What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-10 · 73 added, 70 removed, 110 unchanged (57% of the section changed)

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Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section entitled “Risk Factors” in Part II, Item 1A, that could cause actual results or events to differ materially from the forward-looking statements that 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 Securities and Exchange Commission, 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, 2020.

Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

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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).

Our pipeline includes proprietary intranasal vaccines and next generation peptide therapeutics for obesity, NASH ( pemvidutide, proposed INN, formerly known as ALT-801 ) and chronic hepatitis B (HepTcell).

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.

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Impact of COVID-19

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 closely monitoring how the spread of COVID-19, including any resurgences or the emergence of new variants, is affecting our employees, business, preclinical studies and clinical trials.

We have 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.

Furthermore, as a government contractor, we are subject to the federal government vaccination mandate, which requires federal contractor employees, except in certain limited circumstances, to be vaccinated against COVID-19 by December 8, 2021.

While the vaccination mandate remains subject to the interpretation of various government agencies and other entities, and questions remain regarding the specific application of the vaccination mandate, we are continuing to develop and implement health, safety, employment and operational protocols in order to timely comply with the vaccination mandate.

As of and for the three and nine months ended September 30, 2021, the vaccination mandate has not had a material impact on our employees or operations.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three and nine months ended September 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.

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.

In addition, a recurrence of COVID-19 cases, or variants thereof, 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.

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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.

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

For the three and nine months ended September 30, 2020, we have recognized approximately $2.3 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 September 2021.

The contract consists of an initial base performance period providing approximately $30.9 million in funding for the period July 2016 through December 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 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.

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 in 2021.

For the three and nine months ended September 30, 2021, we have recognized approximately $0.1 million and $0.4 million, respectively, of grant revenue under the current BARDA contract.

For the three and nine months ended September 30, 2020, we recognized approximately $0.6 million and $2.7 million, respectively, of grant revenue under the current BARDA contract.

Critical Accounting Policies and Significant Judgment and Estimates

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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, 2020 except for recently adopted accounting standards (See Note 2 to the consolidated financial statements appearing in Item 1 of this report).

For more information regarding our critical accounting policies, we encourage you to read the discussion contained in Item 7 under the heading “Critical Accounting Policies and Significant Judgments and 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, 2020.

For more information

regarding our critical accounting policies, we encourage you to read the discussion contained in Item 7 under the heading “Critical Accounting Policies and Significant Judgments and 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, 2020.

Results of Operations

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

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

For the Three Months Ended

September 30,

Increase (Decrease)

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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

Other (expense) income, net

Total other (expense) 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

Comparison of the nine months ended September 30, 2021 and 2020:

For the Nine Months Ended

September 30,

Increase (Decrease)

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Other (expense) income, net

Total other income, net

Total other (expense) 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 $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.

Revenue decreased by $2.8 million, or 95%, for the three months ended September 30, 2021, as compared to the same period in 2020.

The decrease was primarily the result of a decrease in MTEC revenue attributable to the timing of clinical trial and development work on the T-COVID program.

Revenue decreased by $4.7 million, or 81%, for the nine months ended September 30, 2021, as compared to the same period in 2020.

The decrease was primarily the result of:

● a decrease of $2.9 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.

● a decrease of $1.8 million in MTEC revenue attributable to the timing of clinical trial and development work on the T-COVID program.

Research and development expenses

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);

Research and development operating expense increased by $12.2 million, or 71%, for the three months ended September 30, 2021, as compared to the same period in 2020.

The increase was primarily the result of:

● an increase of $14.0 million due to development activities for the COVID-19 programs, which include AdCOVID (discontinued in June 2021) and T-COVID;

● an increase of $1.5 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.

● a decrease of $3.3 million due primarily to a decrease in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide and development activities for pemvidutide.

Research and development operating expense increased by $13.5 million, or 33%, for the nine months ended September 30, 2021, as compared to the same period in 2020.

The increase was primarily the result of:

● 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 $27.1 million due primarily to development activities for the COVID-19 program, AdCOVID (discontinued in June 2021);

● an increase of $4.2 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.

● a decrease of $17.8 million due primarily to a decrease in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide and development activities for pemvidutide.

General and administrative expenses

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.

General and administrative expense were consistent during the three months ended September 30, 2021, as compared to the same period in 2020.

General and administrative expense increased by $2.5 million, or 28%, for the nine months ended September 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-progress

Impairment loss on construction-in-progress reported during the nine months ended September 30, 2021 represents a non-cash impairment charge recorded for assets that were previously capitalized in connection with the discontinuation of AdCOVID.

Total other (expense) income, net

Total other (expense) income, net decreased by $0.4 million and $0.6 million during the three and nine months ended September 30, 2021, respectively, as compared to the same period in 2020.

The net decreases are primarily due to changes in foreign currency conversion and interest income.

Income tax benefit

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.

Income tax benefit decreased by $0.5 million and $5.3 million during the three and nine months ended September 30, 2021, respectively, as compared to the same period in 2020.

In both 2021 and 2020, 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 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.

Our primary sources of cash during the nine months ended September 30, 2021 were from sales of equity, maturities of short-term investments, cash receipts of accounts receivable from research grants and cash receipts of income tax refunds.

Our cash, cash equivalents, restricted cash and short-term investments were $199.9 million at September 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 September 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 September 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 June 30, 2021, we had accumulated losses of $235.8 million since our inception.

As of September 30, 2021, we had an accumulated deficit of $269.3 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 not have sufficient capital to fund our plan of operations.

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

Through September 30, 2021, we have collected approximately $3.7 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 September 2021.

The contract consists of an initial base performance period providing approximately $30.9 million in funding for the period July 2016 through December 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 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,

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 in 2021.

Through September 30, 2021, we have collected approximately $25.8 million in cash under the current BARDA contract.

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

Nine Months Ended September 30,

Net cash (used in) provided by:

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Operating Activities

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.

Net cash used in operating activities was $56.3 million for the nine months ended September 30, 2021 compared to $21.0 million during the nine months ended September 30, 2020.

Our sources of cash provided by operations during the nine months ended September 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 $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.

Net cash provided by (used in) investing activities was $62.7 million for the nine months ended September 30, 2021 compared to $35.2 million during the nine months ended September 30, 2020.

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

The net cash used in investing activities during the nine months ended September 30, 2020 was primarily due to purchases and maturities from short-term investments.

Financing Activities

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.

Net cash provided by financing activities during the nine months ended September 30, 2021 was $52.6 million compared to $190.8 million for the nine months ended September 30, 2020.

The net cash provided by financing activities during the nine months ended September 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 nine months ended September 30, 2020 was primarily the result of the receipt of $124.0 million in proceeds from a public offering (discussed below), $41.0 million in proceeds from the exercise of warrants and $25.6 million in proceeds from the issuance of common stock from our at-the-market offerings program.

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 to purchase 1,630,436 shares of our common stock at an exercise price equal to $0.0001 per share (the “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.

deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020.

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 the Company.

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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.

As of September 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”).

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

The 2020 Agreement was fully utilized during the year ended December 31, 2020, and no Shares were sold under the 2020 Agreement during the three and nine months ended September 30, 2021.

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 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.

At September 30, 2021, we had $174.9 million of cash, cash equivalents and restricted cash and $25.0 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 September 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 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.

As of September 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