Business Context and Reporting Period
This is PharmAthene, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2014—not a filing identified in its text as Altimmune, Inc. PharmAthene was a biodefense company developing SparVax, rBChE and Valortim; revenue was primarily from U.S. government contracts. The company had not commercialized products or generated product-sales revenue.
Financial Results and Liquidity
| Metric | Q1 2014 | Q1 2013 or prior balance-sheet date |
|---|---|---|
| Contract revenue | $3.74 million | $6.48 million |
| Operating expenses | $6.14 million | $7.57 million |
| Operating loss | $2.40 million | $1.09 million |
| Net loss | $2.26 million | $2.11 million |
| Net loss per share | $0.04 | $0.04 |
| Net cash used in operating activities | $2.29 million | Cash provided: $0.26 million |
| Cash and cash equivalents | $9.53 million | $10.48 million at Dec. 31, 2013 |
| Total current liabilities | $3.47 million | $6.80 million at Dec. 31, 2013 |
Revenue declined about 42% year over year based on the reported dollar amounts. Operating expenses fell about 19%, primarily as research and development activity decreased, but the operating loss more than doubled. The filing does not present gross profit or a gross margin. Other income was $0.17 million, versus other expense of $1.01 million, largely reflecting a $0.24 million gain from revaluing warrant derivatives compared with a $0.91 million loss a year earlier.
Cash fell by $0.95 million during the quarter. Financing provided $1.38 million net, including approximately $2.5 million in net proceeds from at-the-market share sales, offset in part by debt repayments. At March 31, term debt was approximately $1.49 million; no revolving borrowing was outstanding, and approximately $0.9 million was available under the receivables-based facility. The company reported a $212.6 million accumulated deficit and stated that it had historically relied on equity, debt and government-contract funding. It cautioned that additional capital may be needed and that there is no assurance it can raise it.
Material Changes, Outlook and Risks
- BARDA/SparVax: On April 4, 2014, BARDA notified PharmAthene that it would partially terminate the SparVax contract for convenience and remove most activities, including the proposed Phase 2 trial. BARDA authorized six remaining activities; the company expected to complete them and submit a settlement proposal in Q3 or Q4 2014. Management did not expect significant additional BARDA funding for further SparVax development and anticipated lower future program revenue absent new funding.
- Clinical and development risk: SparVax was on a second FDA clinical hold, related to potency trends in manufactured product lots. The filing describes requested manufacturing and stability work and says it was uncertain whether or when a Phase 2 trial could proceed. Future government funding for SparVax, Valortim and rBChE was described as uncertain or unlikely.
- Debt and liquidity risk: The company warned that GE Capital could assert a default under its secured loan agreement in connection with BARDA’s contract action, potentially accelerating repayment. PharmAthene said it had received no default notice. The loan was secured by substantially all assets, including proceeds from intellectual property.
- SIGA litigation: The Delaware Supreme Court affirmed SIGA’s breach of certain contractual obligations but reversed the prior remedy and remanded the case. The trial court heard remedy arguments in Q1 2014; no award was recorded, and PharmAthene said it might receive no proceeds. Further appeals were possible.
- Equity issuance: The company sold 1.32 million shares through its at-the-market program in Q1 for approximately $2.5 million net. After quarter-end it sold another 723,073 shares for approximately $1.1 million net. These sales dilute existing shareholders.
- Other items: A $0.03 million income-tax provision related to tax amortization of goodwill. The company reported no off-balance-sheet arrangements. Management considered disclosure controls effective and reported no material change in internal control over financial reporting.
Most Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing names PharmAthene, Inc., although the request metadata names Altimmune, Inc.
- Track BARDA’s settlement, remaining contract work and any replacement funding, particularly given the expected reduction in SparVax revenue.
- Review FDA developments on the SparVax clinical hold and the feasibility, cost and funding of further development.
- Assess cash use, remaining at-the-market capacity, potential dilution, debt repayment requirements and any GE Capital default or acceleration notice.
- Monitor the Delaware court’s SIGA remedy decision and any appeal; no related recovery was recognized in this filing.