Hemispherx Biopharma, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2012. The filing is under the historical name Hemispherx Biopharma, Inc.; it is associated with the company identified in the request as AIM ImmunoTech Inc. Financial figures below are in U.S. dollars unless stated otherwise.
Business context
The company was a clinical-stage pharmaceutical developer focused on Ampligen, an experimental therapy, and Alferon N Injection, an FDA-approved product whose U.S. commercial sales were halted because the company lacked releasable finished goods. It also pursued Alferon LDO and clinical programs involving influenza and cancer. Revenue was principally cost recovery from an Ampligen open-label treatment program, not commercial product sales.
Financial performance and position
| Metric | Three months ended June 30, 2012 | Six months ended June 30, 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $49,000 | $121,000 | $36,000 quarter; $78,000 six months |
| Operating loss | $3.633 million | $7.380 million | $3.248 million quarter; $6.838 million six months |
| Net loss | $3.000 million | $5.308 million | $2.294 million quarter; $3.160 million six months |
| Basic and diluted loss per share | $0.02 | $0.04 | $0.02 quarter; $0.02 six months |
| Operating cash used | Not separately stated | $5.478 million | $4.802 million |
- Six-month costs and expenses were $7.501 million: R&D $3.401 million, G&A $3.612 million, and production/cost of goods sold $488,000. With revenue of just $121,000, conventional revenue margins are not meaningful.
- At June 30, cash and cash equivalents were $2.170 million; unrestricted marketable securities were $19.442 million and restricted marketable securities were $7.343 million. The filing reports total cash, cash equivalents and marketable securities of $28.955 million, down from $34.391 million at December 31, 2011. Restricted securities were collateral for the margin loan and were not freely available for sale.
- Current assets were $30.487 million and current liabilities $7.358 million. Total assets were $41.110 million, versus $43.513 million at year-end; stockholders’ equity was $33.535 million, versus $37.965 million.
- The margin account loan was $4.335 million, at an effective rate of approximately 3%; capital-lease liabilities totaled $123,000. The margin loan was secured by approximately $7.343 million of restricted securities.
- Investing activities provided $1.930 million net, including marketable-security maturities, while financing activities provided $2.615 million, principally from margin borrowing. Cash declined $933,000 over the six months.
Changes versus prior comparable periods
- Six-month net loss increased $2.148 million, or 68%, and loss per share rose from $0.02 to $0.04. The quarterly net loss increased $706,000, or 31%, although quarterly loss per share remained $0.02.
- Six-month revenue rose 55%, to $121,000, reflecting increased patient participation in the Ampligen cost-recovery program; revenue remained immaterial relative to expenses.
- Six-month R&D increased 4%, G&A increased 11%, and production costs increased 23%. Management attributed higher G&A mainly to legal fees and directors’ fees.
- Operating cash use rose $676,000 year over year. Management said that excluding the proceeds from the NOL sale, operating cash use decreased approximately $268,000, or 4%.
- Construction in progress increased to $4.347 million from $1.484 million as the New Brunswick manufacturing-facility project advanced. The company reported up to $7.4 million allocated to the project.
Outlook, risks and unusual items
- Ampligen regulatory review: The company submitted its FDA complete response on July 31, 2012, after the June quarter. FDA had agreed to review new analyses from the AMP-516 trial, but whether these establish adequate efficacy remained for FDA review. The company said the review cycle would be six months; FDA acceptance for review did not assure approval. A manufacturing-facility pre-approval inspection and outstanding CRL issues remained material hurdles.
- Alferon supply and sales: The company was validating two of three work-in-process lots and required FDA lot-release and fill-and-finish approvals. It estimated U.S. commercial sales might begin in late 2012 or early 2013 if approvals were obtained, while emphasizing that approval was uncertain. Inventory expiration dates ran from September 30, 2012 through March 10, 2013.
- Funding and dilution: The prior ATM agreement expired in June with no shares sold during the first half. On July 23, the company entered a replacement agreement permitting up to $75 million of stock sales, subject to commissions and market demand. It warned it might need additional financing and that funding might be unavailable or dilutive. The filing does not provide a clear estimate of cash runway.
- Non-cash and one-time items: The six-month results included a $1.328 million gain from selling New Jersey tax net operating losses, compared with $2.272 million in the first half of 2011. The redeemable-warrant valuation adjustment contributed a $236,000 gain in the first half of 2012 versus $944,000 in 2011; these were non-cash adjustments. The quarter’s warrant gain was $387,000 versus $643,000 a year earlier.
- Contingencies and operating risks: Litigation included the Cato Capital case, scheduled for non-jury trial beginning October 29, 2012, and an appeal in the MidSouth/Rosenstein matter. The company recorded no related gain or loss contingencies and said outcomes could not be reliably predicted. Other key risks included clinical efficacy and safety, FDA review, manufacturing scale-up, third-party suppliers, product liability, and the need for financing.
- Other unusual disclosure: The company reported previously unpaid director compensation and planned restricted-stock payments to a director. It also reported no material change in internal controls and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether FDA accepted the July 31 Ampligen complete response as sufficient, its review outcome, and the results of any manufacturing pre-approval inspection.
- Whether Alferon lots and the Althea fill-and-finish process received FDA approval before inventory expired, and whether commercial sales resumed.
- Actual cash burn, availability of unrestricted liquidity, collateral requirements for the margin loan, and financing raised under the $75 million ATM.
- Progress and final costs of the New Brunswick facility project, including inspection readiness and any effect on operating cash needs.
- Developments in Cato Capital and other litigation, as well as the potential dilution from ATM sales, warrants, options, and other share issuances.