Atossa Therapeutics, Inc. — 2023 Q3 Form 10-Q Summary
Business context and reporting period
Atossa is a clinical-stage biopharmaceutical company focused on oncology, primarily breast cancer and other breast conditions. Its lead candidate is oral (Z)-endoxifen, under development for neoadjuvant treatment of ER+/HER2- breast cancer and reduction of mammographic breast density. The company is not marketing products and has no sustainable revenue. This unaudited report covers the three and nine months ended September 30, 2023, filed November 13, 2023.
Financial condition and results
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.467 million | $11.680 million |
| General and administrative expense | $3.001 million | $10.678 million |
| Total operating expenses | $7.468 million | $22.358 million |
| Net loss | $6.229 million | $22.340 million |
| Loss per diluted share | $0.05 | $0.18 |
| Net cash used in operating activities | Not separately provided | $15.370 million |
No meaningful revenue-based margin can be calculated because the company had no revenue. The nine-month operating loss was $22.358 million, and the accumulated deficit was $178.534 million. Interest income was $1.274 million in the quarter and $3.107 million year to date, primarily due to higher cash balances and interest rates.
At September 30, 2023, cash and cash equivalents were $94.031 million, restricted cash was $0.110 million, total current assets were $97.648 million, and working capital was $94.204 million. Total liabilities were $3.444 million, consisting entirely of current liabilities; the filing does not disclose outstanding debt. Cash, cash equivalents and restricted cash declined by $16.859 million during the first nine months.
Material changes versus the prior comparable periods
- Third-quarter operating expenses decreased 9% to $7.468 million from $8.205 million, with R&D down 13% and G&A down 1%.
- Nine-month operating expenses increased 14% to $22.358 million from $19.553 million. R&D increased 16%, mainly from higher clinical-trial spending, while G&A increased 13%, partly due to compensation, severance, patent-related legal fees and investor-relations costs.
- Nine-month net loss increased to $22.340 million from $19.469 million, despite higher interest income. The increase included a $2.990 million impairment charge on the company’s investment in Dynamic Cell Therapies, Inc. recorded in the second quarter.
- Operating cash use improved to $15.370 million from $16.237 million, primarily because the prior-year period had larger working-capital outflows.
- The company repurchased 1,200,664 shares for approximately $1.323 million during the quarter and 1,320 thousand shares for approximately $1.475 million year to date under a program authorized for up to $10 million. Approximately $8.525 million remained available at September 30.
Guidance, outlook, commentary and risks
Management expects continuing operating losses and negative cash flows as clinical development proceeds. Management believes available cash and cash equivalents are sufficient to fund operations for at least one year from issuance of the financial statements, but expects to raise substantial additional capital through equity, debt, collaborations, licenses or other arrangements. There is no assurance that financing will be available on acceptable terms; failure to obtain funding could require the company to curtail or suspend development programs.
- The Phase 2 EVANGELINE trial received Canadian authorization in July 2023. Its 40 mg/day pharmacokinetic run-in dose was tolerated but did not achieve optimal plasma concentrations; the protocol therefore calls for an 80 mg/day dose level before initiating the treatment cohort.
- Enrollment remained ongoing in the Phase 2 I-SPY study of (Z)-endoxifen. A Phase 2 DCIS RECAST platform study began in October 2023, after the reporting period.
- The company does not expect to advance AT-H201 beyond its completed healthy-volunteer study and is concentrating on (Z)-endoxifen programs.
- Intas Pharmaceuticals filed a post-grant review petition challenging U.S. Patent No. 11,572,334 covering methods for making and using endoxifen. The company intends to contest the petition, but cannot assure a favorable outcome. An Indian pre-grant opposition was also filed against a pending endoxifen patent application.
- Non-cancellable clinical-trial commitments were estimated at $5.638 million as of September 30, 2023. The company also owed $0.554 million in salary and bonus payments to its former CFO through December 2023 under a severance agreement.
- Nasdaq notified the company on September 26, 2023 that its stock failed to maintain the $1.00 minimum closing bid price for 30 consecutive business days. The company had until March 25, 2024 to regain compliance or request additional time. The company stated it regained board-independence compliance after the CFO/director resigned on October 5, 2023.
- Approximately $93.874 million of cash and cash equivalents exceeded FDIC insurance limits, creating bank-counterparty exposure.
Most important facts for investors to verify
- Cash runway relative to the pace of clinical-trial spending and the timing, amount and terms of future financing.
- EVANGELINE dose selection, treatment-cohort initiation, enrollment progress and clinical outcomes.
- Results and potential impact of the Intas patent post-grant review and the Indian patent opposition.
- Ability to regain and maintain Nasdaq’s minimum bid-price requirement.
- Potential further impairment of the Dynamic Cell Therapies investment, carried at $1.710 million at September 30, 2023.
- Actual remaining share-repurchase activity and its effect on liquidity and share count.