Atossa Therapeutics, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Atossa Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing therapies for oncology, breast conditions, and COVID-19. Lead programs include oral and topical Endoxifen, AT-H201 inhalation therapy, and AT-301 nasal spray. The filing covers the quarter and nine months ended September 30, 2021, and was filed November 15, 2021.
The company is in the research and development stage, is not currently marketing approved products, and has no sustainable revenue source.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.2 million | $7.4 million |
| General and administrative expense | $3.0 million | $8.3 million |
| Total operating expenses | $5.2 million | $15.7 million |
| Net loss | $5.2 million | $15.8 million |
| Loss per common share, basic and diluted | $0.04 | $0.14 |
| Cash used in operating activities | Not presented for the quarter | $12.8 million |
As of September 30, 2021, cash and cash equivalents were $140.0 million, restricted cash was $0.1 million, and working capital was $141.3 million. Total assets were $143.0 million and stockholders’ equity was $141.3 million. The company reported no debt; total liabilities were $1.7 million, primarily current operating liabilities.
Accumulated deficit was $124.4 million. Cash, cash equivalents, and restricted cash increased to $140.2 million from $39.7 million at December 31, 2020, primarily due to equity and warrant financing proceeds.
Material Changes Versus the Prior Comparable Period
- Revenue remained zero, while the net loss increased to $5.2 million for the quarter from $3.5 million and to $15.8 million for the nine-month period from $10.3 million.
- Operating expenses increased 47% for the quarter and 51% for the nine months. Nine-month R&D expense increased 74%, primarily due to higher clinical-trial costs, compensation, and a $1.0 million one-time fee for exclusive negotiating rights to two oncology research programs.
- Nine-month G&A expense increased 36%, driven by higher insurance, professional fees, compensation, headcount, and non-cash stock-based compensation.
- Operating cash usage increased 57% to $12.8 million for the nine months, reflecting higher clinical development spending, working-capital changes, and the one-time oncology program fee.
- The company raised approximately $69.7 million net from common-stock and warrant offerings and received approximately $43.8 million from warrant exercises during the nine months. It also received approximately $0.4 million from employee stock-option exercises.
- Common shares outstanding increased from 47.5 million at December 31, 2020 to 126.6 million at September 30, 2021. Warrants to purchase approximately 22.3 million common shares remained outstanding at quarter-end, creating potential future dilution.
- The company early adopted ASU 2020-06, eliminating the common-stock warrant liability and recording a $13.0 million cumulative reclassification to stockholders’ equity. This accounting change materially affected comparability with December 31, 2020.
Guidance, Outlook, Risks, and Unusual Items
- Management expects ongoing operating losses and increasing R&D expenses as it advances AT-H201, AT-301, Endoxifen, and other pipeline programs.
- Management believes available funding is sufficient to finance planned operations for at least 12 months from the filing date, depending on the timing and scope of clinical trials. The company expects to require substantial additional capital thereafter and may use equity, debt, collaborations, licensing, or other financing arrangements.
- Management disclosed that, without additional capital, it anticipates liquidity issues in approximately 18 months. Failure to obtain funding could require delaying, reducing, or suspending development programs or operations.
- COVID-19 restrictions slowed enrollment in the Australian Phase 2 Endoxifen study and could delay or slow the planned Swedish mammographic breast-density study. COVID-19 may also affect AT-H201 enrollment, regulatory interactions, clinical sites, supply chains, and access to capital.
- The company expected to open the Swedish Phase 2 Endoxifen study in the fourth quarter of 2021, subject to COVID-19 restrictions, and scheduled a December 2021 FDA pre-IND meeting regarding a U.S. neoadjuvant Endoxifen study.
- AT-H201 received Australian ethics approval in July 2021, and enrollment in its Phase 1/2a study began in September 2021. The company planned to enroll 60 healthy and moderately ill hospitalized COVID-19 participants, with later study stages and sites subject to additional approvals.
- The company reported a material weakness in internal control over financial reporting related to accounting for complex financing transactions and warrants. Remediation was in process and had not been fully tested or completed as of September 30, 2021.
- The company has no approved commercial products and faces substantial clinical, regulatory, manufacturing, intellectual-property, competition, third-party provider, litigation, and commercialization risks.
- Cash concentration risk was significant: approximately $139.9 million of cash exceeded FDIC insurance limits at September 30, 2021.
- The company paid $1.0 million for exclusive negotiating rights to two oncology programs; negotiations were ongoing, and no definitive acquisition agreement was assured.
Most Important Facts for Investors to Verify
- Whether the $140.0 million cash balance and stated 12-month funding runway remain adequate after subsequent clinical, operating, and capital expenditures.
- The timing, enrollment, regulatory status, and results of the Endoxifen, AT-H201, and AT-301 clinical programs.
- Whether COVID-19 restrictions or other factors caused delays in the Swedish Endoxifen study or AT-H201 enrollment.
- Progress toward remediation of the material weakness in financial reporting controls.
- The potential dilution from approximately 22.3 million outstanding warrants, approximately 10.1 million outstanding stock options, and future equity financing.
- Whether the company obtains regulatory approval, enters a definitive agreement for the two oncology programs, or establishes any source of commercial revenue.