Savara Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Savara is a clinical-stage rare respiratory disease company with no product revenue or commercial operations. Its lead candidate, inhaled molgramostim, is in Phase 3 development for autoimmune pulmonary alveolar proteinosis (aPAP).
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $7.6 million | $13.2 million |
| General and administrative expense | $2.8 million | $3.0 million |
| Total operating expenses / operating loss | $10.4 million | $16.2 million |
| Net loss | $10.2 million | $15.4 million |
| Net loss per share, basic and diluted | $0.13 | $0.27 |
| Cash used in operating activities | $9.6 million | $13.1 million |
At March 31, 2021, cash and cash equivalents were $56.0 million and short-term investments were $136.7 million, totaling $192.7 million. Total current assets were $194.8 million versus current liabilities of $7.2 million. Long-term debt was $25.2 million; total liabilities were $32.5 million. Accumulated deficit was $267.7 million. Operating margins are not meaningful because the company has no revenue.
Cash increased by $33.1 million in the quarter. Financing provided $120.5 million, mainly from the public offering; investing used $77.7 million, primarily for purchases of short-term investments. These investment purchases are not operating cash burn.
Material changes and notable items
- Net loss narrowed by $5.2 million year over year, and operating cash use declined by $3.5 million. R&D expense fell $5.6 million, principally because Q1 2020 included $5.4 million of upfront costs for inhaled liposomal ciprofloxacin, with no such expense in Q1 2021. G&A declined modestly.
- On March 15, Savara raised approximately $129.97 million gross and $121.83 million net through common stock and pre-funded warrants. The offering included 57.5 million common shares and warrants covering 32.2 million shares, exercisable at $0.001 per share. The company also paid $3.9 million to repurchase milestone warrants covering 26.1 million shares. Shares outstanding were 113.6 million at March 31 and 113.6 million as of May 13, 2021.
- The company amended its Silicon Valley Bank loan in March. If the Phase 3 trial requirement is not met by June 30, 2021, principal and interest are payable in equal monthly installments over 24 months beginning July 1, 2021, with the first payment including three principal installments. If met, principal payments begin July 1, 2022. The amendment raised the end-of-term charge from 6.0% to 6.2%. The company reported satisfying a separate $25 million equity-proceeds covenant through the offering.
- A Parexel work order for the IMPALA 2 trial is estimated to cost approximately $31 million over the trial. Manufacturing and other contingent milestone commitments for molgramostim totaled $3.2 million at quarter-end; these were not deemed probable and reasonably estimable. Additional low-single-digit API royalties and a 3.5% nebulizer royalty would apply to product sales.
- Vancomycin development was discontinued after its Phase 3 trial failed to meet its primary endpoint; Savara paid approximately $0.8 million in Q1 termination-related manufacturing costs. The company had also ended further development of inhaled liposomal ciprofloxacin.
Outlook, risks and contingencies
Management expects significant expenses and operating losses for at least the next several years as it advances molgramostim and pursues regulatory approval. It stated that cash and short-term investments at March 31 were sufficient to fund operations for the 12 months following issuance of the financial statements and many planned activities, but additional capital may be needed. No product revenue timing or detailed financial guidance was provided.
Key uncertainties include clinical-trial execution and results, regulatory approval, future financing availability, and whether any approved product achieves market acceptance. COVID-19 could affect trial recruitment, providers, suppliers, manufacturing and operations. Management reported no material changes to previously disclosed risk factors and no material pending litigation. The company reported effective disclosure controls and internal control over financial reporting as of March 31, 2021.
Important facts for investors to verify
- Whether the June 30, 2021 molgramostim Phase 3 trial condition was met, and the resulting loan repayment schedule.
- IMPALA 2 enrollment, timing, trial costs and progress against the approximately $31 million Parexel work-order estimate.
- Cash runway assumptions and future financing needs relative to the stated 12-month sufficiency assessment.
- Potential dilution from pre-funded warrants, outstanding warrants and equity awards; the filing lists 48.2 million shares reserved for issuance at March 31.
- Clinical and regulatory risks, COVID-19-related trial or supply disruptions, and contingent manufacturing obligations and royalties.