Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes for the year ended December 31, 2022 included in our Annual Report on Form 10-K, which was filed with the SEC on February 28, 2023.
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “may,” “will,” “should,” “could,” “target,” “strategy,” “intend,” “project,” “guidance,” “likely,” “usually,” “potential,” or the negative of these words or variations of such words, similar expressions, or comparable terminology are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. A further list and description of risks, uncertainties and other factors that could cause actual results or events to differ materially from the forward-looking statements that we make is included in the cautionary statements herein and in our other filings with the SEC, including those set forth under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
We have based the forward-looking statements included in this Quarterly Report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements, other than as required by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Overview
Altimmune, Inc. is a clinical stage biopharmaceutical company focused on developing treatments for obesity and liver diseases. Our lead product candidate, pemvidutide (formerly known as ALT-801), is a GLP-1/glucagon dual receptor agonist that is being developed for the treatment of obesity and non-alcoholic steatohepatitis (“NASH”). In addition, we are developing HepTcell, an immunotherapeutic agent designed to achieve a functional cure for chronic hepatitis B. Except where the context indicates otherwise, references to “we,” “us,” “our,” “Altimmune” or the “Company” refer to the company and its subsidiaries.
Recent Business Update
Pemvidutide
On March 21, 2023 we announced the topline results from a Week 24 interim analysis of 160 subjects in our 48-week MOMENTUM Phase 2 obesity trial of pemvidutide. The MOMENTUM Phase 2 obesity trial is being conducted at 30 sites across the U.S., designed to enroll approximately 320 subjects with subjects randomized 1:1:1:1 to 1.2 mg, 1.8 mg, 2.4 mg pemvidutide or placebo administered weekly for 48 weeks in conjunction with diet and exercise. A pre-specified interim analysis was conducted after 160 subjects completed 24 weeks of treatment.
At Week 24, subjects receiving pemvidutide achieved mean weight losses of 7.3%, 9.4% and 10.7% at the 1.2 mg, 1.8 mg, and 2.4 mg doses, respectively, with the placebo group experiencing a mean weight loss of 1.0% (efficacy estimand using a mixed model of repeated measures (“MMRM”) analysis). Approximately 50% of subjects achieved 10% or more weight loss and approximately 20% of subjects achieved 15% or more weight loss at Week 24 at the 1.8 mg and 2.4 mg doses, respectively. Robust reductions in waist circumference (a measure of visceral fat) and serum lipids were
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also observed, and clinically meaningful reductions in blood pressure were achieved without significant increases in heart rate.
On March 21, 2023, we also announced the results of the 12-week Phase 1b safety trial of pemvidutide in subjects with type 2 diabetes. The Phase 1b trial, which was conducted to evaluate the safety profile of pemvidutide in overweight and obese subjects with type 2 diabetes, was comprised of 54 subjects randomized 1:1:1:1 to 1.2 mg, 1.8 mg, 2.4 mg pemvidutide or placebo administered weekly for 12 weeks.
Subjects receiving pemvidutide achieved mean weight losses of 4.4%, 6.1% and 7.7% at the 1.2 mg, 1.8 mg, and 2.4 mg doses, respectively, over only 12 weeks of treatment, with the placebo group experiencing a mean weight gain of 0.8% (efficacy estimand using MMRM analysis).
HepTcell
On April 11, 2023 we announced the completion of enrollment in our Phase 2 clinical trial of HepTcell, an immunotherapeutic for the treatment of chronic hepatitis B (“CHB”). With the achievement of this milestone, data readout is planned for the first quarter of 2024.
The multicenter clinical trial, which is being conducted at 26 sites in North America, Europe and Southeast Asia, enrolled approximately 80 subjects with inactive CHB and low levels of hepatitis B surface antigen (“HBsAg”). Subjects were randomized 1:1 to HepTcell or placebo. The primary endpoint of the trial is clinical response, defined as a 1-log or greater reduction in HBsAg. Secondary endpoints include changes in the levels of hepatitis B virus (“HBV”) DNA, pre-genomic RNA and other markers of virologic response.
Results of Operations
Comparison of the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(in thousands)
2023
2022
Increase (Decrease)
Revenue
$
21
$
32
$
(11)
(34)
%
Operating expenses:
Research and development
17,249
15,104
2,145
14
%
General and administrative
4,531
4,427
104
2
%
Total operating expenses
21,780
19,531
2,249
12
%
Loss from operations
(21,759)
(19,499)
(2,260)
(12)
%
Other income (expense):
Interest expense
(2)
(62)
60
97
%
Interest income
1,668
21
1,647
7,843
%
Other income (expense), net
19
110
(91)
83
%
Total other income (expense), net
1,685
69
1,616
(2,342)
%
Net loss
$
(20,074)
$
(19,430)
$
(644)
(3)
%
Revenue
We have not generated any revenues from the sale of any products to date. Our revenue in previous years consisted primarily of government and foundation grants and contracts that support our efforts on specific research projects. We are closing out one of the remaining such contracts and any revenue reported during the three months ended March 31, 2023 and 2022 were for indirect rate adjustments.
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Research and development expenses
Research and development operating expense increased by $2.1 million, or 14%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily the result of:
● a net increase of $2.6 million due primarily to costs associated with non-project specific research and development costs including employee compensation, contractors and facility costs;
● an increase of $1.8 million due to change in the three months ended March 31, 2022 of the fair value of contingent consideration liability with respect to the acquisition of pemvidutide, which was fully paid on June 10, 2022;
● a decrease of $2.2 million due to the development activities for pemvidutide primarily due to the NAFLD trials, which were ongoing during the three months ended March 31, 2022 and which substantially completed by December 31, 2022, offset by an increase in the MOMENTUM Phase 2 trial in obesity cost; and
● a decrease of $0.3 million due to development activities for HepTcell.
General and administrative expenses
General and administrative expense increased by $0.1 million, or 2%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase is due primarily to a $0.2 million increase in stock compensation and other labor related expense, partially offset by a $0.1 million decrease in professional fees.
Total other income (expense), net
Total other income (expense), net increased by $1.6 million during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The net increase is primarily due to $1.6 million increase in interest income earned on our cash equivalents and short-term investments.
Liquidity and Capital Resources
Overview
Our primary sources of cash during the three months ended March 31, 2023 were from interest and dividends from our money market funds and short-term investments, and proceeds from maturity of our short-term investments. Our cash, cash equivalents, restricted cash and short-term investments were $165.8 million as of March 31, 2023. We believe, based on the operating cash requirements and capital expenditures expected for 2023 and 2024, our cash on hand as of March 31, 2023, together with expected cash receipts from our income tax refunds and R&D incentives, are sufficient to fund operations for at least a twelve-month period from the issuance date of our March 31, 2023 consolidated financial statements.
We have not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales. In the past, our sources of revenue have consisted of grant revenues under our arrangements with BARDA for the development of NasoShield, MTEC for a clinical trial and development work on T-COVID, and to a lesser degree from other licensing arrangements. The MTEC contract was closed out in June 2021 and we are currently closing out the BARDA contract which was not renewed after December 31, 2021. We have incurred significant losses since we commenced operations. As of March 31, 2023, we had an accumulated deficit of $398.0 million. In addition, we have not generated positive cash flows from operations. We have had to rely on a variety of financing sources, including the issuance of debt and equity securities. As capital resources are consumed to fund our research and development activities, we may require additional capital beyond our currently anticipated amounts. In order to address our capital needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.
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Sources of Liquidity
Public Offering
On July 16, 2020, we offered and sold (i) 3,369,564 shares of our common stock, at a price to the public of $23.00 per share, and (ii) Pre-Funded Warrants, at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of common stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to us. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by us. As of March 31, 2023, 760,870 of the Pre-Funded Warrants were exercised, leaving 869,566 remaining Pre-Funded Warrants unexercised.
Shelf Registrations
On February 28, 2023, we filed a shelf registration statement on Form S-3ASR, which was declared effective immediately. This shelf registration allows us to offer and sell any amount of our common stock, preferred stock, debt securities, warrants, rights and units (the “2023 Shelf”) for a period of 3 years from effectiveness.
On December 31, 2020, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on January 11, 2021. This shelf registration statement covered the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”).
At-the-Market Offerings
On February 28, 2023, we entered into the 2023 Agreement with Sales Agents with respect to an at-the-market offerings program under which we may offer and sell, from time to time at our sole discretion, the Shares through the Sales Agents from the 2023 Shelf. During the three months ended March 31, 2023, we did not sell any shares of common stock under the 2023 Agreement, and as of March 31, 2023, $150.0 million remained available to be sold under the 2023 Shelf.
On February 25, 2021, we entered into the 2021 Agreement with the 2021 Sales Agents with respect to an at-the-market offerings program under which we offered and sold the 2021 Shares through the 2021 Sales Agents from the 2021 Shelf. Under the 2021 Agreement, we sold 10,004,869 shares of common stock resulting in approximately $121.0 million in proceeds, net of $4.0 million commission and other offering costs. As of March 31, 2023, there were no remaining 2021 Shares available under the 2021 Agreement.
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Cash Flows
The following table provides information regarding our cash flows for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(in thousands)
2023
2022
Net cash (used in) provided by:
Operating activities
$
(19,407)
$
(13,526)
Investing activities
13,302
(9)
Financing activities
(302)
3,181
Net decrease in cash and cash equivalents and restricted cash
$
(6,407)
$
(10,354)
Operating Activities
Net cash used in operating activities was $19.4 million for the three months ended March 31, 2023 compared to $13.5 million during the three months ended March 31, 2022. The primary uses of cash from our operating activities include payments for labor and labor-related costs, professional fees, research and development costs associated with our clinical trials, and other general corporate expenditures. The increase in cash used in operations of $5.9 million year over year is due to changes in working capital accounts of $7.3 million, partially offset by an increase in net loss as adjusted for non-cash items of $1.4 million.
Investing Activities
Net cash provided by investing activities was $13.3 million, for the three months ended March 31, 2023 compared to the minimal net cash used during the three months ended March 31, 2022. The cash provided by investing activities during the three months ended March 31, 2023 was primarily due to $34.6 million proceeds from sale and maturities of short-term investments, partially offset by $21.2 million purchase of short-term investments.
Financing Activities
Net cash used in financing activities during the three months ended March 31, 2023 was $0.3 million compared to $3.2 million cash provided during the three months ended March 31, 2022. The net cash used by financing activities during the three months ended March 31, 2023 was primarily due to $0.4 million net payment for tax withholding obligations related to share-based compensation. The net cash provided by financing activities during the three months ended March 31, 2022 was primarily the result of the receipt of $3.0 million in proceeds from the issuance of common stock from our at-the-market offerings program.
Current Resources
We have financed our operations to date principally through our equity offerings and proceeds from issuances of our preferred stock, common stock and warrants. As of March 31, 2023, we had $104.7 million of cash, cash equivalents and restricted cash and $61.0 million of short-term investments. Accordingly, management believes that we have sufficient capital to fund our plan of operations for at least a twelve-month period from the issuance date of our March 31, 2023 financial statements. However, in order to address our capital needs in the long-term, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for interim financial reporting. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of
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contingent liabilities in our consolidated financial statements. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future given available information.
There have been no changes in our critical accounting policies and significant judgment and estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, except for the recently adopted accounting standard for ASU No. 2016-13 as disclosed in Note 2. For more information regarding our critical accounting policies, we encourage you to read the discussion contained in Item 7 under the heading “Critical Accounting Estimates” and Note 2 “Summary of Significant Accounting Policies” included in the notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.