Actinium Pharmaceuticals, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. The financial statements are unaudited. Actinium is a clinical-stage biotechnology company developing radioimmunotherapy candidates; it reported no commercial revenue and had no products approved for sale.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $2.83 million | $4.14 million | $10.71 million | $7.86 million |
| General and administrative expense | $1.79 million | $2.89 million | $9.15 million | $7.72 million |
| Total operating expenses | $4.64 million | $7.04 million | $19.91 million | $15.61 million |
| Net loss | $3.95 million | $6.08 million | $14.48 million | $19.26 million |
| Net loss per share, basic and diluted | $0.10 | $0.21 | $0.39 | $0.73 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $14.58 million | $9.30 million |
- At September 30, 2015, cash and cash equivalents were $24.76 million, current assets were $24.92 million, current liabilities were $2.16 million, and total liabilities were $2.16 million. The balance sheet showed no notes payable; derivative liabilities were $1.23 million. Cash was held at one bank, typically above FDIC-insured limits.
- For the first nine months, investing activities used $27,000 and financing activities provided $32.66 million; cash increased $18.06 million. Financing included $32.83 million in net proceeds from stock sales.
- Profitability and operating margins are not meaningful given the absence of revenue. The nine-month net loss included a $5.43 million gain from changes in fair value of derivative liabilities; this noncash valuation item materially reduced the reported loss.
Changes versus comparable periods
- Q3 net loss narrowed by about $2.13 million year over year, as operating expenses fell $2.41 million. Management attributed the R&D decline largely to lower Iomab-B manufacturing and scale-up costs compared with 2014; G&A also declined, particularly payroll and stock-based compensation costs.
- Nine-month operating expenses increased $4.30 million year over year, led by higher R&D spending for BC8/Iomab-B manufacturing and higher salaries and stock compensation, plus higher G&A professional fees.
- Nine-month net loss improved by $4.78 million, but the comparison was strongly affected by derivative remeasurement: a $5.43 million gain in 2015 versus a $3.65 million loss in 2014. Operating cash use increased by $5.28 million.
- Cash rose substantially after equity financing. The company completed a February underwritten offering and a June registered direct offering; it also issued shares under its shelf sales agreement. Shares outstanding were 41.92 million at September 30 and 42.02 million at October 29, 2015.
Outlook, risks, and other significant items
- Management said cash was sufficient for operations through the next 12 months; elsewhere the risk disclosure estimated funding through the third quarter of 2016. The filing therefore presents different runway descriptions. Management expected future R&D and G&A spending to increase and said further financing would likely be needed.
- Actinium was pursuing Actimab-A and Iomab-B. It estimated direct costs of about $7 million to complete the ongoing Actimab-A Phase 1/2 trial. For Iomab-B, it planned to seek FDA agreement to proceed to a pivotal trial and estimated $25–30 million to complete the anticipated trial by 2017. These are management estimates and plans, not assurances.
- The company reported prolonged bone-marrow suppression at the highest Actimab-A dose levels, with potential for serious consequences; it reduced dose levels while determining the maximum tolerated dose.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, dependence on collaborators and contract manufacturers, limited Ac-225 supply, and substantial future financing needs and dilution. The ORNL isotope supply contract ran through the end of 2015 and required renewal. Iomab-B was not patent protected, according to the filing.
- Potential contractual costs include approximately $1.7 million remaining under the Goodwin manufacturing agreement and $112,015 in disclosed minimum lease obligations for the year ending September 30, 2016. License agreements also include future milestone payments and royalties if specified development, approval, or sales milestones are achieved.
- Warrant derivative liabilities are valued using Level 3 inputs and can make reported earnings volatile as the stock price and other assumptions change. No legal proceedings or defaults upon senior securities were reported. Management concluded disclosure controls were effective as of September 30, 2015.
Important facts for investors to verify
- Clarify the cash-runway discrepancy: “next 12 months” versus through Q3 2016, and assess cash needs against trial plans and operating burn.
- Verify the status, timing, cost, and regulatory path of Actimab-A and Iomab-B, including any updates on Actimab-A dose-related marrow suppression and the planned Iomab-B pivotal trial.
- Assess financing capacity and potential dilution, including remaining use of the shelf registration, outstanding options and warrants, and the terms of future capital raises.
- Confirm renewal and adequacy of Ac-225 supply and progress on manufacturing and clinical-trial requirements.
- Review derivative-liability valuation assumptions and distinguish noncash fair-value gains or losses from operating performance and cash burn.