Actinium Pharmaceuticals, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. The unaudited filing was signed November 14, 2013. Actinium is a clinical-stage biopharmaceutical company developing cancer therapies; it reported no commercial revenue and had no products approved for sale. Its results reflect a 2012 reverse takeover and recapitalization, so the share-count and per-share comparisons are affected by the transaction.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2013 and 2012 | $0 in 2013 and 2012 |
| Research and development expense | $778,232 in 2013; $1,677,301 in 2012 | $2,373,200 in 2013; $2,723,459 in 2012 |
| General and administrative expense | $830,730 in 2013; $722,037 in 2012 | $2,730,233 in 2013; $1,520,221 in 2012 |
| Net loss | $1,420,913 in 2013; $3,012,454 in 2012 | $4,893,951 in 2013; $5,483,954 in 2012 |
| Basic and diluted loss per share | $(0.06) in 2013; $(3.76) in 2012 | $(0.22) in 2013; $(6.84) in 2012 |
- Margins: Not meaningful because the company had no revenue.
- Cash and liquidity: Cash and cash equivalents were $3,990,063 at September 30, down from $5,618,669 at December 31, 2012. Current assets were $4,043,063 and current liabilities $3,445,653, for approximately $597,000 of working capital.
- Cash flow: Nine-month cash used in operations was $4,947,969, versus $3,795,480 in 2012; investing used $8,030. Financing provided $3,327,393, including $3,467,393 of warrant-exercise proceeds, partly offset by repayment of a $140,000 note. Cash declined by $1,628,606 during the period.
- Debt and other liabilities: The $140,000 premium-finance note was fully repaid. No long-term debt was reported. Current liabilities included $2,757,966 of derivative liabilities, measured using Level 3 inputs, and $687,687 of accounts payable and accrued expenses, including related-party amounts.
- Capitalization: Stockholders’ equity was $604,328; accumulated development-stage deficit was $60,637,414. Common shares outstanding were 23,656,582 at September 30 and November 12, 2013.
Material changes versus prior comparable periods
- Third-quarter net loss decreased by $1,591,541 year over year; nine-month net loss decreased by $590,003. Lower R&D spending, lower interest expense from debt-discount and financing-cost amortization, and gains from changes in derivative fair value contributed. The filing says the third-quarter R&D reduction reflected capital conservation.
- Nine-month R&D expense fell $350,259, while G&A expense rose $1,210,012, primarily due to professional and financing-related fees. For the quarter, G&A increased $108,693.
- Despite lower reported net loss, operating cash use increased year over year. Management attributed this to spending on preparation and conduct of a multicenter trial, professional fees, and payroll-related costs.
- Financing included $3.47 million gross proceeds from exercises of warrants at $1.65 per share. The company also completed share exchanges and a merger involving Actinium Corporation; these transactions increased the share count and affect comparability of per-share figures.
Outlook, risks, contingencies, and unusual items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, $4.95 million of operating cash use for the nine months, and no stable recurring revenue source sufficient to cover costs for the next 12 months. It expected to seek debt or equity and other financing, but stated no funding commitments were in place and availability was not assured.
- Funding needs: The company estimated cash needs of up to $2.9 million during 2013 for R&D and working capital. It said additional funding would be needed beyond 2013 and that failure to meet a stated $25 million cash need could require delaying product-development efforts.
- Development plans: Actimab-A was in AML clinical development; the company estimated about $7.5 million in direct costs to complete both parts of its ongoing Phase I/II trial. For Iomab-B, it intended to ask the FDA in 2014 about a pivotal trial and estimated trial costs of $15–20 million. The filing also described a possible NDA filing in 2016–2017 for a licensed product. These are plans and estimates, not assured milestones.
- Key risks: Clinical and regulatory outcomes are uncertain; success depends on financing, collaborations, access to antibodies and radioactive isotopes, manufacturing capability, intellectual-property protection, and finding commercial partners. The company may be unable to secure needed capital or partnerships.
- Commitments: License agreements include potential milestone payments, royalties, and annual research funding. The Abbott agreement includes $7.75 million of stated milestone payments and 12% royalties on licensed-product net sales; the FHCRC agreement includes annual funding, a $1 million approval milestone, and 2% royalties. The filing also describes clinical-trial and research obligations, including an estimated FHCRC trial-development cost of $13.2–23.5 million depending on design.
- Derivative valuation: Warrants with anti-dilution provisions were recorded as derivative liabilities. A $189,348 quarterly gain and $216,112 nine-month gain from fair-value changes reduced reported losses; these non-cash valuation changes are sensitive to assumptions.
- Governance and controls: A new CEO was appointed in September 2013. Disclosure controls were reported ineffective as of September 30 due to material weaknesses previously described in the 2012 Form 10-K; the filing reported no material changes in internal control during the quarter.
Most important facts for investors to verify
- Current cash runway and whether financing has been secured since the filing; the company disclosed substantial doubt about going concern and no funding commitments.
- Actual operating cash burn and clinical-trial spending versus the stated 2013 and future funding needs.
- Clinical, regulatory, and trial-cost updates for Actimab-A and Iomab-B, including the timing and feasibility of planned milestones.
- Changes in derivative liabilities and warrant terms, plus the potential dilution from outstanding warrants and options.
- Whether the disclosed control weaknesses have been remediated and whether subsequent filings provide updated governance and liquidity information.