Aptevo Therapeutics Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Aptevo is a clinical-stage biotechnology company developing oncology immunotherapies; it reported no approved products generating product sales.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Royalty revenue | $0 | $3.1 million |
| Research and development expense | $4.2 million | $4.9 million |
| General and administrative expense | $3.6 million | $3.9 million |
| Loss from operations | $7.8 million | $5.6 million |
| Net income (loss) | $2.8 million | $(7.7) million |
| Basic and diluted EPS | $0.39 | $(1.55) |
| Operating cash flow | $4.6 million | $(5.1) million |
Q1 2023 continuing-operations income was $1.8 million, including a $9.7 million gain from selling IXINITY payment rights to XOMA; discontinued operations contributed $0.9 million. Thus, reported net income reflects a material, non-recurring transaction rather than operating profitability. The filing does not report a meaningful product gross margin.
At March 31, cash and cash equivalents were $25.3 million, total current assets were $28.5 million and current liabilities were $5.8 million. Aptevo had no outstanding debt after repaying $2.8 million of MidCap principal and $0.3 million in exit fees. Operating lease liabilities totaled $5.9 million long-term, plus $0.6 million current. Operating cash flow benefited principally from the XOMA transaction and working-capital movements; financing cash flow was $(1.9) million.
Material changes and developments
- Royalty revenue fell to zero because Aptevo’s 2022 amendment with HCR ended its reporting of Pfizer RUXIENCE royalties as revenue. Aptevo may receive a further $10 million HCR milestone if 2023 sales conditions are met.
- The March 29 XOMA agreement generated $9.6 million at closing and eligibility for a further $0.05 million payment. XOMA acquired all future IXINITY deferred payments and specified portions of potential regulatory and sales milestones. Aptevo retained eligibility for up to $5.8 million in Medexus milestones, subject to the agreement’s terms.
- R&D expense decreased 14% year over year, mainly from lower APVO436, consulting and employee costs; higher ALG.APV-527 trial spending partly offset the decrease. G&A expense decreased about 7%.
- Aptevo issued 730,913 shares through its Piper Sandler equity distribution agreement at an average $2.26 per share, raising $1.6 million. Shares outstanding rose to 7,239,471 from 6,466,294 at year-end 2022. A further 50,000 shares were issued to Lincoln Park after quarter-end through May 11, raising $0.1 million.
Outlook, risks and contingencies
- Management said available cash, potential HCR and Medexus milestones, and existing equity facilities are expected to fund projected operating requirements for at least 12 months from the filing date. The company nevertheless expects significant operating losses and says additional funding will be needed to complete clinical development.
- Management planned to initiate an APVO436 Phase 2 program in the second half of 2023, informed by earlier Phase 1 results. The filing also reports that the first patient had been dosed in the Phase 1 trial of ALG.APV-527.
- Aptevo owes a $2.0 million milestone payment under its OMT license when the first patient is dosed in the APVO436 Phase 2 trial.
- Key uncertainties include clinical safety and efficacy, trial timing and enrollment, reliance on third-party manufacturers and collaborators, the availability and terms of future financing, and the achievement of contingent payments tied to IXINITY and RUXIENCE. Equity financing may dilute shareholders; insufficient funding could force development delays or cuts.
- The filing reports no pending legal matters that management believes could have a material adverse effect. Management concluded disclosure controls were effective as of March 31, 2023.
Important facts for investors to verify
- Whether the expected cash runway remains adequate, given recurring operating losses and the company’s stated need for additional capital.
- Progress, timing, safety and efficacy data for APVO436 Phase 2 and ALG.APV-527 Phase 1, including the $2.0 million APVO436 trial-start milestone.
- Whether the $10 million HCR milestone and any retained Medexus milestones are achieved, and the timing and terms of any payments.
- The exact scope and financial impact of rights transferred to XOMA, including the post-closing payment and retained milestone interests.
- Further share issuance under the Piper Sandler and Lincoln Park agreements, and its effect on dilution and available financing capacity.