Pulmatrix(PULM) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements and detailed notes on accounting policies, financial instruments, and key agreements Consolidated Balance Sheets Consolidated Balance Sheet Highlights | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Cash and cash equivalents | $30,753 | $35,628 | | Total current assets | $32,800 | $38,147 | | Total assets | $36,059 | $40,953 | | Total current liabilities | $4,732 | $5,022 | | Total liabilities | $9,049 | $9,844 | | Total stockholders' equity | $27,010 | $31,109 | Consolidated Statements of Operations Consolidated Statements of Operations Highlights | Metric | Three Months Ended March 31, 2023 (in thousands, except per share data) | Three Months Ended March 31, 2022 (in thousands, except per share data) | | :--------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Revenues | $1,499 | $1,160 | | Research and development expenses | $3,874 | $4,149 | | General and administrative expenses | $2,210 | $1,974 | | Total operating expenses | $6,084 | $6,123 | | Loss from operations | $(4,585) | $(4,963) | | Net loss | $(4,448) | $(4,973) | | Net loss per share - basic and diluted | $(1.22) | $(1.51) | | Weighted average common shares outstanding | 3,650,769 | 3,297,280 | Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity Highlights | Metric | January 1, 2023 (in thousands) | March 31, 2023 (in thousands) | | :-------------------------- | :----------------------------- | :---------------------------- | | Total Stockholders' Equity | $31,109 | $27,010 | | Net loss | - | $(4,448) | | Stock-based compensation | - | $296 | | Issuance of common stock | - | $53 | Key Changes (Q1 2023): * Net loss of $4,448 thousand * Stock-based compensation added $296 thousand to additional paid-in capital * Issuance of common stock, net of issuance costs, added $53 thousand Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(4,928) | $(6,144) | | Net cash used in investing activities | $- | $(10) | | Net cash provided by (used in) financing activities | $53 | $(152) | | Net decrease in cash, cash equivalents and restricted cash | $(4,875) | $(6,306) | | Cash, cash equivalents and restricted cash — end of period | $32,378 | $49,159 | Notes to Condensed Consolidated Financial Statements Note 1. Organization - Pulmatrix, Inc. is a clinical-stage biopharmaceutical company developing novel inhaled therapeutic products using its proprietary iSPERSE dry powder delivery platform for respiratory and other diseases[23] Note 2. Summary of Significant Accounting Policies and Recent Accounting Standards - The condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP, with certain information condensed or omitted as permitted by SEC rules[24] - Management's significant estimates include future expected costs for revenue recognition, clinical trial accruals, incremental borrowing rate, and income taxes[26] - For the three months ended March 31, 2023, 100% of revenue and accounts receivable were from one customer, indicating a high concentration of credit risk[28] - The Company adopted ASU 2016-13 (Financial Instruments—Credit Losses) on January 1, 2023, which did not have a material effect on its financial statements[31] Note 3. Fair Value of Financial Instruments - As of March 31, 2023, and December 31, 2022, the Company did not hold any financial assets or liabilities measured at fair value on a recurring or nonrecurring basis, and there were no transfers between fair value levels[33] Note 4. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets | Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------- | | Clinical and consulting | $579 | $517 | | Insurance | $157 | $286 | | Software and hosting costs | $124 | $99 | | Other | $294 | $166 | | Total | $1,154 | $1,068 | Change: Total prepaid expenses and other current assets increased by $86 thousand from December 31, 2022, to March 31, 2023 Note 5. Property and Equipment, Net Property and Equipment, Net | Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------- | | Laboratory equipment | $1,827 | $1,827 | | Leasehold improvements | $664 | $664 | | Computer equipment | $275 | $275 | | Office furniture and equipment | $217 | $217 | | Less accumulated depreciation and amortization | $(2,780) | $(2,748) | | Property and equipment, net | $203 | $235 | Change: Net property and equipment decreased by $32 thousand, primarily due to depreciation and amortization expense of $32 thousand for Q1 2023 Note 6. Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities | Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------- | | Clinical and consulting | $523 | $475 | | Wages and incentives | $460 | $1,130 | | Legal and patents | $457 | $- | | Other | $222 | $33 | | Total | $1,662 | $1,638 | Change: Total accrued expenses and other current liabilities increased by $24 thousand, driven by increases in legal and patents and clinical and consulting, partially offset by a decrease in wages and incentives Note 7. Significant Agreements (Cipla) - The Company has a Development and Commercialization Agreement with Cipla Technologies LLC for the co-development and commercialization of PUR1900, an inhaled itraconazole formulation for pulmonary indications[37] - The agreement involves cost-sharing, with the Company and Cipla responsible for 60% and 40% of Direct Costs, respectively, potentially shifting to 50/50 upon milestone achievement, with other development costs shared 50/50[39][85] - Revenue is recognized using an input method based on costs incurred for research and development services and the license to Assigned Assets, with $1.5 million in revenue recognized for Q1 2023 and $6.0 million in deferred revenue related to unsatisfied obligations[45][46] Key Development Milestones for PUR1900 Phase 2b | Milestone | Milestone Date | | :---------------------------------------------------- | :------------- | | 25% of patients enrolled in Phase 2b clinical study are dosed | June 30, 2023 | | Company delivers Topline Results to the JSC | June 30, 2024 | Note 8. Common Stock - The Company has an At-The-Market (ATM) Sales Agreement with H.C. Wainwright and Co., LLC to sell up to $20.0 million of common stock[47] Common Stock Sales (Q1 2023) | Metric | Value | | :-------------------------------- | :------ | | Shares sold | 13,100 | | Weighted-average price per share | ~$4.25 | | Net proceeds | ~$53k | Note 9. Warrants - No warrants were issued, exercised, or expired during the three months ended March 31, 2023[49] - Warrants to purchase up to 123,310 shares of common stock at $149.99 per share expired subsequent to March 31, 2023[49] Warrants Outstanding and Exercisable (March 31, 2023) | Metric | Value | | :-------------------------------- | :---------- | | Total outstanding warrants | 1,284,803 shares | | Total exercisable warrants | 1,268,848 shares | Note 10. Stock-based Compensation - The Company's Incentive Plan had 213,569 shares available for future grant as of March 31, 2023[50] Stock Option Activity (Q1 2023) | Metric | Number of Options | Weighted Average Exercise Price | | :-------------------------- | :---------------- | :------------------------------ | | Outstanding — January 1, 2023 | 304,823 | $28.66 | | Granted | 117,912 | $3.99 | | Forfeited or expired | (3,787) | $19.04 | | Outstanding — March 31, 2023 | 418,948 | $21.80 | | Exercisable — March 31, 2023 | 175,061 | $39.69 | Weighted-average grant-date fair value of options granted (Q1 2023): $3.27 per share Total Stock-based Compensation Expense | Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $72 | $63 | | General and administrative | $224 | $218 | | Total | $296 | $281 | Unrecognized stock-based compensation expense: $1.7 million, expected to be recognized over approximately 2.3 years[54] Note 11. Commitments and Contingencies - The Company has aggregate commitments of approximately $5.2 million for research and development activities, with $4.4 million expected to be incurred over the next 12 months[55] - The Company expects to be reimbursed $2.5 million of these R&D commitments under the Cipla Agreement[55] - The Company is not aware of any pending legal proceedings that would reasonably be expected to have a material impact on its financial position or results of operations[56] Note 12. Leases - The lease for the current corporate headquarters expires on August 31, 2023[57] Lease Liabilities (March 31, 2023) | Category | Amount (in thousands) | | :-------------------------- | :-------------------- | | Total lease payments (2023) | $791 | | Less: interest | $(12) | | Total lease liabilities | $779 | | Lease liabilities — short term | $779 | | Lease liabilities — long term | $- | - A new corporate headquarters lease at 36 Crosby Drive, Bedford, Massachusetts, is expected to commence in July 2023 for a 10-year noncancellable term, with the landlord providing a $3.9 million tenant allowance and the Company funding approximately $3.0 million for improvements[61] Lease Cost | Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------- | :----------------------------------------------- | :----------------------------------------------- | | Fixed lease cost | $378 | $357 | | Variable lease cost | $113 | $204 | | Total lease cost | $491 | $561 | Note 13. Income Taxes - The Company had no income tax expense for the three months ended March 31, 2023, and 2022, due to operating losses[63] - A full valuation allowance was recorded against deferred tax assets as of March 31, 2023, and December 31, 2022, indicating that it is more likely than not that the Company will not recognize the benefits of these assets[63] - The Company has no material uncertain tax positions as of March 31, 2023, and December 31, 2022[64] Note 14. Net Loss Per Share - Basic and diluted earnings (loss) per share are computed using the two-class method[66] Potentially Dilutive Securities Excluded from Diluted EPS (Antidilutive) | Security Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Options to purchase common stock | 418,948 | 288,038 | | Preferred stock convertible into common stock | - | 76,250 | | Warrants to purchase common stock | 1,284,803 | 1,539,745 | | Total | 1,703,751 | 1,904,033 | Note 15. Subsequent Events - The Company evaluated subsequent events through the date of financial statement issuance and concluded that no events require disclosure beyond what is already presented[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition, operational results, liquidity, business overview, pipeline, and future outlook Forward-Looking Statements - This report contains forward-looking statements regarding business plans, strategies, and projected operating results, which are subject to various risks and uncertainties[70] - Key risks include the impact of the COVID-19 pandemic, recurring losses and negative cash flows, inability to execute R&D and commercialization plans, manufacturing challenges, clinical trial delays, intellectual property issues, financing difficulties, intense competition, and regulatory approval hurdles[71] Overview of Business and Pipeline Business Description - Pulmatrix is a clinical-stage biopharmaceutical company focused on developing novel inhaled therapeutic products for respiratory and other diseases using its patented iSPERSE™ technology[74] - The iSPERSE™ platform is designed to deliver small, dense particles with high dispersibility and efficient delivery to the lungs, aiming to improve pharmacokinetics and reduce systemic side effects[75] - Advantages of iSPERSE™ include reduced inhaled powder mass, enhanced dosing efficiency, reduced cost of goods, and improved safety and tolerability profiles[76] Product Pipeline and Development Plans - The current pipeline includes PUR1900 for allergic bronchopulmonary aspergillosis (ABPA), PUR3100 for acute migraine, and PUR1800 for acute exacerbations of chronic obstructive pulmonary disease (AECOPD)[77] - The Company expects to incur significant expenses and increasing operating losses for at least the next several years to complete the PUR1900 Phase 2b clinical trial (topline data mid-2024), pursue PUR3100 Phase 2 studies (IND submission mid-2023), and advance PUR1800 (seeking partner for Phase 2)[80][81] - Strategic goals include identifying new product candidates, protecting and expanding the intellectual property portfolio (139 granted iSPERSE patents, 276 granted kinase inhibitor patents), and seeking partnerships and license agreements for PUR3100 and PUR1800[78][82] Therapeutic Candidates PUR1900 Development - PUR1900, an inhaled itraconazole formulation, is being co-developed and commercialized with Cipla for ABPA in patients with asthma[83] - A new Phase 2b clinical study with a 16-week dosing regimen began in Q1 2023, with topline data anticipated in mid-2024[88] - Development costs are shared, with the Company and Cipla responsible for 60% and 40% of Direct Costs, respectively, and 50/50 for other development costs, with Cipla potentially reimbursing an additional 10% of Direct Costs upon milestone achievement[85] PUR3100 Development - PUR3100 is an iSPERSE formulation of dihydroergotamine (DHE) for the treatment of acute migraine, aiming to be the first orally inhaled DHE treatment[92] - A Phase 1 clinical study completed in Q4 2022 demonstrated rapid systemic exposure (Tmax at 5 minutes), peak exposures in the targeted therapeutic range, and a lower incidence of nausea with no vomiting compared to IV DHE[95][96] - The Company plans to submit an Investigational New Drug (IND) Application in mid-2023 to conduct a randomized placebo-controlled Phase 2 clinical study, contingent on financing or partnership arrangements[98] PUR1800 Development - PUR1800, an inhaled kinase inhibitor for AECOPD, completed a Phase 1b clinical study in Q1 2022, showing good tolerability and low, consistent systemic exposure[99][101] - Chronic toxicology studies in rats and dogs demonstrated PUR1800 is safe and well-tolerated with chronic dosing, suggesting potential for chronic respiratory diseases beyond AECOPD[102] - The Company plans to pursue an appropriate partner to advance PUR1800 into a Phase 2 clinical trial[101] Financial Overview Revenues - To date, the Company has not generated any product sales[103] - Revenue for Q1 2023 and Q1 2022 was primarily generated by the collaboration and license agreement with Cipla on the PUR1900 program[103] Research and Development Expenses - Research and development expenses are expensed to operations as incurred and include employee-related costs, CRO/CMO expenses, clinical trial materials, and facility costs[104][105] - Approximately 82% of the Company's staff are research and development employees, supporting internal and external product development efforts[106] - The Company anticipates additional headcount, capital, and development costs as it identifies new opportunities for iSPERSE™ in additional indications[106] General and Administrative Expenses - General and administrative expenses primarily consist of salaries, benefits, stock-based compensation for executive, finance, business development, corporate communications, and HR functions, as well as facility costs, patent filing fees, and legal fees[107] - These expenses are anticipated to increase in the future due to audit, legal, regulatory, and tax-related services for public company compliance, and potential commercialization preparations[108] Critical Accounting Policies, Judgments and Estimates - The preparation of condensed consolidated financial statements requires significant estimates and judgments, particularly concerning revenue recognition and the accrual and recognition of research and development expenses[109] - There were no changes to the Company's critical accounting policies, including estimates, assumptions, and judgments, during the three months ended March 31, 2023[110] Results of Operations Comparison of the Three Months Ended March 31, 2023 and 2022 Results of Operations | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | | Revenues | $1,499 | $1,160 | $339 | | Research and development | $3,874 | $4,149 | $(275) | | General and administrative | $2,210 | $1,974 | $236 | | Total operating expenses | $6,084 | $6,123 | $(39) | | Loss from operations | $(4,585) | $(4,963) | $378 | | Interest income | $222 | $1 | $221 | | Other expense, net | $(85) | $(11) | $(74) | | Net loss | $(4,448) | $(4,973) | $525 | - Revenues increased by $0.3 million due to the Cipla Agreement[111] - Research and development expenses decreased by $0.3 million, primarily due to decreased spend in PUR3100 ($0.6 million) and PUR1800 ($0.3 million), partially offset by increased spend in PUR1900 ($0.6 million)[112] - General and administrative expenses increased by $0.2 million, mainly due to higher legal and professional services costs[113] Liquidity and Capital Resources - As of March 31, 2023, the Company had an accumulated deficit of $277.9 million and total cash and cash equivalents of $30.8 million[114] - The Company expects its existing cash and cash equivalents to fund operating expenses and capital expenditure requirements for at least the next 12 months and into the fourth quarter of 2024[116] - Additional capital will be needed to fund operations due to increasing development costs, which may be raised through equity offerings, debt financings, or strategic alliances[115] Major Sources and Uses of Cash | Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(4,928) | $(6,144) | | Net cash used in investing activities | $- | $(10) | | Net cash provided by (used in) financing activities | $53 | $(152) | | Net decrease in cash, cash equivalents, and restricted cash | $(4,875) | $(6,306) | - Net cash provided by financing activities in Q1 2023 was $53 thousand, primarily from the issuance of common stock under the ATM Offering[122][123] Known Trends, Events and Uncertainties - The ultimate impact of the COVID-19 pandemic and its ongoing effects on global economy, supply chains, and clinical trials remains uncertain[125] - The ongoing conflict between Russia and Ukraine, including related sanctions, could adversely impact geopolitical and macroeconomic conditions, contributing to increased market volatility[126] - These uncertainties may affect the Company's ability to raise sufficient additional capital and may require tailoring drug candidate development programs based on available funding[126] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable, as the Company has no material market risks requiring disclosure - The Company has no material market risks requiring quantitative or qualitative disclosure[129] Item 4. Controls and Procedures This section details the effectiveness of disclosure controls and procedures and confirms no material changes in internal controls Disclosure Controls and Procedures - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[130] - These controls provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported timely[130][131] Changes in Internal Controls over Financial Reporting - There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[132] PART II—OTHER INFORMATION Item 1. Legal Proceedings The Company is not aware of any material legal proceedings or threatened litigation that would impact its financial position - The Company is not aware of any material legal proceedings to which it or its subsidiaries are a party, or any threatened or pending litigation[135] Item 1A. Risk Factors Investors should consider the high degree of risk associated with common stock, detailed in the Annual Report on Form 10-K - Investing in the Company's common stock involves a high degree of risk[137] - Investors should refer to the 'Risk Factors' section in the Annual Report on Form 10-K for the year ended December 31, 2022, for a detailed discussion of risks[137] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales or issuer purchases of equity securities during the period - No unregistered sales of equity securities occurred during the period[138] - No issuer purchases of equity securities occurred during the period[139] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - No defaults upon senior securities occurred during the period[140] Item 4. Mine Safety Disclosures This section is not applicable, as the Company has no mine safety disclosures - This section is not applicable to the Company[141] Item 5. Other Information No other information requiring disclosure was reported in this section - No other information requiring disclosure was reported[142] Item 6. Exhibits This section refers to the 'Index to Exhibits' for a comprehensive list of filed documents, including certifications and XBRL - A list of exhibits filed or furnished with this Form 10-Q is provided in the 'Index to Exhibits'[143] - Exhibits include certifications (e.g., Section 302, Section 906) and Inline XBRL documents[149] SIGNATURES The report is duly signed by Pulmatrix, Inc.'s Chief Executive Officer and President, and Interim Chief Financial Officer - The report was signed by Teofilo Raad, Chief Executive Officer and President, and Peter Ludlum, Interim Chief Financial Officer, on May 12, 2023[147]