Altimmune, Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Altimmune is a clinical-stage biopharmaceutical company developing vaccines and therapies; it reported no product-sale revenue. Reported revenue primarily reflects government research contracts and grants.
Key financial results
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0.64 million | $2.63 million | $5.23 million | $7.74 million |
| Research and development expense | $8.73 million | $4.73 million | $14.89 million | $15.39 million |
| Total operating expenses | $11.92 million | $6.69 million | $22.38 million | $23.23 million |
| Operating loss | $11.27 million | $4.06 million | $17.15 million | $15.49 million |
| Net loss | $10.94 million | $2.35 million | $16.42 million | $14.66 million |
| Net loss per share, basic and diluted | $0.74 | $1.73 | $1.35 | $17.48 |
Loss-per-share figures are shown as losses. No product gross margin is presented; the company has not launched products.
- Liquidity: At September 30, cash, cash equivalents and restricted cash totaled $11.01 million; short-term investments were $28.23 million, for combined resources of approximately $39.23 million. Current assets were $41.62 million and current liabilities $2.47 million.
- Cash flow: Nine-month operating cash use was $7.60 million, compared with $4.23 million in 2018. Investing cash use was $28.23 million, mainly purchases of short-term investments; financing provided $12.49 million, primarily from the March offering.
- Debt and other obligations: Current notes payable were $0.11 million; the BPI France notes were repaid in October 2019. Operating lease liabilities were $1.80 million. The balance sheet also included $2.75 million of contingent consideration related to Spitfire.
- Equity: Stockholders’ equity was $49.38 million, with an accumulated deficit of $133.28 million. Shares outstanding at September 30 were 15.34 million.
Material changes versus comparable periods
- Q3 revenue fell 75.6% year over year, primarily because of lower BARDA activity on NasoShield and the conclusion of the NIAID-funded SparVax-L program. Nine-month revenue declined 32.5% for similar reasons.
- Q3 R&D expense rose 84.6%, principally due to Spitfire acquisition-related in-process R&D costs. The company also recorded a $1.00 million impairment after abandoning SparVax-L. Q3 net loss increased substantially year over year.
- Nine-month operating expenses decreased 3.7%, but net loss increased 12.0%; the prior-year period included a substantially larger income-tax benefit and different warrant fair-value effects.
- Cash and cash equivalents declined from $33.72 million at year-end 2018, while the company invested $28.21 million in short-term securities. Combined cash, restricted cash and short-term investments were $39.23 million at quarter-end.
Outlook, risks and unusual items
- Management said available cash, short-term investments and expected government-contract revenue should fund operations for at least 12 months from issuance of the financial statements. It also said longer-term plans, including clinical trials, require pursuing additional financing, government funding, partnerships or asset monetization. No earnings or revenue guidance was provided.
- Altimmune acquired Spitfire Pharma in July for upfront consideration valued at approximately $5.0 million, paid in 1,887,250 shares. The agreement provides for up to $88 million in additional payments: $5 million upon a qualifying IND submission, $3 million upon initiation of a human trial, and up to $80 million tied to future sales. The sales-linked payments are contingent and would be recognized when the relevant contingency is resolved.
- The company recorded approximately $4.34 million of upfront acquired in-process R&D expense and $2.75 million of estimated regulatory-milestone contingent consideration, also expensed in R&D. The acquisition carries integration, execution and valuation risks.
- SparVax-L activities ended with no future funding identified; management abandoned the program and impaired its remaining $1.00 million carrying value. Management was exploring strategic options for NasoVAX, and development activity had decreased.
- The BARDA NasoShield contract has a stated total value of up to $133.7 million, including a base period through December 2020 and options that require BARDA exercise. The filing cites a $3.7 million award in Q3 for continued Phase 1 development; option funding is not assured.
- Other notable items include a $12.67 million net registered direct offering in March, with warrants, and the potential dilution from outstanding warrants. The company reported effective disclosure controls, no material control changes, and no legal proceedings.
Investor verification points
- Confirm the timing and amount of remaining BARDA funding, and whether any contract options are exercised; verify the post-SparVax-L status of NIAID funding.
- Track clinical, regulatory and development milestones for the Spitfire asset and the resulting contingent-payment exposure.
- Assess the pace of operating cash use against management’s stated 12-month runway and the need for additional capital.
- Review program priorities and strategic plans for NasoVAX, NasoShield, HepTcell and the acquired Spitfire program.
- Monitor dilution from warrants, options and future equity financing, as well as the effect of acquisition-related costs and impairment charges on reported results.