Actinium Pharmaceuticals, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; audited financial statements compare 2013 with 2012. The company is a clinical-stage biopharmaceutical developer, not a commercial-stage business. Its lead programs are Actimab-A, an Ac-225 antibody construct in Phase 1/2 testing for AML, and Iomab-B, an I-131 construct being prepared for a pivotal Phase 3 HSCT trial.
Financial results and liquidity
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.67 million | $3.44 million |
| General and administrative expense | $3.92 million | $4.51 million |
| Total operating expenses | $6.59 million | $7.95 million |
| Net loss | $10.77 million | $8.36 million |
| Net loss per share, basic and diluted | $0.47 | $7.58 |
| Cash used in operating activities | $6.29 million | $5.21 million |
| Cash and cash equivalents at year-end | $5.53 million | $5.62 million |
The 2013 net loss widened despite lower operating expenses, primarily because of a $4.18 million loss from remeasuring derivative liabilities; interest expense fell substantially from 2012. The derivative-related charge is a valuation item, not an operating cash outflow. The filing reports no product sales, so commercial margins are not meaningful.
At December 31, 2013, current assets were $5.75 million and current liabilities were $7.33 million, including $6.71 million of derivative liabilities and $157,825 of notes payable. Total assets were $5.77 million; total liabilities exceeded assets, leaving a stockholders’ deficit of $1.56 million. Cash used in investing activities was $16,592 and financing activities provided $6.22 million. Accumulated development-stage losses were $66.52 million.
The company reported approximately $6.6 million in gross proceeds from private placements completed in December 2013 and January 2014, with approximately $5.8 million net proceeds after fees and costs. Management said available funds were expected to support operations into the first quarter of 2015; it estimated up to $25 million would be needed through 2016, including approximately $7 million for 2014. These estimates depend on further financing and/or licensing proceeds.
Changes versus 2012
- Operating expenses declined $1.36 million, including lower R&D spending attributed primarily to capital conservation.
- Operating cash use increased by about $1.08 million, which management attributed to multicenter-trial preparation and conduct, professional fees, and payroll-related costs.
- Net loss increased $2.41 million, mainly due to the derivative fair-value loss, partly offset by lower interest expense and operating costs.
- The company completed its transition from a former shell company through a reverse merger/share exchange, name and domicile changes, and the merger of its operating subsidiary into the parent.
Outlook, developments, and risks
- Clinical and regulatory: FDA had agreed to the proposed Iomab-B Phase 3 design, subject to trial results and regulatory requirements. The planned study is 150 patients, split between Iomab-B and physician-selected conventional care. The company intended to file its own IND and advance trial preparation in 2014. Actimab-A remained in Phase 1/2; the filing does not report definitive pivotal-trial evidence or product approval.
- Funding and dilution: No commercial revenue is expected in the near term; the company said its first product was not expected to be commercialized before at least 2017. Continued development depends on additional equity or debt financing and potential partners. Financing may dilute shareholders or require the company to license or relinquish product rights.
- Clinical and supply risks: Early-stage results may not predict later outcomes. The filing describes prolonged bone-marrow suppression at higher Actimab-A doses in an earlier trial. Ac-225 supply relies on an ORNL contract extending through 2014, with renewal not assured; the company had not secured access to a suitable commercial cyclotron for its planned alternative production process.
- Intellectual property and partners: The company relies on licensed technology and third-party antibodies, research centers, and contract manufacturers. It disclosed that the BC8 antibody used in Iomab-B is not patent protected and that some patents relevant to Actimab-A had expired or could expire before commercialization.
- Accounting and controls: The independent auditor gave an unqualified opinion on the financial statements. Management nevertheless concluded internal control over financial reporting was ineffective, citing material weaknesses in written accounting procedures and period-end disclosure/reporting controls; remediation was still in progress. Management said the weaknesses did not affect the reported financial results.
- Governance and other items: In February 2014, the CEO was appointed interim CFO after the interim CFO resigned. The company disclosed related-party arrangements, including MSKCC licensing and research obligations and placement-agent fees; investors should review their terms and amounts.
Most important facts to verify
- Current cash runway and subsequent financing proceeds net of fees, and whether further funding has been secured for the stated development plans.
- Latest Actimab-A trial enrollment, safety, and efficacy data, and the status and required regulatory steps for the Iomab-B pivotal trial.
- Composition and valuation assumptions of the $6.71 million derivative liabilities, as well as outstanding warrants, options, and potential shareholder dilution.
- Progress in remediating the disclosed material weaknesses in internal controls and the status of CFO staffing.
- Renewal and adequacy of Ac-225 supply, manufacturing readiness, and the company’s patent, license, and royalty obligations.