Filing Summary
Entity and period: The supplied filing is PharmAthene, Inc.’s Form 10-K for the fiscal year ended December 31, 2013, filed March 11, 2014. It does not identify Altimmune, Inc.; the requested “2013 Q4” is covered only as part of the full-year report, with quarterly data also included.
Business Context
PharmAthene was a development-stage biodefense company whose revenue came primarily from U.S. government contracts, not product sales. Its principal candidates were SparVax, an anthrax vaccine; rBChE, a nerve-agent countermeasure; and Valortim, an anthrax antibody. The company also pursued a potential remedy in litigation with SIGA related to Arestvyr, but recorded no amount due from SIGA.
Financial Results and Position
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Contract revenue | $17.9 million | $25.2 million |
| Operating expenses | $28.8 million | $31.4 million |
| Operating loss | $10.8 million | $6.3 million |
| Net loss | $11.7 million | $4.9 million |
| Basic and diluted loss per share | $0.23 | $0.10 |
| Cash used in operating activities | $7.2 million | $2.3 million |
| Cash and cash equivalents at year-end | $10.5 million | $12.7 million |
| Working capital at year-end | $7.5 million | $12.3 million |
- Revenue fell 29%, principally reflecting lower SparVax development activity. SparVax contributed $15.5 million, rBChE $2.4 million, and Valortim no revenue in 2013.
- Operating loss was approximately 60.5% of revenue and net loss approximately 65.4% of revenue. The filing does not report a gross margin.
- Research and development expense declined 21.5% to $15.3 million; general and administrative expense increased 14.7% to $13.3 million, including $3.3 million of costs related to the terminated Theraclone merger.
- Total debt was approximately $2.8 million at year-end: $1.8 million term-loan principal and $1.1 million drawn on the revolving facility. The term loan bears fixed interest of 10.14%; the revolver rate was 6.5%. Debt is secured by substantially all company assets, subject to stated exceptions.
- FY 2013 financing activities provided $5.0 million, including approximately $6.0 million net proceeds from the controlled equity offering, partly offset by debt repayments. The company had $8.6 million of gross offering capacity remaining at year-end.
Material Changes, Outlook and Risks
- The FDA placed SparVax on clinical hold in December 2013 after identifying a statistically significant downward potency trend in an engineering lot. The agency requested a new cGMP final drug-product lot, release results, and stability data; clinical trials cannot resume unless the hold is lifted.
- BARDA funding for SparVax was scheduled through February 2015, with approximately $19.5 million of the $70 million contract funding remaining at year-end, plus approximately $17 million in unfunded options. Additional funding for a new lot and Phase 2 trial was uncertain.
- The rBChE contract had approximately $0.9 million remaining and was scheduled to end March 31, 2014. Valortim had a roughly $1.0 million BARDA task order to supply master-cell-bank vials, expected for delivery in 2014; further development funding was uncertain.
- Management stated it believed existing resources would support the current operating level through the end of 2014, based on expected 2014 cash needs. It also warned that contract revenue and related development activity could be substantially lower if SparVax cannot advance or new government funding is not secured. The filing provides no formal revenue or earnings guidance.
- In the SIGA case, the Delaware Supreme Court affirmed breach of contract but reversed the prior remedy and remanded the remedy issue. The earlier award of 50% of specified profits after SIGA earned $40 million was no longer in effect; the company might receive no remedy or proceeds. The potential value and timing were uncertain, and the claim was not recognized in the financial statements.
- Other key risks include dependence on government contracts and annual appropriations, continuing losses and negative operating cash flow, reliance on third-party manufacturers and researchers, regulatory and clinical uncertainty, and potential dilution from equity issuance and outstanding options and warrants.
- The company reported no off-balance-sheet arrangements. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm the issuer: this filing is for PharmAthene, Inc. (ticker PIP), not Altimmune, Inc.
- Check subsequent FDA and BARDA updates on the SparVax clinical hold, replacement lot, trial status, and remaining contract funding.
- Review subsequent contract awards, expirations, and cash collections, particularly the rBChE contract and Valortim task order.
- Track the Delaware Chancery Court’s remedy in the SIGA litigation, any appeals, and whether any payment is ultimately recognized or collected.
- Assess cash burn, liquidity, debt maturities and covenants, remaining equity-offering capacity, and dilution from securities outstanding.