Savara Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; financial statements are unaudited. Savara is a clinical-stage biopharmaceutical company developing molgramostim, an inhaled biologic in Phase 3 for autoimmune pulmonary alveolar proteinosis (aPAP). The company has no product revenue and has not commenced commercial operations.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $8.7 million | $5.7 million; up $3.1 million (53.7%) |
| General and administrative expense | $3.4 million | $2.4 million; up $1.0 million (43.0%) |
| Total operating expenses | $12.1 million | $8.0 million |
| Operating loss | $12.1 million | $8.0 million |
| Net loss | $10.6 million | $8.3 million |
| Net loss per share | $0.07 | $0.05 |
| Net cash used in operating activities | $12.0 million | $8.4 million |
| Cash and cash equivalents, March 31 | $34.0 million | $52.1 million at December 31, 2022 |
| Short-term investments, March 31 | $80.8 million | $73.8 million at December 31, 2022 |
| Long-term debt, March 31 | $26.1 million | $26.1 million at December 31, 2022 |
Cash, cash equivalents and short-term investments totaled $114.8 million at quarter-end. The company reported a $349.2 million accumulated deficit. It has no meaningful product gross margin because it has no product sales.
Material changes and drivers
- R&D expense increased primarily from molgramostim chemistry, manufacturing and controls work (about $2.0 million), IMPALA-2 trial activity (about $0.5 million), and higher personnel costs (about $0.6 million).
- G&A expense increased mainly due to added personnel and related costs.
- Net loss widened by $2.3 million. Higher operating expenses were partly offset by a $1.6 million net contribution from other income, compared with a $0.3 million expense a year earlier. The change included higher interest income and tax credit income.
- Operating cash use increased to $12.0 million. Investing activities used $6.1 million, primarily reflecting net purchases of short-term investments. Cash and cash equivalents decreased $18.1 million during the quarter.
Outlook, liquidity and risks
- Management expects significant additional expenses and operating losses for at least the next several years while advancing molgramostim and pursuing regulatory approval. It gave no specific revenue, earnings or cash-burn guidance.
- The filing states that available cash and short-term investments were sufficient to fund operations for the twelve months following issuance of the financial statements. Management also says further capital may be needed; funding availability and terms are uncertain. The filing does not provide a clear estimate of runway beyond that stated period.
- The company expects R&D spending to remain significant, including investment in regulatory support, manufacturing and a second-source manufacturer. The IMPALA-2 clinical-trial work order with Parexel is estimated at approximately $33.6 million over the trial.
- The $26.5 million term loan has interest-only payments through April 2026 and a stated maturity date of April 2027. The interest rate was 7.5% at March 31, 2023. A covenant requires minimum cash and cash equivalents if the balance falls below $40 million; the applicable requirement includes six months of operating expenses and a specified multiple of outstanding principal.
- Unaccrued contingent manufacturing and development milestones totaled $3.0 million at quarter-end; payment depends on achievement of specified milestones. The nebulizer manufacturer is also entitled to a 3.5% royalty on net sales, and the API manufacturer has a low-single-digit royalty provision.
- Management said it was monitoring the Silicon Valley Bank failure and subsequent acquisition by First Citizens, and did not expect a material impact. The company maintains a significant portion of liquidity in U.S. Treasury money-market funds and other short-term investments.
- Key risks include clinical-trial success and timing, regulatory approval, future financing, manufacturing and supply, competition, and possible effects of COVID-19 or geopolitical events. No material changes to previously disclosed risk factors were reported. The company reported no material pending litigation.
Investor facts to verify
- Progress, enrollment and expected timing for the Phase 3 IMPALA-2 trial, and any resulting changes to development spending.
- Whether the company’s liquidity supports planned operations beyond the stated twelve-month period, and the timing and terms of any additional financing.
- Compliance with the loan’s cash covenant, interest-rate exposure and the status of the facility after Silicon Valley Bank’s acquisition.
- Potential dilution: 49.4 million shares were reserved for issuance at March 31, including 38.8 million warrants, options and restricted stock units. The filing reports 114.1 million issued and outstanding shares at quarter-end; weighted-average shares used for EPS were 152.8 million, reflecting the filing’s EPS treatment of common stock and pre-funded warrants.
- Whether contingent manufacturing milestones, the estimated Parexel trial commitment and future manufacturing requirements change materially as development advances.