Business context and reporting period
AmpliPhi Biosciences Corporation’s unaudited Form 10-Q covers the quarter and six months ended June 30, 2017. The filing describes a biotechnology company developing bacteriophage therapies for bacterial infections. The filing entity is AmpliPhi Biosciences Corporation, not Armata Pharmaceuticals, Inc.; investors should verify the requested company and filing match.
Financial results and position
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 |
|---|---|---|
| Revenue | $28,000 | $57,000 |
| Research and development | $1.13 million | $2.62 million |
| General and administrative | $2.78 million | $4.68 million |
| Impairment charge | $5.80 million | $5.80 million |
| Operating loss | $9.69 million | $13.05 million |
| Net loss | $6.46 million | $9.71 million |
- Revenue was from sublicensing agreements related to the former gene-therapy program; the company did not expect product revenue until development and regulatory approval of a candidate.
- For the six months, operating cash used was $6.23 million; investing cash used was $7,000; financing provided $9.49 million. Cash increased by $3.25 million to $8.96 million.
- At June 30, cash was $8.96 million and current assets were $9.24 million, against current liabilities of $3.71 million. The current note payable was $606,000. Total liabilities were $5.25 million.
- Accumulated deficit was $391.08 million. The filing reports substantial doubt about the company’s ability to continue as a going concern.
Material changes versus the prior comparable period
- Second-quarter revenue declined to $28,000 from $103,000; six-month revenue declined to $57,000 from $209,000.
- Six-month R&D expense fell to $2.62 million from $3.22 million, while G&A declined to $4.68 million from $5.10 million. The company cited lower prior-year acquisition, clinical-trial, recruitment, legal and stock-compensation costs, partly offset by payroll and severance costs.
- The $5.80 million IPR&D impairment, with a related $1.30 million tax benefit, was not present in 2016. Management cited the gap between market capitalization and net asset value and a higher discount rate; post-impairment IPR&D carrying value was $4.66 million.
- Six-month operating loss increased to $13.05 million from $8.11 million, largely due to the impairment. Net loss increased to $9.71 million from $6.96 million, although 2016 common-stockholder loss also included preferred-stock conversion and accretion charges.
- A $2.03 million six-month gain from changes in derivative fair values was non-cash and partly reflected a decline in the company’s share price.
Outlook, risks and unusual items
- Management expected existing resources to fund planned operations until mid-2018, but said further capital would be needed. It expected approximately $1.8 million in Australian tax-rebate payments in Q3 2017, subject to tax-authority review and with no assurance of receipt.
- The company raised $9.0 million net in a May 2017 offering. The offering included common shares and warrants; outstanding warrants and options create substantial potential dilution. A further 523,210 shares under an amended issuance agreement depended on shareholder approval and other conditions.
- Management announced a strategic emphasis on targeted phage therapies under single-patient expanded-access procedures, initially in Australia and on a limited basis in the United States. It said the FDA had provided positive feedback on a proposed Phase 2 AB-SA01 trial for chronic rhinosinusitis, but the filing gives no assurance of trial progress or approval.
- Risks include continued operating losses, reliance on additional financing, clinical and regulatory uncertainty, manufacturing scale-up and compliance, and the possibility that expanded-access cases will not support later development. No product candidates had been approved for sale.
- Disclosure controls were deemed ineffective because of an outstanding material weakness in controls over complex and non-routine transactions. Management reported continuing remediation efforts.
- The company effected a 1-for-10 reverse stock split in April 2017. It also gave notice to terminate its University of Leicester collaboration and license agreements.
Investor verification points
- Confirm whether this AmpliPhi 2017 filing is the intended filing for Armata Pharmaceuticals.
- Check subsequent filings for actual Australian rebate receipts, cash runway, financing needs and going-concern developments.
- Verify shareholder approval and completion status of the potential 523,210-share issuance, and review the resulting warrant adjustments and dilution.
- Track the basis and implications of the IPR&D impairment, as well as clinical, regulatory and manufacturing milestones for the phage programs.
- Review remediation of the material weakness and whether disclosure controls were later found effective.