What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-10 compared with 2021-05-17 · 87 added, 56 removed, 93 unchanged (61% of the section changed)

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Altimmune, Inc.

is a clinical stage biopharmaceutical company focused on developing intranasal vaccines, immune modulating therapies and treatments for liver disease.

Our diverse pipeline includes proprietary intranasal vaccines for COVID-19 (AdCOVID), anthrax (NasoShield) and influenza (NasoVAX);

an intranasal immune modulating therapeutic for COVID-19 (T-COVID);

and next generation peptide therapeutics for non-alcoholic steatohepatitis (“NASH”) (ALT-801) and chronic hepatitis B (HepTcell).

is a clinical stage biopharmaceutical company focused on developing treatments for obesity and liver diseases.

Our pipeline includes next generation peptide therapeutics for obesity, NASH (ALT-801) and chronic hepatitis B (HepTcell);

proprietary intranasal vaccines;

and an intranasal immune modulating therapeutic for the coronavirus disease (“COVID-19”) (T-COVID).

In June 2021, we announced the discontinuation of further development of our COVID-19 vaccine candidate, AdCOVID following our review of findings from the Phase 1 clinical trial, and in view of the highly competitive COVID-19 landscape.

In the study, AdCOVID was generally well tolerated, but the immunogenicity data demonstrated lower than expected immune responses for each of the immune parameters tested.

Impact of COVID-19

We are closely monitoring how the spread of the coronavirus disease (“COVID-19”) is affecting our employees, business, preclinical studies and clinical trials.

In response to the COVID-19 pandemic, we have closed our executive offices with certain employees continuing their work outside of our offices and travel for all employees has been restricted.

Essential laboratory staff continue to work onsite with enhanced safety measures.

We are continuing our regular interactions with the FDA and other regulatory agencies and based on current information, we do not anticipate COVID-19 to materially affect our regulatory timelines for NasoShield, T-COVID, AdCOVID, ALT-801 and HepTcell.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three months ended March 31, 2021, at this time, however, there is significant uncertainty relating to the trajectory of the pandemic and the impact of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We are closely monitoring how the spread of COVID-19 is affecting our employees, business, preclinical studies and clinical trials.

We recently reopened our executive office to allow certain employees to return to the office based on a phased approach that is intended to comply with federal and state guidelines, with a focus on employee safety and optimal work environment.

We are continuing our regular interactions with the FDA and other regulatory agencies and, based on current information, we do not anticipate COVID-19 to materially affect our regulatory timelines for our ongoing clinical trials.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three and six months ended June 30, 2021, at this time, however, there is significant uncertainty relating to the trajectory of the pandemic and the impact of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays.

social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

In addition, a recurrence of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest.

We continue to monitor developments as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic.

See “Risk Factors— Our business, results of operations and financial condition may be adversely affected by the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the ongoing coronavirus disease (COVID-19) pandemic.” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

See “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020.

Government Contracts and Grants

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The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology consortium working in partnership with the Department of Defense (“DoD”).

Under the contract, MTEC pays us a firm fixed fee based upon the achievement of certain milestones for conduct and

completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 ( “ RD-Ad5 ” ) vector vaccine platform.

For the three months ended March 3 1 , 202 1 , we have rec ognized approximately $0.5 million of grant revenue under the contract.

Under the contract, MTEC pays us a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform.

For the six months ended June 30, 2021, we have recognized approximately $0.5 million of grant revenue under the contract.

In July 2016, we signed a five-year contract with Biomedical Advanced Research and Development Authority (“BARDA”).

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Under the contract, BARDA pays us a fixed fee and reimburses certain costs for the research and development of an Ad5-vectored, protective antigen-based intranasal anthrax vaccine through cGMP manufacture and conduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity.

The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through December 2020.

The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through September 2021.

BARDA has seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical trials.

Each option, if exercised by BARDA, would provide additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning January 2021.

For the three months ended March 31, 2021 and 2020, we have recognized approximately $0.2 million and $1.6 million, respectively, of grant revenue under the current BARDA contract.

For the three and six months ended June 30, 2021, we have recognized approximately $0.1 million and $0.3 million, respectively, of grant revenue under the current BARDA contract.

For the three and six months ended June 30, 2020, we recognized approximately $0.5 million and $2.1 million, respectively, of grant revenue under the current BARDA contract.

Critical Accounting Policies and Significant Judgment and Estimates

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Results of Operations

Comparison of the three months ended March 31, 2021 and 2020:

Comparison of the three months ended June 30, 2021 and 2020:

For the Three Months Ended

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General and administrative

Impairment loss on construction-in-progress

Total operating expenses

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Interest income

Other income (expense), net

Total other income, net

Net loss before income tax benefit

Income tax benefit

Comparison of the six months ended June 30, 2021 and 2020:

For the Six Months Ended

Increase (Decrease)

Operating expenses:

Research and development

General and administrative

Impairment loss on construction-in-progress

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Interest income

Other (expense) income, net

Total other (expense) income, net

Total other income, net

Net loss before income tax benefit

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These grants consist of firm fixed fee contracts based on milestones and cost reimbursement contracts, with a fixed fee based on either costs incurred or milestones met.

Revenue decreased by $1.4 million, or 62%, for the three months ended March 31, 2021, as compared to the same period in 2020.

Revenue decreased by $0.6 million, or 81%, for the three months ended June 30, 2021, as compared to the same period in 2020.

The decrease was primarily the result of a decrease in BARDA revenue due to timing of clinical trials and development activities on the NasoShield program.

Revenue decreased by $2.0 million, or 67%, for the six months ended June 30, 2021, as compared to the same period in 2020.

The decrease was primarily the result of:

a decrease of $2.0 million in BARDA revenue due to timing of clinical trials and development activities on the NasoShield program;

● a decrease of $2.4 million in BARDA revenue due to timing of clinical trials, development activities and settlement of indirect rates on the NasoShield program;

● an increase of $0.5 million in MTEC revenue attributable to a clinical trial and development work on the T-COVID program.

Research and development expenses

Research and development operating expense increased by $4.7 million, or 65%, for the three months ended March 31, 2021, as compared to the same period in 2020.

Research and development operating expense decreased by $3.3 million, or 20%, for the three months ended June 30, 2021, as compared to the same period in 2020.

The decrease was primarily the result of:

● a decrease of $13.0 million due primarily to a decrease in the fair value of contingent consideration liability with respect to the acquisition of ALT-801 and development activities for ALT-801;

● an increase of $7.7 million due primarily to development activities for the COVID-19 program, AdCOVID (discontinued at the end of June 2021);

● an increase of $2.0 million in other pre-clinical and clinical projects and non-project specific research and development costs.

Research and development operating expense increased by $1.4 million, or 6%, for the six months ended June 30, 2021, as compared to the same period in 2020.

The increase was primarily the result of:

an increase of $5.4 million due to development activities for the COVID-19 programs, which include AdCOVID and T-COVID;

● an increase of $13.1 million due to development activities for the COVID-19 programs, which include AdCOVID (discontinued at the end of June 2021) and T-COVID;

● an increase of $2.8 million in other pre-clinical and clinical projects and non-project specific research and development costs;

● a decrease of $14.5 million due primarily to a decrease in the fair value of contingent consideration liability with respect to the acquisition of ALT-801 and development activities for ALT-801.

General and administrative expenses

General and administrative expense increased by $1.5 million, or 64%, for the three months ended March 31, 2021, as compared to the same period in 2020 due primarily to an increase in stock compensation expense and other labor related costs.

Total other (expense) income, net

Total other (expense) income, net decreased by $0.2 million during the three months ended March 31, 2021, as compared to the same period in 2020.

The decrease is primarily due to changes in interest income.

General and administrative expense increased by $1.1 million, or 44%, for the three months ended June 30, 2021, and by $2.6 million, or 53%, for the six months ended June 30, 2021, as compared to the same period in 2020 due primarily to an increase in stock compensation expense and other labor related costs.

Impairment loss on construction-in-process

Impairment loss on construction-in-process reported during the three and six months ended June 30, 2021 represented a non-cash impairment charge recorded for assets that were previously capitalized in connection with the discontinuation of AdCOVID.

Total other income, net

Total other income, net decreased by less than $0.1 million and $0.2 million during the three and six months ended June 30, 2021, respectively, as compared to the same period in 2020.

The net decreases are primarily due to changes in interest income.

Income tax benefit

Income tax benefit decreased by $3.2 million during the three months ended March 31, 2021, as compared to the same period in 2020.

In both 2020 and 2021, we had a valuation allowance against all of our deferred tax assets, but in 2020 a benefit was recognized related to a net operating loss carryback refund claim pursuant to the Coronavirus Aid, Relief, and Economic Security Act.

Income tax benefit decreased by $1.6 million and $4.8 million during the three and six months ended June 30, 2021, respectively, as compared to the same period in 2020.

In both 2020 and 2021, we had a valuation allowance against

all of our deferred tax assets, but in 2020 a benefit was recognized related to a net operating loss carryback refund claim pursuant to the Coronavirus Aid, Relief, and Economic Security Act.

Liquidity and Capital Resources

Our primary sources of cash during the three months ended March 31, 2021 were from sales of equity, maturities of short-term investments and cash receipts of revenue from our BARDA and MTEC contracts.

Our cash, cash equivalents, restricted cash and short-term investments were $226.5 million at March 31, 2021.

We believe, based on the operating cash requirements and capital expenditures expected for 2021 and 2022, our cash on hand and short-term investments at March 31, 2021, together with expected revenue from our government sponsored contracts and tax refunds, are sufficient to fund operations for at least a twelve-month period from the issuance date of our March 31, 2021 consolidated financial statements.

Our primary sources of cash during the six months ended June 30, 2021 were from sales of equity, maturities of short-term investments and cash receipts of income tax refunds.

Our cash, cash equivalents, restricted cash and short-term investments were $217.9 million at June 30, 2021.

We believe, based on the operating cash requirements and capital expenditures expected for 2021 and 2022, our cash on hand and short-term investments at June 30, 2021, together with expected collections from our government sponsored contracts and tax refunds, are sufficient to fund operations for at least a twelve-month period from the issuance date of our June 30, 2021 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.

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We have incurred significant losses since we commenced operations.

As of March 31, 2021, we had accumulated losses of $210.9 million since our inception.

As of June 30, 2021, we had accumulated losses of $235.8 million since our inception.

In addition, we have not generated positive cash flows from operations.

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Through March 31, 2021, we have collected approximately $1.6 million in cash under the contract.

Through June 30, 2021, we have collected approximately $1.1 million in cash under the contract.

In July 2016, we signed a five-year contract with BARDA.

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The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through December 2020.

The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through September 2021.

BARDA has seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical trials.

Each option, if exercised by BARDA, would provide additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning January 2021.

Through March 31, 2021, we have collected approximately $24.9 million in cash under the current BARDA contract.

The following table provides information regarding our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Net cash provided by (used in):

Through June 30, 2021, we have collected approximately $25.5 million in cash under the current BARDA contract.

The following table provides information regarding our cash flows for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

Net cash (used in) provided by:

Operating activities

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Operating Activities

Net cash used in operating activities was $19.6 million for the three months ended March 31, 2021 compared to $4.3 million during the three months ended March 31, 2020.

Our sources of cash provided by operations during the three months ended March 31, 2021 were primarily cash receipts of revenue generated by our BARDA and MTEC contracts.

Net cash used in operating activities was $38.5 million for the six months ended June 30, 2021 compared to $11.5 million during the six months ended June 30, 2020.

Our sources of cash provided by operations during the six months ended June 30, 2021 were primarily cash receipts of income tax refunds and revenue generated by our BARDA and MTEC contracts.

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.

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Investing Activities

Net cash provided by investing activities was $19.2 million for the three months ended March 31, 2021 compared to $6.6 million during the three months ended March 31, 2020.

The net cash provided by investing activities during the three months ended March 31, 2021 was primarily due to net proceeds from short-term investment activity, partially offset by purchases of property and equipment.

The net cash provided by investing activities during the three months ended March 31, 2020 was primarily due to net proceeds from short-term investment activity.

Net cash provided by investing activities was $44.2 million for the six months ended June 30, 2021 compared to $12.7 million during the six months ended June 30, 2020.

The net cash provided by investing activities during the six months ended June 30, 2021 was primarily due to net proceeds from short-term investment activity, partially offset by purchases of property and equipment.

The net cash provided by investing activities during the six months ended June 30, 2020 was primarily due to net proceeds from short-term investment activity.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2021 was $34.4 million compared to $0.1 million for the three months ended March 31, 2020.

The net cash provided by financing activities during the three months ended March 31, 2021 was primarily the result of the receipt of $34.2 million in proceeds from the issuance of common stock from our at-the-market offering program and $0.1 million in proceeds from the issuance of common stock from our Employee Stock Purchase Plan .

The net cash provided by financing activities during the three months ended March 31, 2020 was primarily the result of proceeds from the issuance of common stock from our Employee Stock Purchase Plan and exercise of warrants.

Net cash provided by financing activities during the six months ended June 30, 2021 was $52.4 million compared to $54.6 million for the six months ended June 30, 2020.

The net cash provided by financing activities during the six months ended June 30, 2021 was primarily the result of the receipt of $52.4 million in proceeds from the issuance of common stock from our at-the-market offerings program.

The net cash provided by financing activities during the six months ended June 30, 2020 was primarily the result of $31.3 million in proceeds from the exercise of warrants and $22.8 million in proceeds from the issuance of common stock from our at-the-market offerings program.

Public Offering

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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.

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 the Company.

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On February 25, 2021, we entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C., and B.

Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offering program under which we may offer and sell, from time to time at its sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million (the “Shares”) through the Sale Agents (the “2021 Offering”).

As of March 31, 2021, we sold 2,110,800 shares of Common Stock under the 2021 Agreement resulting in approximately $34.2 million in net proceeds, with $89.7 million remaining available to be sold under the 2021 Agreement.

On March 27, 2020, we entered into an Equity Distribution Agreement (the “2020 Agreement”) with JMP Securities LLC, serving as placement agent (the “Placement Agent”) with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million (the “Shares”) through the Placement Agent (the “2020 Offering”).

We offered Shares having an aggregate offering price of

$18.9 million pursuant to the prospectus supplement filed with the SEC on March 27, 2020 .

Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offerings program under which we may offer and sell, from time to time at its sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million (the “Shares”) through the Sale Agents (the “2021 Offering”).

As of June 30, 2021, we sold 3,516,510 shares of Common Stock under the 2021 Agreement resulting in approximately $52.4 million in net proceeds, with $70.9 million remaining available to be sold under the 2021 Agreement.

On March 27, 2020, we entered into an Equity Distribution Agreement (the “2020 Agreement”) with JMP Securities LLC, serving as placement agent (the “Placement Agent”) with respect to an at-the-market offerings program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million (the “Shares”) through the Placement Agent (the “2020 Offering”).

We offered Shares having an aggregate offering price of $18.9 million pursuant to the prospectus supplement filed with the SEC on March 27, 2020.

On June 1, 2020, we filed an amendment to the 2020 Agreement which amended the prospectus supplement dated March 27, 2020 to increase the aggregate offering price to $50.0 million.

As of March 30, 202 1, the 2020 Agreement was fully utilized .

As of June 30, 2021, the 2020 Agreement was fully utilized.

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.

At March 31, 2021 , we had $150.0 million of cash, cash equivalents and restricted cash and $76.6 million of short-term investments.

Accordingly, management believes that the Company has sufficient capital to fund its plan of operations for at least a twelve-month period from the issuance date of our March 31, 2021 financial statements.

At June 30, 2021, we had $174.1 million of cash, cash equivalents and restricted cash and $43.7 million of short-term investments.

Accordingly, management believes that the Company has sufficient capital to fund its plan of operations for at least a twelve-month period from the issuance date of our June 30, 2021 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.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of June 30, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis