Armata Pharmaceuticals Announces Third Quarter Results and Provides Corporate and Clinical Update

MARINA DEL REY, Calif., Nov. 12, 2019 /PRNewswire/ -- Armata Pharmaceuticals, Inc. (NYSE American: ARMP) ("Armata" or the "Company"), a clinical-stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections, today announced third quarter results and provided a corporate and clinical update.

Key Third Quarter and Subsequent Period Highlights:

    --  Announced development of new synthetic phage candidate, AP-PA02,
        targeting Pseudomonas aeruginosa, and elevated this candidate to its
        lead development program based on robust killing kinetics observed in
        pre-clinical trials to date
    --  Expanded Board of Directors with the appointment of research and
        development veteran Todd C. Peterson, Ph.D. who brings more than 35
        years of experience in biotechnology and life sciences research and
        development across the areas of molecular biology, nucleic acids and
        genomics product and technology development
    --  Strengthened clinical team with the appointment of Heather Dale Jones,
        M.D., as Medical Director. Dr. Jones, a pulmonologist, brings more than
        20 years of experience in clinical research and medical practice to the
        Armata team, and reinforces Armata's commitment to develop Pseudomonas
        phage product candidates for respiratory infections
    --  Announced receipt of a $1.3 million R&D tax credit from the Australian
        Tax Office
    --  Provided a corporate update at the Ladenburg Thalmann Healthcare
        Conference in September

"During the third quarter and subsequent period, we achieved important corporate and development objectives that we believe best position us for long-term success," said Todd R. Patrick, Chief Executive Officer of Armata. "Most notably, we introduced a new lead clinical program, the synthetic phage candidate AP-PA02, which we are developing to combat Pseudomonas aeruginosa, an increasingly resistant bacterial infection that is particularly problematic for cystic fibrosis patients. The emergence of AP-PA02 reflects the significant research and development capabilities that our company possesses, including our proprietary phage library that allowed us to screen AP-PA02 against a diverse panel of hundreds of Pseudomonas isolates, as well as our best-in-class GMP phage manufacturing capabilities. We are moving quickly with the goal of initiating a Phase 1 first-in-human trial in 2020. In parallel, we are working to optimize a second Pseudomonas phage candidate for the treatment of bacterial pneumonia.

"We also strengthened our team with the appointments of Dr. Todd Peterson as Board member and Dr. Heather Dale Jones as Medical Director. We are quickly approaching a transformational milestone for our company with the anticipated advancement of our phage programs into the clinic, and I am confident that with these appointments, we have the team in place to effectively leverage our proprietary capabilities and position us to be a leader in the development of phage-based therapeutics to combat the growing global crisis of antibiotic resistance," Mr. Patrick concluded.

Upcoming Milestones 2020:

    --  Initiate a clinical trial evaluating safety and tolerability of AP-PA02
        in cystic fibrosis patients chronically infected with P. aeruginosa
    --  Initiate development of an optimized Pseudomonas phage product candidate
        for the treatment of bacterial pneumonia utilizing a core set of phages
        derived from AP-PA02
    --  Obtain third party, non-dilutive funding to advance our Staphylococcus
        aureus phage into clinical trials
    --  Continue to screen pathogens against Armata's proprietary phage library
        to identify additional high-quality bacteriophage product candidates and
        expand the pipeline

Third Quarter Financial Results

Research and Development. Research and Development expenses for the three months ended September 30, 2019 were $3.0 million as compared to $1.9 million for the comparable period in 2018. The increase of $1.0 million was primarily related to a $0.4 million increase in stock-based compensation expense, $0.2 million increase in personnel expenses resulting from the merger of C3J Therapeutics, Inc. ("C3J") and AmpliPhi Biosciences Corporation to form Armata Pharmaceuticals (the "Merger") and $0.3 million increase in laboratory supplies and consulting costs.

General and Administrative. General and Administrative expenses for the three months ended September 30, 2019 were $3.8 million as compared to $0.5 million in the comparable period in 2018. The increase of $3.3 million was primarily due to a $2.1 million increase in stock-based compensation expense, $0.6 million increase in professional fees (legal, audit and investment banking) associated with the Merger, a $0.3 million increase in personnel-related expenses, and a $0.2 million increase in insurance costs.

Loss from Operations. Loss from operations for the three months ended September 30, 2019 was $6.8 million as compared to $2.4 million for the comparable period in 2018. The increase of $4.4 million was due to an increase in non-cash stock-based compensation and additional operating costs in connection with the Merger.

Cash and Equivalents. As of September 30, 2019, Armata held $8.7 million of unrestricted cash and cash equivalents as compared to $9.7 million as of December 31, 2018. Not reflected in the September 30, 2019 cash and cash equivalents balance, subsequent to the end of the quarter, the company received a $1.3 million R&D tax credit from the Australian Tax Office. Management believes its existing resources will be sufficient to fund planned operations into the second quarter of 2020.

As of November 12, 2019, there were approximately 9.9 million shares of common stock outstanding.

About Armata Pharmaceuticals, Inc.

Armata is a clinical-stage biotechnology company focused on the development of precisely targeted bacteriophage therapeutics for the treatment of antibiotic-resistant infections using its proprietary bacteriophage-based technology. Armata is developing and advancing a broad pipeline of natural and synthetic phage candidates, including clinical candidates for Pseudomonas aeruginosa, Staphylococcus aureus, and other pathogens. In addition, in collaboration with Merck, known as MSD outside of the United States and Canada, Armata is developing proprietary synthetic phage candidates to target an undisclosed infectious disease agent. Armata is committed to advancing phage with drug development expertise that spans bench to clinic including in-house phage specific GMP manufacturing.

Forward Looking Statements

This communication contains "forward-looking" statements, including, without limitation, statements related to the anticipated benefits of the Merger and related transactions, Armata's ability to meet expected milestones, expand its pipeline, and pursue additional potential partnerships, Armata's ability to be a leader in the development of phage-based therapeutics, and statements related to the timing and results of clinical trials, including the anticipated initiation of clinical trials of AP-PA02 and AP-SA02, Armata's ability to expand testing of isolates from around the world and the results of those tests, Armata's ability to develop new products based on bacteriophages and synthetic phages, and Armata's expectations for performance of Armata's therapeutic candidates based on Armata's recent nonclinical work. Any statements contained in this communication that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based upon Armata's current expectations. Forward-looking statements involve risks and uncertainties. Armata's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to the ability of Armata's lead clinical candidates, AP-PA02 and AP-SA02, to be more effective than previous candidates; Armata's ability to expedite development of AP-PA02; Armata's ability to advance its preclinical and clinical programs and the uncertain and time-consuming regulatory approval process; Armata's ability to develop products based on bacteriophages and synthetic phages to kill bacterial pathogens; the Company's expected market opportunity for its products; and Armata's ability to sufficiently fund its operations as expected, including obtaining additional funding as needed. Additional risks and uncertainties relating to Armata and its business can be found under the caption "Risk Factors" and elsewhere in Armata's filings and reports with the SEC, including in Armata's Annual Report on Form 10-K, filed with the SEC on March 25, 2019, Armata's Proxy Statement on Schedule 14A, filed with the SEC on April 4, 2019, as amended, and Armata's subsequent filings with the SEC. Armata expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Armata's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Media Contacts:

At Armata:
Steve Martin
Armata Pharmaceuticals, Inc.
ir@armatapharma.com
858-800-2492

Investor Relations:
Joyce Allaire
LifeSci Advisors, LLC
jallaire@lifesciadvisors.com
212-915-2569


                                                            
       
          Armata Pharmaceuticals, Inc.


                                                        
         
       Condensed Consolidated Balance Sheets




                                                                                                        September 30, 2019                          December 31, 2018

                                                                                                                                                ---

                                                                                                      (Unaudited)



     
              Assets



       Cash and cash equivalents                                                                                           $
        8,690,000               $
            9,663,000



       Prepaids and other current assets                                                                                         652,000                           697,000



       Held-for-sale assets, net                                                                                                 592,000




     
              Total current assets                                                                                           9,934,000                        10,360,000



     Property and equipment, net                                                                                               4,788,000                         3,249,000



     Other long term assets                                                                                                      836,000                           936,000



     Intangible assets, net                                                                                                   13,746,000



     
              Total assets                                                                                              $
        29,304,000              $
            14,545,000






     
              Liabilities and stockholders' equity



     
              Total current liabilities                                                                                  $
        4,965,000               $
            2,032,000



     Long term liabilities                                                                                                     3,130,000                         3,702,000



     Derivative liabilities                                                                                                                1,117,000



     Deferred tax liability                                                                                                    3,077,000




     
              Total liabilities                                                                                             11,172,000                         6,851,000





     
              Stockholders' equity                                                                                          18,132,000                         7,694,000



     
              Total liabilities and stockholders' equity                                                                $
        29,304,000              $
            14,545,000


                                                                                                   
          
                Armata Pharmaceuticals, Inc.


                                                                                               
         
            Condensed Consolidated Statements of Operations




                                                Three Months Ended September 30,                                    Nine Months Ended September 30,

                                                                                                                            ---

                                                                            2019                               2018                                                2019            2018

                                                                                                                                                                                 ---

                                                    (Unaudited)                                        (Unaudited)                                   (Unaudited)         (Unaudited)




                  Revenue                                           
              $                                     
              $                                       
              $                       
     $


                  Operating expenses:


     Research and development                                                          3,019,000                                                           1,915,000                             8,156,000               6,388,000


     Acquisition of in-process
      research and development                                                                                                                                                                                        6,767,000


     General and administrative                                                        3,758,000                                                             514,000                             7,220,000               1,709,000


                  Total operating expenses                                             6,777,000                                                           2,429,000                            15,376,000              14,864,000



                  Loss from operations                                               (6,777,000)                                                        (2,429,000)                         (15,376,000)           (14,864,000)



                  Other income (expense):


     Change in fair value of
      derivative liabilities                                                                                                                              (105,000)                            1,117,000               (241,000)


     Other income (expense), net                                                       (178,000)                                                          (237,000)                            (634,000)              (496,000)



                  Total other income (expense),
                   net                                                                 (178,000)                                                          (342,000)                              483,000               (737,000)



                  Loss before income taxes and
                   Net Loss                                                         $(6,955,000)                                                       $(2,771,000)                        $(14,893,000)          $(15,601,000)



     Net loss per share,
      basic                                                                      $
             (0.73)                                                 $
              (0.60)                   $
              (2.05)     $
              (3.35)



     Weighted average shares
      outstanding, basic                                                               9,552,688                                                           4,652,777                             7,254,803               4,652,777



     Net loss per share,
      diluted                                                                    $
             (0.73)                                                 $
              (0.60)                   $
              (2.11)     $
              (3.35)



     Weighted average shares
      outstanding, diluted                                                             9,552,688                                                           4,652,777                             7,497,194               4,652,777



               Note: Historical share numbers
                have been adjusted for the
                merger and reverse 1-for-14
                reverse stock split to provide
                comparability with the current
                period.


                                 
              
                Armata Pharmaceuticals, Inc.


                        
              
                Condensed Consolidated Statement of Cash Flows




                                                                            Nine Months Ended September 30,



                                                              2019                                                 2018

                                                                                                                   ---

                                                       (Unaudited)                                         (Unaudited)


                   Operating activities:



     Net loss                                                       $
              (14,893,000)                                     $
         (15,601,000)


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


       Acquisition of in-process
        research and development                                                                                        5,691,000


      Change in fair value of
       derivative liabilities                                                   (1,117,000)                                                 241,000


      Stock-based compensation                                                    3,224,000                                                   47,000



     Depreciation                                                                1,049,000                                                1,139,000


      Non-cash interest expense                                                     717,000                                                  709,000


      Changes in operating assets and
       liabilities, net                                                         (1,833,000)                                                 342,000


                   Net cash used in operating
                    activities                                                 (12,853,000)                                             (7,432,000)



                   Investing activities:


      Cash acquired in reverse merger
       transaction                                                                3,008,000


      Purchase and sale/maturity of
       investment securities, net                                                                                       9,624,000


      Purchases of property and
       equipment, net                                                             (203,000)                                               (275,000)


                   Net cash used in investing
                    activities                                                    2,805,000                                                9,349,000



                   Financing activities:


      Payment of deferred
       consideration for asset
       acquisition                                                              (1,000,000)


      Proceeds from sale of common
       stock, net of offering costs                                               9,975,000


                   Net cash provided by used in
                    financing activities                                          8,975,000



      Net increase (decrease) in cash
       and cash equivalents                                                     (1,073,000)                                               1,917,000


      Cash, cash equivalents and
       restricted cash, beginning of
       period                                                                    10,463,000                                               12,276,000


      Cash, cash
       equivalents and
       restricted cash,
       end of period                                                    $
              9,390,000                                        $
         14,193,000

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SOURCE Armata Pharmaceuticals, Inc.