Savara Inc. — FY2018 Form 10-K Summary
Business context and reporting period
Savara is a clinical-stage orphan lung disease biopharmaceutical company. This Form 10-K covers the fiscal year ended December 31, 2018; it is an annual report, not a standalone fourth-quarter filing. The company had no product sales and depended on external financing while developing its pipeline.
- Molgradex: Phase 3 for autoimmune pulmonary alveolar proteinosis (aPAP); Phase 2a for nontuberculous mycobacterial (NTM) lung infection.
- AeroVanc: Phase 3 inhaled vancomycin for persistent MRSA lung infection in people with cystic fibrosis.
Financial performance and condition
| Metric | FY2018 | FY2017 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $37.2 million | $18.5 million |
| General and administrative expense | $10.7 million | $11.1 million |
| Operating loss | $70.0 million | $30.0 million |
| Net loss | $61.5 million | $29.8 million |
| Net loss per share | $1.85 | $1.76 |
| Cash used in operating activities | $39.3 million | $28.2 million |
- FY2018 revenue was reported as zero in the quarterly data. A $0.3 million Japan-license milestone received in October was recorded as deferred revenue because performance obligations remained unmet.
- Cash and cash equivalents were $24.3 million and short-term investments were $86.5 million at year-end, totaling $110.8 million. Working capital was $106.1 million.
- Total assets were $152.3 million; total liabilities were $44.1 million; stockholders’ equity was $108.2 million. Accumulated deficit was $129.7 million.
- Debt facility carrying value was $24.5 million at year-end, against $25.0 million gross principal. The loan bears interest at prime plus 3.0%; interest-only payments run through October 2020, with maturity on November 1, 2022.
- No meaningful operating margin can be calculated because the company had no product revenue and incurred operating losses.
Fourth-quarter and year-over-year changes
- In Q4 2018, revenue was zero, operating loss was $13.2 million, net loss was $10.5 million, and basic and diluted loss per share was $0.29.
- FY2018 net loss increased by $31.7 million from FY2017. R&D expense approximately doubled, driven by expanded Molgradex aPAP and NTM work and Phase 3 AeroVanc costs.
- A $21.7 million noncash impairment was recorded in Q1 2018 for Aironite after an unsuccessful Phase 2 study; Savara discontinued development. A related $4.6 million deferred tax liability reversal contributed to the year’s $8.5 million income tax benefit.
- Operating cash use rose by $11.0 million year over year. Financing cash inflows were $55.2 million, including $45.8 million net proceeds from a July 2018 share offering and $9.4 million net debt proceeds. Shares outstanding rose from 30.5 million to 35.1 million during 2018.
- Management corrected quarterly 2018 loss-per-share calculations to include pre-funded warrants; the revised quarterly values are shown in the filing and the change was assessed as not material to prior periods.
Outlook, risks and unusual items
- Management expected Molgradex IMPALA topline results at the end of Q2 2019; patient enrollment had completed in October 2018 with 139 participants. AeroVanc AVAIL enrollment was expected to finish in Q3 2019, with topline results expected in Q2 2020. These are forward-looking targets, not reported outcomes.
- OPTIMA interim results disclosed in December 2018 covered 14 evaluable patients: among 10 with MAC infection, four had sputum-smear conversion by week 24 and three had negative cultures at weeks 16 and 20, with week-24 culture results pending. No conversions were observed in four evaluable MABSC patients. The study was extended from 24 to 48 weeks; final results were expected in Q1 2020.
- Across all 32 OPTIMA participants, six (19%) experienced serious adverse events, including one death by suicide considered unrelated to treatment. One pulmonary-exacerbation/worsening-NTM SAE was considered possibly treatment-related; three patients discontinued because of adverse events. Savara reported increased blood eosinophils in 17 patients (53%).
- Management stated existing capital resources were expected to fund planned operations into 2020, while also warning that substantial additional capital would be needed. The financial-statement note said available cash and investments were sufficient for operations for twelve months after issuance of the statements. Funding needs, clinical outcomes, approval timing and commercial prospects remain uncertain.
- The amended SVB facility increased to $45 million: $25 million became available, including refinancing of the prior $15 million balance; a further $20 million tranche was available on request before September 30, 2019, subject to conditions. Drawing that tranche could require $20 million cash collateral if market capitalization fell below $200 million. The lender holds a first-priority lien on assets and the agreement contains restrictive covenants.
- Key risks include clinical-trial failure or delay, regulatory and manufacturing hurdles, dependence on contract vendors without backup suppliers, further financing and dilution, reimbursement and market-acceptance uncertainty, and limited aPAP patent protection. No material pending litigation was reported. Management and the auditor reported effective internal controls; the financial statements received an unqualified audit opinion.
Important facts for investors to verify
- Whether IMPALA and AVAIL timelines and endpoints were ultimately met, and what the complete trial results and regulatory discussions showed.
- Current cash runway and financing needs, including actual operating cash burn, any subsequent equity issuance, and whether the additional SVB tranche was drawn or collateralized.
- OPTIMA’s complete 48-week efficacy and safety results, particularly differences between MAC and MABSC outcomes.
- Manufacturing readiness, supply agreements and remaining contingent milestones, royalties and other obligations tied to Molgradex and AeroVanc.
- Potential dilution from outstanding options, warrants and future fundraising, as well as the practical value of orphan-drug and patent protections.