AIM Immunotech Inc. (then Hemispherx Biopharma, Inc.) — Q2 2014 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2014. Financial statements are unaudited. The company was a clinical-stage biopharmaceutical company developing Ampligen and Alferon products.
Financial results and liquidity
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $36,000 | $36,000 | $112,000 | $78,000 |
| Operating loss | $(5.085) million | $(4.734) million | $(10.197) million | $(9.296) million |
| Net loss | $(4.956) million | $(4.283) million | $(8.792) million | $(7.894) million |
| Loss per share | $(0.03) | $(0.03) | $(0.05) | $(0.05) |
- Revenue came from the Ampligen open-label cost-recovery program; the company reported no Alferon finished goods available for commercial sale. Revenue remained immaterial relative to costs, and the filing does not present a meaningful commercial gross margin.
- Six-month research and development expense was $4.656 million, essentially unchanged year over year. General and administrative expense rose 29% to $5.036 million, including higher legal costs and executive compensation.
- At June 30, cash and cash equivalents were $2.617 million and marketable securities were $17.595 million, totaling $20.212 million. Current assets were $20.458 million versus current liabilities of $4.161 million.
- Operating cash use was $6.206 million for the six months, compared with $9.629 million a year earlier. Investing activities used $0.420 million; financing provided $8.440 million, chiefly from stock sales. Cash increased $1.814 million to $2.617 million.
- Total liabilities were $4.181 million, including $38,000 of capital lease obligations and $13,000 of redeemable warrants. The margin-account loan balance was zero. The company had an accumulated deficit of $269.111 million.
Changes, outlook, and key risks
- Six-month net loss increased $898,000 year over year. Higher G&A and lower investment income and warrant-valuation gains contributed; the $1.126 million gain from selling New Jersey tax-loss carryforwards partly offset the increase.
- The company raised $8.458 million net through its at-the-market equity program, selling 20.685 million shares in the first half. Shares outstanding were 189,997,547 on August 1, 2014. Further equity financing could dilute shareholders.
- The FDA had declined to approve the Ampligen NDA for chronic fatigue syndrome in February 2013, requesting at least one additional clinical trial, nonclinical studies, and further analyses. Management estimated a new study could take 18 months to three years after study-design acceptance; it said the work was beyond current financial resources without additional funding. No specific study cost or formal financial guidance was provided.
- Alferon commercial sales remained halted. Facility upgrades and validation, FDA inspection and reaffirmation, and product quality and stability review were still required. Management estimated newly produced Alferon API would be ready for FDA submission in approximately 14 months, while emphasizing there was no assurance of inspection success or resumed sales.
- Management warned that continued operations and development may require additional financing, which may not be available. It could reduce discretionary spending, including some R&D, to conserve cash. The Bioclones discussions in South Africa outlined potential research and registration projects but were subject to formal agreements, approvals, funding, and successful results.
- Material legal matters included securities and shareholder-derivative litigation, a former CFO employment dispute, and other proceedings. The company said outcomes and potential losses could not be reasonably estimated. A South African arbitration panel declined to domesticate the company’s $188 million U.S. judgment against Johannesburg Consolidated Investments and related parties; the company said its security bonds would probably be forfeited.
- Other notable items: the company wrote off older Alferon work-in-process inventory in 2013; it reported no other-than-temporary impairment of marketable securities at June 30, 2014. Management concluded disclosure controls were effective and reported no material change in internal controls during the six-month period.
Investor verification points
- Confirm current unrestricted cash and marketable securities, quarterly cash burn, and the funding available for required Ampligen studies and manufacturing work.
- Check progress, timing, and costs for FDA feedback, Ampligen clinical and nonclinical requirements, and Alferon facility validation, inspection, and product release.
- Review subsequent equity issuance, remaining ATM capacity, share dilution, and any financing restrictions or shareholder-approval requirements.
- Track Alferon commercial inventory and sales prospects, and whether the Bioclones discussions resulted in binding agreements or funded programs.
- Monitor developments and potential financial effects of the disclosed litigation, including the South African judgment enforcement matter.