PULM: 2017 Financial Results; Business Update for 2018

By Anita Dushyanth, PhD

NASDAQ:PULM

Financial Update:

On March 13, 2018 Pulmatrix (PULM) reported financial results for fiscal 2017.

Cystic Fibrosis Foundation Therapeutics (CFFT) is a nonprofit drug discovery and development affiliate of the Cystic Fibrosis Foundation. CFFT awarded a grant to Pulmatrix to support the pharmaceutical development of Pulmazole (PUR1900) for the treatment of allergic bronchopulmonary aspergillosis (ABPA) in patients with asthma and cystic fibrosis. The grant received from CFFT was recorded as revenue ($0.3 million) in 2017.

Operating expenses came in close to $18 million (and inline with our estimates) with R&D at ~$10 million and general and administrative expenses at roughly $7.5 million. The firm recorded a net loss of $18 million for the year.

Net cash used in operating activities was $14.5 million. PULM raised approximately $16 million via the sale of commonfrom equity in 2017. The firm’s cash balance (cash and cash equivalents) was close to $3.6 million as of December 31, 2017.

Business Update:

2017 Highlights:

• Pulmazole (aka PUR1900) received qualified infectious disease product (QIDP) status to treat fungal infections in the airways of cystic fibrosis patients. Later in the year, a second QIDP status was awarded to Pulmazole to treat fungal infections in the airways of ABPA patients.
• Received CFFT grant to support the development of Pulmazole.
• Pulmatrix entered into partnership with Vectura Group plc to develop PUR0200 (for COPD patients) for the U.S. market.
• The firm in-licensed PUR1800 (a narrow spectrum kinase inhibitor) from Janssen/Respivert

What to expect in 2018?

Pulmazole Pulmatrix filed a Clinical Trial Application (CTA) in 2H 2017 in the EU to support a Phase 1/1b trial in healthy volunteers and asthmatics. The goal of the trial is to establish the safety and tolerability of PUR1900, an inhaled dry-powder formulation of itraconazole. In January 2018, PULM received authorization of the CTA from U.K.’s Medicines and Healthcare Products Regulatory Agency (MHRA) to initiate the first clinical trial of PUR1900. The CFFT grant will help support this safety study.

The clinical plan for Phase 1/1b Pulmazole is a three-part study comprised of single ascending dose (SAD), multiple ascending dose (MAD) as well as single dose comparing inhaled versus oral dose of the drug. The studies will be conducted in parallel. Phase 1/1b will establish PUR1900’s safety, tolerability and PK profile versus ABPA-Asthma oral antifungal standard of care (Sporanox).

The SAD study will recruit healthy volunteers who will be administered escalating doses of PUR1900 (dose: 5mg, 10mg and 25mg) to assess safety and tolerability along with 96h PK profile. The MAD trial will also recruit healthy volunteers to study the PK profile as well as safety and tolerability over a 14-day dosing period (10mg and 20mg). Part 3 of the Phase 1/1b trial is a crossover study designed to determine the PK, safety and tolerability of single dose of 20mg of PUR1900 (inhaled route) as compared to 200mg of Sporanox (oral route) in patients with mild to moderate stable asthma. The study is designed to include up to 42 volunteers in the SAD/MAD evaluation and 16 asthmatic patients in the crossover study.

The firm commenced screening subjects and the first patient was dosed in early February. Pulmatrix anticipates data read-out in mid-2018 and plans to use the Phase 1/1b data to support initiation of a Phase 2 program in patients with ABPA, which is expected to initiate by end of the year.

PUR1800:

The firm licensed PUR1800 from Janssen/Respivert in June 2017. Studies conducted by RespiVert/Janssen for PUR1800 demonstrated that the molecule has been well tolerated for up to 14 days of dosing in patients with COPD. The firm plans to develop a drug for the treatment of acute exacerbations in patients with COPD. PULM intends to complete preclinical work including CMC development work and 28-day GLP inhalation toxicology studies, which would be used to support initiation of a Phase IIa study in COPD patients – which could happen in 2019.

PUR200:

In September 2017, PULM signed an agreement with Vectura to develop PUR0200 for COPD patients for the U.S. market. Per the terms, Vectura will pay a technology access fee of $1 million to Pulmatrix upon achievement of certain pharmaceutical development criteria - whichmanagement beleives could happen by mid-2018. Vectura has also agreed to pay Pulmatrix a mid-teen percentage share of any future revenues that it receives relating to the development and sale of VR410 and VR410-related products, including any future combinations.

Valuation:

We model OpEx to increase in 2018, reflecting the ongoing/anticipated clinical studies. The firm’s cash balance was $3.6 million at the end of fiscal 2017. While the CFFT grant will support the Phase 1/1b safety study of PUR1900, we think the company will certainly need to secure additional funds during 2018. A potential key milestone is to complete the Phase 1/1b study in a timely manner. The data read-out is due by mid-year, which, if positive, could be a catalyst for raising funds. The study results could also trigger a partnership deal for PULM. We remain confident in management’s ability to execute on their strategy. We reiterate our price target of $7.50/share.

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