Avenue Therapeutics(ATXI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's analysis of financial condition and operations Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Avenue Therapeutics, Inc., including the balance sheets, statements of operations, statements of changes in stockholders' equity, and statements of cash flows, along with accompanying notes Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :----------------------------------- | :------------------------------- | :--------------------------------- | | Cash and cash equivalents | 3,326 | 2,594 | | Total assets | 4,161 | 2,672 | | Total current liabilities | 1,329 | 816 | | Total liabilities | 1,329 | 816 | | Total stockholders' equity | 2,832 | 1,856 | - Total assets increased by $1,489 thousand from December 31, 2024, to June 30, 2025, primarily due to an increase in cash and cash equivalents and a new receivable from a license termination agreement[9] - Total stockholders' equity increased by $976 thousand, driven by changes in additional paid-in capital and a reduction in accumulated deficit[9] Unaudited Condensed Consolidated Statements of Operations The financial statements reflect the company's financial performance for the periods ended June 30, 2025, highlighting a net income for the three months ended June 30, 2025, compared to a net loss in the prior year, and a reduced net loss for the six months ended June 30, 2025 | Metric | Three Months Ended June 30, 2025 ($ in thousands) | Three Months Ended June 30, 2024 ($ in thousands) | Six Months Ended June 30, 2025 ($ in thousands) | Six Months Ended June 30, 2024 ($ in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Other revenue | 1,404 | — | 1,404 | — | | Research and development expenses | 192 | 1,361 | 603 | 3,752 | | General and administrative expenses | 915 | 1,462 | 2,408 | 2,778 | | Net income (loss) | 329 | (2,701) | (1,529) | (7,050) | | Net income (loss) attributable to Avenue | 335 | (2,692) | (1,517) | (7,032) | | Net income (loss) per common share (basic & diluted) | 0.11 | (6.43) | (0.49) | (18.86) | - The company reported a net income of $329 thousand for the three months ended June 30, 2025, a significant improvement from a net loss of $2,701 thousand in the same period of 2024, primarily due to $1.4 million in other revenue from the AnnJi license termination and reduced operating expenses[12] - For the six months ended June 30, 2025, the net loss decreased to $1,529 thousand from $7,050 thousand in the prior year, driven by the new revenue stream and substantial reductions in research and development expenses[12] Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity This section details changes in stockholders' equity, including additional paid-in capital and accumulated deficit, for the six months ended June 30, 2025 | Metric | Balance at Dec 31, 2024 ($ in thousands) | Balance at June 30, 2025 ($ in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------ | | Additional paid-in capital | 105,377 | 108,155 | | Accumulated deficit | (102,580) | (104,097) | | Total stockholders' equity | 1,856 | 2,832 | - Additional paid-in capital increased by $2,778 thousand for the six months ended June 30, 2025, primarily due to ATM sales of common stock and share-based compensation[16] - The accumulated deficit increased by $1,517 thousand during the six months ended June 30, 2025, reflecting the net loss for the period[16] Unaudited Condensed Consolidated Statements of Cash Flows This section presents the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 ($ in thousands) | Six Months Ended June 30, 2024 ($ in thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Operating activities | (1,362) | (5,373) | | Financing activities | 2,094 | 8,509 | | Net change in cash and cash equivalents | 732 | 3,136 | | Cash and cash equivalents, end of period | 3,326 | 4,919 | - Net cash used in operating activities significantly decreased to $1,362 thousand for the six months ended June 30, 2025, from $5,373 thousand in the prior year, mainly due to a reduced net loss and changes in operating assets and liabilities[20] - Net cash provided by financing activities was $2,094 thousand for the six months ended June 30, 2025, primarily from ATM sales of common stock, a decrease from $8,509 thousand in the prior year which included significant proceeds from warrant exercises[20] NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1 - Organization, Plan of Business Operations This note describes the company's business, product candidates, recent Nasdaq delisting, AnnJi license termination, and going concern considerations - Avenue Therapeutics, Inc. is a specialty pharmaceutical company focused on developing therapies for neurologic diseases, with current product candidates including IV tramadol for post-operative acute pain and BAER-101 for epilepsy and panic disorders[22] - The company's common stock was delisted from Nasdaq on March 19, 2025, due to non-compliance with listing rules and now trades on the OTCID under the symbol 'ATXI'[23] - The license agreement for AJ201 with AnnJi Pharmaceutical Co. Ltd. was terminated on April 24, 2025. Avenue transferred all rights to AJ201 back to AnnJi and received $1.4 million in net revenue, with potential for future milestone and royalty payments[25][26] - The company has incurred substantial operating losses and has an accumulated deficit of $104.1 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern without additional funding[30] Note 2 - Significant Accounting Policies This note outlines the key accounting principles and policies used in preparing the consolidated financial statements, including revenue recognition and fair value measurements - The consolidated financial statements are prepared in conformity with U.S. GAAP and include the accounts of the Company and its subsidiary, Baergic, with all intercompany balances eliminated[31][32] - The Company operates and manages its business as one operating and reportable segment[34] - Fair value measurements are classified into a three-level hierarchy based on the observability of inputs, with Level 3 inputs being unobservable and requiring significant judgment[38] - Basic and diluted net loss per share are computed by dividing net loss attributable to common shares outstanding, with potential dilutive securities excluded when anti-dilutive[41] | Potential Dilutive Securities | As of June 30, 2025 | As of June 30, 2024 | | :---------------------------- | :------------------ | :------------------ | | Unvested restricted stock units/awards | 532 | 1,028 | | Deferred stock units | 235,000 | — | | Warrants | 1,476,200 | 1,476,200 | | Options | 256,474 | 22,474 | | Class A Preferred shares | 222 | 222 | | Total potential dilutive effect | 1,968,428 | 1,499,924 | - The Company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures) and ASU No. 2024-03 (Expense Disaggregation Disclosures), with adoption planned for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[47][48] Note 3 — Licenses/Supplier Agreements This note details the company's exclusive license agreements for IV tramadol and neurological disorder compounds, including potential milestone and royalty payments - The Company holds an exclusive license for IV tramadol in the U.S. market from Revogenex, with potential future milestone payments of $3.0 million upon FDA approval and high single-digit to low double-digit royalties on net sales[49] - Baergic, a subsidiary, has license agreements with AstraZeneca AB and Cincinnati Children's Hospital Medical Center for compounds related to neurological disorders, involving potential development milestones up to $81.5 million and commercial/sales-based milestones up to $151 million, plus low to high single-digit royalties[51][52] Note 4 — Related Party Agreements This note describes agreements and transactions with related parties, including management services from Fortress Biotech and consulting fees for Baergic - Fortress Biotech, Inc. provides management services to Avenue, with related expenses recorded 50% in R&D and 50% in G&A, totaling $0.1 million for the three months and $0.3 million for the six months ended June 30, 2025[53] - Avenue issued 22,476 common shares to Fortress as an Annual Equity Fee on January 2, 2025, representing 2.5% of fully-diluted outstanding equity[55] - For the six months ended June 30, 2025, Avenue recorded a Financing Equity Fee of $0.1 million and issued 23,474 common shares to Fortress[56] - Avenue provides management, advisory, and consulting services to its subsidiary Baergic, for an annual consulting fee of $0.5 million, which increases to $1.0 million if Baergic's net assets exceed $100 million[61] Note 5 — Accounts Payable and Accrued Expenses This note provides a breakdown of accounts payable and accrued expenses as of June 30, 2025, and December 31, 2024 | Category | As of June 30, 2025 ($ in thousands) | As of December 31, 2024 ($ in thousands) | | :------------------------------ | :----------------------------------- | :------------------------------------- | | Accounts payable | 79 | 155 | | Accrued employee compensation | 107 | 18 | | Accrued contracted services and other | 766 | 481 | | Total accounts payable and accrued expenses | 952 | 654 | - Total accounts payable and accrued expenses increased by $298 thousand from December 31, 2024, to June 30, 2025, primarily due to increases in accrued employee compensation and accrued contracted services[63] Note 6 - Commitments and Contingencies This note discloses the company's commitments and contingencies, including the absence of material litigation or lease obligations - The Company is not party to any leases for office space or equipment[64] - As of June 30, 2025, there was no litigation against the Company that is expected to have a material adverse effect on its business, financial condition, results of operations, or cash flows[65] Note 7 - Stockholder's Equity This note details the components of stockholders' equity, including preferred stock, common stock, warrants, and stock-based compensation plans - Class A Preferred Stock holders have superior voting rights, casting 1.1 times the votes of common stock on an as-if-converted basis, ensuring a voting majority[67] - Each share of Class A Preferred Stock is convertible into 1,125 shares of Common Stock, adjusted for reverse stock splits in September 2022 and April 2024[68] - The Company is no longer eligible to use its Form S-3 shelf registration statement or the ATM facility due to its delisting from Nasdaq[71][72] - In January 2024 and May 2024, the Company conducted warrant inducement and private placement transactions, resulting in the issuance of new warrants and the exercise of existing ones, with associated losses on settlement and deemed dividends recorded[73][74][75][76][77][78] - The 2015 Incentive Plan was amended in June 2024 to increase authorized shares issuable to 5,070,223 and extend its term to June 24, 2034[79] - As of June 30, 2025, the Company had 235,532 unvested restricted stock units and awards, with $0.1 million in unrecognized stock-based compensation expense expected to be recognized over 1.0 years[81][82] - Total stock-based compensation expense for the six months ended June 30, 2025, was $360 thousand, slightly down from $383 thousand in the prior year[87] - The Company made payments totaling $0.2 million to InvaGen during the six months ended June 30, 2025, under a share repurchase agreement, with approximately $1.4 million paid in aggregate to date[89] Note 8 - Common Stock Warrants This note explains the accounting treatment and fair value measurement of common stock warrants, classified as liability instruments - Warrants are classified as either equity or liability instruments based on specific terms and accounting guidance, with liability-classified warrants re-measured at fair value each reporting period[90][91] - The October 2022 Warrants are classified as liabilities due to redemption terms outside the Company's control and are valued using the Black-Scholes Model[92][93] | Metric | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :-------------- | | Stock price | $2.00 | $0.20 | | Risk-free interest rate | 4.27% | 3.72% | | Expected term in years | 2.8 | 2.3 | | Expected volatility | 155% | 132% | - The fair value of warrant liabilities decreased from $16 thousand at December 31, 2024, to $0 at June 30, 2025, primarily due to changes in fair value and the exercise of warrants[94] Note 9 - Subsequent Events This note reports on events occurring after the balance sheet date that may require disclosure - No subsequent events requiring disclosure were reported as of the date of this report[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024 Forward-Looking Statements This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements regarding future activities, events, and financial conditions, which are subject to risks and uncertainties, including the need for regulatory approval of product candidates, potential adverse side effects, and the ability to secure future financing[96] - Key risks include the company's lack of drug products for sale, substantial doubt about its ability to continue as a going concern, reliance on third parties, and the impact of Nasdaq delisting on liquidity and market price[96][105] Overview This section provides a general business description, financial performance summary, and future capital needs of the company - Avenue Therapeutics, Inc. is a specialty pharmaceutical company developing IV tramadol for post-operative acute pain and BAER-101 for epilepsy and panic disorders[99] - The company reported a net loss of approximately $1.5 million for the six months ended June 30, 2025, and had an accumulated deficit of $104.1 million, primarily from R&D and G&A costs[100] - Additional capital through debt or equity offerings or strategic partnerships is needed to fund operations and product development, with no assurance of availability on acceptable terms[102] Recent Developments This section details key recent events, including Nasdaq delisting, AnnJi license termination, and updates on IV tramadol and BAER-101 development - The company's common stock was delisted from Nasdaq on March 19, 2025, due to non-compliance with the $2.5 million stockholders' equity rule and now trades on the OTCID under 'ATXI'[104][106][107] - The AnnJi License Agreement for AJ201 was terminated on April 24, 2025. Avenue transferred all rights to AnnJi and received $1.4 million in net revenue, with potential future milestone and royalty payments[110][111][112] - Avenue reached final agreement with the FDA in January 2024 on the Phase 3 safety study protocol for IV tramadol, designed to assess respiratory depression risk compared to IV morphine, but currently lacks plans to initiate the study without financing[114][115][116] - Preclinical data for BAER-101 showed full suppression of seizure activity in an epilepsy model, and the company is exploring strategic alternatives for Baergic and/or BAER-101, including partnerships or a sale, or initiating a Phase 2a study with additional financing[118][119] Critical Accounting Policies and Use of Estimates This section discusses management's significant judgments and estimates used in preparing the financial statements - The preparation of financial statements requires management to make estimates and judgments, particularly for accrued expenses and stock-based compensation, which are based on historical experience and known trends[120] - There were no material changes in critical accounting estimates or policies from December 31, 2024[121] Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements and their potential impact - Refer to Note 2, 'Significant Accounting Policies,' for a discussion of recent accounting pronouncements[122] Smaller Reporting Company Status This section clarifies the company's status as a smaller reporting company and its reduced disclosure obligations - The company qualifies as a 'smaller reporting company,' allowing for reduced disclosure obligations, such as presenting only two years of audited financial statements and simplified executive compensation disclosures[123] Basis of Presentation and Principles of Consolidation This section outlines the basis for financial statement preparation and consolidation principles, including non-controlling interests - The consolidated financial statements are prepared in conformity with U.S. GAAP and include the accounts of the Company and its subsidiary, Baergic, with all intercompany balances and transactions eliminated[124] - Net loss attributable to non-controlling interests is recorded based on the percentage of economic or ownership interest retained by third parties in Baergic[124] Results of Operations This section analyzes the company's financial performance for the three and six months ended June 30, 2025, compared to prior periods General This section provides an overview of the company's accumulated deficit and expected future operating losses - As of June 30, 2025, the company had an accumulated deficit of $104.1 million and expects to incur substantial operating losses for the foreseeable future as product candidates are still in development[126] Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the second quarter of 2025 against the same period in 2024 | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------------ | :----------------------- | :----------------------- | :---------------------- | :--------- | | Other revenue | 1,404 | — | 1,404 | —% | | Research and development expenses | 192 | 1,361 | (1,169) | (86)% | | General and administrative expenses | 915 | 1,462 | (547) | (37)% | | Income (loss) from operations | 297 | (2,823) | 3,120 | (111)% | | Net income (loss) attributable to Avenue | 335 | (2,692) | 3,027 | (112)% | - Other revenue of $1.4 million was recognized in Q2 2025 due to the AnnJi license termination, compared to no revenue in Q2 2024[128] - Research and development expenses decreased by $1.2 million (86%) in Q2 2025, primarily due to a $1.1 million decrease in AJ201 development costs following its sale[130] - General and administrative expenses decreased by $0.6 million (37%) in Q2 2025, driven by lower legal expenses, reduced stock issuance to Fortress, and decreased professional fees[132] - The company recorded a gain of $1 thousand from the change in fair value of warrant liabilities in Q2 2025, compared to a gain of $0.3 million in Q2 2024[135] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the first half of 2025 against the same period in 2024 | Metric | H1 2025 ($ in thousands) | H1 2024 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------------ | :----------------------- | :----------------------- | :---------------------- | :--------- | | Other revenue | 1,404 | — | 1,404 | —% | | Research and development expenses | 603 | 3,752 | (3,149) | (84)% | | General and administrative expenses | 2,408 | 2,778 | (370) | (13)% | | Income (loss) from operations | (1,607) | (6,530) | 4,923 | (75)% | | Net loss attributable to Avenue | (1,517) | (7,032) | 5,515 | (78)% | - Other revenue of $1.4 million was generated in H1 2025 from the AnnJi license termination, with no revenue in H1 2024[138] - Research and development expenses decreased by $3.2 million (84%) in H1 2025, primarily due to a $2.9 million reduction in AJ201 development costs[140] - General and administrative expenses decreased by $0.4 million (13%) in H1 2025, mainly due to lower professional fees and reduced equity issuance to Fortress[142] - The company recorded a gain of $16 thousand from the change in fair value of warrant liabilities in H1 2025, compared to a loss of $0.1 million in H1 2024[145] Liquidity and Capital Resources This section discusses the company's cash position, future funding requirements, and the impact of Nasdaq delisting on capital access - As of June 30, 2025, the company had $3.3 million in cash and cash equivalents. It expects to require additional financing to fund operations and product development for more than 12 months[147] - The Nasdaq delisting on July 18, 2025, makes it more difficult to obtain additional funding, as the company is no longer eligible to use its Form S-3 shelf registration statement or ATM facility[147] | Cash Flow Activity | Six Months Ended June 30, 2025 ($ in thousands) | Six Months Ended June 30, 2024 ($ in thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Operating activities | (1,362) | (5,373) | | Financing activities | 2,094 | 8,509 | | Net increase (decrease) in cash and cash equivalents | 732 | 3,136 | - Net cash used in operating activities decreased significantly to $1.4 million in H1 2025 from $5.4 million in H1 2024, primarily due to a reduced net loss and changes in operating assets and liabilities[149] - Net cash provided by financing activities was $2.1 million in H1 2025, mainly from ATM sales of common stock, a decrease from $8.5 million in H1 2024 which included substantial proceeds from warrant exercises[151][152] - Contractual obligations include potential milestone payments for Baergic's licenses (up to $81.5 million development, $151 million commercial) and IV tramadol ($3.0 million regulatory), plus royalties[154][155] - The company has paid approximately $1.4 million to InvaGen under a share repurchase agreement as of June 30, 2025, with a remaining contingent fee of up to $4.0 million from future financings[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Avenue Therapeutics, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk[157] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Disclosure Controls and Procedures This section describes the company's disclosure controls and procedures and management's conclusion on their effectiveness - The company maintains disclosure controls and procedures designed to ensure timely recording, processing, summarizing, and reporting of information required under the Exchange Act[158] - As of June 30, 2025, management, including the CEO and interim CFO, concluded that the company's disclosure controls and procedures were effective[160] - A control system provides only reasonable, not absolute, assurance that objectives are met, acknowledging inherent limitations and resource constraints[161] Changes in Internal Control over Financial Reporting This section reports on any material changes in internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[162] PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, and other required disclosures not covered in the financial information Item 1. Legal Proceedings This section states that there are no material legal proceedings pending against the company, beyond routine actions not expected to have a material adverse effect on its business - To the company's knowledge, there are no legal proceedings pending against it that are expected to have a material adverse effect on its business, financial condition, results of operations, or cash flows[163] Item 1A. Risk Factors This section refers readers to the 'Risk Factors' disclosed in the company's 2024 Form 10-K and other information in the current 10-Q, emphasizing that these may not cover all potential risks - Readers should carefully consider the 'Risk Factors' outlined in the 2024 Form 10-K and other information in this Quarterly Report on Form 10-Q, as additional unknown risks may also adversely affect the business[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked as 'N/A', indicating no information to report regarding unregistered sales of equity securities and use of proceeds - This item is not applicable, indicating no unregistered sales of equity securities or use of proceeds to report[165] Item 3. Defaults Upon Senior Securities This item is marked as 'N/A', indicating no information to report regarding defaults upon senior securities - This item is not applicable, indicating no defaults upon senior securities to report[166] Item 4. Mine Safety Disclosures This item is marked as 'N/A', indicating no information to report regarding mine safety disclosures - This item is not applicable, indicating no mine safety disclosures to report[167] Item 5. Other Information This section reports that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[168] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including various certificates of incorporation, bylaws, the AnnJi License Termination and Program Transfer Agreement, certifications from executive officers, and financial information in iXBRL format - The exhibits include amendments to the Certificate of Incorporation, Second Amended and Restated Bylaws, the AnnJi License Termination and Program Transfer Agreement, and certifications from the Principal Executive Officer and Principal Financial Officer[170] - Financial information for the period ended June 30, 2025, is provided in Inline Extensible Business Reporting Language (iXBRL) format[170] SIGNATURES This section contains the required signatures of the registrant's authorized officers, confirming the due filing of the report - The report is signed by Alexandra MacLean, M.D., Chief Executive Officer and Director, and David Jin, Interim Chief Financial Officer and Chief Operating Officer, on August 14, 2025[174]