Aptevo Therapeutics Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Aptevo is a clinical-stage biotechnology company developing immunotherapies for cancer. Its lead clinical candidate is APVO436; other candidates include preclinical programs. The company reported royalty revenue, not revenue from approved products.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Royalty revenue | $3.114 million | $2.421 million |
| Research and development expense | $4.866 million | $5.362 million |
| General and administrative expense | $3.859 million | $3.947 million |
| Loss from operations | $5.611 million | $6.888 million |
| Net loss from continuing operations | $7.875 million | $7.670 million |
| Net loss | $7.697 million | $7.256 million |
| Basic and diluted net loss per share | $1.55 | $1.64 |
| Net cash used in operating activities | $5.117 million | $7.504 million |
- Royalty revenue rose 29%, or $0.693 million, year over year. R&D expense declined $0.496 million, mainly from lower preclinical and employee costs, partly offset by increased APVO436 trial spending. G&A expense was essentially unchanged.
- Other expense increased to $2.264 million from $0.782 million, primarily due to non-cash interest expense on the HCR royalty-sale arrangement. Q1 2022 included $1.780 million of non-cash interest expense under that arrangement.
- Cash and cash equivalents were $34.991 million at March 31, 2022, with $1.259 million restricted cash; combined cash, cash equivalents and restricted cash totaled $36.250 million. The company used $10.053 million of cash overall during the quarter.
- Stockholders’ equity moved from $1.216 million at year-end 2021 to a deficit of $5.884 million at March 31, 2022. Accumulated deficit was $221.760 million.
- MidCap term-loan principal was reduced to $5.0 million after a $10 million HCR milestone receipt in March; the balance-sheet carrying amount of long-term debt was $4.804 million, excluding the separate royalty-sale liability. The HCR royalty-sale liability was $38.660 million, including $15.318 million classified as current.
Material developments and outlook
- Aptevo received a $10 million milestone payment from HCR tied to 2021 RUXIENCE sales and used proceeds to pay down the MidCap loan. Up to $22.5 million of additional HCR milestone payments may be available for 2022 and 2023, subject to sales milestones. HCR receives the RUXIENCE royalties until its contractual return threshold is met; Aptevo then becomes entitled to 50% of subsequent royalty payments.
- Management stated that available resources and anticipated receipts and financing sources were expected to fund projected operating needs and debt service for at least 12 months from issuance of the financial statements. The filing also says Aptevo expects significant operating losses for the next several years and will need substantial additional funding to advance development. This is not a guarantee of runway.
- Aptevo reported that two APVO436 Phase 1b patients had substantial blast-count reductions and clinical benefit enabling them to proceed to allogeneic stem-cell transplant. These are early, limited observations; the filing cautions that early and interim trial results may not predict later outcomes.
- On April 1, 2022, Nasdaq notified the company that it did not meet the $2.5 million minimum stockholders’ equity requirement, based on its December 31, 2021 equity of $1.216 million. Aptevo said it intended to submit a compliance plan by May 16, 2022; continued listing was not assured.
- Medexus deferred payments tied to IXINITY sales were $0.178 million in the quarter. The payment rate was expected to rise from 2% to 5% of net sales no later than June 30, 2022, under the agreement’s terms.
- Key risks include continued losses and financing needs, Nasdaq listing compliance, clinical-trial enrollment and efficacy/safety uncertainty, dependence on Pfizer RUXIENCE sales and Medexus IXINITY sales, potential COVID-19-related trial or financing disruption, and debt and royalty-agreement obligations. The company also cited inflation, interest-rate and supply-chain pressures.
Most important facts for investors to verify
- Whether Aptevo submitted and Nasdaq accepted a compliance plan, and whether the company subsequently regained the required stockholders’ equity.
- Current cash, operating cash burn and financing runway, including the timing and likelihood of further HCR milestones and Medexus payments.
- MidCap debt repayment status and the current amount, classification and estimated amortization of the HCR royalty-sale liability.
- Updated APVO436 trial enrollment, safety and efficacy data, and whether the early transplant outcomes translate into durable clinical benefit.
- Whether the IXINITY deferred-payment rate increased as expected and how RUXIENCE sales affect any remaining HCR milestone eligibility.