Filing identity and reporting period
Important identity discrepancy: The supplied filing is AmpliPhi Biosciences Corporation’s Form 10-Q for the quarter ended September 30, 2018, not a filing under the name Armata Pharmaceuticals, Inc. Verify the issuer and any corporate-name or succession relationship before relying on this summary.
AmpliPhi was a clinical-stage biotechnology company developing targeted bacteriophage treatments for serious antibiotic-resistant infections. Its lead candidates were AB-SA01 for Staphylococcus aureus and AB-PA01 for Pseudomonas aeruginosa. The financial statements are unaudited.
Financial performance and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $38,000 | $0 | $95,000 |
| Research and development expense (benefit) | $361,000 | ($829,000) | $3.517 million | $1.791 million |
| General and administrative expense | $1.276 million | $1.613 million | $4.227 million | $6.295 million |
| Operating loss | $1.637 million | $746,000 | $7.744 million | $13.791 million |
| Net loss | $1.606 million | $779,000 | $7.790 million | $10.486 million |
| Basic net loss per share | $0.10 | $0.09 | $0.51 | $1.97 |
No meaningful product margin is available: the company reported no revenue in 2018 and expected no product revenue until development and regulatory approval. Q3 2018 R&D expense was reported net of approximately $1.2 million in Australian tax incentive payments; the comparable 2017 quarter included approximately $2.0 million in rebates, producing an R&D benefit. Excluding rebates, management said R&D costs increased year over year, chiefly due to clinical costs.
For the first nine months, operating cash use was $6.954 million, versus $6.823 million in 2017. Investing cash use was $41,000. Financing provided $6.362 million, mainly from January and March 2018 equity offerings. Cash declined by $633,000 during the period to $4.499 million at September 30.
At September 30, total assets were $10.619 million, current liabilities $2.465 million, total liabilities $3.766 million, and stockholders’ equity $6.853 million. Current assets were $5.114 million. The balance sheet listed no conventional borrowings or note payable at period-end; liabilities included accounts payable, accrued expenses, derivative liabilities and deferred taxes. Accumulated deficit was $401.996 million.
Changes, outlook and material matters
- Nine-month net loss improved from 2017, primarily reflecting the absence of the prior-year $5.8 million impairment charge and lower G&A; 2017 also included a $1.3 million income tax benefit and a gain from revaluing warrant liabilities. Q3 net loss, by contrast, increased from the prior-year quarter.
- In October 2018, after quarter-end, the company raised $6.8 million gross in an offering of common stock, pre-funded warrants and common warrants, before offering expenses. Management said cash resources including the net proceeds would fund planned operations until mid-2019. It also stated that additional capital would be needed, and warned that available financing might not be obtained on acceptable terms or at all.
- The filing states that recurring losses and negative operating cash flows raise substantial doubt about the company’s ability to continue as a going concern. It expects significant losses for at least several years and has no product revenue.
- FDA feedback in 2018 generally supported proposed Phase 1/2 trial designs for both AB-SA01 and AB-PA01, with no additional clinical or nonclinical data then required to proceed. The trials contemplated roughly 100 patients each; the company was seeking non-dilutive financing and other opportunities to conduct them. It intended to start an AB-SA01 bacteremia trial in 2019, subject to funding.
- The company reported physician-assessed treatment success in 84% of 21 expanded-access patients across seven hospitals. These uncontrolled, single-patient cases do not establish clinical-trial efficacy, and the filing cautions that expanded-access data may not support regulatory approval.
- The October offering added substantial potential dilution. The filing also describes an exercise-price adjustment on certain existing warrants following the offering. Clinical execution, manufacturing scale-up and regulatory approval remain significant risks; the company noted that no phage product had been approved.
- Management reported effective disclosure controls at the reasonable-assurance level and no material quarterly change in internal control over financial reporting. The filing reported no material legal proceeding and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Confirm the issuer identity: the source document names AmpliPhi Biosciences Corporation, whereas the request names Armata Pharmaceuticals, Inc.
- Check net proceeds, offering costs, post-offering shares and warrant terms from the October 2018 financing; $6.8 million is gross proceeds, not net cash raised.
- Assess the cash runway against actual spending and financing needs; “until mid-2019” is management’s estimate, not a guarantee.
- Track whether the proposed trials were funded, initiated and completed, and review controlled trial results separately from expanded-access outcomes.
- Evaluate dilution and potential warrant exercises, including the October-issued warrants and adjusted exercise price of certain earlier warrants.
- Review the going-concern warning, manufacturing and regulatory risks, and the timing and amount of future capital required.