Atossa Therapeutics, Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
Atossa is a clinical-stage biopharmaceutical company focused on oncology, particularly breast cancer and other breast conditions. Its lead candidate is oral (Z)-endoxifen, being developed for neoadjuvant treatment of ER+/HER2- breast cancer and reduction of mammographic breast density. The company has no marketed products or sustainable revenue. This report covers the three and six months ended June 30, 2023, filed August 14, 2023.
- EVANGELINE Phase 2: Health Canada authorization was received in June 2023; the initial six-patient pharmacokinetic run-in cohort was fully enrolled. The 40 mg/day dose was tolerated but did not achieve optimal plasma concentrations, so the company plans to initiate an 80 mg/day dose group.
- I-SPY 2 Phase 2: Six patients had been dosed with (Z)-endoxifen as of June 30, 2023.
- The company completed its AT-H201 healthy-volunteer study and does not expect to advance the program further.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.705 million | $7.213 million |
| General and administrative expense | $4.088 million | $7.678 million |
| Total operating expenses | $7.793 million | $14.891 million |
| Operating loss | $7.793 million | $14.891 million |
| Net loss | $9.830 million | $16.111 million |
| Net loss per share | $0.08 | $0.13 |
| Net cash used in operating activities | Not separately reported | $11.487 million |
- Because the company has no revenue, gross and operating margins are not meaningful.
- Cash and cash equivalents were $99.390 million at June 30, 2023, compared with $110.890 million at December 31, 2022. Cash, cash equivalents and restricted cash totaled $99.500 million.
- Working capital was $102.525 million. Total liabilities were $3.478 million, and the filing does not disclose outstanding debt; liabilities consisted primarily of accounts payable, accrued expenses, payroll liabilities and other current liabilities.
- Accumulated deficit was $172.305 million. Total stockholders’ equity was $104.877 million.
- Interest income was $1.833 million for the six months, compared with $13 thousand in the prior-year period, reflecting higher cash balances invested in money-market accounts and higher interest rates.
Material changes versus the prior comparable period
- Six-month operating expenses increased 31% to $14.891 million from $11.348 million. R&D increased 46%, primarily from higher clinical-trial, active-pharmaceutical-ingredient and formulation costs. G&A increased 20%, driven by compensation, former-CFO severance, legal and professional fees, patent activity and investor-relations costs.
- Six-month net loss increased to $16.111 million from $11.457 million, while net cash used in operating activities increased 6.1% to $11.487 million from $10.827 million.
- The company recorded a $2.990 million impairment charge on its investment in Dynamic Cell Therapies, reducing the investment from $4.700 million to $1.710 million. The impairment reflected adverse market conditions and concerns about DCT’s ability to continue as a going concern.
- The company authorized a common-stock repurchase program of up to $10 million through December 31, 2023. During June, it repurchased 119,382 shares for approximately $152 thousand, as reported in the repurchase table.
- On May 26, 2023, the company entered into a former-CFO severance agreement. It recorded $554 thousand of salary and bonus severance obligations over six months and $320 thousand of accelerated stock-compensation expense.
Guidance, outlook, risks and unusual items
- Management expects available cash and cash equivalents to fund operations for at least 12 months from issuance of the financial statements, but expects continuing losses and will need substantial additional capital over the next several years.
- Potential funding sources include equity offerings, debt financing, collaborations, licensing transactions and other strategic arrangements. Financing may be unavailable or available only on unfavorable terms; failure to obtain funding could require curtailment or suspension of operations.
- Key development risks include clinical-trial enrollment and execution, safety and efficacy outcomes, regulatory approval, third-party manufacturing and CRO performance, supply-chain dependence, intellectual-property protection and commercialization capability.
- The company’s investment in DCT remains subject to further impairment risk because it is measured using a Level 3 valuation with significant unobservable assumptions.
- As of June 30, 2023, deposits of approximately $99.208 million exceeded FDIC insurance limits, creating concentration risk.
- The filing reports no material legal proceedings. It identifies an estimated non-cancellable CRO commitment of $903 thousand in MD&A, while the commitments note reports $908 thousand; investors should reconcile this difference.
- Nasdaq notified the company in July 2023 that it had regained compliance with the $1.00 minimum bid-price requirement. Separately, the company was not in compliance with Nasdaq’s board-independence requirement and had until the earlier of its next annual meeting or June 1, 2024 to demonstrate compliance.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting.
Most important facts for investors to verify
- Whether the planned 80 mg/day EVANGELINE dose achieves target pharmacokinetic concentrations and allows the Treatment Cohort to begin.
- Clinical enrollment, safety, efficacy and timing updates for EVANGELINE, I-SPY 2 and the Karisma breast-density study.
- Cash-burn trends, remaining runway and the timing, terms and potential dilution of future financing.
- Whether the DCT investment requires additional impairment charges and whether DCT secures sufficient financing.
- Compliance with Nasdaq’s board-independence requirement and continued listing standards.
- The final amount and timing of CRO/CMO commitments, former-CFO severance payments and share repurchases.