Azitra, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Azitra is an early-stage clinical biopharmaceutical company developing engineered microbes and biologics for dermatology; it has not commenced commercial operations. The filing was signed November 14, 2023.
Financial performance and liquidity
| Metric | Q3 2023 | Nine months 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue, all service revenue from related party | $310,700 | $596,000 | $48,500; $253,500 |
| Operating expenses | $2.30 million | $5.63 million | $2.42 million; $7.01 million |
| Loss from operations | $1.99 million | $5.04 million | $2.37 million; $6.76 million |
| Net loss | $1.94 million | $8.83 million | $2.42 million; $6.63 million |
| Net loss per share, basic and diluted | $0.16 | $1.97 | $2.95; $8.25 |
| Cash used in operating activities | — | $4.78 million | —; $6.18 million |
Revenue is from the Bayer joint development agreement, not product sales. Gross margin is not presented; the filing does not provide a clear product-margin measure. Q3 operating expenses fell 5% year over year: G&A rose 67%, mainly from accounting, legal, financing and insurance costs, while R&D fell 60%, reflecting reduced program costs and staffing, partly offset by higher manufacturing-related costs. For the first nine months, operating expenses declined 20%, but net loss increased 33%, principally due to a $3.63 million non-cash fair-value expense on convertible notes and higher interest expense.
At September 30, cash and cash equivalents were $4.40 million, current assets $4.86 million, current liabilities $1.45 million and working capital approximately $3.41 million. Total assets were $7.49 million. Convertible notes were fully converted and no convertible-note debt remained; lease liabilities totaled approximately $959,000, and a $60,933 warrant liability remained. Nine-month investing cash outflow was $258,274; financing provided $5.94 million, primarily from the IPO. Cash increased $907,671 from year-end 2022.
Material developments versus the prior period
- In June 2023, Azitra completed its IPO, selling 1.5 million shares at $5 per share and receiving approximately $5.99 million net proceeds.
- At the IPO closing, outstanding preferred stock and convertible notes converted into common stock. Common shares outstanding rose from 1,043,988 at December 31, 2022 to 12,097,643 at September 30, 2023. The 2022 notes’ conversion resulted in a $3.63 million non-cash fair-value charge in the nine-month results.
- R&D spending was lower than the prior year in the first nine months, while management expects it to increase significantly as clinical trials and product development advance.
- The company recorded $351,360 of impairment losses on license-related intangible assets and deferred patent costs during the nine months.
Outlook, risks and other notable items
- Management expected existing cash to fund operations into the first half of 2024, including dosing in the planned ATR-12 Phase 1b trial and ATR-04 preclinical work. It also expected to need additional capital in the first half of 2024, potentially sooner. No assurance is given that financing will be available on acceptable terms.
- Management disclosed substantial doubt about Azitra’s ability to continue as a going concern, citing accumulated deficit of $46.1 million, operating losses and $4.8 million of operating cash use for the nine months. Additional funding will be needed to advance development and cover expected future losses.
- Management expected to begin the ATR-12 Phase 1b trial in December 2023 and report initial results in mid-2024. It planned to submit an ATR-04 IND in the first half of 2024, subject to FDA clearance, with a trial anticipated in the second half of 2024. ATR-01 IND filing was targeted for late 2024 or early 2025.
- All reported service revenue came from one customer, Bayer, which is also a significant investor. This concentration and related-party relationship are relevant to revenue durability and independence.
- Disclosure controls were deemed ineffective as of September 30, 2023 because of a material weakness in segregation of accounting duties. Management planned to increase accounting staffing. The filing states risk factors were not materially changed from the June 2023 prospectus.
- The cover page marks “No” for having filed all required Exchange Act reports during the preceding 12 months; investors should confirm the reason and any implications.
Key facts for investors to verify
- Current cash runway, planned financing needs and whether new capital has been secured since the filing.
- ATR-12 trial start and enrollment progress, FDA status for ATR-04, and updated development milestones for ATR-01.
- Terms and potential dilution from future equity, debt, licensing or partnership financing.
- Reliability and continuation of Bayer-related revenue, including the related-party terms and customer concentration.
- Remediation of the accounting segregation material weakness and the filing’s “No” response on prior required reports.
- Nature and implications of the $351,360 impairment charges and remaining value of relevant licenses and patent costs.