Pulmatrix, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial statement amounts are in thousands of dollars, except per-share and share data. Pulmatrix is a clinical-stage biotechnology company developing inhaled therapies using its iSPERSE platform; it has no products approved for sale and has generated no product-sales revenue.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1,069 | $4,372 | $4,713 | $10,634 |
| Research and development expense | $4,026 | $3,873 | $12,423 | $12,344 |
| General and administrative expense | $1,656 | $1,776 | $4,837 | $5,478 |
| Goodwill impairment | $3,577 | — | $3,577 | — |
| Operating loss | $(8,190) | $(1,277) | $(16,124) | $(7,188) |
| Net loss | $(8,184) | $(10,553) | $(16,140) | $(16,409) |
| Basic and diluted loss per share | $(0.15) | $(0.31) | $(0.30) | $(0.62) |
- Revenue and margins: Revenue came from collaboration and licensing agreements and immaterial royalties, not product sales. The filing does not report a meaningful gross margin.
- Cash flow: Operating cash use was $15,331 for the first nine months of 2021, compared with $9,715 in 2020. Investing cash use was $118; financing provided $37,283, primarily from an equity offering.
- Cash and liquidity: At September 30, 2021, cash and cash equivalents were $53,491, with an additional $204 of restricted cash. Management expected existing cash to fund operating expenses and capital requirements for at least 12 months after the report date, while cautioning that assumptions could prove wrong.
- Balance sheet and debt: Total assets were $55,748; total liabilities were $10,555; and stockholders’ equity was $45,193. The filing reports no outstanding borrowing debt. Liabilities included $7,397 of deferred revenue and operating lease liabilities. Accumulated deficit was $250,609.
Material changes and notable items
- Q3 revenue declined $3,303 year over year, principally reflecting lower collaboration/license revenue. Nine-month revenue fell $5,921. JJEI-related revenue was recognized through the agreement’s July 6, 2021 termination date; all rights to the kinase inhibitor portfolio, including PUR1800 and PUR5700, reverted to Pulmatrix.
- Operating loss widened substantially in Q3, primarily because revenue fell and the company recorded a $3,577 goodwill impairment. The impairment followed a decline in the company’s stock value; goodwill was fully written off. The charge was noncash.
- For the first nine months, R&D expense was broadly level with 2020: higher PUR3100 preclinical and manufacturing spending was largely offset by lower PUR1800 and Pulmazole spending. The prior-year net loss included a $9,289 warrant inducement expense, helping explain why 2021 net loss was slightly lower despite the larger operating loss.
- Common shares outstanding increased from 36,105,097 at December 31, 2020 to 56,249,062 at September 30, 2021. A February 2021 registered direct offering raised $37,079 net; the $20 million ATM facility had no sales through September 30.
Outlook, risks, and contingencies
- Pulmazole/Cipla: Development had been paused amid a dispute over Cipla’s funding obligations. On November 8, 2021, after quarter-end, the parties amended the agreement and resolved the dispute. The amendment allocates certain territories to Cipla and revises cost-sharing terms. Pulmatrix expected the Phase 2b study to start in Q1 2023, with topline data in mid-2024; these are forward-looking targets.
- PUR1800: The Phase 1b study in stable COPD was fully enrolled, with topline data expected in Q1 2022. The company reported completed chronic toxicology studies and continued development for acute COPD exacerbations and other airway diseases.
- PUR3100: Pulmatrix expected to submit an IND in Q1 2022, begin a Phase 1 study in Q2 2022, and report topline data in Q3 2022. A Phase 2 migraine study was anticipated to start in Q4 2022. Timing and outcomes remain subject to clinical and regulatory risks.
- The company expects continuing losses and increased development spending, and may need additional capital. Key risks include clinical and regulatory uncertainty, COVID-19-related disruption, dependence on collaborators and third-party manufacturers, financing availability, and competition.
- Nasdaq notified Pulmatrix in August 2021 that its share price did not meet the $1.00 minimum bid requirement. The initial compliance period ran through February 14, 2022; the company had not regained compliance as of the report date and warned that delisting could result if it failed to cure the deficiency.
- The filing disclosed no material legal proceedings and no material off-balance-sheet arrangements. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the November 2021 Cipla amendment leads to resumed Pulmazole development and whether cost-sharing and milestone terms are met.
- Whether PUR1800 and PUR3100 studies meet the stated enrollment, data, and timing expectations, including the effect of COVID-19 or regulatory feedback.
- Cash burn, deferred-revenue recognition, and whether available liquidity remains sufficient as programs advance.
- Nasdaq minimum-bid compliance status and any actions, including a possible reverse stock split, to avoid delisting.
- Potential dilution from the increased share count, outstanding warrants and options, and any future ATM or other financing.