Atossa Therapeutics, Inc. — Q1 2022 Form 10-Q Summary
Business Context and Reporting Period
Atossa Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing therapeutics for breast cancer, breast conditions and COVID-19. Its principal programs are oral Endoxifen, AT-301 nasal spray and AT-H201 inhalation therapy. The filing covers the three months ended March 31, 2022, and was filed May 9, 2022. The company is not marketing products and has no sustainable revenue.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $1.499 million | $1.379 million | Up 9% |
| General and administrative expense | $3.248 million | $2.152 million | Up 51% |
| Total operating expenses | $4.747 million | $3.531 million | Up 34% |
| Net loss | $4.786 million | $3.538 million | Loss increased 35% |
| Basic and diluted loss per share | $0.04 | $0.04 | Reported amount unchanged |
| Cash used in operating activities | $4.878 million | $4.408 million | Use increased 11% |
All financial statement amounts are in thousands unless otherwise noted. The company had no cost of revenue, income tax expense or income tax benefit. Operating margin and net margin are not meaningful because the company had no revenue.
Cash, Liquidity and Capital Structure
- Cash and cash equivalents were $131.486 million at March 31, 2022, compared with $136.377 million at December 31, 2021. Cash, cash equivalents and restricted cash totaled $131.596 million.
- Working capital was $134.526 million. Total assets were $137.478 million, total liabilities were $2.322 million and stockholders’ equity was $135.156 million.
- The company had no debt reported on the balance sheet. Current liabilities consisted primarily of accounts payable, accrued expenses and payroll liabilities.
- There were no financing cash flows in Q1 2022. In Q1 2021, financing activities provided $102.428 million from stock and warrant transactions.
- Management believes available funding is sufficient to finance operations for at least one year from issuance of the financial statements, but expects to raise substantial additional capital over the next several years.
- Accumulated deficit was $134.020 million at March 31, 2022, compared with $129.234 million at December 31, 2021. There were 126.624 million common shares outstanding at March 31, 2022 and May 6, 2022.
Material Changes Versus the Prior Comparable Period
- R&D expense increased $120,000, primarily from higher clinical and nonclinical trial spending and drug manufacturing costs, partly offset by a $1.0 million refund related to a canceled exclusive negotiation arrangement for two oncology programs.
- G&A expense increased $1.096 million, mainly from higher non-cash stock-based compensation, increased employee compensation and higher legal fees related to patent activity.
- Stock-based compensation increased to $1.806 million from $640,000, contributing materially to the higher operating loss.
- Operating cash burn increased $470,000. Higher clinical-trial and prepaid clinical expenses were partly offset by the $1.0 million refund.
- Prepaid expenses increased to $3.874 million from $2.488 million, while the R&D rebate receivable declined to $668,000 from $1.072 million.
- Warrants to purchase 22.277 million common shares were outstanding at March 31, 2022. No warrants were exercised during Q1 2022, compared with $32.760 million of warrant-exercise proceeds in Q1 2021.
Development Outlook, Commentary and Risks
- The company commenced the Phase 2 Karisma-Endoxifen study in December 2021 in approximately 240 premenopausal women with measurable breast density. The company stated that additional evidence may be needed to establish reduced breast cancer incidence for breast-density reduction to be an approvable indication.
- Management plans to open an investigational new drug application for a multicenter Phase 2 Endoxifen study in premenopausal women with ER-positive, HER2-negative breast cancer in the neoadjuvant setting.
- AT-H201 enrollment began in Australia in September 2021; enrollment in the second of four study parts was completed in April 2022. Progression to later parts and additional sites may depend on COVID-19 infection levels and ethics or regulatory approvals.
- AT-301 completed a 32-subject Phase 1 safety study. The company is preparing additional preclinical studies before seeking FDA authorization for a U.S. Phase 2 study.
- The company expects continuing operating losses and negative cash flows. If additional financing is unavailable or unfavorable, it may need to delay, modify or terminate development programs or relinquish rights through collaborations or licensing arrangements.
- COVID-19 may disrupt clinical enrollment, regulatory reviews, manufacturing and supply chains, and access to capital. Management reported no significant enrollment or drug-supply delays at the filing date, but noted that declining COVID-19 case levels could make COVID-19 study enrollment more difficult and that the end of the pandemic could reduce the market for its COVID-19 programs.
- Other significant risks include clinical-trial failure or delay, regulatory non-approval, reliance on third-party manufacturers and CROs, intellectual-property challenges, product-liability exposure, foreign-currency risk, Nasdaq continued-listing requirements and potential shareholder dilution from future equity or warrant exercises.
- The Australian R&D rebate program is subject to government review; disallowed expenditures could result in repayment of rebates, penalties and interest. The company collected $563,000 of rebates during Q1 2022.
- Management concluded that disclosure controls and procedures were effective as of March 31, 2022, and reported no material changes in internal control over financial reporting.
Investor Verification Priorities
- Verify cash runway assumptions against the pace of clinical spending, stock-based compensation and planned development activities.
- Monitor the timing, enrollment, interim data and regulatory status of the Karisma-Endoxifen, neoadjuvant Endoxifen, AT-301 and AT-H201 programs.
- Assess future financing needs, authorized-share capacity, potential dilution and the terms of any equity, debt, collaboration or licensing transactions.
- Review the 22.277 million outstanding warrants and 12.749 million outstanding stock options for potential dilution and expiration or exercise risk.
- Track the Australian R&D rebate receivable and any government review, repayment, penalty or interest exposure.
- Confirm Nasdaq listing compliance, particularly the minimum bid-price and stockholders’ equity requirements.
- Evaluate whether COVID-19 trends, supply-chain conditions or regulatory delays could reduce the commercial relevance or timing of the COVID-19 programs.