Filing summary
Entity and period: This is AmpliPhi Biosciences Corporation’s unaudited Form 10-Q for the quarter ended March 31, 2019, signed May 6, 2019. The request identifies Armata Pharmaceuticals, Inc., but the filing itself names AmpliPhi Biosciences Corporation; verify the issuer and any subsequent name change before relying on this summary.
Business context and financial results
AmpliPhi was a clinical-stage biotechnology company developing bacteriophage therapies for serious bacterial infections. Its lead candidate was AB-SA01 for Staphylococcus aureus infections. It reported no product revenue and expected no product revenue in the foreseeable future.
| Metric | Q1 2019 | Q1 2018 or comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $1.494 million | $1.464 million |
| General and administrative expense | $2.112 million | $1.591 million |
| Operating loss | $3.606 million | $3.055 million |
| Net loss | $3.617 million | $3.134 million |
| Net loss per share, basic and diluted | $0.11 | $0.24 |
| Net cash used in operating activities | $2.620 million | $3.536 million |
| Cash and cash equivalents, March 31 | $5.535 million | $8.157 million at Dec. 31, 2018 |
Gross profit and operating margins are not applicable because the company reported no revenue. Management attributed higher general and administrative expense mainly to professional fees; research and development costs were broadly flat, with higher payroll costs offset by lower clinical expenses. Operating cash use fell year over year, which management attributed to lower payments for research and development and administrative costs.
Financial position and material changes
- Total assets were $9.617 million and total liabilities were $4.656 million at March 31, 2019. Current assets were $5.942 million versus current liabilities of $3.591 million. The filing reports no material interest-bearing debt balance.
- Accumulated deficit was $409.933 million. Stockholders’ equity declined to $4.961 million from $8.474 million at year-end 2018, principally reflecting the quarterly net loss.
- Cash declined by $2.622 million during the quarter. Financing activities provided only $5,000, from warrant exercises; the prior-year quarter included $6.610 million of financing proceeds.
- The company adopted lease accounting Topic 842 on January 1, 2019, recognizing an approximately $310,000 lease liability and right-of-use asset at adoption. The March 31 balance sheet showed a $286,000 right-of-use asset and $213,000 of other long-term liabilities.
- Common shares outstanding were 32,774,690 at March 31 and 33,469,008 at May 3, 2019. The company also had 26,480,505 warrants and 863,892 options outstanding at March 31, creating potential dilution.
Outlook, risks and unusual items
- Liquidity and going concern: Management said existing cash was expected to fund planned operations only until mid-2019. Recurring losses and negative operating cash flows raised substantial doubt about the company’s ability to continue as a going concern. Additional capital was required, and the filing warned that unavailable financing could force reductions or cessation of operations.
- Proposed C3J merger: The January 2019 merger agreement remained subject to shareholder and other approvals. AmpliPhi expected former C3J security holders to own approximately 70% of the combined company, with existing AmpliPhi holders owning approximately 30%, on a fully diluted basis. Certain C3J shareholders had agreed, subject to closing conditions, to invest $10 million in the combined company immediately after closing; expected price per share was approximately $0.36 based on then-current capitalizations. The company targeted a May 2019 closing.
- Clinical development: The FDA had generally agreed with proposed Phase 1/2 trial designs for AB-SA01 and AB-PA01, but funding was needed to proceed. Management said it was seeking non-dilutive financing and might consider smaller trials, which could be insufficient for later development and require additional studies.
- Merger-related litigation: Three putative shareholder class actions filed in April 2019 alleged omissions or misrepresentations in the merger proxy statement. The company amended the proxy statement on May 1; it had not recorded a liability because the amount was not estimable. It warned that insurance might not be sufficient.
- Other risks include clinical and regulatory failure, manufacturing and scale-up challenges, dependence on third parties, competition, dilution, and the possibility that merger failure would materially harm the business. The filing reported no off-balance-sheet arrangements and no other material legal proceedings as of March 31.
Most important facts to verify
- Whether this AmpliPhi filing is the intended filing for Armata Pharmaceuticals and how the issuer’s identity or name changed.
- Whether the C3J merger and the associated $10 million investment closed, and the final ownership, reverse-split ratio, and financing terms.
- Cash runway and subsequent financing or other events, given the stated mid-2019 funding horizon and going-concern uncertainty.
- Current status and potential exposure from the merger-related lawsuits and whether insurance covers any resulting costs.
- Clinical-trial funding, commencement, and regulatory developments for AB-SA01 and AB-PA01, along with the dilution implications of outstanding warrants and options.