Business context and reporting period
This is PharmAthene, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2014—not a filing identified in its text as Altimmune, Inc. The company develops biodefense medical countermeasures, principally through U.S. government contracts. Its candidates included SparVax, rBChE and Valortim; it had no commercial product sales.
Financial performance and position
| Metric | Q2 2014 | Six months 2014 | Comparable 2013 period |
|---|---|---|---|
| Contract revenue | $3.66 million | $7.40 million | Q2: $4.30 million; six months: $10.77 million |
| Operating expenses | $4.83 million | $10.97 million | Q2: $5.78 million; six months: $13.34 million |
| Operating loss | $1.17 million | $3.57 million | Q2: $1.48 million; six months: $2.57 million |
| Net loss | $0.44 million | $2.70 million | Q2: $1.24 million; six months: $3.35 million |
| Net loss per share | $0.01 | $0.05 | Q2: $0.02; six months: $0.07 |
| Operating cash flow | Not presented quarterly | $(2.83) million | Six months: $(0.23) million |
Q2 operating loss was about 32% of revenue; the six-month operating loss was about 48% of revenue. These are calculated ratios, not company-reported margins.
At June 30, 2014, cash and cash equivalents were $11.27 million, total current assets $12.43 million and current liabilities $2.83 million. Total assets were $15.22 million, total liabilities $4.36 million, and stockholders’ equity $10.86 million. Debt was approximately $1.3 million under the GE Capital facility; the term loan bore fixed interest of 10.14% and the undrawn revolving facility had approximately $0.5 million available. Six-month financing cash flow was $3.68 million, including about $5.1 million in net equity-offering proceeds and repayments of revolving and term debt. No separate gross-profit figure is provided.
Material changes versus prior periods
- Revenue fell 14% in Q2 and 31.5% in the first half. Six-month SparVax revenue declined 19.8% and rBChE revenue declined 77.3%.
- Research and development expense fell 29.4% in Q2 and 32.6% in the first half, principally reflecting reduced SparVax activity after BARDA de-scoped the contract and a change in rBChE work.
- First-half operating cash use increased to $2.83 million from $0.23 million, partly due to lower liabilities and deferred revenue; cash nevertheless rose by $0.78 million, mainly because of equity financing.
- Shares outstanding increased from 52.30 million at December 31, 2013 to 55.53 million at June 30, 2014. The company reported 56.44 million outstanding on August 1.
Outlook, risks and unusual items
- BARDA partially terminated/de-scoped the SparVax contract, including the proposed Phase 2 trial, and authorized completion of six remaining activities. The company expected closeout activities and a settlement proposal in Q3 or Q4 2014 and did not expect significant further BARDA funding for SparVax. Management anticipated lower future revenue and increased losses.
- In July 2014, the company planned a reduction in force of 11 employees, about one-third of its technical staff, and other cost cuts. It expected a restructuring charge of approximately $0.3 million in Q3. Subsequent to quarter-end, it sold 876,954 shares for approximately $1.2 million net.
- Management said additional capital may be needed and there is no assurance it can be raised on acceptable terms or at all. The filing gives no clear cash-runway estimate. GE Capital could assert a default related to the BARDA contract change and accelerate the debt; the company had received no default notice as of the filing.
- The Delaware litigation with SIGA remained pending on remedy after the state supreme court remanded the case. The prior award of a share of Tecovirimat profits was no longer in effect; the company had recorded no receivable and might receive no proceeds.
- All product candidates remained in development. SparVax was on FDA clinical hold, and government funding, regulatory outcomes, product safety and efficacy, contract audits, and the outcome of the SIGA litigation were material uncertainties.
- A $1.03 million first-half gain from changes in the fair value of warrant-related derivative liabilities reduced reported losses; it is a non-cash, model-based item. The filing also disclosed approximately $5.0 million of contractual obligations, mainly facility leases, R&D agreements and loan payments.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for PharmAthene, Inc., while the request metadata names Altimmune, Inc.
- Check the status and financial consequences of BARDA contract closeout, any settlement, and alternative funding for SparVax and other programs.
- Review subsequent cash use, equity issuance and dilution, available financing, and GE Capital covenant/default status.
- Verify developments in the SIGA remedy proceedings and whether any award is collectible or tied to future Tecovirimat sales.
- Monitor FDA clinical-hold requirements and the feasibility, funding and timelines for advancing the company’s candidates.