Aptevo Therapeutics Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; comparative period is Q1 2019. Aptevo is a clinical-stage biotechnology company focused on cancer immunotherapies. On February 28, 2020, it sold its IXINITY and Hemophilia B business to Medexus, making those results discontinued operations.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparator |
|---|---|---|
| Research and development expense | $4.0 million | $6.6 million |
| General and administrative expense | $3.6 million | $4.5 million |
| Total operating expenses | $7.6 million | $11.2 million |
| Loss from continuing operations | $10.0 million | $11.7 million |
| Income (loss) from discontinued operations | $12.9 million | $(0.3) million |
| Net income (loss) | $2.9 million | $(12.0) million |
| Net cash used in operating activities | $11.2 million | $13.8 million |
Q1 2020 net income was driven by the $14.3 million gain on the sale; it does not reflect profitable ongoing operations. The filing reports no revenue from continuing operations. Operating cash outflow remained substantial. Cash and cash equivalents were $12.3 million and restricted cash was $2.5 million at March 31, 2020, compared with combined cash and restricted cash of $19.9 million at year-end 2019. Total assets were $25.2 million, total liabilities $10.1 million, and stockholders’ equity $15.2 million.
Aptevo received $30 million of sale consideration, including $0.75 million in escrow, and used $22.1 million to repay its MidCap debt in full. It recorded a $2.1 million debt-extinguishment loss. The company reported no term debt at quarter-end; operating lease liabilities remained. The sale also released the $5 million minimum-cash restriction under the MidCap agreement.
Changes, outlook, and risks
- Research and development spending fell by $2.6 million, mainly from lower preclinical, discovery, and discontinued-program costs; APVO436 expense was broadly stable. General and administrative expense declined by $0.9 million, primarily due to lower personnel and professional-services costs.
- The sale shifted Aptevo’s focus to its oncology pipeline. APVO436 enrollment continued in a Phase 1/1b study, with Cohort 6 ongoing; the company also selected APVO436 for the Leukemia & Lymphoma Society’s Beat AML Master Clinical Trial. Aptevo and Alligator decided to seek a partner for ALG.APV-527 before Phase 1 development.
- Management stated that recurring operating losses and operating cash outflows raise substantial doubt about Aptevo’s ability to continue as a going concern for one year from issuance. Additional funding is needed in 2020, and available financing is not assured. Without funding, the company may delay, reduce, or terminate development or other activities. Management expects significant operating losses for the next several years.
- Potential future Medexus milestone, deferred, and royalty payments depend on commercialization and other contractual terms; the filing notes COVID-19 could affect Medexus’ performance and Aptevo’s receipts. No quantified financial guidance was provided.
- COVID-19 could disrupt clinical enrollment, trial-site activity, supplies, staffing, partnering, and access to capital. The filing also identifies clinical, regulatory, manufacturing, financing, and product-development risks. The Beat AML agreement represents an $8.1 million purchase obligation over four years and may be terminated for convenience with 180 days’ notice.
- Aptevo completed a 1-for-14 reverse stock split in March 2020. It reported 3,232,811 common shares outstanding at March 31, and 1,571,429 warrants remained outstanding.
Investor verification points
- Confirm the final sale adjustment, escrow release, transition-service amounts, and timing and conditions for Medexus deferred, milestone, or royalty payments.
- Assess cash burn and the timing, availability, and potential dilution or terms of additional financing against the going-concern warning.
- Track APVO436 trial enrollment and Beat AML timing, as well as progress in finding a development partner for ALG.APV-527.
- Review the $8.1 million Beat AML commitment and other expected cash requirements alongside available unrestricted cash.