Pulmatrix(PULM) - 2021 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's analysis, market risk, and internal controls Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $63,445 | $31,657 | | Total current assets | $64,494 | $32,538 | | Total assets | $69,850 | $38,169 | | Total current liabilities | $7,088 | $8,254 | | Total liabilities | $13,204 | $15,030 | | Total stockholders' equity | $56,646 | $23,139 | Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $1,390 | $2,762 | | Research and development | $3,856 | $5,287 | | General and administrative | $1,619 | $2,212 | | Total operating expenses | $5,475 | $7,499 | | Loss from operations | $(4,085) | $(4,737) | | Net loss | $(4,104) | $(4,686) | | Net loss per share, basic and diluted | $(0.09) | $(0.23) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity, including stock issuance and net loss, over the reporting period Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | January 1, 2021 | March 31, 2021 | | :----------------------------------- | :-------------- | :------------- | | Balance — Total Stockholders' Equity | $23,139 | $56,646 | | Issuance of common stock, net | — | $37,079 | | Net loss | $(4,104) | $(4,104) | Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in)/provided by operating activities | $(5,495) | $798 | | Net cash used in investing activities | $0 | $(96) | | Net cash provided by financing activities | $37,283 | $260 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $31,788 | $962 | | Cash, cash equivalents and restricted cash — end of period | $63,649 | $24,606 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements - Pulmatrix, Inc. is a clinical-stage biotechnology company focused on inhaled therapeutic products using its proprietary iSPERSE™ dry powder delivery platform[21] - Principal sources of revenue are collaborative arrangements and license agreements (Cipla, JJEI, Sensory Cloud), recognized as services are provided or when sales-based royalties occur[30][31][33] - Johnson & Johnson Enterprise Innovation, Inc. (JJEI) exercised its option to terminate the license agreement in April 2021, effective July 6, 2021, reverting all rights to PUR1800 and PUR5700 back to Pulmatrix[44][74] - Pulmatrix notified Cipla Technologies LLC of a material breach on May 10, 2021, due to Cipla's refusal to fund 50% of Pulmazole development costs, demanding reaffirmation within 30 days or termination and reacquisition of Pulmazole rights for 25% of fair market value[49][76] - On February 16, 2021, the company closed a registered direct offering of 20,000,000 shares of common stock, generating net proceeds of $37,079 thousand[53] Share-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $56 | $47 | | General and administrative | $272 | $296 | | Total share-based compensation expense | $328 | $343 | - As of March 31, 2021, the company had aggregate commitments of approximately $1,460 thousand remaining on research and development contracts[69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, liquidity, capital resources, and critical accounting policies Forward-Looking Statements This section identifies statements about future expectations and outlines inherent risks and uncertainties - The report contains forward-looking statements identified by terms such as 'anticipates,' 'expects,' 'plans,' and 'would,' which are subject to risks and uncertainties[80] - Key risks include the impact of COVID-19 on clinical trials, recurring losses, inability to execute R&D plans, manufacturing challenges, termination of license agreements, and intense industry competition[81] Overview This section introduces the company's core business, proprietary technology, product pipeline, and funding strategy - Pulmatrix is a clinical-stage biotechnology company focused on developing novel inhaled therapeutic products using its proprietary iSPERSE™ dry powder delivery technology for respiratory and other diseases[83][84] - The current pipeline includes Pulmazole (for ABPA in asthma/CF), PUR1800 (for AECOPD), and PUR3100 (for acute migraine)[86] - The company expects to incur significant expenses and increasing operating losses, aiming to fund operations through equity/debt financings, licensing agreements, and collaborations[88][89][90] Recent Developments This section highlights significant events impacting the company, including clinical study updates, partnership changes, and financing activities - The COVID-19 pandemic led to the termination of the Phase 2 Pulmazole clinical study in July 2020 and could delay enrollment for the PUR1800 Phase 1b study[96][100] - Pulmatrix notified Cipla of a material breach regarding the Pulmazole agreement due to Cipla's refusal to fund 50% of development costs for the planned Phase 2b study, potentially leading to termination and reacquisition of rights[98] - JJEI terminated its license agreement for PUR1800 in April 2021, effective July 6, 2021, with Pulmatrix intending to continue PUR1800 development[101] - A registered direct offering closed on February 16, 2021, raising $37.1 million in net proceeds from the sale of 20,000,000 common shares[102] Financial Overview This section summarizes the company's revenue sources, key expense categories, and accounting policies - Revenues are generated from collaboration and license agreements (Cipla, JJEI, Sensory Cloud); no product sales to date[103] Research and Development Expenses (YoY Change, in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------------------- | :------ | :------ | :----- | | Total R&D Expense | $3,856 | $5,287 | $(1,431) | | Decrease in PUR1800 project spend | | | $(1,200) | | Decrease in Pulmazole Phase 2 spend | | | $(1,000) | | Increase in PUR3100 pre-clinical/manufacturing | | | $700 | | Increase in general operating expenses | | | $100 | General and Administrative Expenses (YoY Change, in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------------------- | :------ | :------ | :----- | | Total G&A Expense | $1,619 | $2,212 | $(593) | | Decrease in employment costs | | | $(400) | | Decrease in consulting costs | | | $(100) | | Decrease in patent costs | | | $(100) | - There have been no material changes to the company's critical accounting policies and estimates since the 2020 Form 10-K[111] Results of Operations This section details the company's financial performance, including revenues, operating expenses, and net loss for the period Results of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------- | :------ | :------ | :----- | | Revenues | $1,390 | $2,762 | $(1,372) | | Total operating expenses | $5,475 | $7,499 | $(2,024) | | Loss from operations | $(4,085) | $(4,737) | $652 | | Net loss | $(4,104) | $(4,686) | $582 | Liquidity and Capital Resources This section discusses the company's cash position, funding needs, and ability to meet short-term and long-term obligations - As of March 31, 2021, the company had an accumulated deficit of $238.6 million and cash and cash equivalents of $63.4 million[116] - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements for at least the next 12 months, but additional capital will be needed for ongoing development[117][118] - The COVID-19 pandemic introduces significant economic uncertainty and volatility, potentially impacting the company's ability to raise sufficient additional capital[119][120] Major Sources and Uses of Cash (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in)/provided by operating activities | $(5,495) | $798 | | Net cash used in investing activities | $0 | $(96) | | Net cash provided by financing activities | $37,283 | $260 | | Net increase/(decrease) in cash and cash equivalents | $31,788 | $962 | - Net cash provided by financing activities for Q1 2021 was $37.3 million, primarily from the issuance of common stock ($37.1 million) and warrant exercises ($0.2 million)[127][128][129] - The company has no off-balance sheet arrangements that are material to investors[131] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no material quantitative or qualitative disclosures about market risk applicable to the company for the reporting period - Not applicable[132] Item 4. Controls and Procedures The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2021. No material changes in internal control over financial reporting were identified during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[133] - No material changes in internal control over financial reporting were identified during the quarter ended March 31, 2020 (as stated in the original text)[135] PART II — OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings, nor is it aware of any threatened or pending litigation - The company is not aware of any material legal proceedings, threatened or pending litigation, or proceedings contemplated by governmental authorities[138] Item 1A. Risk Factors This section updates risk factor disclosures, highlighting contractual disputes, COVID-19 impact on studies, and stock price volatility - The company is in a contractual dispute with Cipla regarding the Pulmazole development agreement, which may result in delays, legal costs, or the loss of rights to Pulmazole[142][144][146] - The COVID-19 pandemic has caused interruptions and delays in clinical studies, including the termination of the Phase 2 Pulmazole study and potential delays for the PUR1800 Phase 1b study, and continues to pose indeterminable adverse effects on business and the global economy[147][148][149][150] - The price of the company's common stock is subject to significant fluctuation and volatility due to various factors, including industry conditions, financial performance, strategic announcements, and general market conditions (including COVID-19)[152][153][155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities and no repurchases of its own equity securities during the quarter ended March 31, 2021 - No unregistered sales of equity securities occurred during the quarter[156] - The company did not repurchase any of its equity securities during the quarter ended March 31, 2021[157] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the reporting period - None[158] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[159] Item 5. Other Information The company reported no other information to disclose under this item - None[160] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, such as corporate governance documents, warrants, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Restated Bylaws, Forms of Common and Placement Agent Warrants, Securities Purchase Agreements, and Certifications (302 and 906)[166] SIGNATURES This section contains the official signatures of the company's executive officers, certifying the report - The report was signed by Teofilo Raad, President and Chief Executive Officer, and Michelle S. Siegert, Vice President, Finance, on May 11, 2021[164]