects.
- Cash balances substantially exceeded FDIC insurance limits; the filing reported $116.768 million, including restricted cash, above insured limits at September 30, 2022.
- The company disclosed ordinary-course legal proceedings and claims but believes they are unlikely to have a material effect.
Facts investors should verify
- Cash runway, quarterly cash burn and the timing and terms of any future capital raise.
- Enrollment, interim data, safety and regulatory progress for EVANGELINE, Karisma and AT-H201.
- Completion and accounting treatment of the additional $2.000 million CAR-T investment and any subsequent acquisition agreement.
- Nasdaq minimum-bid compliance and any resulting reverse split, delisting or financing implications.
- Outstanding dilution: 13.706 million stock options and 21.515 million warrants were outstanding at September 30, 2022, excluding the one outstanding Series B preferred share.