Armata Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; unaudited. Armata is a clinical-stage biotechnology company developing bacteriophage therapies for difficult-to-treat and antibiotic-resistant bacterial infections. It has no product-sales revenue; reported revenue is grant revenue.
Financial results
| Metric | Three months ended September 30, 2021 | Three months ended September 30, 2020 | Nine months ended September 30, 2021 | Nine months ended September 30, 2020 |
|---|---|---|---|---|
| Grant revenue | $1.251 million | $0.288 million | $3.485 million | $0.319 million |
| Research and development expense | $5.626 million | $4.066 million | $15.201 million | $9.464 million |
| General and administrative expense | $1.768 million | $1.845 million | $6.058 million | $5.989 million |
| Total operating expenses | $7.394 million | $5.911 million | $21.259 million | $15.453 million |
| Loss from operations | $(6.143) million | $(5.623) million | $(17.774) million | $(15.134) million |
| Net loss | $(5.419) million | $(5.769) million | $(17.108) million | $(15.557) million |
| Basic and diluted net loss per share | $(0.22) | $(0.31) | $(0.73) | $(0.99) |
Cash flow and balance sheet: Cash and cash equivalents were $12.076 million at September 30, 2021, with a further $1.2 million restricted; total assets were $42.671 million, total liabilities $18.916 million, and stockholders’ equity $23.755 million. Accumulated deficit was $196.810 million. For the nine months, operating cash use was $14.977 million, investing cash use $1.076 million, and financing cash provided $18.480 million; cash, cash equivalents and restricted cash increased $2.427 million to $13.276 million.
The balance sheet included $12.314 million of operating lease liabilities, current and long term. The PPP loan was forgiven in July 2021; the company recorded a $0.726 million extinguishment gain. The final $2.0 million scheduled installment on deferred consideration for the Synthetic Genomics asset acquisition was paid in Q1 2021. No operating margin is presented in the filing.
Changes versus prior comparable periods
- Q3 grant revenue rose by $0.963 million, primarily reflecting MTEC reimbursement of AP-SA02 program costs. Nine-month grant revenue rose by $3.166 million.
- R&D expense increased $1.560 million in Q3 and $5.737 million for the nine months, reflecting higher clinical-trial, outsourcing and personnel costs. Nine-month changes also included CFF expense credits and an Australian tax rebate.
- Q3 net loss narrowed by $0.350 million, despite a larger operating loss, due mainly to the $0.726 million PPP forgiveness gain. Nine-month net loss increased by $1.551 million.
- Operating cash use increased by $3.009 million year over year for the nine months. Net financing proceeds were lower than in 2020, while the company raised $19.363 million net through 2021 private placements during the period.
- Common shares outstanding increased to 24,965,086 at quarter-end from 18,688,461 at December 31, 2020, principally reflecting the 2021 private placement.
Outlook, developments and principal risks
- Management stated that September 30 cash resources were expected to fund planned operations into Q1 2022. The company nevertheless disclosed substantial doubt about its ability to continue as a going concern: it has recurring losses and negative operating cash flows, needs additional capital, and cannot conclude that future financing plans are probable. Failure to raise funds could force reduced or discontinued programs or operations.
- After quarter-end, on October 28, 2021, Armata sold 2,121,213 shares to CFF and Innoviva for approximately $7.0 million gross, before expenses. Management’s runway statement also refers to these October proceeds. Equity fundraising may dilute existing holders; collaboration or licensing could require surrendering valuable rights.
- Clinical programs include AP-PA02 for chronic Pseudomonas infection in cystic fibrosis and AP-SA02 for Staphylococcus aureus bacteremia. The filing describes planned or ongoing Phase 1b/2 development, but gives no specific financial guidance or definitive completion dates. MTEC awarded up to $15 million toward AP-SA02 costs; CFF awarded up to $5 million toward AP-PA02, with future payments dependent on milestones.
- COVID-19 has delayed clinical-trial site identification and initiation; further enrollment, supply-chain and regulatory disruption remains possible. Management said it could not estimate pandemic effects on results, financial condition or liquidity for the remainder of 2021 or 2022.
- Armata entered a new Los Angeles lease after quarter-end: approximately 56,000 square feet, a 16-year term beginning May 2022, rent abatement during planned improvements in 2022–2023, base rent of about $0.25 million monthly in 2024, and tenant-improvement allowance up to $6.5 million. The existing Marina del Rey lease runs through 2031.
- CEO Todd Patrick retired from day-to-day management effective August 1, 2021; Brian Varnum became CEO. Innoviva held approximately 59.6% of outstanding shares following the October placement and could hold approximately 74.7% if it exercised its warrants, according to the filing.
- Key risks include clinical efficacy and regulatory uncertainty for a novel therapy class with no approved bacteriophage products, manufacturing scale-up and cGMP compliance, trial delays, financing needs and dilution, and dependence on partners and grants. The filing reported no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Cash runway assumptions, including the treatment of the October 2021 placement proceeds and expected cash use.
- Clinical-trial enrollment, timelines and milestones for AP-PA02 and AP-SA02, including COVID-19 and manufacturing effects.
- Grant reimbursement and milestone conditions, including remaining CFF award availability and MTEC funding obligations.
- Ownership, warrant exercise and potential dilution following the private placements; Innoviva’s voting and control position.
- Financial and operational impact of the new Los Angeles lease alongside the existing Marina del Rey lease.