AIM Immunotech Inc. (then Hemispherx Biopharma, Inc.) — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Amounts below are in U.S. dollars. The filing reports the company under its former name, Hemispherx Biopharma, Inc.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $23,000 | $45,000 | $106,000 | $157,000 |
| Operating loss | $(3.983)m | $(4.329)m | $(13.807)m | $(14.526)m |
| Net loss | $(3.803)m | $(4.202)m | $(12.093)m | $(12.994)m |
| Basic and diluted loss per share | $(0.02) | $(0.02) | $(0.05) | $(0.07) |
| Operating cash used | — | — | $12.739m | $9.931m |
- Revenue came entirely from the Ampligen open-label cost-recovery treatment program; there were no commercial Alferon finished goods available for sale. The filing does not provide a meaningful gross-margin measure.
- At September 30, cash and cash equivalents were $1.161m and marketable securities were $11.214m, totaling $12.375m. This was down $3.733m, or 23%, from $16.108m at December 31, 2014.
- Cash from financing was $9.661m, mainly net proceeds of $9.680m from at-the-market stock sales. Investing activities provided $2.083m. Cash declined by $0.995m during the nine months.
- Assets totaled $26.497m; current assets were $13.979m and current liabilities $3.327m, for working capital of $10.652m. Total liabilities were $3.327m, including a $3,000 current capital-lease balance; the filing reports no material borrowings.
- Stockholders’ equity was $23.170m and accumulated deficit was $289.862m. Work-in-process inventory was $1.326m. Property and equipment, net, rose to $11.501m as completed New Brunswick facility construction was placed in service.
Material changes versus the prior comparable periods
- Q3 net loss narrowed by $399,000, or 10%, year over year; nine-month net loss narrowed by $901,000, or 7%. Lower general and administrative expense—principally lower legal fees—was the main contributor. Nine-month results also included a $1.374m gain from selling New Jersey tax-loss carryforwards, versus $1.126m in 2014.
- Nine-month operating cash use increased $2.808m, or 28%. Management attributed the increase mainly to payment of approximately $1.831m in prior-year executive bonuses and the $1.326m increase in inventory.
- Nine-month R&D expense rose 8% to $7.081m and production costs rose 33% to $1.232m, primarily reflecting Alferon manufacturing validation, stability testing and pre-production work. Revenue fell 32% to $106,000, mainly because patients received lower Ampligen dosages.
- The company sold 40,993,690 shares under its at-the-market agreement during the nine months. Shares issued and outstanding rose from 204.0m at year-end 2014 to 247.6m at September 30, 2015, diluting existing holders.
Outlook, risks, contingencies and unusual items
- Funding and liquidity: Management said available resources may not cover planned development and commercialization work. Additional financing may be required, may not be available, and could further dilute shareholders. The filing gives no formal cash-runway estimate.
- Ampligen: The FDA’s 2013 Complete Response Letter declined to approve Ampligen for chronic fatigue syndrome and called for at least one additional clinical trial, nonclinical studies and data analyses. The company said it could not estimate the work’s cost or timing before further FDA discussions; a new study could take an estimated 18 months to three years after design acceptance and would exceed current financial resources without additional funding.
- Alferon manufacturing: U.S. commercial sales remained suspended pending new production, FDA pre-approval inspection and product-release approval. Manufacturing interruptions caused equipment problems; vendors roughly estimated repairs at two to three months, but no firm repair schedule was available. International sales were projected to begin as early as the following quarter, subject to approvals and production readiness. Timing and resumption of sales were uncertain.
- Business development: The company entered agreements for Ampligen early access or regulatory efforts in Europe and Turkey and Australia and New Zealand, and for Alferon in Australia and New Zealand. These programs and international sales are subject to regulatory, manufacturing and commercial execution risks. The filing also described preclinical Ebola research; it cautioned that laboratory and animal findings do not establish human safety or efficacy.
- Legal matters: A securities class-action settlement received final court approval in July 2015 and was paid by insurance, with no company funds used. Shareholder derivative cases remained pending, including an amended complaint filed after quarter-end. The filing states outcomes and potential impacts are uncertain and records no related loss contingency.
- Investment and other items: Marketable securities had $401,000 of unrealized losses at quarter-end; the company also identified approximately $54,000 of other-than-temporary impairment during the nine months. The filing reports no off-balance-sheet arrangements.
Most important facts for investors to verify
- Current unrestricted cash and marketable securities, monthly operating cash burn, and the company’s ability to fund operations without further equity issuance.
- Progress, cost and required study design in discussions with the FDA regarding Ampligen, and whether a funded development plan is feasible.
- Alferon repair, validation, FDA inspection and product-release milestones, including whether any projected international or U.S. sales actually begin.
- Terms and expected economics of early-access and licensing arrangements, including actual product demand, transfer pricing and regulatory progress.
- Share issuance capacity and dilution under the at-the-market agreement, plus the status and possible exposure of remaining derivative litigation.