Filing summary
Entity discrepancy: The supplied filing is PharmAthene, Inc.’s Form 10-Q, not a filing under the name Altimmune, Inc. Confirm the issuer and filing before relying on this summary. The report covers the quarter and nine months ended September 30, 2015; the financial statements are unaudited.
Business context
PharmAthene was a biodefense company developing medical countermeasures, with operations focused on anthrax vaccine programs. Its revenue came primarily from U.S. government contracts. A March 2015 realignment eliminated about two-thirds of the workforce to conserve cash, pursue partners for its programs, and continue work under its NIAID contract.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Contract revenue | $1.16 million | $0.96 million | $9.37 million | $8.36 million |
| Operating expenses | $2.81 million | $4.96 million | $11.84 million | $15.93 million |
| Operating loss | $1.66 million | $4.00 million | $2.46 million | $7.57 million |
| Net loss | $1.32 million | $4.63 million | $2.20 million | $7.33 million |
| Basic and diluted loss per share | $0.02 | $0.08 | $0.03 | $0.13 |
For the nine months, operating cash use was $1.39 million, investing cash use was $0.06 million, and financing provided $0.19 million. Cash declined $1.25 million to $17.39 million from $18.64 million at year-end 2014. Cash and cash equivalents included $6.43 million in money-market funds.
At September 30, 2015, total assets were $20.90 million, current assets $18.25 million, current liabilities $2.38 million, and stockholders’ equity $17.67 million. The company had no short-term debt reported at quarter-end; it paid off its remaining GE Capital loan obligation in September. Other liabilities included $0.23 million of warrant-related derivative instruments. The filing does not provide a clear gross-margin figure.
Changes versus comparable periods
- Nine-month revenue rose 12% year over year, mainly reflecting government-contract work and a one-time $5.8 million BARDA audit-related recovery recognized in Q1 2015. That amount was collected in April.
- Nine-month operating expenses fell about 26%, reflecting lower R&D spending after BARDA scaled back SparVax and the rBChE contract ended, as well as reduced G&A following the workforce reduction. Restructuring costs partly offset these reductions.
- Q3 net loss narrowed by about $3.30 million year over year. Lower operating costs and a favorable change in warrant derivative fair value contributed; the derivative valuation is non-cash and model-based.
- Cash use from operations improved versus the prior-year nine-month period, while financing inflows were substantially lower, as the company did not sell shares under its equity offering facility in 2015.
Outlook, risks, and unusual items
- Management said September 30 cash was expected to fund operations through at least the end of 2016, based on anticipated operating requirements and capital expenditures. This outlook depends on costs, contract receipts, and the timing and outcome of litigation.
- NIAID exercised the first option on its lyophilized anthrax vaccine contract, adding approximately $2.3 million of funding and extending performance through September 30, 2016. The contract could total up to $28.1 million if milestones are met and all options are exercised; further options are at NIAID’s discretion.
- The company recorded approximately $2.5 million in nine-month restructuring expense, including about $2.0 million of severance and $0.4 million related to subleasing office space and impairment. Most severance was expected to be paid in 2015.
- PharmAthene reported a $194.6 million Chancery Court judgment against SIGA, including $113.1 million in expectation damages and $81.5 million in interest and specified legal/expert fees. Oral arguments on appeals took place October 7, 2015. The judgment was not recorded as an asset; the outcome, collectability, and timing of any payment were uncertain, and SIGA was in Chapter 11.
- BARDA began an audit of 2014 costs tied to the partially terminated SparVax contract. The company said actual rates exceeded provisional rates but could not assure the amount or timing of any additional recovery or the audit outcome.
- A July 2015 DepoVax license with ImmunoVaccine includes reimbursement up to $210,000, annual payments of $200,000, potential milestone payments, and royalties on applicable sales.
- Management warned of dependence on government funding, possible contract reductions or termination, product-development and regulatory uncertainty, potential need for additional capital and dilution, and risks associated with the SIGA appeal and the realignment plan. It also stated that future funding for several legacy programs was unlikely.
Investor verification priorities
- Confirm that PharmAthene, rather than Altimmune, is the intended issuer and that the filing matches the intended investment.
- Check subsequent developments in the SIGA appeal, bankruptcy proceedings, and the potential collectability of the judgment; no proceeds were recognized in this filing.
- Track cash burn against management’s stated runway and the timing and amount of NIAID funding and any additional option exercises.
- Review results of the BARDA audit of 2014 costs and whether any further recoveries are recognized or collected.
- Verify restructuring cash payments, obligations under the office lease and sublease, and any equity issuance or dilution after quarter-end.