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ATXI: Second Quarter 2018 Results

Zacks Small Cap Research

By John Vandermosten, CFA



Avenue Therapeutics (ATXI) provided their press release and their form 10-K including second quarter 2018 financial results for investor review. Total expenses for the second quarter were $4.7 million, comprised of research and development expense of $3.8 million and general and administrative expense of $0.9 million. No revenues were reported. Net loss was ($4.7) million or ($0.45) per share.

R&D expense was $3.8 million in 2Q:18, rising from $0.4 million in 2Q:17 as the company ramped up its two Phase III studies for IV tramadol. The amount was lower than our expectation due to an effort to conserve cash and delay some non-critical activities in order to focus on the abdominoplasty trial which is targeted for 2H:18.

G&A expenses were $927 thousand in the quarter, down from $1.3 million in the same period last year on account of lower levels of stock compensation. This was partially offset by increases in increases personnel costs, market research costs and other general expenses. This compares to our estimate of $1.5 million.

Interest income in the quarter was $24 thousand. Cash balance stood at $8.9 million as of June 30, 2018 after 2Q:18 cash burn of ($6.0) million.

Following the favorable safety and efficacy results from the bunionectomy study, and in preparation for the soft tissue study, Avenue has been developing the protocol, preparing contracts, initiating the data monitoring and management with the CROs and other activities that will allow for an immediate start to the final Phase III study. Other activities during the quarter include the key opinion leader (KOL) call on June 11 which discussed trends in surgical pain management. We provided a review of the discussion here.

We reduce our estimates for cash burn in 2018 to reflect the company’s sharpened focus on critical efforts. Avenue is seeking non-dilutive forms of capital to obtain sufficient cash to complete the soft tissue (abdominoplasty) study. Management guidance anticipates sufficient liquidity to support operations until August 2019 and they believe there are opportunities for non-dilutive financing. We anticipate that there will be an announcement regarding financing prior to the start of the remaining study.

Avenue commissioned a survey that was performed in March and April of 2018, measuring the perceptions of practitioners on the use of IV tramadol as an alternative to Schedule II opioids. The surveyed practitioners were evenly split among orthopedic surgeons, general surgeons, anesthesiologists and emergency medicine physicians. The data was gathered prior to any results from Avenue’s bunionectomy study, which confirmed safe and effective use. Below, the graphic highlights the key rationales for IV tramadol use. Ability to avoid strong opioids had the strongest support, which is understandable given the national crisis we are suffering in the United States in this class of drug.

View Exhibit I – Survey Results

Key Events

‣ Initiated Phase III Bunionectomy Study – 3Q:17
‣ Initiated Safety Study – 4Q:17
‣ Topline Readout from Phase III Bunionectomy Study – 2Q:18
‣ KOL call for Intravenous Tramadol – 2Q:18
‣ Initiate Phase III Abdominoplasty Study – 2H:18
‣ Topline readout of Safety & Abdominoplasty Study – mid-2019
‣ Submit NDA for IV tramadol – Year-end 2019

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