Altimmune, Inc. — Q2 2018 Form 10-Q
Business context and period. Unaudited results cover the quarter and six months ended June 30, 2018. Altimmune is a clinical-stage immunotherapeutics and vaccine company with no product sales; revenue is primarily government research grants and contracts. The filing cautions that interim results are not necessarily indicative of full-year results.
Financial performance and liquidity
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Total revenue | $2.42 million, down 20% year over year | $5.11 million, up 53% |
| Research and development expense | $4.92 million, down 6% | $10.67 million, up 33% |
| General and administrative expense | $2.93 million, up 63% | $5.38 million, up 41% |
| Operating loss | $5.44 million | $11.43 million |
| Net loss | $9.14 million, versus $3.11 million | $12.31 million, versus $7.69 million |
| Net loss per common share, basic and diluted | $0.34 | $0.61 |
- Revenue consisted overwhelmingly of research grants and contracts; license revenue was about $5,000 for the quarter and $10,000 for the six-month period. The company reported no product-sale revenue. Product gross margins are not provided.
- For the first half, BARDA revenue was $3.9 million and NIAID revenue was $1.24 million. The year-over-year revenue increase reflected government-contract activity, including NIAID revenue from the acquired PharmAthene contract.
- Cash, cash equivalents and restricted cash totaled $4.76 million at June 30, including $0.59 million restricted. Cash and cash equivalents excluding restricted cash were $4.17 million. Current assets were $11.87 million and current liabilities $7.07 million.
- Operating cash use was $3.21 million in the first half, compared with $11.15 million in the prior-year period. Investing used $0.84 million, mainly for improvements to the new facility; financing used $3.44 million, principally for preferred-stock redemption and warrant-exchange cash consideration.
- At June 30, notes payable were $1.31 million current; other long-term liabilities included $0.58 million of BPI France notes. The company issued $1.5 million principal of exchange notes in June, with a reported carrying value of approximately $1.32 million after derivative discount. The July renewal of its secured credit line increased capacity from $250,000 to $1.75 million, subject to a minimum-liquidity requirement.
- Accumulated deficit was $90.0 million and stockholders’ equity was $35.81 million. Shares outstanding were 37.36 million at June 30 and 38,487,482 on August 14.
Material changes and unusual items
- Q2 net loss included $5.23 million of expense from warrant fair-value changes and the warrant exchange; first-half warrant-related expense was $3.68 million. The June exchange involved 5.03 million common shares, $1.5 million of convertible notes and $1.1 million cash in exchange for warrants to buy 1.59 million shares. The company said it pursued the exchange because warrant dilution impeded financing.
- First-half results included a $0.49 million goodwill impairment charge associated with a purchase-price-allocation adjustment and reduced acquired tax-refund receivable. Goodwill had previously been fully impaired.
- Preferred-stock accretion and dividends were $2.59 million for the first half and reduced earnings attributable to common stockholders. Preferred stock outstanding at June 30 had a stated redemption value of $0.51 million; subsequent exchanges and redemptions eliminated the remaining Series B preferred shares by July 17, according to the filing.
- G&A increases reflected public-company costs, additional staff and professional services, and $0.6 million of severance-related labor costs. R&D spending rose year over year for the first half, including costs related to NasoVAX clinical work and other programs.
Outlook, risks and contingencies
- Going concern and financing: Management stated that June 30 resources were expected to fund operations only into Q4 2018 and were insufficient for a twelve-month period from the expected financial-statement issuance date. The filing says substantial doubt exists about the company’s ability to continue as a going concern without additional capital. Altimmune filed a public registration statement on July 30, 2018, seeking financing to fund activities through the next major clinical milestones; availability and terms were uncertain.
- Programs: NasoVAX Phase 2 initial data showed tolerability and reported 100% seroprotection at two of three dose levels; additional data were expected in Q3 2018, with another Phase 2 trial planned for 2019. NasoShield Phase 1 began in Q1, with topline data expected in Q3; further BARDA options and funding depend on progress and BARDA decisions. HepTcell’s initial immunogenicity results were inconclusive; follow-up was expected in Q4 2018 to inform further development. Altimmune was seeking additional funding for SparVax-L.
- There is no formal financial guidance in the provided filing text. Management’s stated cash-runway estimate depends on expected tax refunds and government-contract revenue as well as cash on hand.
- Key risks include continued losses, dependence on new financing and government funding, clinical and regulatory uncertainty, manufacturing difficulties, and potential dilution. The filing specifically reports repeated manufacturing failures for NasoVAX clinical material and warns these could delay planned trials.
- The company reported ordinary-course contractual disputes, litigation and potential claims but did not believe their resolution would materially adversely affect financial position or results. No legal proceedings were listed in Part II. Disclosure controls were judged effective; no material change in internal control over financial reporting was identified.
Important facts for investors to verify
- Whether the planned financing was completed on acceptable terms and extended the runway beyond Q4 2018.
- Actual unrestricted liquidity, timing and collection of expected tax refunds, and compliance with the credit line’s minimum-liquidity condition.
- NasoVAX additional Phase 2 data and manufacturing readiness; NasoShield Phase 1 results and any BARDA option exercise; and HepTcell follow-up results.
- Final completion and shareholder approval of the July warrant exchange, including share issuance, remaining warrant dilution and exchange-note obligations.
- Nasdaq bid-price compliance: the filing reported a November 13, 2018 deadline to regain the $1.00 minimum bid-price standard and proposed shareholder votes on authorized shares and a reverse stock split.
- The quality and sustainability of grant- and contract-based revenue, and the accounting and realizability of tax benefits and refund receivables.