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Altimmune, Inc. - Quarter Report: 2019 September (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 001-32587

 

Altimmune, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

20-2726770

State or Other Jurisdiction of

Incorporation or Organization

 

I.R.S. Employer

Identification No.

 

910 Clopper Road Suite 201S, Gaithersburg, Maryland

 

20878

Address of Principal Executive Offices

 

Zip Code

 

(240) 654-1450

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

ALT

The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of November 12, 2019 there were 15,338,072 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 

 

 


 

 

 

ALTIMMUNE, INC.

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1. Consolidated Financial Statements

 

 

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

 

1

 

Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (unaudited)

 

2

 

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (unaudited)

 

3

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)

 

5

 

Notes to Consolidated Financial Statements (unaudited)

 

6

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

19

 

 

 

 

 

Item 4. Controls and Procedures

 

19

 

 

 

 

PART II — OTHER INFORMATION

 

20

 

 

 

 

 

Item 1. Legal Proceedings

 

20

 

 

 

 

 

Item 1A. Risk Factors

 

20

 

 

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

20

 

 

 

 

 

Item 3. Defaults Upon Senior Securities

 

20

 

 

 

 

 

Item 4. Mine Safety Disclosures

 

20

 

 

 

 

 

Item 5. Other Information

 

20

 

 

 

 

 

Item 6. Exhibits

 

21

 

 

 

i


 

 

Part I—FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited).

ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,972,482

 

 

$

33,718,713

 

Restricted cash

 

 

34,174

 

 

 

634,416

 

Total cash, cash equivalents and restricted cash

 

 

11,006,656

 

 

 

34,353,129

 

Short-term investments

 

 

28,226,026

 

 

 

 

Accounts receivable

 

 

1,012,491

 

 

 

3,461,938

 

Tax refund receivable

 

 

968,597

 

 

 

1,008,973

 

Prepaid expenses and other current assets

 

 

410,148

 

 

 

548,094

 

Total current assets

 

 

41,623,918

 

 

 

39,372,134

 

Property and equipment, net

 

 

1,162,715

 

 

 

1,342,802

 

Right of use asset

 

 

717,303

 

 

 

 

Intangible assets, net

 

 

12,741,656

 

 

 

13,851,924

 

Other assets

 

 

142,331

 

 

 

183,682

 

Total assets

 

$

56,387,923

 

 

$

54,750,542

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

49,884

 

 

$

372,860

 

Accrued expenses and other current liabilities

 

 

2,311,824

 

 

 

4,082,949

 

Notes payable

 

 

105,062

 

 

 

71,596

 

Total current liabilities

 

 

2,466,770

 

 

 

4,527,405

 

Deferred income taxes

 

 

 

 

 

58,500

 

Contingent consideration

 

 

2,750,000

 

 

 

 

Other long-term liabilities

 

 

1,787,203

 

 

 

1,852,071

 

Total liabilities

 

 

7,003,973

 

 

 

6,437,976

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized;

   15,338,356 and 9,078,735 shares issued; 15,338,072 and 9,078,238 shares

  outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

1,502

 

 

 

876

 

Additional paid-in capital

 

 

187,683,155

 

 

 

170,207,844

 

Accumulated deficit

 

 

(133,279,497

)

 

 

(116,855,991

)

Accumulated other comprehensive loss

 

 

(5,021,210

)

 

 

(5,040,163

)

Total stockholders’ equity

 

 

49,383,950

 

 

 

48,312,566

 

Total liabilities and stockholders’ equity

 

$

56,387,923

 

 

$

54,750,542

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

1


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

643,978

 

 

$

2,634,393

 

 

$

5,225,600

 

 

$

7,742,514

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,729,697

 

 

 

4,728,726

 

 

 

14,892,464

 

 

 

15,394,616

 

General and administrative

 

 

2,187,661

 

 

 

1,963,733

 

 

 

6,485,960

 

 

 

7,345,651

 

Impairment charges

 

 

1,000,000

 

 

 

 

 

 

1,000,000

 

 

 

490,676

 

Total operating expenses

 

 

11,917,358

 

 

 

6,692,459

 

 

 

22,378,424

 

 

 

23,230,943

 

Loss from operations

 

 

(11,273,380

)

 

 

(4,058,066

)

 

 

(17,152,824

)

 

 

(15,488,429

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair value of warrant liability

 

 

76,000

 

 

 

806,224

 

 

 

30,000

 

 

 

(2,874,484

)

Changes in fair value of embedded derivatives

 

 

 

 

 

185,768

 

 

 

 

 

 

183,638

 

Interest expense

 

 

(756

)

 

 

(166,946

)

 

 

(2,244

)

 

 

(169,737

)

Interest income

 

 

224,058

 

 

 

21,100

 

 

 

649,268

 

 

 

78,306

 

Other income (expense)

 

 

(23,734

)

 

 

31,378

 

 

 

(6,206

)

 

 

289,053

 

Total other income (expense)

 

 

275,568

 

 

 

877,524

 

 

 

670,818

 

 

 

(2,493,224

)

Net loss before income tax benefit

 

 

(10,997,812

)

 

 

(3,180,542

)

 

 

(16,482,006

)

 

 

(17,981,653

)

Income tax benefit

 

 

58,500

 

 

 

829,393

 

 

 

58,500

 

 

 

3,318,124

 

Net loss

 

 

(10,939,312

)

 

 

(2,351,149

)

 

 

(16,423,506

)

 

 

(14,663,529

)

Other comprehensive income (loss) – foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(463,177

)

Other comprehensive income (loss) – unrealized gains on investments

 

 

18,953

 

 

 

 

 

 

18,953

 

 

 

 

Comprehensive loss

 

$

(10,920,359

)

 

$

(2,351,149

)

 

$

(16,404,553

)

 

$

(15,126,706

)

Net loss

 

$

(10,939,312

)

 

$

(2,351,149

)

 

$

(16,423,506

)

 

$

(14,663,529

)

Preferred stock accretion and other deemed dividends

 

 

 

 

 

64,139

 

 

 

(452,925

)

 

 

(2,527,275

)

Net loss attributed to common stockholders

 

$

(10,939,312

)

 

$

(2,287,010

)

 

$

(16,876,431

)

 

$

(17,190,804

)

Weighted-average common shares outstanding, basic and diluted

 

 

14,768,931

 

 

 

1,321,289

 

 

 

12,481,494

 

 

 

983,651

 

Net loss per share attributed to common stockholders, basic and diluted

 

$

(0.74

)

 

$

(1.73

)

 

$

(1.35

)

 

$

(17.48

)

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

 

2


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, January 1, 2019

 

 

 

 

 

 

9,078,238

 

 

$

876

 

 

$

170,207,844

 

 

$

(116,855,991

)

 

$

(5,040,163

)

 

$

48,312,566

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

71

 

 

 

 

 

 

 

407,742

 

 

 

 

 

 

 

 

 

 

 

407,742

 

Issuance of common stock in registered direct offering,

   net of offering costs

 

 

 

 

 

 

4,361,370

 

 

 

436

 

 

 

12,668,348

 

 

 

 

 

 

 

 

 

 

 

12,668,784

 

Issuance of common stock upon exercise of warrants

 

 

 

 

 

 

11,000

 

 

 

1

 

 

 

30,323

 

 

 

 

 

 

 

 

 

 

 

30,324

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,097,306

)

 

 

 

 

 

 

(2,097,306

)

Balance, March 31, 2019

 

 

 

 

 

 

13,450,679

 

 

 

1,313

 

 

 

183,314,257

 

 

 

(118,953,297

)

 

 

(5,040,163

)

 

 

59,322,110

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

71

 

 

 

 

 

 

 

289,800

 

 

 

 

 

 

 

 

 

 

 

289,800

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,386,888

)

 

 

 

 

 

 

(3,386,888

)

Balance, June 30, 2019

 

 

 

 

 

 

13,450,750

 

 

 

1,313

 

 

 

183,604,057

 

 

 

(122,340,185

)

 

 

(5,040,163

)

 

 

56,225,022

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

72

 

 

 

 

 

 

 

287,802

 

 

 

 

 

 

 

 

 

 

 

287,802

 

Issuance of common stock for acquired in-process

   research and development

 

 

 

 

 

 

1,887,250

 

 

 

189

 

 

 

3,791,296

 

 

 

 

 

 

 

 

 

 

 

3,791,485

 

Unrealized gain on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,953

 

 

 

18,953

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,939,312

)

 

 

 

 

 

 

(10,939,312

)

Balance, September 30, 2019

 

 

 

 

 

 

15,338,072

 

 

$

1,502

 

 

$

187,683,155

 

 

$

(133,279,497

)

 

$

(5,021,210

)

 

$

49,383,950

 

 


3


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

Series B Redeemable

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, January 1, 2018

 

 

12,177

 

 

$

9,281,767

 

 

 

608,499

 

 

$

61

 

 

$

121,657,587

 

 

$

(77,684,839

)

 

$

(4,576,986

)

 

$

39,395,823

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

71

 

 

 

 

 

 

356,737

 

 

 

 

 

 

 

 

 

 

 

356,737

 

Exercises of stock options

 

 

 

 

 

 

 

 

 

 

7,703

 

 

 

1

 

 

 

18,487

 

 

 

 

 

 

 

 

 

 

 

18,488

 

Conversion of Series B redeemable convertible preferred

   stock into common stock

 

 

(5,219

)

 

 

(5,218,572

)

 

 

130,447

 

 

 

13

 

 

 

5,218,559

 

 

 

 

 

 

 

 

 

 

 

5,218,572

 

Accretion of Series B Redeemable convertible preferred

   stock

 

 

 

 

 

 

1,891,321

 

 

 

 

 

 

 

 

 

 

 

(1,891,321

)

 

 

 

 

 

 

 

 

 

 

(1,891,321

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

615,471

 

 

 

615,471

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,173,538

)

 

 

 

 

 

 

(3,173,538

)

Balance, March 31, 2018

 

 

6,958

 

 

 

5,954,516

 

 

 

746,720

 

 

 

75

 

 

 

125,360,049

 

 

 

(80,858,377

)

 

 

(3,961,515

)

 

 

40,540,232

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

71

 

 

 

 

 

 

252,156

 

 

 

 

 

 

 

 

 

 

 

252,156

 

Exercises of stock options

 

 

 

 

 

 

 

 

 

 

1,837

 

 

 

 

 

 

4,410

 

 

 

 

 

 

 

 

 

 

 

4,410

 

Accretion of Series B redeemable convertible preferred stock

 

 

 

 

 

 

956,150

 

 

 

 

 

 

 

 

 

 

 

(956,150

)

 

 

 

 

 

 

 

 

 

 

(956,150

)

Conversion of Series B redeemable convertible preferred

  stock into common stock

 

 

(4,036

)

 

 

(4,036,539

)

 

 

334,180

 

 

 

33

 

 

 

4,036,506

 

 

 

 

 

 

 

 

 

 

 

4,036,539

 

Redemption of Series B redeemable convertible

  preferred stock for cash and release of embedded

  derivative

 

 

(2,364

)

 

 

(2,364,044

)

 

 

 

 

 

 

 

 

 

 

23,292

 

 

 

 

 

 

 

 

 

 

 

23,292

 

Issuance of common stock for the exchange of warrants

 

 

 

 

 

 

 

 

 

 

167,700

 

 

 

17

 

 

 

2,126,983

 

 

 

 

 

 

 

 

 

 

 

2,127,000

 

Foreign currency translation

   adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,078,648

)

 

 

(1,078,648

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,138,842

)

 

 

 

 

 

 

(9,138,842

)

Balance, June 30, 2018

 

 

558

 

 

 

510,083

 

 

 

1,250,508

 

 

 

125

 

 

 

130,847,246

 

 

 

(89,997,219

)

 

 

(5,040,163

)

 

 

35,809,989

 

Stock based compensation and vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

71

 

 

 

 

 

 

95,649

 

 

 

 

 

 

 

 

 

 

 

95,649

 

Accretion of Series B redeemble convertible preferred stock

 

 

 

 

 

 

47,414

 

 

 

 

 

 

 

 

 

 

 

(47,414

)

 

 

 

 

 

 

 

 

 

 

(47,414

)

Conversion of Series B redeemable convertible preferred

  stock into common stock

 

 

(558

)

 

 

(557,497

)

 

 

37,451

 

 

 

4

 

 

 

535,253

 

 

 

 

 

 

 

 

 

 

 

535,257

 

Issuance of common stock for the exchange of warrants

 

 

 

 

 

 

 

 

 

 

150,968

 

 

 

15

 

 

 

1,306,026

 

 

 

 

 

 

 

 

 

 

 

1,306,041

 

Issuance of common stock and units in registered direct

   offerings, net of offering costs

 

 

 

 

 

 

 

 

 

 

286,633

 

 

 

29

 

 

 

4,334,786

 

 

 

 

 

 

 

 

 

 

 

4,334,815

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,351,149

)

 

 

 

 

 

 

(2,351,149

)

Balance, September 30, 2018

 

 

 

 

$

 

 

 

1,725,630

 

 

$

173

 

 

$

137,071,546

 

 

$

(92,348,368

)

 

$

(5,040,163

)

 

$

39,683,188

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

 

 

4


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

For the Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,423,506

)

 

$

(14,663,529

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Non-cash consideration for acquired in-process research and development

 

 

6,541,485

 

 

 

 

Impairment charge

 

 

1,000,000

 

 

 

490,676

 

Stock-based compensation

 

 

985,260

 

 

 

704,425

 

Depreciation

 

 

181,314

 

 

 

146,299

 

Amortization

 

 

135,664

 

 

 

45,426

 

Unrealized gains on foreign currency exchange

 

 

(3,310

)

 

 

31,357

 

Debt discount and deferred financing cost accretion

 

 

 

 

 

120,024

 

Gain on disposal of property and equipment

 

 

 

 

 

(3,806

)

Changes in fair value of warrant liability

 

 

(30,000

)

 

 

2,874,484

 

Changes in fair value of embedded derivatives

 

 

 

 

 

(183,638

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,449,447

 

 

 

1,258,837

 

Prepaid expenses and other current assets

 

 

179,298

 

 

 

589,773

 

Accounts payable

 

 

(322,976

)

 

 

20,940

 

Accrued expenses and other current liabilities

 

 

(2,125,851

)

 

 

1,695,296

 

Deferred revenue

 

 

(14,833

)

 

 

(14,833

)

Deferred rent

 

 

 

 

 

861,741

 

Lease obligation

 

 

(133,813

)

 

 

 

Tax refund receivable

 

 

40,376

 

 

 

4,839,775

 

Deferred taxes

 

 

(58,500

)

 

 

(3,046,768

)

Net cash used in operating activities

 

 

(7,599,945

)

 

 

(4,233,521

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash paid for short-term investments

 

 

(28,207,073

)

 

 

 

Purchase of property and equipment

 

 

(1,227

)

 

 

(968,354

)

Proceeds from sale of property and equipment

 

 

 

 

 

14,492

 

Additions to intangible assets

 

 

(25,396

)

 

 

(39,145

)

Net cash used in investing activities

 

 

(28,233,696

)

 

 

(993,007

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Redemption of preferred stock

 

 

 

 

 

(2,386,284

)

Cash paid in conjunction with warrant exchange

 

 

(25,000

)

 

 

(1,100,000

)

Proceeds from conditional economic incentive

 

 

 

 

 

100,000

 

Proceeds from issuance of common units, net of issuance costs

 

 

12,668,784

 

 

 

4,334,816

 

Payments of notes payable

 

 

(186,940

)

 

 

 

Proceeds from exercises of warrants and stock options

 

 

30,324

 

 

 

22,898

 

Net cash provided by financing activities

 

 

12,487,168

 

 

 

971,430

 

EFFECT OF EXCHANGE RATES ON CASH

 

 

 

 

 

(50,365

)

Net decrease in cash and cash equivalents and restricted cash

 

 

(23,346,473

)

 

 

(4,305,463

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

34,353,129

 

 

 

12,303,639

 

Cash, cash equivalents and restricted cash, end of period

 

$

11,006,656

 

 

$

7,998,176

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

49,712

 

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Conversion of Series B redeemable convertible preferred stock into

   common stock

 

$

 

 

$

9,790,368

 

Common stock issued for acquired in-process research and development

 

$

3,791,485

 

 

$

 

Accretion of Series B redeemable convertible preferred stock

 

$

 

 

$

2,894,885

 

Notes payable issued in conjunction with the exchange of warrants

 

$

 

 

$

1,500,000

 

Settlement of warrant liability for common stock

 

$

 

 

$

3,345,030

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5


 

 

ALTIMMUNE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.Nature of Business and Basis of Presentation

Nature of Business

Altimmune, Inc., headquartered in Gaithersburg, Maryland, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware. The Company is focused on discovering and developing immunotherapies and vaccines to address significant unmet medical needs. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 included in the annual report on Form 10-K which was filed with the SEC on April 1, 2019. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2019 or any future years or periods.

Basis of presentation

The unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.

2.Summary of Significant Accounting Policies

During the nine months ended September 30, 2019, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual report on Form 10-K for the year ended December 31, 2018 as filed with the SEC, except for contingent consideration, investments, and the recently adopted accounting standard for leases.

Investments

The Company’s short-term investments are comprised of debt securities that have original maturities less than or equal to one year and are classified as available-for-sale securities. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in other income in the consolidated results of operations. The Company monitors its investment portfolio for impairment quarterly or more frequently if circumstances warrant. In determining whether a decline in the value of an investment is other-than-temporary, the Company evaluate currently available factors that may include, among others: (1) general market conditions; (2) the duration and extent to which fair value has been less than the carrying value; (3) the investment issuer's financial condition and business outlook; and (4) its assessment as to whether it is more likely than not that the Company will be required to sell a security prior to recovery of its amortized cost basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income are recognized in other income when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government agencies, or corporate institutions whose debt is rated as investment grade. Investments are classified as either current or non-current assets on our consolidated balance sheets based on their contractual maturity dates.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are recorded as a current and long-term lease obligation, with a corresponding right of use lease assets.

The lease obligations represent the Company’s obligation to make lease payments arising from the lease. The right of use lease assets represent the Company’s right to use an underlying asset for the lease term. The lease obligations and the operating right of use lease assets are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the

6


 

 

present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

Contingent Consideration

The Company records contingent consideration associated with development and regulatory milestones that meets the definition of a liability under ASC 480 at fair value. The fair value model used to calculate this obligation is based on the income approach (a discounted cash flow model) or a Monte Carlo simulation, if more appropriate, that has been risk adjusted based on the probability of achievement of the milestones. The inputs the Company uses for determining the fair value of the contingent consideration associated with development and regulatory milestones are Level 3 fair value measurements. The Company re-evaluates the fair value on a quarterly basis. Changes in the fair value can result from adjustments to the discount rates and updates in the assumed timing of milestone achievement. Any future increase in the fair value of the contingent consideration associated with development and regulatory milestones are based on an increased likelihood that the underlying milestones will be achieved.

The associated payment or payments which will become due and payable for development and regulatory milestones will result in a charge to research and development expense in the period in which the increase is determined. Similarly, any future decrease in the fair value for development and regulatory milestones will result in a reduction in research and development expense.

Recently Issued Accounting Pronouncements - Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires a lessee to separate the lease components from the non-lease components in a contract and recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. The standard requires a modified retrospective approach or an optional transition to apply the new guidance in the year of transition rather than at the beginning of the earliest period presented. The Company adopted ASU 2016-02 in the first quarter of 2019 under the optional transition method. The Company’s current operating leases will be accounted for as operating lease liabilities and right of use assets upon adoption. The Company has elected the package of practical expedients permitted. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease, (b) whether classification of the operating leases would be different in accordance, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs at lease commencement. In addition, the Company does not allocate the consideration between lease and non-lease components. On January 1, 2019, the Company recorded a lease liability and a corresponding right of use asset. The adjustment resulted in an increase of $756,347 to total assets and total liabilities on the January 1, 2019 consolidated balance sheet. The adoption will not have a material impact on the consolidated statement of operations or consolidated statement of cash flows.

In June 2018, FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718)—Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements - Pending Adoption

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, was issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. The Company is still completing its assessment of the impacts and anticipated adoption date of this guidance.

3.Acquisitions

The Company entered into a definitive agreement to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”) on July 8, 2019. Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.  

The transaction closed on July 12, 2019. The Company issued 1,887,250 unregistered shares of its common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5,000,000 less working capital and transaction expense adjustment amounts as defined in the agreement (the “closing consideration”). The number of shares issued as payment of the Closing Consideration was determined based on the average of the closing prices of the Company’s common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The Spitfire Equityholders

7


 

 

agreed to a lock-up on the upfront consideration pursuant to which 33.3% of the shares will be released at 6 months; 33.3% will be released at 12 months; and 33.3% will be released at 18 months.

The Merger Agreement also includes future contingent payments up to $88,000,000 in cash and shares of the Company’s common stock as follows (each, a “Milestone Event”):

 

a one-time payment of $5.0 million (the “IND Milestone Consideration Amount”) within sixty (60) days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable governmental authority in a foreign jurisdiction, which IND has not been rejected or placed on clinical hold by the FDA or such applicable foreign governmental authority within time specified in the Merger Agreement; plus

 

a one-time payment of $3.0 million (together with the IND Milestone Consideration Amount, the “Regulatory Milestones”) within sixty (60) days of the initiation of a human clinical trial of a product candidate anywhere in the world; plus

 

payments of up to $80.0 million upon the achievement of specified worldwide net sales (the “Sales Milestones”) of all products developed using the technology acquired in the License Agreement within ten (10) years following the approval of a new drug application filed with the FDA.

The Company determined that the acquisition of Spitfire should be accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business. The Company expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. During the three and nine months ended September 30, 2019, the Company recorded an in-process research and development expense of $4,337,574 for the up-front consideration, which included the fair value of the common stock transferred and net liabilities assumed. The fair value of the common shares transferred was based on the Company’s stock price of $2.45 on July 12, 2019, offset by an estimated discount of $832,277 for lack of marketability.

The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity. The stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. The Company has estimated contingent consideration of $2,750,000 based upon a Monte Carlo simulation that has been risk adjusted based on the probability of achieving the milestone and a discount for lack of marketability, which was expensed to in-process research and development expenses during the three and nine months ended September 30. 2019.

The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, the Company will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable.

Finally, transaction costs associated with the Spitfire acquisition of $61,673 and $680,090 are recorded within research and development expense during the three and nine months ended September 30, 2019, respectively.

4.Net Loss Per Share

Because the Company has reported a net loss attributable to common stockholders for all periods presented, basic and diluted net loss per share attributable to common stockholders are the same for all periods presented. For periods presented, all preferred stock, unvested restricted stock, common stock warrants, and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

 

Potential common shares issuable upon conversion, vesting or exercise of preferred stock, unvested restricted stock, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding are as follows:

 

 

 

The three and nine months ended

 

 

The three and nine months ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

Common stock warrants

 

 

10,384,706

 

 

 

1,767

 

Common stock options

 

 

976,861

 

 

 

45,517

 

Restricted stock

 

 

323,191

 

 

 

568

 

 

5.Goodwill and Intangible Assets

Goodwill

In May 2017, the Company closed on a business combination and recorded an initial purchase price allocation including goodwill. During the nine months ended September 30, 2018 and prior to the end of the measurement period for accounting for the business combination, the Company recorded adjustments to the purchase price allocation resulting in a net decrease in tax refunds receivable, with a corresponding net increase in goodwill, of $490,676. As goodwill related to this transaction had previously been determined to be fully impaired, the Company recognized an

8


 

 

impairment charge of $490,676 as a result of these purchase price allocation adjustments during the nine months ended September 30, 2018. The purchase price allocation was considered final in May 2018, and no further adjustments were recorded.

Intangibles assets

The Company’s intangible assets consisted of the following:

 

 

 

September 30, 2019

 

 

 

Estimated

Useful

Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Impairment

 

 

Net Book

Value

 

Internally developed patents

 

6-10 years

 

$

743,956

 

 

$

(440,994

)

 

$

 

 

$

302,962

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(265,273

)

 

 

 

 

 

19,727

 

Total intangible assets subject to amortization

 

 

 

 

1,028,956

 

 

 

(706,267

)

 

 

 

 

 

322,689

 

IPR&D assets

 

Indefinite

 

 

13,418,967

 

 

 

 

 

 

(1,000,000

)

 

 

12,418,967

 

Total

 

 

 

$

14,447,923

 

 

$

(706,267

)

 

$

(1,000,000

)

 

$

12,741,656

 

 

 

 

December 31, 2018

 

 

 

Estimated

Useful

Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Impairment

 

 

Net Book

Value

 

Internally developed patents

 

6-10 years

 

$

718,559

 

 

$

(317,172

)

 

$

 

 

$

401,387

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(253,430

)

 

 

 

 

 

31,570

 

Total intangible assets subject to amortization

 

 

 

 

1,003,559

 

 

 

(570,602

)

 

 

 

 

 

432,957

 

IPR&D assets

 

Indefinite

 

 

37,868,978

 

 

 

 

 

 

(24,450,011

)

 

 

13,418,967

 

Total

 

 

 

$

38,872,537

 

 

$

(570,602

)

 

$

(24,450,011

)

 

$

13,851,924

 

Amortization expense of intangible assets subject to amortization was $28,084 and $15,972 for the three months ended September 30, 2019 and 2018, and $135,664 and $45,426 for the nine months ended September 30, 2019 and 2018, respectively. Amortization expense was classified as research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss.

The development activities under the SparVax-L NIAID contract were completed during the third quarter of 2019, with no future funding identified. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, the Company abandoned the project and concluded that the full remaining net book value of the SparVax-L IPR&D asset was impaired during the three months ended September 30, 2019. An impairment charge of $1,000,000 was expensed for the three and nine months ended September 30, 2019.

As of September 30, 2019, future estimated amortization expense was as follows:

 

Years ending December 31,

 

 

 

 

The remainder of 2019

 

$

11,570

 

2020

 

 

41,589

 

2021

 

 

25,375

 

2022

 

 

25,375

 

2023

 

 

25,375

 

2024 and thereafter

 

 

193,405

 

Total

 

$

322,689

 

 

9


 

 

6.Accrued Expenses

Accrued expenses and other current liabilities consist of the following:

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Accrued professional services

 

$

398,754

 

 

$

552,619

 

Accrued payroll and employee benefits

 

 

954,658

 

 

 

1,257,191

 

Accrued interest

 

 

3,441

 

 

 

1,192

 

Accrued research and development

 

 

682,463

 

 

 

2,076,704

 

Lease obligation, current portion

 

 

252,755

 

 

 

 

Deferred rent, current portion

 

 

 

 

 

175,490

 

Deferred revenue

 

 

19,753

 

 

 

19,753

 

Total accrued expenses

 

$

2,311,824

 

 

$

4,082,949

 

 

7.Notes Payable and Other Long-Term Liabilities

The Company’s current portion of outstanding notes payable are summarized as follows:

 

 

September 30,

2019

 

 

December 31,

2018

 

BPI France notes, short-term portion

 

$

105,062

 

 

$

71,596

 

Total notes payable

 

$

105,062

 

 

$

71,596

 

 

The Company’s long-term portion of outstanding notes payable as well as other long-term liabilities are summarized as follows:

 

 

 

September 30,

2019

 

 

December 31,

2018

 

BPI France notes, long-term portion

 

$

 

 

$

501,174

 

Lease obligation, long-term portion (see Note 11)

 

 

1,552,031

 

 

 

 

Deferred rent, long-term portion

 

 

 

 

 

1,045,807

 

Common stock warrant liability (see Note 9)

 

 

10,000

 

 

 

65,000

 

Other

 

 

225,172

 

 

 

240,090

 

Total other long-term liabilities

 

$

1,787,203

 

 

$

1,852,071

 

 

Line of Credit

On July 27, 2018, the Company renewed its existing line of credit agreement for a six-month term with an increase to the borrowing capacity from $250,000 to $1,750,000, subject to a minimum liquidity requirement equal to the outstanding balance of the line. The line of credit was not renewed and expired in January 2019. There was no balance on this credit facility as of December 31, 2018 or for the period within 2019 prior to its expiration.

BPI France Notes

Altimmune France has two non-interest-bearing research and development funding arrangements with BPI France that were entered into in December 2013 to provide Altimmune France up to €750,000 in research funding in the first arrangement and up to €250,000 in the second arrangement. Altimmune France was permitted to draw 50% of the funds upon the signing of the arrangements, an additional 30% contingent upon a financial audit and technical progress report, and the remaining amounts at the completion of the research and development project being funded by the arrangements. In October 2016, the Company and BPI France agreed to extend the term on the arrangement by two years. The total amount advanced under the arrangements was €500,000. In April 2019, the Company was notified that €102,951 exceeded the allowable funding in accordance with the arrangement and made payment of this amount on June 5, 2019. In September 2019, the Company was notified that €238,229 ($265,540) was converted into a grant and recognized as grant revenue for the three and nine months ended September 30, 2019. In addition to the €102,951 amount paid in excess of the allowable funding, the Company paid €62,500 (total repayments of $186,940) during the nine months ended September 30, 2019. In October 2019, the Company paid the remaining balance on the BPI France notes. The BPI France notes are recorded at their repayment value which approximates fair value.

8.Common Stock

On July 12, 2019, as discussed in Note 3, the Company issued 1,887,250 unregistered shares of its common stock as upfront consideration to certain former Spitfire Equityholders representing the closing consideration.   

On March 12, 2019, the Company issued a combined total of 1,500,000 common units and 2,861,370 pre-funded units to two institutional investors in a registered direct offering (the “Registered Direct Offering”). Each common unit in the Registered Direct Offering was sold at a price

10


 

 

of $3.21 and consisted of one share of common stock and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. Each warrant sold in the Registered Direct Offering was exercisable immediately and expired five years from the date of issuance. Each pre-funded unit in the Registered Direct Offering was sold at a public offering price of $3.20 and consisted of a pre-funded warrant to purchase one share of common stock at an exercise price of $0.01 per share and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. The pre-funded warrants were immediately exercisable and were able to be exercised at any time until all of the pre-funded warrants were exercised in full. All of the pre-funded warrants were exercised prior to March 31, 2019. The net proceeds of the Registered Direct Offering were approximately $12,668,784, after deducting the underwriting discount and offering expenses payable by the Company.

The warrants issued in the Registered Direct Offering were concluded to be equity classified freestanding financial instruments. The Registered Direct Offering triggered a down round adjustment to the exercise price of warrants previously issued in an October 2018 public offering from $4.1798 to $2.7568. The Company treated the value of the effect of the reduction in exercise price as a deemed dividend of $452,925 during the nine months ended September 30, 2019, which reduced income available to common shareholders.

9.Warrants

A summary of warrant activity during the nine months ended September 30, 2019 is as follows:

 

 

 

 

 

 

 

 

 

Warrants outstanding, January 1, 2019

 

 

7,344,297

 

 

Issuances (Note 8)

 

 

3,052,959

 

 

Exchanges

 

 

(1,550

)

 

Exercises and conversions

 

 

(11,000

)

 

Warrants outstanding, September 30, 2019

 

 

10,384,706

 

 

 

For warrants classified as a liability, the following is a summary of the periodic changes in their fair value during the nine months ended September 30, 2019:

 

Balance, January 1, 2019

 

$

65,000

 

Changes in fair value (Monte Carlo simulation valuation)

 

 

(30,000

)

Warrant repurchases

 

 

(25,000

)

Balance, September 30, 2019

 

$

10,000

 

 

10.Stock-Based Compensation

Stock Options

The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. At September 30, 2019, there was $1,536,208 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 3.41 years. During the nine months ended September 30, 2019, the Company granted 725,000 stock options with a weighted average exercise price of $2.67 and per share weighted average grant date fair value of $2.02.

Information related to stock options outstanding at September 30, 2019 is as follows:

 

 

Number

of Stock

Options

 

 

Weighted-

average

Exercise

Price

 

 

Weighted-

average

Remaining

Contractual

Term

(Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding

 

 

976,861

 

 

$

5.16

 

 

 

5.91

 

 

$

 

Exercisable

 

 

188,928

 

 

$

11.88

 

 

 

5.19

 

 

$

 

Unvested

 

 

787,933

 

 

$

3.55

 

 

 

6.08

 

 

$

 

 

Restricted Stock

At September 30, 2019, the Company had unvested restricted stock of 323,191 shares with total unrecognized compensation expense of $917,158, which the Company expects to recognize over a weighted average period of approximately 3.17 years. During the nine months ended September 30, 2019, the Company released 214 shares of common stock from restriction as a result of the vesting of restricted stock.

2019 Employee Stock Purchase Plan

On March 29, 2019, the board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). A total of 403,500 shares of the Company’s common stock have been reserved for issuance under the 2019 ESPP. Subject to any plan limitations, the 2019 ESPP allows eligible employees to contribute through payroll deductions up to 10% of their earnings for the purchase of the Company’s common stock at a discounted

11


 

 

price per share. The offering periods begin in February and August of each year, with the initial offering period starting on August 1, 2019. The common shares issuable under the 2019 ESPP were registered pursuant to a registration statement on Form S-8 on April 4, 2019

Unless otherwise determined by the administrator, the Company’s common stock will be purchased for the accounts of employees participating in the 2019 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. The ESPP estimated shares to be purchased fair value is included in the stock-based compensation expense.

Employees have the ability to purchase shares of the Company’s common stock at the lower of the first or last trading day of the offering period, which represents an option and, therefore, the ESPP is a compensatory plan under ASC 718-50, Employee Stock Purchase Plans. Accordingly, stock-based compensation expense is determined based on the option’s grant-date fair value and is recognized over the requisite service period of the option. The Company used the Black-Scholes valuation model and recognized stock-based compensation expense of $8,596 for the three and nine months ended September 30, 2019, respectively.

Stock-based compensation expense

Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2019 and 2018 as follows:

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Research and development

 

$

71,662

 

 

$

39,405

 

 

$

240,345

 

 

$

236,717

 

General and administrative

 

 

216,113

 

 

 

56,186

 

 

 

744,915

 

 

 

467,708

 

Total

 

$

287,775

 

 

$

95,591

 

 

$

985,260

 

 

$

704,425

 

 

11.Operating Leases

The Company rents office and laboratory space in the United States. The Company also leases office equipment under a non-cancellable equipment lease through December 2022. Rent expense during the three and nine months ended September 30, 2019 under all of the Company’s operating leases was $84,745 and $258,824, respectively, which includes short-term leases and variable lease costs not included in the lease obligation.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

The office space lease provides for increases in future minimum annual rental payments as defined in the lease agreements. The Company has determined the lease renewal option is not reasonably certain.

The operating cash outflows related to operating lease obligation and the operating cash inflows related to non cash lease expense for the nine months ended September 30, 2019 were $172,857 and $39,044, respectively.  

Supplemental other information related to the operating leases balance sheet information is as follows:

 

 

September 30, 2019

 

Operating lease obligations

 

$

1,804,786

 

Operating lease right-of-use assets

 

$

717,303

 

Weighted-average remaining lease term

 

 

5.58

 

Weighted-average discount rate

 

 

8.0

%

Maturities of lease liabilities is as follows:

Year ending December 31,

 

 

 

 

The remainder of 2019

 

$

95,714

 

2020

 

 

387,079

 

2021

 

 

393,542

 

2022

 

 

400,198

 

2023

 

 

407,054

 

2024 and thereafter

 

 

552,948

 

Total lease payments

 

 

2,236,535

 

Less imputed interest

 

 

(431,749

)

Total

 

$

1,804,786

 

 

 

12


 

 

12.Commitments and Contingencies

As disclosed in Note 3, the Company is obligated to make payments of up to $80.0 million upon the achievement of specified worldwide net sales of all products developed using the technology acquired from Spitfire Pharma Inc. within ten (10) years following the approval of a new drug application filed with the FDA.

The Company is a party in various other contractual disputes, litigation, and potential claims arising in the ordinary course of business. The Company does not believe that the resolution of these matters will have a material adverse effect on its financial position or results of operations.

13.Fair Value Measurement

Cash equivalents and short-term investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. Short-term investments had quoted prices at September 30, 2019 as shown below:

 

 

September 30, 2019

 

 

 

Amortized Cost

 

 

Unrealized Gain

 

 

Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States treasury securities

 

$

3,388,492

 

 

$

2,872

 

 

$

3,391,364

 

Financial and corporate debt securities

 

 

24,818,581

 

 

 

16,081

 

 

 

24,834,662

 

Total

 

$

28,207,073

 

 

$

18,953

 

 

$

28,226,026

 

 

The fair value of contingent payments classified as a liability was estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The assumptions used to estimate the fair value of contingent payments that were classified as a liability at September 30, 2019 were as follows:

Expected volatility

 

95.3

%

Risk-free interest rate

 

1.6

%

Cost of capital

 

30.0

%

The Company’s warrant liability is valued using the Monte Carlo simulation valuation model. If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs.

There were no transfers into and out of any of the levels of the fair value hierarchy during 2019 or 2018.

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2019 consisted of the following:

 

 

Fair Value Measurement at September 30, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

10,620,192

 

 

$

10,620,192

 

 

$

 

 

$

 

Short-term investments

 

 

28,226,026

 

 

 

3,391,364

 

 

 

24,834,662

 

 

 

 

Contingent consideration

 

 

2,750,000

 

 

 

 

 

 

 

 

 

2,750,000

 

Warrant liability

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2018 consisted of the following:

 

 

Fair Value Measurement at December 31, 2018

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

29,375,509

 

 

$

29,375,509

 

 

$

 

 

$

 

Warrant liability

 

 

65,000

 

 

 

 

 

 

 

 

 

65,000

 

Assets recorded at fair value on a nonrecurring basis, such as property and equipment, intangible assets, and goodwill are recognized at fair value when they are impaired. During the three and nine months ended September 30, 2019, the Company recognized an intangible asset impairment (Note 5) measured at fair value on a nonrecurring basis.

13


 

 

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, 2018 included in our annual report on Form 10-K, which was filed with the Securities and Exchange Commission on April 1, 2019.

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. 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. 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 liver disease and immune modulating therapies. Our diverse pipeline includes next generation peptide therapeutics for NASH (ALT-801) and chronic Hepatitis B (HepTcellTM), conjugated immunostimulants for the treatment of cancer (ALT-702) and intranasal vaccines (NasoVAXTM and NasoShieldTM).

Acquisition

We entered into a definitive agreement to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”) on July 8, 2019. Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.  

The transaction closed on July 12, 2019. We issued 1,887,250 unregistered shares of our common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5.0 million less working capital and transaction expense adjustment amounts as defined in the agreement (the “closing consideration”). The number of shares issued as payment of the closing consideration was determined based on the average of the closing prices of our common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The Spitfire Equityholders agreed to a lock-up on the upfront consideration pursuant to which 33.3% of the shares will be released at 6 months; 33.3% will be released at 12 months; and 33.3% will be released at 18 months.

The Merger Agreement also includes future contingent payments up to $88.0 million in cash and shares of our common stock as follows (each, a “Milestone Event”):  

 

a one-time payment of $5.0 million (the “IND Milestone Consideration Amount”) within sixty days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable governmental authority in a foreign jurisdiction, which IND has not been rejected or placed on clinical hold by the FDA or such applicable foreign governmental authority within time specified in the Merger Agreement; plus

 

a one-time payment of $3.0 million (together with the IND Milestone Consideration Amount, the “Regulatory Milestones”) within sixty days of the initiation of a human clinical trial of a product candidate anywhere in the world; plus

 

payments of up to $80.0 million upon the achievement of specified worldwide net sales (the “Sales Milestones”) of all products developed using the technology acquired in the License Agreement within ten years following the approval of a new drug application filed with the FDA.

We determined that the acquisition of Spitfire should be accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business. We expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. During the three and nine months ended September 30, 2019, we recorded an in-process research and development expense of $4.3 million for the up-front consideration, which included the fair value of the stock transferred

14


 

 

and net liabilities assumed. The fair value of the common shares transferred was based on our stock price of $2.45 as of July 12, 2019, offset by an estimated discount of $0.8 million for lack of marketability discount. The net liabilities assumed of $0.5 million approximated fair value.

The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity. The stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. We estimated contingent consideration of $2.8 million based upon a Monte Carlo simulation that has been risk adjusted based on the probability of achieving the milestone and included a discount for lack of marketability, which was expensed to in-process research and development expenses during the three and nine months ended September 30. 2019.

The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, we will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable.

Finally, transaction costs associated with the Spitfire acquisition of $0.1 million and $0.7 million are recorded within research and development expense during the three and nine months ended September 30, 2019, respectively.

Critical Accounting Policies and Significant Judgment and 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 accounting principles generally accepted in the U.S. 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, and expenses, and the related disclosure of contingent assets and liabilities. 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, 2018 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, 2018.

Results of Operations

Comparison of the three months ended September 30, 2019 and 2018:

 

 

 

For the Three Months Ended

September 30,

 

 

2019

 

 

2018

 

 

Increase (Decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

643,978

 

 

$

2,634,393

 

 

$

(1,990,415

)

 

 

(75.6

)

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,729,697

 

 

 

4,728,726

 

 

 

4,000,971

 

 

 

84.6

 

 

General and administrative

 

 

2,187,661

 

 

 

1,963,733

 

 

 

223,928

 

 

 

11.4

 

 

Impairment charges

 

 

1,000,000

 

 

 

-

 

 

 

1,000,000

 

 

 

 

 

Total operating expenses

 

 

11,917,358

 

 

 

6,692,459

 

 

 

5,224,899

 

 

 

78.1

 

 

Loss from operations

 

 

(11,273,380

)

 

 

(4,058,066

)

 

 

7,215,314

 

 

 

177.8

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair value of warrant

   liability

 

 

76,000

 

 

 

806,224

 

 

 

(730,224

)

 

 

(90.6

)

 

Changes in fair value of embedded

   derivative

 

 

 

 

 

185,768

 

 

 

(185,768

)

 

 

 

 

Interest expense

 

 

(756

)

 

 

(166,946

)

 

 

(166,190

)

 

 

(99.5

)

 

Interest income

 

 

224,058

 

 

 

21,100

 

 

 

202,958

 

 

 

961.9

 

 

Other income (expenses)

 

 

(23,734

)

 

 

31,378

 

 

 

(55,112

)

 

 

(175.6

)

 

Total other income (expense)

 

 

275,568

 

 

 

877,524

 

 

 

(601,956

)

 

 

(68.6

)

 

Net loss before income tax benefit

 

 

(10,997,812

)

 

 

(3,180,542

)

 

 

7,817,270

 

 

 

245.8

 

 

Income tax benefit

 

 

58,500

 

 

 

829,393

 

 

 

(770,893

)

 

 

(92.9

)

 

Net loss

 

$

(10,939,312

)

 

$

(2,351,149

)

 

$

8,588,163

 

 

 

365.3

 

%

15


 

 

Comparison of the nine months ended September 30, 2019 and 2018:

 

 

For the Nine Months Ended

September 30,

 

 

2019

 

 

2018

 

 

Increase (Decrease)

Revenue

 

$

5,225,600

 

 

$

7,742,514

 

 

$

(2,516,914

)

 

 

(32.5

)

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,892,464

 

 

 

15,394,616

 

 

 

(502,152

)

 

 

(3.3

)

 

General and administrative

 

 

6,485,960

 

 

 

7,345,651

 

 

 

(859,691

)

 

 

(11.7

)

 

Impairment charges

 

 

1,000,000

 

 

 

490,676

 

 

 

509,324

 

 

 

103.8

 

 

Total operating expenses

 

 

22,378,424

 

 

 

23,230,943

 

 

 

(852,519

)

 

 

(3.7

)

 

Loss from operations

 

 

(17,152,824

)

 

 

(15,488,429

)

 

 

1,664,395

 

 

 

10.7

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair value of warrant

   liability, including loss on exchange

 

 

30,000

 

 

 

(2,874,484

)

 

 

(2,904,484

)

 

 

(101.0

)

 

Changes in fair value of embedded

   derivative

 

 

 

 

 

183,638

 

 

 

(183,638

)

 

 

 

 

Interest expense

 

 

(2,244

)

 

 

(169,737

)

 

 

(167,493

)

 

 

(98.7

)

 

Interest income

 

 

649,268

 

 

 

78,306

 

 

 

570,962

 

 

 

729.1

 

 

Other income (expenses)

 

 

(6,206

)

 

 

289,053

 

 

 

(295,259

)

 

 

(102.1

)

 

Total other income (expense)

 

 

670,818

 

 

 

(2,493,224

)

 

 

(3,164,042

)

 

 

(126.9

)

 

Net loss before income tax benefit

 

 

(16,482,006

)

 

 

(17,981,653

)

 

 

(1,499,647

)

 

 

(8.3

)

 

Income tax benefit

 

 

58,500

 

 

 

3,318,124

 

 

 

(3,259,624

)

 

 

(98.2

)

 

Net loss

 

$

(16,423,506

)

 

$

(14,663,529

)

 

$

(1,759,977

)

 

 

12.0

 

%

Revenue

Revenue consists primarily of research grants from Biomedical Advanced Research and Development Authority, or BARDA, and the National Institute of Allergy and Infectious Diseases, or NIAID, in the United States for our anthrax vaccine product candidates. These grants consist of cost reimbursement contracts, with a fixed fee based on either costs or milestones.

Revenue decreased by $1.99 million, or 75.6%, for the three months ended September 30, 2019 as compared to the same period in 2018. The decrease was primarily the result of:

 

a decrease of $1.75 million in BARDA revenue due to timing of clinical trials and development activities on the NasoShield program;

 

a decrease of $0.51 million in NIAID revenue due to the activities diminishing under the SparVax-L program as the contract concluded in the third quarter of 2019 with no future funding identified; and

 

the recognition of $0.27 million in grant revenue related to the France BPI note.

Revenue decreased by $2.52 million, or 32.5%, for the nine months ended September 30, 2019, as compared to the same period in 2018. The decrease was primarily the result of:

 

a decrease of $1.22 million in BARDA revenue due directly to timing of clinical trials and development activities on the NasoShield program;

 

a decrease of $1.57 million in NIAID revenue due to the activities diminishing under the SparVax-L program as the contract concluded in the third quarter of 2019 with no future funding identified; and

 

the recognition of $0.27 million in grant revenue related to the France BPI note.

Research and development expenses

Research and development operating expense increased by $4.00 million, or 84.6%, for the three months ended September 30, 2019 as compared to the same period in 2018. The increase was primarily the result of:

 

an increase of $7.15 million due to all costs incurred with respect to the Spitfire acquisition which were recorded as acquired in process research and development;  

 

a decrease of $1.61 million due to development activities decreasing for NasoVAX as management explores strategic options with the program;

 

a decrease of $1.30 million due to timing of a clinical trial and development activities for NasoShield;

 

a decrease of $0.36 million due to timing of clinical trial and manufacturing development activities for HepTcell;

 

a decrease of $0.29 million due to reduced development cost for SparVax-L as the contract concluded in the third quarter of 2019; and

 

an increase of $0.41 million in pre-clinical projects and non-project specific research and development costs including employee compensation and facility costs.

16


 

 

Research and development operating expense decreased by $0.50 million, or 3.3%, for the nine months ended September 30, 2019, as compared to the same period in 2018. The decrease was primarily the result of:

 

an increase of $7.75 million due to due to all costs incurred with respect to the Spitfire acquisition which were recorded as acquired in process research and development;

 

a decrease of $4.60 million due to development activities decreasing for NasoVAX as management explores strategic options with the program;

 

a decrease of $1.90 million due to timing of a clinical trial and related activities for HepTcell;

 

a decrease of $0.89 million due to reduced development cost for SparVax-L as it the contract concluded in the third quarter of 2019; and

 

a decrease of $0.86 due to timing of clinical trial and development activities for NasoShield.

General and administrative expenses

General and administrative expense increased by $0.2 million, or 11.4%, for the three months ended September 30, 2019 as compared to the same period in 2018 due primarily to increased insurance and stock compensation costs. General and administrative expense decreased by $0.9 million, or 11.7% for the nine months ended September 30, 2019, as compared to the same periods in 2018 primarily due to decreases in professional service costs, including legal costs.

Impairments Charges

Impairment charges of $1.0 million reported during the three and nine months ended September 30, 2019 resulted from the completion of SparVax-L NIAID contract with no future funding identified. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, we abandoned the project and impaired the remaining net book value of the SparVax-L IPR&D asset.   

Goodwill impairment charges reported during the nine months ended September 30, 2018 represented an adjustment recorded during the measurement period to reduce the tax refund receivable acquired in connection with a 2017 business combination. We recorded adjustments to the purchase price allocation resulting in a net decrease in tax refunds receivable, with a corresponding net increase in goodwill, of $0.49 million. As goodwill related to this transaction had previously been determined to be fully impaired, we recognized an impairment charge of $0.49 million. The purchase price allocation was considered final in May 2018, and no further adjustments were recorded.

Other income (expense)

Other income (expense) decreased by $0.6 million and $3.2 million during the three and nine months ended September 30, 2019, respectively, as compared to the same periods in 2018. The decreases are primarily due to changes in the fair value of warrant liability and embedded derivatives as these instruments were settled primarily in 2018 offset by an increase of interest income due to higher cash and investment balances versus the prior year.

Income tax benefit

We recorded a $0.06 million discrete tax benefit for the three and nine months ended September 30, 2019, as compared to an income tax benefit of $0.8 million and $3.3 million for the same respective periods in 2018. We have a valuation allowance against our deferred tax assets. During the three and nine months ended September 30, 2019, our tax loss was applied to the valuation allowance. The $0.06 million discrete tax benefit was a result of the release of deferred tax liabilities associated with the SparVax-L impairment of the remaining net book value of the IPR&D asset. During the nine months ended September 30, 2018, our income tax benefit included $2.1 million for our projected 2018 unlimited lived Federal net operating loss determined to be realizable, $1.0 million due to Maryland state net operating losses, and discrete tax benefits of $0.2 million related to a change in estimate.

Liquidity and Capital Resources

Overview

Our primary sources of cash during the nine months ended September 30, 2019 was the cash on-hand as of January 1, 2019 and the receipt of $12.7 million in proceeds from the Registered Direct Offering (as discussed below). Our cash, cash equivalents, and short-term investments were $39.2 million at September 30, 2019. We believe, based on the operating cash requirements and capital expenditures expected for 2019, our cash on hand at September 30, 2019, short-term investments, and revenue from our government sponsored contracts, are sufficient to fund operations for at least a twelve-month period from the issuance date of our September 30, 2019 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. Our sources of revenue have consisted of revenues under our contract with BARDA and NIAID for the development of NasoShield and SparVax-L, respectively, and to a lesser degree from other licensing arrangements. We have incurred significant losses since we commenced operations. As of September 30, 2019, we had accumulated losses of $133.3 million since our inception. 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.

17


 

 

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.

In July 2016, we signed a five-year contract with BARDA. The contract, as amended, has a total value of up to $133.7 million and is used to fund clinical development of NasoShield. 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, inclusive of a $3.7 million award during the third quarter of 2019 for continued Phase 1 clinical development. 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 September 30, 2019, we have received an aggregate of approximately $21.3 million under the current BARDA contract.

We had a $15.3 million NIAID contract that was incrementally funded for the development of SparVax-L. Activities under this contract were completed during the quarter ended September 30, 2019 and no further funding is expected for this program. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, we abandoned the project and impaired the $1 million remaining net book value of the SparVax-L IPR&D asset.  

Cash Flows

The following table provides information regarding our cash flows for the three months ended September 30, 2019 and 2018:

 

 

 

For the Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Net cash provided by (used in):

 

 

 

 

 

 

 

 

Operating activities

 

$

(7,599,945

)

 

$

(4,233,521

)

Investing activities

 

$

(28,233,696

)

 

$

(993,007

)

Financing activities

 

$

12,487,168

 

 

$

971,430

 

 

Operating Activities

Net cash used in operating activities was $7.6 million for the nine months ended September 30, 2019 compared to $4.2 million during the nine months ended September 30, 2018. Our sources of cash provided by operations during the three months ended September 30, 2019 were primarily cash receipts of revenue generated by our BARDA and NIAID 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. The increase in cash used in operations of $3.4 million year over year is due to a decrease in net loss as adjusted for noncash items of $2.8 million offset by changes in working capital accounts of $6.2 million.

Investing Activities

Net cash used in investing activities was $28.2 million for the nine months ended September 30, 2019 compared to $1.0 million during the nine months ended September 30, 2018. The net cash used in investing activities during 2019 was primarily due to purchases of short-term investments. The net cash used in investing activities in 2018 was primarily due to purchases of property and equipment related to the buildout of the Company’s new office and laboratory facilities which was completed in 2018.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2019 was $12.5 million compared to net cash used in financing activities of $1.0 million for the same period in 2018. The net cash provided by financing activities during the nine months ended September 30, 2019 was primarily the result of the receipt of $12.7 million in proceeds from the Registered Direct Offering (as discussed below). The net cash provided by financing activities during the nine months ended September 30, 2018 was primarily the result of a $2.4 million cash redemption by certain holders of our Series B Redeemable Preferred stock (the “Stockholders”) and a $1.1 million cash payment to extinguish warrants to purchase our common stock held by the Stockholders, being offset by the receipt of $4.3 million in proceeds from the sale of our common stock.

Financing

On March 12, 2019, we issued a combined total of 1,500,000 common units and 2,861,370 pre-funded units to certain institutional investors in a registered direct offering or the “Registered Direct Offering”. Each common unit in the Registered Direct Offering was sold at a price of $3.21 and consisted of one share of our common stock and 0.70 of a warrant to purchase one share of our common stock at an exercise price of $3.21. Each warrant sold in the Registered Direct Offering was exercisable immediately and expires five years from the date of issuance. Each pre-funded unit in the Registered Direct Offering was sold at a public offering price of $3.20 and consisted of a pre-funded warrant to purchase one share of our common stock at an exercise price of $0.01 per share and 0.70 of a warrant to purchase one share of our common stock

18


 

 

at an exercise price of $3.21. The pre-funded warrants were immediately exercisable and were able to be exercised at any time until all of the pre-funded warrants are exercised in full. All of the pre-funded warrants were exercised prior to March 31, 2019. The net proceeds of the Registered Direct Offering were approximately $12.7 million, after deducting the underwriting discount and offering expenses payable by us. The Registered Direct Offering triggered an adjustment to the exercise price of the warrants issued with the offering of common units and pre-funded units on October 2, 2018 from $4.1798 to $2.7568.

On July 15, 2019, we issued 1,887,250 unregistered shares of our common stock as upfront consideration to the Spitfire Equityholders, representing the closing consideration. The number of shares issued as payment of the closing consideration was determined based on the average of the closing prices of our common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Merger Agreement. The price of the shares transferred on July 12, 2019 was $2.45.    

Current Resources

We have financed our operations to date principally through proceeds from issuances of our preferred stock, common stock, and warrants. At September 30, 2019, we had $11.0 million of cash, cash equivalents and restricted cash and $28.2 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, 2019 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 September 30, 2019, 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.

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.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (“the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2019 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

19


 

 

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, subsection “Risk Factors” in our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019, as they could materially affect our business, financial condition or future results of operations. The risks described in our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019 are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and future results of operations. The following information updates, and should be read in conjunction with, the risk factors previously disclosed in Item 1A, subsection “Risk Factors” to Part I of our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019. Except as set forth below, there have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our 2018 Annual Report on Form 10-K.

We recently completed the acquisition of Spitfire Pharma, Inc. and the failure to successfully integrate its operations could adversely affect our future results.

Our success will depend, in significant part, on our ability to realize the anticipated benefits from combining our operations with the operations of Spitfire Pharma, Inc. (“Spitfire”). The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in our failure to achieve some or all of the anticipated benefits of the merger. Potential difficulties that may be encountered in the integration process include the following:

 

increased operating complexity of our business, requiring greater personnel and resources;

 

increased costs in connection with the acquisition and integration;

 

using our cash and assets efficiently to develop our business;

 

uncertainty related to the value or benefits of intellectual property or technologies acquired;

 

potential unknown or currently unquantifiable liabilities associated with the acquisition and our operations; and

 

performance shortfalls as a result of the diversion of the management’s attention caused by integrating the companies’ operations.

 

If the acquired business is not successfully integrated into our company, our business, financial condition and results of operations could be materially adversely affected, as well as our professional reputation. Furthermore, if we are unable to successfully integrate the acquired business and operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. Successful integration of the acquired business will depend on our ability to manage these operations, to realize opportunities for revenue growth presented by our products and eliminate certain excess costs of the acquired business.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Please refer to Item 3.02 contained in our Current Report on Form 8-K filed on July 9, 2019 and our Current Report on Form 8-K filed on July 15, 2019 for the information required by Item 701 of Regulation S-K as to all equity securities that we issued during the period covered by this Quarterly Report on Form 10-Q that were not registered under the Securities Act.

Item 3.

Default upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

20


 

 

Item 6.

Exhibits

 

No.

 

Description

 

 

 

 

 

 

 

 

 

2.1

 

Agreement and Plan of Merger and Reorganization, dated July 8, 2019, by and among the Company, Springfield Merger Sub, Inc., Springfield Merger Sub, LLC, Spitfire Pharma, Inc. and David Collier, as the Stockholder Representative (incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed on July 9, 2019)

 

 

 

 

 

10.1

 

Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on July 9, 2019)

 

 

 

 

 

10.2 ^^

 

Amended and Restated License Agreement, dated July 12, 2019, by and between Mederis Diabetes, LLC and Spitfire Pharma, Inc.

 

10.3 ^^

 

Amendment No. 5 to Contract Award issued by Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 20, 2019

 

10.4

 

Employment Agreement, dated September 3, 2019, by and between the Company and M. Scott Harris, M.D.

 

31.1

  

Certification of Principal Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)

 

 

 

 

31.2

  

Certification of Principal Financial Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)

 

 

 

 

32.1

  

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

 

 

 

 

32.2

  

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

 

 

 

 

101.INS

  

Instance Document

 

 

 

 

101.SCH

  

XBRL Taxonomy Extension Schema Document

 

 

 

 

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

^^

Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission

 

  

This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.

 

 

21


 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

ALTIMMUNE, INC.

 

 

 

 

Dated: November 13, 2019

By:

 

/s/ Vipin K. Garg

 

Name:

 

Vipin K. Garg

 

Title:

 

President and Chief Executive Officer (Principal Executive Officer)

 

 

 

 

Dated: November 13, 2019

By:

 

/s/ Will Brown

 

Name:

 

Will Brown

 

Title:

 

Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

 

 

 

 

22