Altimmune, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter report. Altimmune is a clinical-stage immunotherapeutics company; it had no product sales and relied primarily on U.S. government research contracts.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $10.33 million | $10.74 million |
| Research and development expense | $18.46 million | $18.41 million |
| General and administrative expense | $9.77 million | $8.46 million |
| Impairment charges | $24.94 million | $35.92 million |
| Operating loss | $42.83 million | $52.05 million |
| Net loss | $39.17 million | $46.43 million |
| Cash used in operating activities | $9.39 million | $20.21 million |
| Cash, cash equivalents and restricted cash at year-end | $34.35 million | $12.30 million |
- BARDA generated $8.3 million of 2018 revenue and NIAID generated $2.0 million; substantially all revenue came from government contracts. No product revenue was reported, so product margins are not applicable.
- Year-end cash included $33.72 million of cash and cash equivalents and $0.63 million of restricted cash. Total current assets were $39.37 million versus current liabilities of $4.53 million.
- Total liabilities were $6.44 million. Notes payable were modest: $71,596 current and $501,174 long-term, primarily BPI France research funding. The $1.5 million Exchange Notes issued in 2018 were repaid in cash in October; the credit line expired in January 2019 and was not renewed.
- Management said available cash and expected government-contract revenue were sufficient for at least 12 months from issuance of the financial statements, but not enough to fund clinical development through approval or commercialization. A March 2019 offering subsequently generated approximately $12.7 million net.
Changes and notable items
- Revenue declined 4% year over year, mainly from lower BARDA activity; R&D expense was essentially flat, while G&A rose 15%.
- Net loss narrowed, partly because impairment charges were lower than in 2017. The 2018 impairment included $21.4 million for SparVax-L and $3.1 million after Altimmune discontinued Oncosyn. The SparVax-L asset was written down from $22.4 million to about $1.0 million amid limited prospects for future funding. HepTcell’s carrying value was not impaired.
- Cash from financing was $32.5 million in 2018, principally following equity and unit offerings that raised $37.4 million net, partly offset by preferred-stock redemptions and warrant-exchange payments. Common shares outstanding increased from 608,499 to 9,078,238; figures reflect the 1-for-30 reverse split. The company had 7.34 million warrants outstanding at year-end, creating potential dilution.
- Other expense included a $2.9 million loss from changes in warrant fair value and exchanges. The $6.15 million income tax benefit was not operating cash revenue.
Pipeline, outlook and risks
- HepTcell: Phase 1 in 61 chronic-HBV patients was completed. The filing reports good tolerability and increased T-cell responses in the two adjuvanted arms; management planned Phase 2 development.
- NasoVAX: The Phase 2a trial was completed. The company reported tolerability, immunogenicity signals and seroprotective antibody levels at least 13 months in a subset. Separately, repeated manufacturing failures delayed planned multivalent trials.
- NasoShield: Phase 1 results showed tolerability but no appreciable toxin-neutralizing antibody response, contrary to expectations from animal studies. The company was investigating the result, with findings expected in the first half of 2019.
- SparVax-L: NIAID-funded work was substantially complete. Further development depended on new government or other funding, which had not been identified by the filing date.
- The BARDA contract had a base period funded at approximately $24.1 million through November 2019 and options that could bring total potential contract value to $130 million through 2021. Options are at BARDA’s discretion; the company had recognized approximately $14.7 million under the current contract by year-end. NasoShield’s Phase 1 immune-response result adds uncertainty to continued funding.
- Management anticipated increased R&D spending and planned to pursue additional financing, government funding, partnerships or asset monetization. The filing gives no specific revenue, earnings or clinical milestone guidance.
- Principal risks include clinical safety and efficacy uncertainty, dependence on government funding, limited capital and potential dilution, manufacturing and trial delays, regulatory approval hurdles, and reliance on third-party manufacturers. The company reported no legal proceedings. The auditor gave an unqualified opinion on the financial statements; management concluded disclosure controls and internal control over financial reporting were effective, with no auditor opinion on internal-control effectiveness.
Most important facts for investors to verify
- Whether BARDA exercises contract options and whether NasoShield investigations produce an acceptable explanation or further clinical evidence.
- Whether Altimmune secures funding for SparVax-L and what additional development, if any, is planned after the impairment.
- Progress, design, cost and funding for the planned HepTcell Phase 2 program, and whether NasoVAX manufacturing issues are resolved.
- Cash runway assumptions, including the impact of operating burn, restricted cash, government reimbursements and the March 2019 financing.
- Potential dilution from outstanding warrants, equity awards and future capital raises, and the terms of any further financing.