Pulmatrix, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited. Unless noted otherwise, amounts are in millions of dollars; share and per-share data reflect the 1-for-20 reverse stock split effective February 28, 2022.
Business context
Pulmatrix is a clinical-stage biotechnology company developing inhaled therapies using its iSPERSE dry-powder delivery platform. It has no product sales; reported revenue is primarily from collaboration and licensing agreements. Its principal programs are PUR1900 for pulmonary fungal disease, PUR1800 for acute COPD exacerbations, and PUR3100 for acute migraine.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.872 | $1.069 | $4.363 | $4.713 |
| Research and development | $5.287 | $4.026 | $13.773 | $12.423 |
| General and administrative | $1.685 | $1.656 | $5.212 | $4.837 |
| Operating loss | $(5.100) | $(8.190) | $(14.622) | $(16.124) |
| Net loss | $(5.052) | $(8.184) | $(14.620) | $(16.140) |
| Net loss per share | $(1.45) | $(2.91) | $(4.32) | $(6.08) |
Q3 revenue increased $0.803 million, driven by PUR1900 collaboration revenue, partly offset by the absence of PUR1800 revenue. Nine-month revenue declined $0.350 million: PUR1900 revenue rose to $4.3 million from $0.9 million, while PUR1800 revenue fell to zero from $3.7 million. R&D increased year over year, principally due to PUR1900 clinical spending and employee costs. The prior-year comparisons included a $3.577 million goodwill impairment, with no such charge in 2022.
No product gross margin is reported, and gross margin is not a meaningful disclosed measure for this clinical-stage business. Interest income was $0.102 million for Q3 and $0.118 million for the nine-month period in 2022. The filing reports no income tax expense.
At September 30, 2022, cash and cash equivalents were $40.683 million; restricted cash was another $1.625 million, including $0.153 million current. Total assets were $46.450 million, total liabilities $11.404 million, and stockholders’ equity $35.046 million. Current assets were $43.225 million and current liabilities $6.324 million. The filing shows no outstanding borrowings or other financial debt.
Cash used in operations was $14.310 million for the first nine months, versus $15.331 million in 2021; investing used $0.077 million. Financing provided $1.230 million, primarily from $1.4 million of net ATM proceeds, compared with $37.283 million in the prior period, which included a $37.1 million equity offering. Cash, cash equivalents and restricted cash decreased $13.157 million to $42.308 million. Management estimated existing cash and cash equivalents would fund projected operating expenses and capital expenditures into the second quarter of 2024.
Material changes and capital structure
- Common shares outstanding increased to 3,639,185 at September 30, 2022 from 3,222,037 at year-end 2021. The company sold 252,013 shares through its ATM program during the nine months for approximately $1.4 million net proceeds.
- All Series A preferred shares had converted to common stock by September 30, 2022. The company completed a 1-for-20 reverse split in February 2022.
- Deferred revenue was $6.220 million, including $1.140 million current, relating to remaining Cipla agreement obligations. One customer accounted for 99% of nine-month revenue and 99% of accounts receivable at quarter-end.
- Remaining R&D contract commitments were approximately $4.4 million, of which management expected partners to reimburse $1.9 million; $4.0 million was expected to be current over the following 12 months.
Outlook, commentary and risks
- Management expects continued operating losses and increasing development costs, and says additional capital may be needed through equity, debt, third-party funding, collaborations or strategic alliances. Management cautions that cash-use projections may prove incorrect.
- PUR1900 Phase 2 dosing was anticipated to begin in Q1 2023, with topline data expected in mid-2024. Under the Cipla plan, a 25% enrollment-and-dosing milestone is set for June 30, 2023; delivery of topline results to the joint steering committee is set for June 30, 2024. Missed milestones may permit either party to stop funding, subject to agreement terms.
- PUR1800 Phase 1b topline results indicated tolerability and low, consistent systemic exposure. The company planned to present analyzed results in 2023 and use the data to inform a potential Phase 2 study.
- PUR3100 Phase 1 dosing was complete; topline data were anticipated in early Q1 2023. The company planned to use the results to inform a potential placebo-controlled Phase 2 study.
- The current headquarters lease expires June 30, 2023. A new approximately 20,000-square-foot facility is expected to commence in May 2023 under a ten-year lease; management anticipated contributing approximately $2.9 million toward improvements, in addition to landlord funding and allowances.
- Risks include recurring losses and negative operating cash flow, dependence on external financing and a highly concentrated customer base, clinical and regulatory uncertainty, trial enrollment and execution, reliance on collaborators, manufacturing and intellectual-property risks, and potential effects of COVID-19, supply-chain disruption, inflation and geopolitical conditions. The company reported that Nasdaq minimum-bid-price compliance had been regained in March 2022, but warned it could fall out of compliance again.
No formal financial guidance was provided. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no material pending legal proceedings.
Key facts investors should verify
- Whether PUR1900 trial start-up and the Cipla milestones remain on schedule, and how future development costs are shared.
- Whether PUR3100 data and PUR1800 follow-up support progression to planned studies.
- Cash burn, partner reimbursements and financing needs relative to the stated Q2 2024 runway estimate.
- Revenue and receivables concentration, including the continued contribution and credit status of the principal customer.
- Expected costs and timing for the new headquarters lease, as well as future ATM issuance and potential share dilution.