Business context and reporting period
AIM ImmunoTech’s filing is under its then-registrant name, Hemispherx Biopharma, Inc. It reports unaudited consolidated results for the three months ended March 31, 2012, compared with the same 2011 period; balance-sheet figures are compared with December 31, 2011. The company was a clinical-stage specialty pharmaceutical business focused on Ampligen and Alferon products.
Financial performance and liquidity
Amounts are in thousands of dollars, except per-share data and shares.
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Revenue | $72 | $42 |
| Operating loss | $(3,747) | $(3,590) |
| Net loss | $(2,308) | $(866) |
| Net loss per share | $(0.02) | $(0.01) |
| Operating cash used | $(1,665) | $(1,818) |
| Cash and cash equivalents | $3,650 | $3,103 at Dec. 31, 2011 |
| Cash, cash equivalents and marketable securities | $32,190 | $34,391 at Dec. 31, 2011 |
| Total assets | $42,733 | $43,513 at Dec. 31, 2011 |
| Total liabilities | $6,599 | $5,548 at Dec. 31, 2011 |
Production costs exceeded revenue, resulting in a gross loss of $208, compared with $151 in Q1 2011. Research and development was $1,665, up 2%; general and administrative expense was $1,874, up 4%; total costs and expenses were $3,819, up 5%. No operating margin was reported. The company used $1,665 of operating cash, generated $1,643 from investing activities and $569 from financing activities, and ended the quarter with $547 more cash than at the start. Investing cash inflows included $3,189 of investment maturities, while property and construction spending was $1,552.
At quarter-end, current assets were $33,644 and current liabilities were $5,982. The company had a $2,277 margin-account loan, bearing an approximately 3% effective rate and collateralized by $3,074 of restricted securities. Capital-lease liabilities totaled $135. Construction in progress rose to $3,032 from $1,484. The filing reports no off-balance-sheet arrangements.
Material changes versus the prior period
Net loss increased by $1,442, or 167%. Contributing factors included a $452 adverse year-over-year swing in the non-cash warrant valuation, and $944 less income from sales of New Jersey net operating losses: $1,328 in 2012 versus $2,272 in 2011. Higher production, R&D and administrative expenses also increased the loss; higher investment income of $116 partly offset these items. Revenue grew $30, or 71%, from the Ampligen cost-recovery program, with patient participation up 37%.
Outlook, commentary and key risks
- The company had no Alferon N Injection product available for commercial sale; reported revenue came from the Ampligen open-label treatment program. Late-2012 Alferon sales were an estimate contingent on FDA release of existing materials, successful fill-and-finish work by Althea, and required approvals. Existing work-in-process inventory had expiration dates from September 2012 through March 2013.
- The FDA’s 2009 Complete Response Letter said the Ampligen application was not approvable as submitted and called for additional clinical evidence and other work. The FDA said in January 2012 it would await the company’s complete response; the company was pursuing an amended NDA. No approval timetable or assurance of approval was provided.
- Alferon facility improvements were underway, with the project budget increased to $6.5 million and completion projected for mid-2012. The facility’s FDA status would need reaffirmation after improvements; new Alferon production depended on completion and regulatory review.
- Other development programs faced delays or enrollment constraints. The Alferon LDO Phase II study was delayed for a confirmatory study; the India influenza study had enrolled 30 of a stated 60-patient objective. Ampligen vaccine-adjuvant studies were at early stages.
- Management warned that additional financing might be required and could dilute shareholders or involve senior securities. It cited limited shares available for fundraising without further stockholder approval and the possibility of cutting discretionary spending, including R&D, to conserve cash.
- Contingencies included pending MidSouth/Sage appeals and Cato Capital litigation. The company had recorded no gain or loss contingency; counsel could not estimate the likely outcome or potential loss. An adverse result could materially affect the business.
Most important facts for investors to verify
- FDA status and evidence requirements for the Ampligen NDA, including whether and when an amended response is submitted.
- FDA release decisions, Althea fill-and-finish progress, inventory expiration exposure, and facility recertification milestones for Alferon.
- Cash burn and remaining usable liquidity, including restricted collateral, margin-loan terms, construction spending and financing needs.
- Whether the reported New Jersey tax-loss sale proceeds and warrant revaluation effects recur, and how underlying operating costs and revenues trend without them.
- Enrollment, results, timelines and funding for clinical programs, plus developments in the Cato and MidSouth/Sage litigation.