0001564590-20-025123.txt : 20200513 0001564590-20-025123.hdr.sgml : 20200513 20200513171139 ACCESSION NUMBER: 0001564590-20-025123 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200513 DATE AS OF CHANGE: 20200513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Altimmune, Inc. CENTRAL INDEX KEY: 0001326190 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 202726770 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32587 FILM NUMBER: 20874141 BUSINESS ADDRESS: STREET 1: 910 CLOPPER ROAD STREET 2: SUITE 201S CITY: GAITHERSBURG STATE: MD ZIP: 20878 BUSINESS PHONE: 2406541450 MAIL ADDRESS: STREET 1: 910 CLOPPER ROAD STREET 2: SUITE 201S CITY: GAITHERSBURG STATE: MD ZIP: 20878 FORMER COMPANY: FORMER CONFORMED NAME: PHARMATHENE, INC DATE OF NAME CHANGE: 20071016 FORMER COMPANY: FORMER CONFORMED NAME: HEALTHCARE ACQUISITION CORP DATE OF NAME CHANGE: 20050505 10-Q 1 alt-10q_20200331.htm 10-Q alt-10q_20200331.htm

 

 

 

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 March 31, 2020

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 May 13, 2020 there were 15,526,887 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 March 31, 2020 (unaudited) and December 31, 2019

 

1

 

Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2020 and 2019 (unaudited)

 

2

 

Consolidated Statements of Stockholders’ Equity (unaudited)

 

3

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)

 

4

 

Notes to Consolidated Financial Statements (unaudited)

 

5

 

 

 

 

 

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

 

12

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

15

 

 

 

 

 

Item 4. Controls and Procedures

 

15

 

 

 

 

PART II — OTHER INFORMATION

 

16

 

 

 

 

 

Item 1. Legal Proceedings

 

16

 

 

 

 

 

Item 1A. Risk Factors

 

16

 

 

 

 

 

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

 

18

 

 

 

 

 

Item 3. Defaults Upon Senior Securities

 

18

 

 

 

 

 

Item 4. Mine Safety Disclosures

 

18

 

 

 

 

 

Item 5. Other Information

 

18

 

 

 

 

 

Item 6. Exhibits

 

19

 

 

 

i


 

 

Part I—FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited).

ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,275,214

 

 

$

8,962,686

 

Restricted cash

 

 

34,174

 

 

 

34,174

 

Total cash, cash equivalents and restricted cash

 

 

11,309,388

 

 

 

8,996,860

 

Short-term investments

 

 

21,644,214

 

 

 

28,277,386

 

Accounts receivable

 

 

1,994,736

 

 

 

1,021,179

 

Tax refund receivable

 

 

3,989,728

 

 

 

629,096

 

Prepaid expenses and other current assets

 

 

698,905

 

 

 

470,228

 

Total current assets

 

 

39,636,971

 

 

 

39,394,749

 

Property and equipment, net

 

 

1,062,834

 

 

 

1,104,208

 

Right of use asset

 

 

680,826

 

 

 

698,321

 

Intangible assets, net

 

 

12,737,735

 

 

 

12,732,195

 

Other assets

 

 

114,764

 

 

 

128,547

 

Total assets

 

$

54,233,130

 

 

$

54,058,020

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

929,629

 

 

$

18,232

 

Accrued expenses and other current liabilities

 

 

5,115,694

 

 

 

3,904,767

 

Total current liabilities

 

 

6,045,323

 

 

 

3,922,999

 

Contingent consideration

 

 

4,500,000

 

 

 

2,750,000

 

Other long-term liabilities

 

 

1,791,190

 

 

 

1,864,875

 

Total liabilities

 

 

12,336,513

 

 

 

8,537,874

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   15,359,644 and 15,312,381 shares issued; 15,359,502 and 15,312,167

   shares outstanding at March 31, 2020 and December 31, 2019,

   respectively

 

 

1,514

 

 

 

1,508

 

Additional paid-in capital

 

 

188,209,465

 

 

 

187,914,916

 

Accumulated deficit

 

 

(141,261,771

)

 

 

(137,376,122

)

Accumulated other comprehensive loss, net

 

 

(5,052,591

)

 

 

(5,020,156

)

Total stockholders’ equity

 

 

41,896,617

 

 

 

45,520,146

 

Total liabilities and stockholders’ equity

 

$

54,233,130

 

 

$

54,058,020

 

 

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

March 31,

 

 

 

2020

 

 

2019

 

Revenue

 

$

2,212,694

 

 

$

2,955,592

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

7,187,531

 

 

 

3,217,671

 

General and administrative

 

 

2,331,917

 

 

 

2,066,482

 

Total operating expenses

 

 

9,519,448

 

 

 

5,284,153

 

Loss from operations

 

 

(7,306,754

)

 

 

(2,328,561

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,885

)

 

 

(740

)

Interest income

 

 

151,569

 

 

 

185,246

 

Other income, net

 

 

25,542

 

 

 

46,749

 

Total other income, net

 

 

175,226

 

 

 

231,255

 

Net loss before income tax benefit

 

 

(7,131,528

)

 

 

(2,097,306

)

Income tax benefit

 

 

3,245,879

 

 

 

 

Net loss

 

 

(3,885,649

)

 

 

(2,097,306

)

Other comprehensive loss – unrealized loss on investments

 

 

(32,435

)

 

 

 

Comprehensive loss

 

$

(3,918,084

)

 

$

(2,097,306

)

Net loss

 

$

(3,885,649

)

 

$

(2,097,306

)

Deemed dividends

 

 

 

 

 

(452,925

)

Net loss attributed to common stockholders

 

$

(3,885,649

)

 

$

(2,550,231

)

Weighted-average common shares outstanding, basic and diluted

 

 

15,110,585

 

 

 

9,489,765

 

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

 

$

(0.26

)

 

$

(0.27

)

 

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

 

 

2


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, January 1, 2020

 

 

15,312,167

 

 

$

1,508

 

 

$

187,914,916

 

 

$

(137,376,122

)

 

$

(5,020,156

)

 

$

45,520,146

 

Stock based compensation

 

 

 

 

 

 

 

 

214,921

 

 

 

 

 

 

 

 

 

 

 

214,921

 

Vesting of restricted stock awards including withholding, net

 

 

(5,974

)

 

 

1

 

 

 

(17,080

)

 

 

 

 

 

 

 

 

 

 

(17,079

)

Issuance of common stock from Employee Stock Purchase Plan

 

 

38,809

 

 

 

3

 

 

 

56,736

 

 

 

 

 

 

 

 

 

 

 

56,739

 

Issuance of common stock upon exercise of warrants

 

 

14,500

 

 

 

2

 

 

 

39,972

 

 

 

 

 

 

 

 

 

 

 

39,974

 

Unrealized loss on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,435

)

 

 

(32,435

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,885,649

)

 

 

 

 

 

 

(3,885,649

)

Balance, March 31, 2020

 

 

15,359,502

 

 

$

1,514

 

 

$

188,209,465

 

 

$

(141,261,771

)

 

$

(5,052,591

)

 

$

41,896,617

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, January 1, 2019

 

 

9,078,239

 

 

$

876

 

 

$

170,207,844

 

 

$

(116,855,991

)

 

$

(5,040,163

)

 

$

48,312,566

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

407,714

 

 

 

 

 

 

 

 

 

 

 

407,714

 

Vesting of restricted stock awards

 

 

71

 

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

28

 

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

 

 

13,450,680

 

 

$

1,313

 

 

$

183,314,257

 

 

$

(118,953,297

)

 

$

(5,040,163

)

 

$

59,322,110

 

 

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

 

 

 

3


 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,885,649

)

 

$

(2,097,306

)

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

 

 

 

 

 

 

 

 

Change in value of contingent consideration for acquired in-process research and development

 

 

1,750,000

 

 

 

 

Stock-based compensation

 

 

214,921

 

 

 

407,714

 

Depreciation

 

 

59,505

 

 

 

61,277

 

Amortization

 

 

13,851

 

 

 

92,744

 

Unrealized losses (gains) on foreign currency exchange

 

 

24,939

 

 

 

(46,081

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(973,557

)

 

 

555,808

 

Prepaid expenses and other current assets

 

 

(214,893

)

 

 

55,928

 

Accounts payable

 

 

911,397

 

 

 

(358,107

)

Accrued expenses and other current liabilities

 

 

1,175,988

 

 

 

(699,942

)

Deferred revenue

 

 

(18,885

)

 

 

17,176

 

Lease obligation

 

 

(44,385

)

 

 

(44,202

)

Tax refund receivable

 

 

(3,360,633

)

 

 

(57,896

)

Net cash used in operating activities

 

 

(4,347,401

)

 

 

(2,112,887

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sales and maturities of short-term investments

 

 

13,700,000

 

 

 

 

Purchases of short-term investments

 

 

(7,099,263

)

 

 

 

Purchase of property and equipment

 

 

(18,131

)

 

 

(1,226

)

Cash paid for internally developed patents

 

 

(19,390

)

 

 

(3,020

)

Net cash provided by (used in) investing activities

 

 

6,563,216

 

 

 

(4,246

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common units, net of issuance costs

 

 

 

 

 

12,668,784

 

Proceeds from issuance of common stock from Employee Stock Purchase Plan

 

 

56,739

 

 

 

 

Proceeds from exercises of warrants

 

 

39,974

 

 

 

30,324

 

Net cash provided by financing activities

 

 

96,713

 

 

 

12,699,108

 

Net increase in cash and cash equivalents and restricted cash

 

 

2,312,528

 

 

 

10,581,975

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

8,996,860

 

 

 

34,353,129

 

Cash, cash equivalents and restricted cash, end of period

 

$

11,309,388

 

 

$

44,935,104

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

 

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

4


 

 

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 developing treatments for liver disease, immune modulating therapies and vaccines. Our diverse pipeline of product candidates includes next generation peptide therapeutics for non-alcoholic steatohepatitis (“NASH “) (ALT-801) and chronic hepatitis B (HepTcell), conjugated immunostimulants for the treatment of cancer (ALT-702) and intranasal vaccines (NasoVAX, NasoShield, and AdCOVID). 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, 2019 included in the annual report on Form 10-K which was filed with the SEC on March 27, 2020. 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 2020 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 three months ended March 31, 2020, 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, 2019 as filed with the SEC, except for the recently adopted accounting standard for investments.

Recently Issued Accounting Pronouncements - Adopted

In August 2018, the Financial Accounting Standards Board (“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 and eliminates certain disclosure requirements, such as the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy. This ASU adds new disclosure requirements for Level 3 measurements and is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2020 which resulted in expanded disclosures in Note 14 regarding the Company’s recurring Level 3 fair value measurements.

3.Contingent consideration

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 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 days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable

5


 

 

 

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 Phase 2 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.

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. Such 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. As of the acquisition date, the Company estimated future contingent consideration of $2,750,000 based upon a Monte Carlo simulation that was 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 year ended December 31, 2019. The Company remeasured the fair value of the contingent consideration as of March 31, 2020, and increased the liability to $4,500,000 primarily due to an increase in the probability of milestone achievement. The increase in the liability of $1,750,000 was expensed to research and development expense during the three months ended March 31, 2020.

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.

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 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 unvested restricted stock, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding are as follows:

 

 

 

For the Three Months Ended

 

 

For the Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Common stock warrants

 

 

10,370,206

 

 

 

10,386,256

 

Common stock options

 

 

1,423,612

 

 

 

900,869

 

Restricted stock

 

 

215,413

 

 

 

323,333

 

 

5.Intangible Assets

The Company’s intangible assets consisted of the following:

 

 

 

March 31, 2020

 

 

 

Estimated

Useful

Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

Internally developed patents

 

6-10 years

 

$

765,703

 

 

$

(458,778

)

 

$

306,925

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(273,157

)

 

 

11,843

 

Total intangible assets subject to amortization

 

 

 

 

1,050,703

 

 

 

(731,935

)

 

 

318,768

 

IPR&D assets

 

Indefinite

 

 

12,418,967

 

 

 

 

 

 

12,418,967

 

Total

 

 

 

$

13,469,670

 

 

$

(731,935

)

 

$

12,737,735

 

 

 

 

December 31, 2019

 

 

 

Estimated

Useful

Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

Internally developed patents

 

6-10 years

 

$

746,323

 

 

$

(448,874

)

 

$

297,449

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(269,221

)

 

 

15,779

 

Total intangible assets subject to amortization

 

 

 

 

1,031,323

 

 

 

(718,095

)

 

 

313,228

 

IPR&D assets

 

Indefinite

 

 

12,418,967

 

 

 

 

 

 

12,418,967

 

Total

 

 

 

$

13,450,290

 

 

$

(718,095

)

 

$

12,732,195

 

6


 

 

Amortization expense of intangible assets subject to amortization was $13,851 and $92,744 for the three months ended March 31, 2020 and 2019. Amortization expense was classified as research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss.

As of March 31, 2020, future estimated amortization expense was as follows:

 

Years ending December 31,

 

 

 

 

The remainder of 2020

 

$

31,452

 

2021

 

 

26,147

 

2022

 

 

26,147

 

2023

 

 

26,147

 

2024

 

 

22,241

 

2025 and thereafter

 

 

186,634

 

Total

 

$

318,768

 

 

6.Accrued Expenses

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued professional services

 

$

699,154

 

 

$

429,467

 

Accrued payroll and employee benefits

 

 

595,884

 

 

 

1,183,130

 

Accrued interest

 

 

6,933

 

 

 

5,047

 

Accrued research and development

 

 

3,499,817

 

 

 

1,966,111

 

Lease obligation, current portion (see Note 11)

 

 

266,278

 

 

 

259,449

 

Deferred revenue

 

 

47,628

 

 

 

61,563

 

Total accrued expenses

 

$

5,115,694

 

 

$

3,904,767

 

 

7.Other Long-Term Liabilities

The Company’s other long-term liabilities are summarized as follows:

 

 

 

March 31,

2020

 

 

December 31,

2019

 

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

 

$

1,415,970

 

 

$

1,484,679

 

Common stock warrant liability (see Note 9)

 

 

10,000

 

 

 

10,000

 

Economic conditional grants

 

 

250,000

 

 

 

250,000

 

Other

 

 

115,220

 

 

 

120,196

 

Total other long-term liabilities

 

$

1,791,190

 

 

$

1,864,875

 

 

8.At-the-Market Offering

On March 27, 2020, the Company entered into an Equity Distribution Agreement (the “Agreement”) with JMP Securities LLC, serving as placement agent (the “Placement Agent”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million (the “Shares”) through the Placement Agent (the “Offering”). Any Shares offered and sold in the Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2019, which was declared effective on April 12, 2019, the prospectus supplement relating to the Offering filed with the SEC on March 27, 2020 and any applicable additional prospectus supplements related to the Offering that form a part of the Registration Statement. The aggregate market value of Shares eligible for sale in the Offering and under the Equity Distribution Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The Company is only offering Shares having an aggregate offering price of $18.9 million pursuant to the prospectus supplement filed with the SEC on March 27, 2020. The Company will be required to file another prospectus supplement in the event it determines to offer more than $18.9 million of Shares in accordance with the terms of the Agreement, to the extent then permitted under General Instruction I.B.6 of Form S-3. From April 8, 2020 through May 13, 2020, the Company sold 164,900 shares of Common Stock under the Equity Distribution Agreement resulting in $0.6 million in net proceeds, leaving $18.3 million available to be sold under the current prospectus supplement.

 

7


 

 

9.Warrants

A summary of warrant activity during the three months ended March 31, 2020 is as follows:

 

 

 

 

 

 

 

 

 

Warrants outstanding, January 1, 2020

 

 

10,384,706

 

 

Exercises and conversions

 

 

(14,500

)

 

Warrants outstanding, March 31, 2020

 

 

10,370,206

 

 

 

For warrants classified as a liability, the following is a summary of the periodic changes in their fair value during the three months ended March 31, 2020:

 

Balance, January 1, 2020

 

$

10,000

 

Changes in fair value

 

 

 

Balance, March 31, 2020

 

$

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 March 31, 2020, there was $1,802,811 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 3.28 years. During the three months ended March 31, 2020, the Company granted 450,500 stock options with a weighted average exercise price of $1.92 and per share weighted average grant date fair value of $1.51.

Information related to stock options outstanding at March 31, 2020 is as follows:

 

 

Number

of Stock

Options

 

 

Weighted-

average

Exercise

Price

 

 

Weighted-

average

Remaining

Contractual

Term

(Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding

 

 

1,423,612

 

 

$

3.59

 

 

 

5.96

 

 

$

940,809

 

Exercisable

 

 

377,757

 

 

$

6.19

 

 

 

5.61

 

 

$

136,786

 

Unvested

 

 

1,045,855

 

 

$

2.65

 

 

 

6.08

 

 

$

804,022

 

 

Restricted Stock

At March 31, 2020, the Company had unvested restricted stock of 215,413 shares with total unrecognized compensation expense of $771,291, which the Company expects to recognize over a weighted average period of approximately 2.67 years. During the three months ended March 31, 2020, the Company released 20,253 shares of common stock from restriction as a result of the vesting of restricted stock.

2019 Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (“ESPP”), employees purchased 38,809 shares for $56,739 during the three months ended March 31, 2020. During the three months ended March 31, 2020, the Company recognized compensation expense of $14,712.

Stock-based compensation expense

Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019 as follows:

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

29,000

 

 

$

76,624

 

General and administrative

 

 

185,921

 

 

 

331,090

 

Total

 

$

214,921

 

 

$

407,714

 

 

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 months ended March 31, 2020 under all of the Company’s operating leases was $87,599, which includes short-term leases and variable lease costs not included in the lease obligation.

8


 

 

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 cash paid for operating lease liabilities for the three months ended March 31, 2020 was $61,880.

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

 

 

March 31, 2020

 

Operating lease obligations

 

$

1,682,248

 

Operating lease right-of-use assets

 

$

680,826

 

Weighted-average remaining lease term

 

 

5.08

 

Weighted-average discount rate

 

 

8.0

%

Maturities of lease liabilities is as follows:

Year ending December 31,

 

 

 

 

The remainder of 2020

 

$

291,366

 

2021

 

$

393,542

 

2022

 

$

400,198

 

2023

 

$

407,054

 

2024

 

$

414,116

 

2025 and thereafter

 

$

138,831

 

Total lease payments

 

 

2,045,107

 

Less imputed interest

 

 

(362,859

)

Total

 

$

1,682,248

 

 

 

12.Income Taxes

 

In response to global pandemic associated with COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act provided both stimulus measures and a number of tax provisions, including: temporary changes regarding the utilization and carry back of net operating losses, temporary changes to the prior and future limitations on interest deductions, technical corrections from prior tax legislation for tax depreciation of qualified improvement property, and certain refundable employee retention credits. As of March 31, 2020, the Company intends to file a refund claim of $2,890,348 with the Internal Revenue Service reflecting a partial refund of its 2016 tax liability by carrying back its 2019 and 2018 losses not previously claimed. This amount has been recorded as a discrete item in the income tax benefit for the three months ended March 31, 2020. In addition the Company is currently estimating it will be able to carry back a portion of its current and forecasted 2020 net operating losses as of year end and has included an estimate in its annual effective tax rate calculation as of March 31, 2020 which resulted in an additional income tax benefit of $355,531 recorded during the three months ended March 31, 2020. Accordingly, the Company has recognized a total tax benefit of $3,245,879 in the three months ended March 31, 2020.

 

13.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.

In December 2019, a complaint was filed by Dr. De-Chu Christopher Tang (“Plaintiff”) against the Company in U.S. District Court for the Eastern District of Texas. The Plaintiff amended the complaint in February 2020 to include Vipin K. Garg and David J. Drutz as defendants, in addition to the Company (Dr. Garg, Dr. Drutz, and the Company are collectively referred to as “Defendants”). In March 2020 the Defendants’ filed a motion to dismiss the complaint. The Court denied the motion without prejudice and allowed Plaintiff an opportunity to file an amended complaint. Plaintiff’s second amended complaint was filed on April 17, 2020, and Defendants filed a motion to dismiss that complaint on May 1, 2020. Plaintiff, who is representing himself, alleges five causes of action as follows: (1) Defendants’ alleged retention of Plaintiff’s lab notebooks; (2) alleged plagiarism based on publishing an article without naming Plaintiff as an author; (3) use of the Adhigh System, which Plaintiff alleges he developed; (4) allegations that Defendants manipulated the Company’s stock and caused a decrease in value; and (5) allegations that the Defendants “wast[ed] government grant money and poison[ed] science by leaving data to rot.” The Company believes the allegations in the complaint are without merit and intends to vigorously defend the litigation. However, the outcome of this legal proceeding is uncertain at this time and the Company cannot reasonably estimate a range of loss, if any. Accordingly, the Company has not accrued any liability associated with this action. The Company is a party in various other contractual disputes, litigation, and potential claims arising in the ordinary course of business none of which are currently reasonably possible or probable of material loss.

9


 

 

14.Fair Value Measurement

The Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2020 consisted of the following:

 

 

Fair Value Measurement at March 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

8,737,735

 

 

$

8,737,735

 

 

$

 

 

$

 

Short-term investments

 

 

21,644,214

 

 

 

 

 

 

21,644,214

 

 

 

 

Contingent consideration

 

 

4,500,000

 

 

 

 

 

 

 

 

 

4,500,000

 

Warrant liability

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2019 consisted of the following:

 

 

Fair Value Measurement at December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Recurring fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

8,034,640

 

 

$

8,034,640

 

 

$

 

 

$

 

Short-term investments

 

 

28,277,386

 

 

 

 

 

 

28,277,386

 

 

 

 

Contingent consideration

 

 

2,750,000

 

 

 

 

 

 

 

 

 

2,750,000

 

Warrant liability

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

Assets recorded at fair value on a nonrecurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired.

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 March 31, 2020 as shown below:

 

 

March 31, 2020

 

 

 

Amortized Cost

 

 

Unrealized Gain (Loss)

 

 

Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States treasury securities

 

$

1,699,058

 

 

$

2,693

 

 

$

1,701,751

 

Financial and corporate debt securities

 

 

19,957,584

 

 

 

(15,121

)

 

 

19,942,463

 

Total

 

$

21,656,642

 

 

$

(12,428

)

 

$

21,644,214

 

 

The fair value of contingent payments classified as a liability was based on the regulatory milestones described in Note 3 and estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The following table is a reconciliation of the beginning and ending balance of contingent consideration liability:

Balance at January 1, 2020

$

2,750,000

 

Change in fair value

 

1,750,000

 

Balance at March 31, 2020

$

4,500,000

 

The assumptions used to estimate the fair value of contingent payments that are classified as a liability at March 31, 2020 include the following significant unobservable inputs:

Unobservable input

 

Value or Range

 

 

Weighted Average

 

 

 

 

 

 

 

 

 

 

Expected volatility

 

110.5%

 

 

110.5%

 

Risk-free interest rate

 

0.24%

 

 

0.24%

 

Cost of capital

 

30.0%

 

 

30.0%

 

Discount for lack of marketability

 

19%-20%

 

 

19.5%

 

Probability of payment

 

42%-67%

 

 

60%

 

Projected year of payment

 

2020-2022

 

 

2020

 

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.

10


 

 

There were no transfers into and out of any of the levels of the fair value hierarchy during 2020 or 2019.

 

15.Subsequent Events

PER.C6 License Agreement Expansion

On April 2, 2020, the Company entered into Amendment No. 3 to the Second Restated License Agreement (the “Amendment”), by and between the Company and Janssen Vaccines & Prevention B.V. (formerly known as Crucell Holland B.V.) (as amended by Amendment No. 1 to Second Restated License Agreement and Amendment No. 2 to Second Restated License Agreement, together with the Amendment, the “License Agreement”). Pursuant to the Amendment, the field of licenses granted to the Company for the use of the PER.C6 cell line under the License Agreement is expanded to cover COVID-19 caused by SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), in addition to the existing licenses related to Bacillus anthracis and influenza virus. All capitalized terms not defined herein shall have the meanings assigned to them in the Amendment or the License Agreement, as applicable.

Pursuant to the Amendment, the Company agreed to pay certain additional development-based milestone payments through approval of licensed products by the FDA for the treatment or prevention of COVID-19, up to an aggregate amount of $1,225,000. The Company also agreed to pay royalty payments as a percentage of net sales of products for the treatment or prevention of COVID-19 in any country where such product is covered by a valid claim of any licensed patent or uses licensed know-how, subject to a royalty stacking reduction and minimum annual royalty payments, until the expiration of the term of the License Agreement, as amended.

Paycheck Protection Program

On April 7, 2020, the Company applied for a loan from ServisFirst Bank, as lender, pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the "SBA"). On April 13, 2020, the Loan was approved and the Company received the proceeds from a loan in the amount of $632,000 (the “PPP Loan”).

The PPP Loan, which took the form of a promissory note (the “Promissory Note”) matures on April 7, 2022 and bears interest at a rate of 1% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence on November 7, 2020. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the PPP Loan at any time without incurring any prepayment charges.

All or a portion of the Loan may be forgiven by the SBA and lender upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities during the eight week period beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal.

Equity Distribution Agreement

As disclosed in Note 8, from April 8, 2020 through May 13, 2020, the Company sold 164,900 shares of common stock under the Equity Distribution Agreement resulting in $0.6 million in net proceeds, leaving $18.3 million available to be sold under the current prospectus supplement.

11


 

 

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, 2019 included in our annual report on Form 10-K, which was filed with the Securities and Exchange Commission on March 27, 2020.

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 treatments for liver disease, immune modulating therapies and vaccines. Our diverse pipeline of product candidates includes next generation peptide therapeutics for non-alcoholic steatohepatitis (“NASH”) (ALT-801) and chronic hepatitis B (HepTcell), conjugated immunostimulants for the treatment of cancer (ALT-702) and intranasal vaccines (NasoVAX, NasoShield and AdCOVID).

Impact of COVID-19

We are closely monitoring how the spread of COVID-19 is affecting our employees, business, preclinical studies and clinical trials. In response to the COVID-19 pandemic, we have closed our executive offices with certain employees continuing their work outside of our offices and travel for all employees has been restricted.  Essential laboratory staff continue to work onsite with enhanced safety measures. We are continuing our regular interactions with the FDA and other regulatory agencies and based on current information, we do not anticipate COVID-19 to materially affect our regulatory timelines for NasoShield, AdCOVID and ALT-801. We expect the pandemic to have some near-term impact on the initiation of our HepTcell Phase 2 study and, accordingly, we will delay the initiation of this trial. We expect to provide an update on timing for initiating the study in the second half of 2020.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three months ended March 31, 2020, at this time, however, there is significant uncertainty relating to the trajectory of the pandemic and the impact of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. See “Risk Factors— Our business, results of operations and financial condition may be adversely affected by the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the ongoing coronavirus disease (COVID-19) pandemic.” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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, 2019 except for recently adopted accounting standards (See Note 2 to the consolidated financial

12


 

 

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, 2019.

Results of Operations

Comparison of the three months ended March 31, 2020 and 2019:

 

 

 

For the Three Months Ended

March 31,

 

 

2020

 

 

2019

 

 

Increase (Decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,212,694

 

 

$

2,955,592

 

 

$

(742,898

)

 

 

(25.1

)

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development