Actinium Pharmaceuticals, Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013. The company is a clinical-stage biotechnology developer; it reported no commercial revenue. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $509,262 | $601,272 | $1,594,968 | $1,046,158 |
| General and administrative expense | $966,367 | $237,908 | $1,899,503 | $798,184 |
| Net loss | $2,784,011 | $1,562,591 | $3,473,038 | $2,471,500 |
| Net loss per share, basic and diluted | $0.13 | $0.09 | $0.16 | $0.15 |
| Cash used in operating activities | Not provided separately | Not provided separately | $3,327,820 | $1,862,232 |
- At June 30, cash and cash equivalents were $5,650,328; current assets were $5,734,598 and total assets were $5,734,598.
- Current and total liabilities were $3,819,742, including $2,957,977 of derivative liabilities, $793,630 of accounts payable and accrued expenses, and $36,950 of notes payable. Stockholders’ equity was $1,914,856.
- Six-month financing cash inflow was $3,360,591, primarily from $3,463,641 gross proceeds from warrant exercises; investing cash outflow was $1,112. Cash increased by $31,659 over the six months.
- No operating margin is meaningful because the company had no revenue. The filing does not provide a clear standalone Q2 cash-flow value.
Changes and material items
- Q2 net loss increased $1,221,420 year over year. The filing attributes this chiefly to a larger loss from the fair-value change in derivative liabilities ($1,307,748 in Q2 2013 versus $402,524 in Q2 2012) and higher professional and payroll-related costs; lower interest expense partly offset the increase.
- For the first six months, R&D expense rose $548,810, reflecting continued Actimab-A trial activity, BC8 manufacturing and Iomab-B development. G&A expense rose $1,101,319, primarily from professional fees, financing-related fees and stock-based compensation.
- Six-month operating cash use increased by $1,465,588 year over year, which management linked to clinical-trial preparation and activity, professional fees and payroll-related costs.
- Derivative liabilities declined from $3,574,958 at year-end 2012 to $2,957,977 at June 30, 2013, including reclassification of $590,217 to paid-in capital and a $26,764 fair-value gain for the six-month period. The Q2 fair-value movement was a loss.
- The company paid $103,050 of principal on its premium-finance note during the first half. It also reported 23,584,424 common shares issued and outstanding at June 30; a separate cover-page figure gives 16,297,077 shares as of August 12, excluding shares whose certificates were still being exchanged.
Outlook, risks and contingencies
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, $3,327,820 of operating cash use in the first half, an accumulated deficit of $59,216,501 at June 30, and no stable recurring revenue source. Management expects to seek debt or equity financing, other financing and grants; no funding commitments or assurance of availability were disclosed.
- The company estimated cash needs of up to $25 million in 2013 for R&D, manufacturing, clinical and preclinical trials, material supply and working capital. It warned that a shortfall could delay development programs and require a focus on the Actimab-A trial.
- Management described four candidates in active clinical trials and said it was actively pursuing Actimab-A and Iomab-B. It estimated direct costs of about $7.5 million to complete the ongoing Actimab-A Phase I/II trial and $15–20 million for the anticipated Iomab-B pivotal trial. The filing stated an intention to request FDA permission to enter that pivotal trial in 2014, with completion anticipated in 2016. It also said an MSKCC NDA filing was expected in 2015.
- Key business risks include clinical or regulatory failure, dependence on research and clinical collaborators, access to actinium-225 and antibody supply, manufacturing execution, intellectual-property protection and the need for substantial additional capital.
- License and trial agreements include potential milestone payments, royalties and per-patient costs. Notable disclosed items include Abbott milestones totaling $7.75 million plus royalties of up to 12% of net sales; an FHCRC trial-development estimate of $13.2–$23.5 million, subject to trial design; and a $337,500 radioactive-material purchase contract through December 2013. A $125,000 payment to the former CEO was due September 1, 2013. The company disclosed a subsequent $37,500 payment to FHCRC on August 12, 2013.
- Disclosure controls and procedures were assessed as ineffective as of June 30, 2013. Management reported no material changes in internal control over financial reporting during the quarter.
Investor verification points
- Reconcile the financial statements with inconsistent MD&A figures: the statements report a six-month net loss of $3,473,038 and accumulated deficit of $59,216,501, while MD&A elsewhere cites a $2.9 million loss and a $58.6 million deficit.
- Clarify the share-count discrepancy between 23,584,424 shares at June 30 and the cover-page figure of 16,297,077 at August 12, including the certificate-exchange exclusion.
- Confirm financing plans, available runway and whether the stated 2013 cash need of up to $25 million can be met; the filing identifies no committed funding.
- Track clinical-trial progress, FDA interactions and actual versus estimated program costs, particularly for Actimab-A and Iomab-B.
- Monitor derivative-liability valuation and potential dilution from outstanding warrants and options; the filing reports 9,535,694 warrants and 2,280,184 options outstanding at June 30.