Altimmune, Inc. annual report, FY2021

Altimmune, Inc. — FY2021 Form 10-K

Reporting period: Year ended December 31, 2021; filed March 15, 2022. This is an annual report, not a standalone Q4 report. Altimmune is a clinical-stage biopharmaceutical company developing pemvidutide for obesity and liver disease and HepTcell for chronic hepatitis B. It had no approved products and no product-sale revenue.

Financial results and liquidity

Metric	FY2021	FY2020
Revenue, primarily government grants and contracts	$4.4 million	$8.2 million
Research and development expense	$74.5 million	$49.8 million
General and administrative expense	$15.4 million	$13.2 million
Operating loss	$96.9 million	$54.8 million
Net loss	$97.1 million	$49.0 million
Net loss per share, basic and diluted	$2.35	$1.91
Net cash used in operating activities	$78.2 million	$34.3 million

• Cash, cash equivalents and restricted cash were $190.3 million at year-end, versus $116.0 million in 2020. Management said available resources were expected to fund operations for at least 12 months from issuance of the financial statements, but not through the trials needed for approval or commercialization.
• Current assets were $204.1 million and current liabilities $18.3 million; total assets were $218.9 million, total liabilities $19.7 million, and stockholders’ equity $199.1 million.
• The company reported no debt at December 31, 2021. Its $632,000 Paycheck Protection Program loan had been repaid in 2020. Operating lease liabilities totaled $1.5 million.
• Financing activities provided $65.1 million in 2021, primarily from $64.8 million net proceeds under the at-the-market equity program. The company sold 4.8 million shares under that program and had $58.0 million of capacity remaining at year-end.
• Revenue was almost entirely government-funded: the U.S. government accounted for 97% of revenue in both years. No gross margin or product margin is meaningful for this pre-commercial business; the filing does not report a conventional product margin.

Material changes and unusual items

• Revenue declined 46%, primarily because MTEC revenue fell with the timing of T-COVID trial work and its discontinuation. BARDA funding for NasoShield ended December 31, 2021; BARDA had not elected to extend the contract.
• R&D expense rose 50%. Management cited increased pemvidutide development, AdCOVID work before its discontinuation, other program costs, and changes in contingent-consideration valuation. A $15.6 million reduction in the contingent-consideration fair value partly offset expense increases.
• Altimmune recorded an $11.4 million non-cash impairment charge for Lonza construction-in-progress assets after discontinuing AdCOVID and terminating the manufacturing agreement. It also recorded a $0.6 million impairment of intangible assets related to discontinued programs.
• FY2020 included a $5.4 million income-tax benefit related to a CARES Act net-operating-loss carryback; FY2021 had no income-tax benefit. The accumulated deficit was $293.2 million at year-end.
• Cash used in operations increased to $78.2 million. Investing activities provided $87.5 million, mainly from net short-term investment activity; financing provided $65.1 million. The resulting net increase in cash and restricted cash was $74.4 million.

Pipeline, outlook and risks

• Pemvidutide: In a 12-week Phase 1 obesity study, mean weight loss was 4.9%, 10.3% and 9.0% at 1.2 mg, 1.8 mg and 2.4 mg, respectively, versus 1.6% with placebo. The study was small; the 1.8 mg and 2.4 mg cohorts had 9 and 11 participants. Adverse events were mainly mild to moderate gastrointestinal effects; tolerability decreased at the highest dose. One placebo participant and one 1.8 mg participant had ALT elevations that resolved after dosing paused. Liver-fat findings came from a post-hoc analysis of only eight participants with baseline steatosis and require confirmation.
• Management expected to begin a 48-week Phase 2 obesity trial in the first half of 2022, with a 24-week interim readout expected in Q4 2022. A Phase 1b NAFLD trial topline readout was expected in Q3 2022, with an extension-study readout expected in Q4 2022. A 52-week biopsy-driven Phase 2 NASH study was planned for 2022, subject to study findings and priorities. The FDA cleared the obesity Phase 2 trial on January 31, 2022, after year-end.
• HepTcell: Phase 2 was underway; the company expected data in the first half of 2023. Its earlier Phase 1 study showed increased HBV-specific T-cell responses in adjuvanted arms, but clinical efficacy remains unproven.
• AdCOVID was discontinued after lower-than-expected immune responses in Phase 1; T-COVID was discontinued after enrollment challenges; NasoShield development ended with BARDA support; and NasoVAX development was discontinued. These exits reduced the portfolio and contributed to impairments and loss of government funding.
• Key risks include continued operating losses, need for additional capital and potential shareholder dilution; clinical, regulatory and manufacturing failure or delay; dependence on third-party manufacturers and trial providers; competition; and potential disruption from COVID-19, labor shortages and supply-chain constraints. Management also cautioned that government grants may decline.
• A former employee refiled litigation in Maryland in December 2021 alleging, among other matters, intellectual-property and lab-notebook claims. The company disputes the allegations; the outcome is uncertain and no loss was accrued. The filing also describes a potential contingent payment of up to $88 million tied to pemvidutide milestones and sales.
• Ernst & Young issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor was not engaged to audit internal-control effectiveness.

Important facts for investors to verify

• Whether pemvidutide’s small Phase 1 weight-loss and post-hoc liver-fat findings are replicated in larger, controlled trials, and what the complete safety and tolerability profile shows.
• Whether the planned obesity, NAFLD and NASH trial timelines and readouts were achieved, and whether the FDA or other regulators require additional studies.
• Current cash runway and expected burn relative to trial plans, including any subsequent financing, partnership proceeds or equity dilution.
• Whether the loss of BARDA support and discontinued programs affect future grant revenue, costs or remaining contractual obligations.
• The status and potential financial impact of the Maryland litigation, Spitfire contingent consideration and the terminated Lonza arrangement.