Aptevo Therapeutics Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Aptevo is a clinical-stage immuno-oncology biotechnology company; it reported no product revenue in the quarter.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $3.1 million |
| Research and development expense | $5.5 million | $3.9 million | $9.6 million | $8.7 million |
| General and administrative expense | $2.7 million | $3.7 million | $6.3 million | $7.6 million |
| Net income (loss) | $(7.9) million | $28.0 million | $(5.2) million | $20.3 million |
| Basic and diluted earnings (loss) per share | $(1.23) | $5.58 | $(0.72) | $4.08 |
- Operating loss was $8.2 million in Q2 2023, compared with $7.6 million in Q2 2022. Gross margin is not applicable because the company reported no revenue.
- Prior-year earnings were driven by a one-time $37.2 million gain from extinguishing the royalty-sale liability. Q2 2023 had no comparable gain. In the first half of 2023, Aptevo recorded a $9.7 million gain from selling certain Medexus payment rights to XOMA.
- Six-month operating cash use was $0.2 million, versus $8.2 million in the prior-year period. Investing cash flow was zero; financing cash use was $1.4 million, including debt repayment and fees, partly offset by $2.1 million of stock-sale proceeds. Cash declined $1.6 million during the half.
- Cash and equivalents were $21.0 million at June 30, down from $22.6 million at December 31, 2022. Current assets were $22.7 million and current liabilities $6.9 million.
- Aptevo repaid its MidCap term loan in March; it reported no balance-sheet debt at June 30. Lease liabilities totaled approximately $6.5 million, including current and long-term amounts.
Changes, liquidity and outlook
- R&D spending rose 41% year over year in Q2, principally from higher costs for APVO436 and the ALG.APV-527 Phase 1 study; lower preclinical and employee costs partly offset the increase. First-half R&D costs included $1.5 million for Aptevo’s share of the Alligator collaboration, compared with $0.3 million a year earlier.
- G&A expense decreased year over year, which management attributed mainly to lower employee and consulting costs.
- In March, Aptevo received $9.6 million plus a $0.05 million post-closing payment from XOMA for all future Medexus deferred payments and a portion of potential IXINITY milestones. Aptevo retained rights to specified portions of certain milestones and said it could receive up to $5.8 million in remaining Medexus milestones.
- Aptevo remains eligible for a $10 million HCR milestone tied to RUXIENCE sales in 2023. Receipt depends on sales and other contractual conditions; the company does not control Pfizer’s commercialization.
- Management stated existing cash and potential milestone proceeds, together with available equity financing, were expected to fund projected operating requirements for at least 12 months from the filing date. This outlook depends on uncertain milestone receipts, spending, financing access and market conditions. The company expects continued operating losses and says additional funding will be required to complete development programs.
- On August 4, after quarter-end, Aptevo completed an offering at $0.62 per share or pre-funded warrant, reporting $5.0 million gross and $4.5 million net proceeds. It also issued Series A and B warrants; the filing says exercise could provide up to an additional $10 million. The financing creates substantial potential dilution.
- No formal financial guidance was provided. Management cited inflation, interest rates, market volatility, supply constraints and possible delays in financing or partnering as risks to its plans. Without additional funds, Aptevo may have to delay, reduce or terminate development activities.
Pipeline, contingencies and other notable items
- Aptevo reported preliminary APVO436 results in venetoclax-naive patients treated with venetoclax, azacitidine and APVO436: 9 of 11 patients were included in the duration-of-remission analysis; 3 proceeded to stem-cell transplant; and one remained in complete remission through the protocol maximum of eight cycles. These are company-reported findings from a small study, not confirmatory evidence of efficacy.
- Enrollment in the APVO436 Phase 1b study was complete; the company expected to initiate a Phase 2 study in the second half of 2023. The first-in-human ALG.APV-527 Phase 1 study began in Q1 2023.
- A $2.0 million milestone payment under the OMT license is due upon first-patient dosing in an APVO436 Phase 2 trial.
- The Seattle office and laboratory lease runs through April 2030. Legal proceedings disclosed no pending matter management believed could materially adversely affect the company. Management assessed disclosure controls as effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the stated 12-month liquidity outlook remains supportable after accounting for ongoing clinical costs, the August offering and actual cash receipts.
- Progress, enrollment, safety and full efficacy data for APVO436 and ALG.APV-527, including whether preliminary APVO436 remission outcomes persist in broader or later-stage trials.
- Whether the $10 million HCR sales milestone and any remaining Medexus milestones are achieved, and the timing and amount of Aptevo’s retained share after the XOMA transaction.
- The exact share count and dilution from the August offering, pre-funded warrants and Series A/B warrants. The filing reports 11,523,716 common shares outstanding as of August 10; investors should reconcile this with offering and warrant terms.
- The amount of financing still available under the Lincoln Park and Piper Sandler arrangements, applicable limits and market-price conditions, and the potential impact of further equity issuance.