Savara Inc 10-Q for FY2022 Q2
Savara Inc (SVRA)
About this 10-Q
Savara Inc filed this 10-Q on August 11, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).
Headline figures
Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $9.16M
- compared with a net loss of $10.94M a year earlier
- Diluted EPS
- -$0.06
- compared with -$0.07 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
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(Exact name of registrant as specified in its charter)
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(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:
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 Exchange Act). Yes
As of August 11, 2022, the registrant had
Table of Contents
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Page |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
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3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
25 |
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Item 1. |
25 |
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Item 1A. |
25 |
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Item 2. |
25 |
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Item 3. |
25 |
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Item 4. |
25 |
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Item 5. |
25 |
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Item 6. |
25 |
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26 |
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27 |
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i
PART I—FINANCIAL INFORMATION
Item I. Financial Information
Savara Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
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June 30, 2022 |
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December 31, 2021 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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In-process R&D |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of long-term debt |
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— |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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( |
) |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
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For the three months ended June 30, |
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For the six months ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense) |
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Interest expense, net |
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( |
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( |
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( |
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( |
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Foreign currency exchange gain (loss) |
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( |
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Tax credit income |
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Total other income (expense), net |
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( |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net loss per share: |
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Basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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Weighted-average common shares outstanding: |
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Basic and diluted |
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Other comprehensive loss: |
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(Loss) gain on foreign currency translation |
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( |
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( |
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( |
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Unrealized gain (loss) on short-term |
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( |
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( |
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Total comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Periods Ended June 30, 2022 and 2021
(In thousands, except share amounts)
(Unaudited)
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Stockholders’ Equity |
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Common Stock |
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Number of |
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Amount |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance on December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Repurchase of shares for |
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( |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange translation |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized loss on short- |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance on March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Repurchase of shares for |
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( |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange translation |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized gain on short- |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance on June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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3
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (continued)
Periods Ended June 30, 2022 and 2021
(In thousands, except share amounts)
(Unaudited)
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Stockholders’ Equity |
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Common Stock |
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Number of |
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Amount |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance on December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock |
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— |
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— |
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Repurchase of outstanding |
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— |
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— |
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( |
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— |
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— |
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( |
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Net issuance of common |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized loss on short- |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance on March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange |
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— |
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— |
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— |
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— |
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Unrealized gain on short- |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance on June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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For the six months ended June 30, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of right-of-use assets |
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Foreign currency (gain) loss |
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( |
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Amortization of debt issuance costs |
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Amortization on premium to short-term investments |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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( |
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Non-current assets |
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( |
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( |
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Accounts payable and accrued expenses and other current liabilities |
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( |
) |
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( |
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Long-term liabilities |
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— |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
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( |
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Purchase of available-for-sale securities, net |
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( |
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( |
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Maturity of available-for-sale securities |
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Sale of available-for-sale securities, net |
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— |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Repurchase of outstanding pre-funded warrants |
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— |
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( |
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Repayment of long-term debt (1) |
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( |
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— |
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Proceeds from long-term debt, net (1) |
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Issuance of common stock and pre-funded warrants in public offering, net of offering costs |
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— |
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Proceeds from exercise of stock options |
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— |
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Issuance of common stock upon exercise of warrants, net |
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— |
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Repurchase of shares for minimum tax withholdings |
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( |
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— |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Increase in cash and cash equivalents |
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Cash and cash equivalents beginning of period |
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Cash and cash equivalents end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Savara Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization and Nature of Operations
Description of Business
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s lead program, molgramostim nebulizer solution (“molgramostim”), a novel inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Austin, Texas.
Since inception, Savara has devoted its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has
Previously, the Company's pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis.
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments that are necessary to fairly present the statements of financial position, operations and cash flows for the periods presented. The results of operations for interim periods shown in this report are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted from these condensed consolidated financial statements, as permitted by rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The Company believes the disclosures made in these condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these condensed consolidated financial statements be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements. There have been no changes to the Company's significant accounting policies since the date of those financial statements.
Principles of Consolidation
The interim condensed consolidated financial statements of the Company are stated in U.S. dollars and are prepared under U.S. GAAP. These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive income in the condensed consolidated balance sheet. All intercompany transactions and accounts have been eliminated in consolidation. The condensed consolidated balance sheet at June 30, 2022 has been derived from the Company's audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements.
Liquidity
As of June 30, 2022, the Company had an accumulated deficit of approximately $
6
The Company is currently focused on the development of molgramostim for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this program. If the clinical trial for the Company’s product candidate fails or produces unsuccessful results and the product candidate does not gain regulatory approval or, if approved, fails to achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments and, potentially, through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders.
The Company’s cash and cash equivalents of $
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management’s estimates include, but are not limited to, those related to the accrual of research and development expenses and general and administrative costs, certain financial instruments recorded at fair value, the valuation of stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience, changes in circumstance and facts, and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.
Risks and Uncertainties
The product candidate being developed by the Company requires approval from the U.S. Food and Drug Administration (“FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it may have a material adverse impact on the Company’s business, results of operations, and its financial position.
The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s products. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its cash and cash equivalents with a limited number of high-quality financial institutions and at times may exceed the amount of insurance provided on such deposits.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company's chief operating decision maker is the Chief Executive Officer. We have
Recent Accounting Pronouncements
There are no recent accounting pronouncements issued by the FASB, the AICPA, or the SEC that are believed by the Company's management to have a material effect, if any, on the Company’s condensed consolidated financial statements.
7
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
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June 30, 2022 |
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December 31, 2021 |
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Prepaid contracted research and development costs |
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$ |
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$ |
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R&D tax credit receivable |
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VAT receivable |
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Prepaid insurance |
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Deposits and other |
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Total prepaid expenses and other current assets |
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$ |
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$ |
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Prepaid Contracted Research and Development Costs
As of June 30, 2022, Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for molgramostim for the treatment of aPAP. This includes prepaid amounts paid under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers that provide services in connection with the Company's research and development activities.
R&D Tax Credit Receivable
The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of June 30, 2022. Under Danish tax law, Denmark remits a research and development tax credit equal to
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of (in thousands):
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June 30, 2022 |
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December 31, 2021 |
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Accrued contracted research and development costs |
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$ |
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$ |
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Accrued compensation |
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Accrued general and administrative costs |
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Lease liability |
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Total accrued expenses and other current liabilities |
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$ |
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$ |
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Accrued Contracted Research and Development Costs
As of June 30, 2022, Accrued contracted research and development costs are primarily comprised of costs associated with molgramostim for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.
Accrued Compensation
8
5. Short-term Investments
The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. The following table summarizes, by major security type, the Company’s investments (in thousands):
As of June 30, 2022 |
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Amortized Cost |
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Gross Unrealized Gains |
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Gross Unrealized Losses |
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Fair Value |
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Short-term investments |
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U.S. government securities |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
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Corporate securities |
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— |
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( |
) |
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Commercial paper |
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— |
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— |
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Total short-term investments |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
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As of December 31, 2021 |
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Amortized Cost |
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Gross Unrealized Gains |
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Gross Unrealized Losses |
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Fair Value |
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Short-term investments |
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U.S. government securities |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
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Asset backed securities |
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— |
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( |
) |
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Corporate securities |
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— |
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( |
) |
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Commercial paper |
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— |
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— |
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Total short-term investments |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
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The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive income in the condensed consolidated balance sheet. Classification as short-term or long-term is based upon whether the initial maturity of the debt securities is less than or greater than twelve months.
There were
6. Long-term Debt
On April 28, 2017, the Company and its subsidiary, Aravas Inc. (“Aravas”) entered into a loan and security agreement with Silicon Valley Bank, as amended by the First Amendment to the Loan and Security Agreement on
On
The loan bears interest at a floating rate equal to the greater of (i)
Silicon Valley Bank was granted a perfected first priority lien in all of the Company's assets with a negative pledge on intellectual property. The Amended Loan Agreement contained customary affirmative and negative covenants, including among others, covenants that limit the Company's and its subsidiaries’ ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to certain exceptions. Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if the Company’s balance of cash and cash
9
equivalents falls below $
In accordance with FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, the Company evaluated the Amended Loan Agreement to determine whether it should be accounted for as a modification or extinguishment. As a result of this analysis, the Amended Loan Agreement was accounted for as a modification. Accordingly,
Summary of Carrying Value
The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands):
Future minimum payments due during the year ended December 31, |
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June 30, 2022 |
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December 31, 2021 |
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2022 |
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$ |
— |
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$ |
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2023 |
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— |
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2024 |
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— |
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— |
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2025 |
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— |
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— |
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2026 |
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— |
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2027 |
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— |
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Total future minimum payments |
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Unamortized end of term charge |
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( |
) |
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( |
) |
Debt issuance costs |
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( |
) |
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( |
) |
Debt discount related to warrants |
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( |
) |
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( |
) |
Total debt |
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Current portion of long-term debt |
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— |
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( |
) |
Long-term debt |
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$ |
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$ |
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7. Fair Value Measurements
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired in-process research and development (“IPR&D”) and other long-lived assets that are written down to fair value if they are impaired.
IPR&D is considered an indefinite-lived intangible asset and is assessed for impairment annually, or more frequently if impairment indicators exist. In accordance with ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), the Company utilizes a two-step method, which allows the Company to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the IPR&D is more likely than not less than the carrying value, a quantitative impairment test is required.
10
During the six months ended June 30, 2022 and 2021, the Company experienced a decrease of approximately $
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.
Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.
The fair value of these instruments as of June 30, 2022 and December 31, 2021 was as follows (in thousands):
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Quoted Prices in |
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Significant |
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Significant |
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Total |
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As of June 30, 2022 |
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Cash equivalents: |
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U.S. Treasury money market funds |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Short-term investments: |
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U.S. government securities |
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— |
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— |
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Corporate securities |
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— |
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— |
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Commercial paper |
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— |
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— |
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As of December 31, 2021 |
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Cash equivalents: |
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U.S. Treasury money market funds |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Short-term investments: |
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U.S. government securities |
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— |
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— |
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Asset backed securities |
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— |
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— |
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Corporate securities |
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— |
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— |
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Commercial paper |
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— |
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— |
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8. Stockholders’ Equity
Public Offering of Common Stock
On March 15, 2021, the Company sold (i) an aggregate of
The Company determined that the securities issued in the Public Offering were free-standing and that the 2021 Pre-Funded Warrants did not contain any settlement obligations that would result in liability classification under ASC 480, Distinguishing Liability from Equity and ASC 815-40, Contracts in Entity’s Own Equity. The shares encompassed in the 2021 Pre-Funded Warrants were sold at the same price as the underlying common stock, less $
The Public Offering resulted in net proceeds to the Company of approximately $
Financial instruments |
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Proceeds |
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Common stock |
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$ |
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2021 Pre-funded Warrants |
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Total |
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Offering expenses |
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( |
) |
Net proceeds |
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$ |
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11
The Company intends to use the net proceeds from the Public Offering to fund the clinical development of molgramostim for the treatment of aPAP and other general corporate purposes.
Milestone Warrants
Immediately prior to the Public Offering, the Company entered into separate, privately-negotiated warrant repurchase agreements with certain holders of its outstanding milestone warrants, each dated as of December 24, 2019. On March 15, 2021, the Company paid $
On August 13, 2021, thirty days following the achievement of a defined clinical milestone, the remaining
Termination of Wainwright Common Stock Sales Agreement
On April 28, 2017, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, which was subsequently amended on June 29, 2018 (the “Wainwright Sales Agreement”), pursuant to which the Company could offer and sell, from time to time, through Wainwright, shares of Common Stock having an aggregate offering price of not more than $
The Company terminated the Wainwright Sales Agreement effective
Evercore Common Stock Sales Agreement
On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore Group L.L.C., (“Evercore”), as sales agent (the “Evercore Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Common Stock (the “Shares”), having an aggregate offering price of not more than $
During the six months ended June 30, 2022 and 2021, the Company did
Common Stock Reserved for Issuance
The Company’s shares of common stock reserved for issuance as of the periods indicated were as follows:
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June 30, 2022 |
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December 31, 2021 |
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April 2017 Warrants |
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June 2017 Warrants |
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December 2018 Warrants |
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2017 Pre-funded Warrants |
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Pre-funded PIPE Warrants |
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2021 Pre-funded Warrants |
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Stock options outstanding |
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Issued and nonvested RSUs |
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Total shares reserved |
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Warrants
The following table summarizes the outstanding warrants for the Company’s common stock as of June 30, 2022:
Expiration Date |
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Shares Underlying |
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Exercise Price |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated Other Comprehensive Income (Loss) Information
The components of accumulated other comprehensive income (loss) as of the dates indicated and the change during the period were (in thousands):
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Foreign Exchange Translation Adjustment |
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Unrealized Gain (Loss) on ST Investments |
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Total Accumulated Other Comprehensive Income (Loss) |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
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Change |
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( |
) |
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( |
) |
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( |
) |
Balance, December 31, 2021 |
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$ |
( |
) |
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Change |
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( |
) |
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( |
) |
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( |
) |
Balance, June 30, 2022 |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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9. Commitments
Manufacturing and Other
The Company is subject to various royalties and manufacturing and development payments related to its product candidate, molgramostim.
The Company is also subject to certain contingent milestone payments, disclosed in the following table, payable to the manufacturer of the nebulizer used to administer molgramostim. In addition to these milestones, the Company will owe a royalty of three-and one-half percent (
The following table summarizes manufacturing commitments and contingencies as of the period indicated (in thousands):
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June 30, 2022 |
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Molgramostim manufacturer: |
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Achievement of certain milestones related to validation of API and regulatory approval of |
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$ |
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Molgramostim nebulizer manufacturer: |
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Achievement of various development activities and regulatory approval of nebulizer utilized |
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Total manufacturing and other commitments |
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$ |
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The milestone commitments disclosed above reflect the activities that have
On December 10, 2020, the Company announced that the Phase 3 trial of vancomycin in people living with cystic fibrosis who have MRSA lung infection did not meet the primary endpoint. On January 7, 2021 the Company issued a termination notice to GlaxoSmithKline Trading Services Limited (“GSK”), which manufactures the drug product from bulk vancomycin powder.
Contract Research
On March 5, 2021, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials.
13
Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 trial. Under that work order and subsequent change orders, the Company will pay Parexel service fees, pass-through expenses, and investigator fees estimated to be approximately $
Risk Management
The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to certain risks associated with operating the Company’s business to an acceptable level.
10. Stock-Based Compensation
Equity Incentive Plans
2008 Stock Option Plan
The Company adopted the Savara Inc. Stock Option Plan (the “2008 Plan”), pursuant to which the Company reserved shares for issuance to employees, directors, and consultants. The 2008 Plan includes (i) the option grant program providing for both incentive and non-qualified stock options, as defined by the Internal Revenue Code, and (ii) the stock issuance program providing for the issuance of awards that are valued based upon common stock, including restricted stock, dividend equivalents, stock appreciation rights, phantom stock, and performance units. The 2008 Plan also allows eligible persons to purchase shares of common stock at an amount determined by the plan administrator. Upon a participant’s termination, the Company retains the right to repurchase nonvested shares issued in conjunction with the stock issuance program at the fair market value per share as of the date of termination.
The Company previously issued incentive and non-qualified options and restricted stock to employees and non-employees under the 2008 Plan. The terms of the stock options, including the exercise price per share and vesting provisions, were determined by the board of directors. Stock options were granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant based upon objective and subjective factors including: third-party valuations, preferred stock transactions with third parties, current operating and financial performance, management estimates, and future expectations.
The Company
Amended and Restated 2015 Omnibus Incentive Option Plan
The Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended with approval by the Company's stockholders. The Amended and Restated 2015 Plan provides for the grant of incentive and non-statutory stock options, as well as share appreciation rights, restricted shares, restricted stock units (“RSUs”), performance units, shares, and other stock-based awards. Share-based awards are subject to terms and conditions established by board of directors or the compensation committee of board of directors. As of June 30, 2022, the number of shares of common stock available for grant under the 2015 Plan was
Under both the 2008 Plan and 2015 Plan, stock options typically vest
2021 Inducement Equity Incentive Plan
The Company adopted the 2021 Inducement Equity Incentive Plan in May 2021 and amended it in September 2021 (as amended, the “Inducement Plan”) . The Inducement Plan provides for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, or performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement grant in accordance with Nasdaq Listing Rule 5635(c)(4). As of June 30, 2022, the number of shares of common stock available for grant under the Inducement Plan was
Under the Inducement Plan, stock options typically vest
14
Stock-Based Awards Activity
The following table provides a summary of stock-based awards activity for the six months ended June 30, 2022:
Stock Options:
Outstanding at December 31, 2021 |
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Granted |
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Exercised |
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Expired/cancelled/forfeited |
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( |
) |
Outstanding at June 30, 2022 |
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The total compensation cost related to non-vested stock options not yet recognized as of June 30, 2022 was $
RSUs:
Outstanding at December 31, 2021 |
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Granted |
|
|
|
|
Vested |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding at June 30, 2022 |
|
|
|
The total compensation cost related to unvested RSUs not yet recognized as of June 30, 2022 was $
Stock-Based Compensation
Stock-based compensation expense is included in the following line items in the accompanying statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11. Net Loss per Share
Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. For periods in which the Company generated a net loss, the Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive.
The following equity instruments were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
|
|
Six months ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Awards under equity incentive plan |
|
|
|
|
|
|
||
Non-vested restricted shares and restricted stock units |
|
|
|
|
|
|
||
Warrants to purchase common stock |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
15
The following table calculates basic earnings per share of common stock and diluted earnings per share of common stock for the three and six months ended June 30, 2022 and 2021 (in thousands, except share and per share amounts):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Undistributed earnings and net loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted EPS |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
12. Subsequent Events
The Company has evaluated subsequent events through the date these condensed consolidated financial statements were issued. The Company determined there were no events that required disclosure or recognition in these condensed consolidated financial statements.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein that involve risks and uncertainties, such as Savara’s plans, objectives, expectations, intentions, and beliefs should be considered forward-looking statements. Savara’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those identified below, the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the risks associated with the process of conducting clinical trials and developing, obtaining regulatory approval for and commercializing drug candidates that are safe and effective for use as human therapeutics, the timing and ability to raise additional capital as needed to fund continued operations, natural disasters, pandemics, geopolitical events, and those discussed in the section entitled “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 30, 2022, all of which are difficult to predict.
Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our lead program, molgramostim nebulizer solution (“molgramostim”), a novel inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Savara, together with its wholly-owned subsidiaries, operate in one segment with its principal office in Austin, Texas.
Since inception, we have devoted our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to June 30, 2022, we have raised net cash proceeds of approximately $392.9 million, primarily from public offerings of our common stock, private placements of convertible preferred stock, and debt financings.
Previously, our pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis.
We have never been profitable and have incurred operating losses every year since inception. Our net losses for the three months ended June 30, 2022 and 2021 were $9.2 million and $10.9 million, respectively. Our net losses for the six months ended June 30, 2022 and 2021 were $17.5 million and $21.2 million, respectively, and the net loss for the year ended December 31, 2021 was $43.0 million. As of June 30, 2022, we had an accumulated deficit of approximately $318 million. Our operating losses primarily resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, our primary product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to the timing of clinical development programs and efforts to achieve regulatory approval.
As of June 30, 2022, we had cash and cash equivalents of $95.2 million and short-term investments of $47.3 million. We will continue to require additional capital to continue our clinical development and potential commercialization activities. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many
17
factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
COVID-19 Update
The continuing COVID-19 global pandemic poses risks to our business. As we continue enrollment of our Phase 3 trial for the use of molgramostim for the treatment of aPAP, there remains a general uncertainty regarding the impact of COVID-19 on the aPAP patient population, health care providers, and clinical trial staff and personnel. Patients suffering from aPAP lung disease are prone to underlying lung conditions and are often treated by infectious disease specialists and pulmonologists. Some aPAP patients may be hesitant to enroll in the study due to the study requiring multiple clinical site visits, which may lead to COVID-19 exposure. Further, if an aPAP patient enrolled in the study contracted COVID-19, they may experience an interruption in treatment or need to discontinue their participation. There could also be delays in treatment associated with quarantine requirements if a staff member at an enrollment site contracts COVID-19 or treating physicians may need to refocus their attention on COVID-19 as new variants emerge.
We are unable to quantify the impact this situation will have on our future financial performance; the public health actions being undertaken to reduce the spread of the virus have created, and may continue to create, challenges and disruptions to our operations. Management, on an on-going basis, is evaluating our liquidity position, communicating with and monitoring the actions of our service providers, manufacturers, and suppliers and reviewing our near-term financial performance as we manage Savara through the uncertainty related to COVID-19.
As of the date of this report:
The COVID-19 pandemic remains extremely fluid and we are continuing to re-assess the impact on our operations by monitoring the spread of COVID-19, emerging COVID-19 variants, and the actions implemented to combat the virus in various regions throughout the world. Where possible and appropriate, we are making necessary operational and strategic decisions in an attempt to mitigate the negative impact of the virus on our operations.
Recent Events
Amended and Restated Loan Agreement
On April 21, 2022, we entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”) between Savara and our subsidiary, Aravas Inc. ("Aravas"), as borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated in its entirety the Loan and Security Agreement between Savara and Aravas, as borrowers, and the Lender dated April 28, 2017, as subsequently amended on October 31, 2017, December 4, 2018, January 31, 2020, and March 30, 2021 (the “Loan Agreement”). The Amended Loan Agreement provides for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.
Pursuant to the Amended Loan Agreement, the loan has an interest-only monthly payment through April 21, 2026 (the “Interest-Only Period”) and thereafter equal monthly installments of principal plus interest over 12 months until April 21, 2027 (the “Maturity Date”). However, we may elect to extend the Interest-Only Period until the Maturity Date if we maintain cash and cash equivalents equal to at least 1.75 times the outstanding principal amount of the loan during the fifth year. If the Interest-Only Period is extended, all principal and unpaid interest is due and payable on the Maturity Date.
The loan bears interest at a floating rate equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Savara is obligated to pay customary closing fees and a final payment of 2.75% of the principal amount advanced under the facility. The Company may prepay the loan in whole or in part at any time, subject to a prepayment fee of 4.25% if prepaid within the first anniversary of the closing date and 1.0% if prepaid between the first and second anniversaries of the closing date. Following the second anniversary, there is no prepayment fee.
Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if our balance of cash and cash equivalents falls below $40 million, we are required to maintain cash and cash equivalents equal to at least (i) six
18
months of operating expenses and (ii) 1.2 times the outstanding principal amount of the loan (or 1.75 in the final year of the loan if the Interest-Only Period is extended).
Innovation Passport in United Kingdom ("UK") for Molgramostim
In June 2022, we announced molgramostim has been awarded an Innovation Passport for the treatment of aPAP by the UK's Medicines and Healthcare Products Regulatory Agency. Innovation Passport is the entry point to the Innovative Licensing and Access Pathway, a novel program aimed at accelerating the time to market and facilitating patient access to medicines in the UK.
International Conflict
In February 2022, Russia commenced a military invasion of Ukraine. The political and physical conditions in Ukraine and Russia, as well as in neighboring countries, may disrupt our supply chain and increase our costs, which may adversely affect our ability to conduct ongoing clinical trials and impact patients’ ability to partake in our clinical trials. While we do not believe this conflict will have a material impact on our current operations, given the rapidly evolving situation and the potential to expand beyond Ukraine and Russia, the full impact of the conflict remains uncertain.
Financial Operations Overview
Research and Development Expenses
The largest component of our operating expenses has historically been our investment in research and development activities. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
The following table shows our research and development expenses for the periods indicated:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Product candidates: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Molgramostim |
|
$ |
6,418 |
|
|
$ |
7,155 |
|
|
$ |
12,102 |
|
|
$ |
12,246 |
|
Vancomycin |
|
|
— |
|
|
|
97 |
|
|
|
— |
|
|
|
2,595 |
|
Total research and development expenses |
|
$ |
6,418 |
|
|
$ |
7,252 |
|
|
$ |
12,102 |
|
|
$ |
14,841 |
|
We expect research and development expenses will remain significant in the future as we advance our molgramostim product candidate into and through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of a second source manufacturer and clinical supplies.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the
19
duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of molgramostim.
General and Administrative Expenses
General and administrative expenses primarily consist of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal and investor relations, and professional and consulting fees for accounting, legal, investor relations, business development, commercial strategy and research, human resources, and information technology services. Other general and administrative expenses include facility lease and insurance costs.
Critical Accounting Policies and Estimates
There have not been any material changes during the six months ended June 30, 2022 to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Please read Part II, Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 for further description of our critical accounting policies.
Results of Operations — Comparison of Three Months Ended June 30, 2022 and 2021
|
|
For the Three Months Ended June 30, |
|
|
Dollar |
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
6,418 |
|
|
$ |
7,252 |
|
|
$ |
(834 |
) |
General and administrative |
|
|
2,957 |
|
|
|
3,153 |
|
|
|
(196 |
) |
Depreciation and amortization |
|
|
8 |
|
|
|
47 |
|
|
|
(39 |
) |
Total operating expenses |
|
|
9,383 |
|
|
|
10,452 |
|
|
|
(1,069 |
) |
Loss from operations |
|
|
(9,383 |
) |
|
|
(10,452 |
) |
|
|
1,069 |
|
Other income (expense), net |
|
|
219 |
|
|
|
(489 |
) |
|
|
708 |
|
Net loss |
|
$ |
(9,164 |
) |
|
$ |
(10,941 |
) |
|
$ |
1,777 |
|
Research and Development
Research and development expenses decreased by $0.8 million, or 11.5%, to $6.4 million for the three months ended June 30, 2022 from $7.3 million for the three months ended June 30, 2021. This decrease is due to an approximately $0.7 million decrease associated with molgramostim, which is primarily due to the timing of certain CRO-related costs. Additionally, there was an approximately $0.1 million decrease associated with the close-out and wind-down of inhaled vancomycin development activities.
General and Administrative
General and administrative expenses decreased by $0.2 million, or 6.2%, to $3.0 million for the three months ended June 30, 2022 from $3.2 million for the three months ended June 30, 2021. The decrease is primarily attributable to decreased administrative and compensation costs associated with streamlining certain operational activities, which was initiated during the third quarter of 2021.
Other Income (Expense), Net
Other income (expense), net increased by $0.7 million to income of $0.2 million for the three months ended June 30, 2022 from an expense of $0.5 million for the three months ended June 30, 2021. The change is primarily related to a $0.4 million increase in Tax credit income during the three months ended June 30, 2022, which is a result of increased spend in our Danish subsidiary during the quarter. During 2021, the maximum tax credit amount was recognized during the first quarter resulting in no such income during the three months ended June 30, 2021. Additionally, Interest expense, net decreased by approximately $0.3 million as a result of the lower interest rate associated with the Amended Loan Agreement.
20
Results of Operations — Comparison of Six Months Ended June 30, 2022 and 2021
|
|
Six months ended June 30, |
|
|
Dollar |
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
12,102 |
|
|
$ |
14,841 |
|
|
$ |
(2,739 |
) |
General and administrative |
|
|
5,311 |
|
|
|
5,931 |
|
|
|
(620 |
) |
Depreciation |
|
|
16 |
|
|
|
94 |
|
|
|
(78 |
) |
Total operating expenses |
|
|
17,429 |
|
|
|
20,866 |
|
|
|
(3,437 |
) |
Loss from operations |
|
|
(17,429 |
) |
|
|
(20,866 |
) |
|
|
3,437 |
|
Other expense, net |
|
|
(35 |
) |
|
|
(292 |
) |
|
|
257 |
|
Net loss |
|
$ |
(17,464 |
) |
|
$ |
(21,158 |
) |
|
$ |
3,694 |
|
Research and Development
Research and development expenses decreased by $2.7 million, or 18.5%, to $12.1 million for the six months ended June 30, 2022 from $14.8 million for the six months ended June 30, 2021. The decrease is primarily attributable to an approximately $2.6 million decrease in costs associated with the close-out and wind-down of vancomycin activities.
General and Administrative
General and administrative expenses decreased by $0.6 million, or 10.5%, to $5.3 million for the six months ended June 30, 2022 from $5.9 million for the six months ended June 30, 2021. The decrease is primarily attributable to decreased administrative and compensation costs associated with streamlining certain operational activities, which was initiated during the third quarter of 2021.
Other Expense, Net
Other expense, net decreased by $0.3 million, or 97%, during the six months ended June 30, 2022 from the six months ended June 30, 2021. The change is primarily related to a $0.3 million decrease in Interest expense, net during the six months ended June 30, 2022, which is a result of the lower interest rate associated with the Amended Loan Agreement.
Liquidity and Capital Resources
As of June 30, 2022, we had $95.2 million of cash and cash equivalents, $47.3 million in short-term investments, and an accumulated deficit of approximately $318 million. As discussed in Note 6. Long-term Debt in the notes to the condensed consolidated financial statements included in this Quarterly Report, we entered into a Loan and Security Agreement with Silicon Valley Bank during the year ended December 31, 2017, which was amended a fourth time in March 2021, under which we have drawn a total of $25 million. During April 2022, we entered into the Amended Loan Agreement that provided for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.
On March 11, 2021, we completed a public issuance of our common stock and pre-funded warrants for gross proceeds of approximately $130 million and net proceeds, after deducting underwriting discounts, commissions and offering expenses, of approximately $122.2 million as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report. Since 2017, we have completed four public offerings with combined net proceeds, after deducting the underwriting discounts and commissions and offering expenses, of approximately $257.6 million.
We have used and intend to use the net proceeds from these offerings for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial and given the uncertainty created by the COVID-19 global pandemic, we will continue to monitor our liquidity and capital requirements.
21
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Cash used in operating activities |
|
$ |
(17,741 |
) |
|
$ |
(21,791 |
) |
Cash provided by (used in) investing activities |
|
|
78,860 |
|
|
|
(81,171 |
) |
Cash provided by financing activities |
|
|
87 |
|
|
|
120,790 |
|
Effect of exchange rate changes |
|
|
(65 |
) |
|
|
(55 |
) |
Net change in cash |
|
$ |
61,141 |
|
|
$ |
17,773 |
|
Cash flows from operating activities
Cash used in operating activities for the six months ended June 30, 2022 was $17.7 million, consisting of a net loss of $17.5 million, a net $1.9 million decrease in changes in operating assets and liability predominately associated with a decrease in Accounts payable and Accrued expenses and other current liabilities relating to the wind-down or completion of our non-aPAP trials. This was partially offset by approximately $1.7 million of noncash charges (comprised of depreciation and amortization including right-of-use assets, accretion on discount to short-term investments, amortization of debt issuance costs and stock-based compensation).
Cash flows from investing activities
Cash provided by investing activities of $78.9 million for the six months ended June 30, 2022 was primarily associated with cash provided by proceeds from the maturities and net sales of short-term investments partially offset by cash used for purchases of short-term investments.
Cash flows from financing activities
Cash provided by financing activities was minimal for the six months ended June 30, 2022. The change from the six months ended June 30, 2021 is primarily related to $122.1 million in net proceeds from the public issuance of common stock and pre-funded warrants in March 2021 and $2.5 million in net proceeds from the exercise of warrants. This was partially offset by the payment of $3.9 million to repurchase outstanding warrants, as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report.
Future Funding Requirements
We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.
As of June 30, 2022, we had cash, cash equivalents, and short-term investments of approximately $142.4 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 9. Commitments - Manufacturing and Other, of the condensed consolidated financial statements in this Quarterly Report, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
Although we believe we are well capitalized based on our current operations, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market product candidate to third parties that we would otherwise prefer to develop and market ourselves.
22
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements, of the condensed consolidated financial statements in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have market risk exposure related to our cash, cash equivalents, and short-term investment securities. Such interest-earning instruments carry a degree of interest rate risk; however, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 1% change in interest rates during any of the periods presented would not have a material impact on our condensed consolidated financial statements. Additionally, our investment securities are fixed income instruments denominated and payable in U.S. dollars and have short-term maturities, typically less than twelve months, and typically carry credit ratings of “A” at a minimum by two of three Nationally Recognized Statistical Rating Organizations, specifically Moody’s, Standard & Poor’s, or Fitch. As such, we do not believe that our cash, cash equivalents, and short-term investment securities have significant risk of default or illiquidity.
We also have interest rate exposure related to our long-term debt. As of June 30, 2022, the Amended Loan Agreement bore interest equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Changes in the prime rate would have impacted our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on June 30, 2022 were to have occurred, this change would not have had a material effect on our interest expense with respect to outstanding borrowed amounts.
We have ongoing operations in Europe and pay those vendors in local currency, including Euros or Danish Krone. At times, we seek to limit the impact of foreign currency fluctuations through the use of derivative instruments and short-term foreign currency forward exchange contracts not designated as hedging instruments. We did not recognize any significant exchange rate losses during the six months ended June 30, 2022 and 2021. A 10% change in the Euro-to-dollar or Krone-to-dollar exchange rate on June 30, 2022 would not have had a material effect on our results of operations or financial condition.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. While certain costs have increased during 2022, we do not believe that inflation had a material effect on our results of operations during the periods presented.
Although we do not believe that we are currently exposed to material changes in the risks related to our cash, cash equivalents, and short-term investment securities, interest rates of our long-term debt, or foreign currency exchange rates, we are cautiously and actively monitoring potential risks associated with these instruments.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2022, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of June 30, 2022 based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. We are not currently a party to any material pending litigation or other material legal proceeding.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021, and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2021 or our other SEC filings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
An Exhibit Index has been attached as part of this report and is incorporated by reference.
25
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
3.2 |
|
|
10.1 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Savara Inc. |
|
|
|
|
Date: August 11, 2022 |
By: |
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) |
Date: August 11, 2022 |
By: |
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
27
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Pauls, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: August 11, 2022 |
|
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Lowrance, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: August 11, 2022 |
|
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Pauls, principal executive officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
August 11, 2022
/s/ Matthew Pauls |
Matthew Pauls |
Chief Executive Officer and Chair of the Board of Directors |
(Principal Executive Officer) |
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Lowrance, principal financial officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
August 11, 2022
/s/ David Lowrance |
David Lowrance |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |