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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 001-32587

Graphic

ALTIMMUNE, INC.

(Exact Name of Registrant as Specified in its Charter)

    

Delaware

    

20-2726770

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

910 Clopper Road Suite 201S, Gaithersburg, Maryland

    

20878

(Address of Principal Executive Offices)

 

(Zip Code)

(240) 654-1450

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

ALT

The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes      No  

As of August 4, 2023 there were 52,686,426 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

ALTIMMUNE, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

1

Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

1

Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (unaudited)

2

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)

3

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

5

Notes to Consolidated Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4.

Controls and Procedures

19

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

19

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 3.

Defaults Upon Senior Securities

20

Item 4.

Mine Safety Disclosures

20

Item 5.

Other Information

20

Item 6.

Exhibits

21

Signatures

22

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share amounts)

    

June 30, 

December 31, 

2023

2022

(Unaudited)

ASSETS

 

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

102,352

$

111,097

Restricted cash

 

41

 

34

Total cash, cash equivalents and restricted cash

 

102,393

 

111,131

Short-term investments

 

57,602

 

73,783

Accounts receivable

 

136

 

173

Income tax and R&D incentive receivables

 

3,579

 

2,368

Prepaid expenses and other current assets

 

5,822

 

5,358

Total current assets

 

169,532

 

192,813

Property and equipment, net

 

882

 

1,081

Indefinite-lived intangible asset

 

12,419

 

12,419

Other assets

 

483

 

615

Total assets

$

183,316

$

206,928

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

4,035

$

4,804

Accrued expenses and other current liabilities

 

7,402

 

12,250

Total current liabilities

 

11,437

 

17,054

Other long-term liabilities

 

4,165

 

4,581

Total liabilities

 

15,602

 

21,635

Commitments and contingencies (Note 10)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.0001 par value; 200,000,000 shares authorized; 52,657,661 and 49,199,845 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

5

5

Additional paid-in capital

 

586,908

 

568,399

Accumulated deficit

 

(414,019)

 

(377,884)

Accumulated other comprehensive loss, net

 

(5,180)

 

(5,227)

Total stockholders’ equity

 

167,714

 

185,293

Total liabilities and stockholders’ equity

$

183,316

$

206,928

The accompanying notes are an integral part of the unaudited consolidated financial statements.

1

Table of Contents

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per-share amounts)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

    

2022

    

2023

    

2022

Revenues

$

6

$

8

$

27

$

40

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

13,253

 

15,993

 

30,502

 

31,097

General and administrative

 

4,760

 

4,410

 

9,291

 

8,837

Total operating expenses

 

18,013

 

20,403

 

39,793

 

39,934

Loss from operations

 

(18,007)

 

(20,395)

 

(39,766)

 

(39,894)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(2)

 

(65)

 

(4)

 

(127)

Interest income

 

1,835

 

328

 

3,503

 

349

Other income (expense), net

 

113

 

25

 

132

 

135

Total other income (expense), net

 

1,946

 

288

 

3,631

 

357

Net loss

 

(16,061)

 

(20,107)

 

(36,135)

 

(39,537)

Other comprehensive income — unrealized (loss) gain on short-term investments

 

(79)

 

(120)

 

47

 

(120)

Comprehensive loss

$

(16,140)

$

(20,227)

$

(36,088)

$

(39,657)

Net loss per share, basic and diluted

$

(0.32)

$

(0.42)

$

(0.72)

$

(0.90)

Weighted-average common shares outstanding, basic and diluted

 

50,691,558

 

47,502,599

 

50,410,184

 

44,150,835

The accompanying notes are an integral part of the unaudited consolidated financial statements.

2

Table of Contents

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

Accumulated

Additional

Other

Total

    

Common Stock

    

Paid-In

    

Accumulated

    

Comprehensive

    

Stockholders’

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2022

49,199,845

$

5

$

568,399

$

(377,884)

$

(5,227)

$

185,293

Stock-based compensation

 

 

 

2,675

 

 

 

2,675

Exercise of stock options

 

19,303

 

 

61

 

 

 

61

Vesting of restricted stock awards including withholding, net

54,347

(484)

(484)

Issuance of common stock from Employee Stock Purchase Plan

 

13,215

 

 

135

 

 

 

135

Unrealized (loss) gain on short-term investments

 

 

 

 

 

126

 

126

Net loss

(20,074)

(20,074)

Balance at March 31, 2023

 

49,286,710

 

$

5

 

$

570,786

 

$

(397,958)

 

$

(5,101)

 

$

167,732

Stock-based compensation

 

 

$

 

$

2,786

 

$

 

$

 

$

2,786

Vesting of restricted stock awards including withholding, net

 

6,320

 

 

(16)

 

 

 

(16)

Issuance of common stock in at-the-market offerings, net

3,364,631

13,352

13,352

Unrealized (loss) gain on short-term investments

 

 

 

 

 

(79)

 

(79)

Net loss

 

 

 

 

(16,061)

 

 

(16,061)

Balance at June 30, 2023

 

52,657,661

 

$

5

 

$

586,908

 

$

(414,019)

 

$

(5,180)

 

$

167,714

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3

Table of Contents

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

Accumulated

Additional

Other

Total

    

Common Stock

    

Paid-In

    

Accumulated

    

Comprehensive

    

Stockholders’

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2021

40,993,768

$

4

$

497,342

$

(293,171)

$

(5,040)

$

199,135

Stock-based compensation

 

 

 

2,033

 

 

 

2,033

Exercise of stock options

 

95,771

 

 

197

 

 

 

197

Vesting of restricted stock awards including withholding, net

 

17,568

(170)

 

(170)

Issuance of common stock from Employee Stock Purchase Plan

 

16,450

 

 

113

 

 

 

113

Issuance of common stock in at-the-market offerings, net

 

335,485

 

 

2,990

 

2,990

Issuance of common stock upon exercise of warrants

 

1,760,854

 

Net loss

(19,430)

(19,430)

Balance at March 31, 2022

 

43,219,896

 

$

4

 

$

502,505

 

$

(312,601)

 

$

(5,040)

 

$

184,868

Stock-based compensation

 

 

$

 

$

2,048

 

$

 

$

 

$

2,048

Exercise of stock options

152,913

403

403

Vesting of restricted stock awards including withholding, net

 

(5,865)

 

 

(80)

 

 

 

(80)

Issuance of common stock in at-the-market offerings, net

 

2,157,717

 

1

 

21,346

 

 

 

21,347

Issuance of common stock related to contingent consideration liability

847,444

6,176

6,176

Unrealized (loss) gain on short-term investments

 

 

 

 

 

(120)

 

(120)

Net loss

 

 

 

 

(20,107)

 

 

(20,107)

Balance at June 30, 2022

 

46,372,105

 

$

5

 

$

532,398

 

$

(332,708)

 

$

(5,160)

 

$

194,535

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

Table of Contents

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

    

Six Months Ended

June 30, 

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net loss

$

(36,135)

$

(39,537)

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

 

  

 

Change in fair value of contingent consideration liability

 

 

86

Stock-based compensation expense

 

5,461

 

4,081

Depreciation and amortization

 

(861)

 

172

Loss on foreign currency exchange

 

(132)

 

(134)

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

37

 

233

Prepaid expenses and other assets

 

(250)

 

3,397

Accounts payable

 

(769)

 

838

Accrued expenses and other liabilities

 

(4,930)

 

1,124

Income tax and R&D incentive receivables

 

(1,211)

 

(490)

Net cash used in operating activities

 

(38,790)

 

(30,230)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Proceeds from sales and maturities of short-term investments

 

60,565

 

Purchases of short-term investments

 

(43,229)

 

(48,949)

Purchases of property and equipment, net

 

(47)

 

(28)

Net cash provided by (used in) investing activities

 

17,289

 

(48,977)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Payments of deferred offering costs

(195)

(36)

Proceeds from issuance of common stock in at-the-market offerings, net

 

13,352

 

24,337

Proceeds from issuance of common stock from Employee Stock Purchase Plan

 

135

 

113

Payment of conditional economic incentive

(90)

Proceeds from exercises of stock options

 

61

 

600

Payments for tax withholding in share-based compensation

 

(500)

 

(250)

Net cash provided by financing activities

 

12,763

 

24,764

Net decrease in cash and cash equivalents and restricted cash

 

(8,738)

 

(54,443)

Cash, cash equivalents and restricted cash at beginning of period

 

111,131

 

190,335

Cash, cash equivalents and restricted cash at end of period

$

102,393

$

135,892

SUPPLEMENTAL NON-CASH ACTIVITIES:

 

 

Fair value of common stock retired in exchange for issuance of common stock warrant

$

$

6,176

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

Table of Contents

ALTIMMUNE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Altimmune, Inc., headquartered in Gaithersburg, Maryland, United States, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware.

The Company is focused on developing treatments for obesity and liver diseases. The Company’s pipeline includes next generation peptide therapeutics for obesity and non-alcoholic steatohepatitis (“NASH”) (for both, pemvidutide, formerly known as ALT-801), and for chronic hepatitis B (“HepTcellTM”). Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

Basis of Presentation

The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 included in the Annual Report on Form 10-K which was filed with the SEC on February 28, 2023. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2023 or any future years or periods.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2023, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC, except for the recently adopted accounting standard for ASU No. 2016-13 as disclosed below.

Use of Estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not

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limited to, the valuation of share-based awards, income taxes, and accruals for research and development activities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods.

Short-term Investments

The Company’s short-term investments are comprised of U.S. Treasuries, corporate debt securities and certificates of deposit that have original maturities less than or equal to one year and are classified as available-for-sale (“AFS”) securities. Such securities are carried at estimated fair value, net of allowance for credit loss determined based on the Current Expected Credit Loss. Any unrealized holding gains or losses are reported as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. In the event that the AFS security's fair value is below the amortized cost and (i) the Company intends to sell the AFS security and (ii) the AFS security is required to be sold before recovery of the loss, the AFS security's amortized cost base will be written down to its fair value and the loss will be recognized in the income statement. If the Company intends not to sell the AFS security and the AFS security is not required to be sold before recovery of the loss, the Company evaluates whether a portion of the unrealized loss is a result of credit loss. The portion of unrealized loss related to credit loss will be recorded as allowance for credit loss in the balance sheet with the corresponding credit loss in the income statement and the portion of unrealized loss not related to credit loss will be recognized in other comprehensive income (“OCI”). Dividend and interest income are recognized in other income when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government agencies, or corporate institutions whose debt is rated as investment grade. As of June 30, 2023, none of the unrealized losses on the Company’s short-term investments are a result of credit loss, and therefore, the unrealized losses were recognized in OCI.

Income Taxes

Due to a full valuation allowance, the Company did not record an income tax expense (benefit) for either of the three and six months ended June 30, 2023 or 2022. The Company calculates its quarterly income tax provision based on an estimated, annual effective tax rates applied to ordinary income (or loss) and other known items computed and recognized as they occur. The Company’s total provision is based on the United States statutory rate, increased by state and foreign taxes and reduced by a full valuation allowance on the Company’s deferred tax assets.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected and any unrealized loss relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The Company adopted this new accounting standard on January 1, 2023 using a modified retrospective method. Adoption of this update did not have a material impact on the Company’s financial statements and related disclosures.

3. Fair Value Measurements

The Company’s assets measured at fair value on a recurring basis as of June 30, 2023 consisted of the following (in thousands):

Fair Value Measurement at June 30, 2023

    

Total

    

Level 1

    

Level 2

    

Level 3

Assets:

Cash equivalents - money market funds

$

89,918

$

89,918

$

$

Short-term investments

 

57,602

 

 

57,602

 

Total

$

147,520

$

89,918

$

57,602

$

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The Company’s assets measured at fair value on a recurring basis as of December 31, 2022 consisted of the following (in thousands):

Fair Value Measurement at December 31, 2022

    

Total

    

Level 1

    

Level 2

    

Level 3

Assets:

Cash equivalents - money market funds

$

105,794

    

$

105,794

$

$

Short-term investments

 

73,783

 

 

73,783

 

Total

$

179,577

$

105,794

$

73,783

$

Short-term investments have been initially valued at the transaction price and subsequently valued at the end of each reporting period utilizing third party pricing services or other market observable data (Level 2). The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value.

Short-term investments with quoted prices as of June 30, 2023 as shown below (in thousands):

June 30, 2023

Amortized Cost

Unrealized (Loss) Gain

Credit loss

Market Value

United States treasury securities

    

$

11,861

    

$

(13)

    

$

    

$

11,848

Commercial paper and corporate debt securities

33,127

(92)

33,035

Asset backed securities

 

6,876

 

(17)

 

 

6,859

Agency debt securities

5,878

(18)

5,860

Total

$

57,742

$

(140)

$

$

57,602

Short-term investments with quoted prices as of December 31, 2022 as shown below (in thousands):

December 31, 2022

Amortized Cost

Unrealized (Loss) Gain

Credit Loss

Market Value

United States treasury securities

    

$

15,868

    

$

(86)

    

$

    

$

15,782

Commercial paper and corporate debt securities

50,747

(71)

50,676

Asset backed securities

 

5,427

 

(35)

 

 

5,392

Agency debt securities

1,928

5

1,933

Total

$

73,970

$

(187)

$

$

73,783

Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. Assets recorded at fair value on a non-recurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired. During the six months ended June 30, 2023 and year ended December 31, 2022, the Company had no significant assets or liabilities that were measured at fair value on a non-recurring basis.

4. Operating Leases

The Company’s operating leases consist of leases for office and laboratory space in the United States, which expire in April 2025. Rent expense under the Company’s operating leases was $0.1 million and $0.3 million during the three and six months ended June 30, 2023. During the three and six months ended June 30, 2022, rent expense under the Company’s operating leases was $0.1 million and $0.2 million, respectively. Rent expense includes short-term leases and variable lease costs that are not included in the lease obligation.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

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The office space lease provides for increases in future minimum annual rental payments as defined in the lease agreements. The office space lease also includes an option to renew the lease as of the end of the term. The Company has determined that the lease renewal option is not reasonably certain of being exercised.

The cash paid for operating lease liabilities for each of the six months ended June 30, 2023 and 2022 was $0.3 million.

Supplemental other information related to the operating leases balance sheet information is as follows (in thousands):

 

June 30, 2023

December 31, 2022

 

Operating lease obligations (see Note 5 and 6)

    

$

903

    

$

1,124

Operating lease right-of-use assets (included in "Other assets" in Balance Sheet)

$

484

$

596

Weighted-average remaining lease term (years)

 

1.8

 

2.3

Weighted-average discount rate

 

7.2

%  

 

7.2

%

5. Accrued Expenses

Accrued expenses and other current liabilities consist of the following (in thousands):

June 30, 2023

December 31, 2022

Accrued professional services

    

$

263

    

$

276

Accrued payroll and employee benefits

 

1,748

 

2,955

Accrued research and development

 

4,800

 

7,295

Lease obligation, current portion (see Note 4)

 

474

 

452

Excess tax refund payable

56

1,169

Accrued interest and other

 

61

 

103

Total accrued expenses and other current liabilities

$

7,402

$

12,250

6. Other Long-Term Liabilities

The Company’s other long-term liabilities are summarized as follows (in thousands):

June 30, 2023

December 31, 2022

Research and development incentive credit

$

3,524

$

3,599

Lease obligation, long-term portion (see Note 4)

    

429

    

672

Conditional economic incentive grants

 

160

 

250

Other

 

52

 

60

Total other long-term liabilities

$

4,165

$

4,581

7. Common Stock

The Amended and Restated Certificate of Incorporation, as amended (“Charter”), authorizes the Company to issue 200,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2023, the Company had 52,657,661 shares of common stock issued and outstanding.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

The Charter also authorizes the Company to issue 1,000,000 shares of preferred stock, par value $0.0001 per share. As of June 30, 2023, the Company had no shares of preferred stock issued and outstanding.

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At-the-Market Offerings

On February 28, 2023, the Company entered into an Equity Distribution Agreement (the “2023 Agreement”) with Evercore Group L.L.C., JMP Securities LLC and B. Riley Securities, Inc., serving as sales agents (the “Sales Agents”), with respect to an at-the-market offerings program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $150.0 million (the “Shares”) through the Sales Agents (the “2023 Offering”). All Shares offered and sold in the 2023 Offering will be issued pursuant to the Company’s Registration Statement on Form S-3ASR filed with the SEC on February 28, 2023, which was declared effective immediately, the prospectus supplement relating to the 2023 Offering filed with the SEC on February 28, 2023 and any applicable additional prospectus supplements related to the 2023 Offering that form a part of the Registration Statement. The Company capitalized approximately $0.2 million of other offering costs which will offset the proceeds received from the shares sold under the 2023 Agreement. During the six months ended June 30, 2023, the Company sold 3,364,631 shares of common stock under the 2023 Agreement resulting in approximately $13.4 million in proceeds, net of $0.4 million commission and other offering costs. As of June 30, 2023, $136.2 million remained available to be sold under the 2023 Agreement. As of June 30, 2023, there was $0.2 million deferred offering costs included in prepaid expenses and other current assets on the accompanying consolidated balance sheets.

On February 25, 2021, the Company entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C. and B. Riley Securities, Inc., serving as sales agents (the “2021 Sales Agents”), with respect to an at-the-market offerings program under which the Company offered and sold shares of its common stock, having an aggregate offering price of up to $125.0 million (the “2021 Shares”) through the 2021 Sales Agents (the “2021 Offering”). All 2021 Shares offered and sold in the 2021 Offering were issued pursuant to the Company’s Registration Statement on Form S-3 filed with the SEC on December 31, 2020, which was declared effective on January 11, 2021, the prospectus supplement relating to the 2021 Offering filed with the SEC on February 25, 2021 and any applicable additional prospectus supplements related to the 2021 Offering that form a part of the Registration Statement. Under the 2021 Agreement, the Company sold 10,004,869 shares of common stock resulting in approximately $121.0 million in proceeds, net of $4.0 million commission and other offering costs. As of June 30, 2023, there were no remaining shares available under the 2021 Agreement.

Public Offering

On July 16, 2020, the Company offered and sold (i) 3,369,564 shares of common stock, at a price to the public of $23.00 per share, and (ii) pre-funded warrants of the Company to purchase 1,630,436 shares of common stock at an exercise price equal to $0.0001 per share (the “Pre-Funded Warrants”), at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of common stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of the Company’s common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to the Company.

The Company has assessed the Pre-Funded Warrants for appropriate equity or liability classification and determined that the Pre-Funded Warrants are freestanding instruments that do not meet the definition of a liability pursuant to ASC 480 and do not meet the definition of a derivative pursuant to FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). The Pre-Funded Warrants are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the Pre-Funded Warrants were classified as equity and are accounted for as a component of additional paid-in capital at the time of issuance. On January 24, 2022, 760,870 of the Pre-Funded Warrants were exercised, resulting in the issuance of 760,870 shares of common stock. As of June 30, 2023, there were 869,566 remaining Pre-Funded Warrants unexercised.

As of June 30, 2023, including the remaining 869,566 Pre-Funded Warrants, there were 1,015,166 outstanding warrants with a weighted-average exercise price of $0.66 and weighted-average contractual term of 0.4 years.

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8. Stock-Based Compensation

Stock Options

The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. As of June 30, 2023, there was $19.5 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 3.0 years. During the six months ended June 30, 2023, the Company granted 1,506,226 stock options with a weighted average exercise price of $10.91 and per share weighted average grant date fair value of $8.85.

Information related to stock options outstanding as of June 30, 2023 is as follows:

    

    

    

Weighted-Average

    

Weighted-

Remaining

Number of

Average

Contractual Term

Aggregate Intrinsic

Stock Options

Exercise Price

(Years)

Value (In thousands)

Outstanding

 

4,825,831

$

9.66

 

6.0

$

726

Exercisable

 

2,049,291

$

8.68

 

5.8

$

640

Unvested

 

2,776,540

$

10.39

 

6.1

$

86

Restricted Stock Units (RSUs)

During the six months ended June 30, 2023, the Company granted 319,700 shares of RSUs with a weighted average grant date fair value of $13.20 which vest over four years. As of June 30, 2023, the Company had unvested RSUs of 620,417 shares with total unrecognized compensation expense of $5.6 million, which the Company expects to recognize over a weighted average period of approximately 3.0 years. During the six months ended June 30, 2023, the Company issued 60,667 shares of unrestricted common stock as a result of the vesting of 98,768 RSUs net of 38,101 shares of common stock withheld to satisfy tax withholding obligations.

2019 Employee Stock Purchase Plan (ESPP)

Under the ESPP, employees purchased 13,215 shares for $0.1 million during the six months ended June 30, 2023. During the three and six months ended June 30, 2023, the Company recognized compensation expense of $0.1 million and $0.2 million, respectively. During the three and six months ended June 30, 2022, the Company recognized compensation expense of $47,000 and $0.1 million, respectively.

Stock-based Compensation Expense

Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022 as follows (in thousands):

    

Three Months Ended

    

Six Months Ended

June 30, 

June 30, 

2023

    

2022

2023

    

2022

Research and development

$

1,209

$

663

$

2,396

$

1,281

General and administrative

 

1,577

 

1,385

 

3,065

 

2,800

Total

$

2,786

$

2,048

$

5,461

$

4,081

9. Net Loss Per Share

Because the Company has reported a net loss attributable to common stockholders for the six months ended June 30, 2023 and 2022, basic and diluted net loss per share attributable to common stockholders in each period are the same.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average numbers of shares of common stock outstanding for the period. Basic

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shares outstanding includes the weighted average effect of the Company’s outstanding pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.

Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period. As such, all unvested restricted stock, RSUs, common stock warrants, and stock options have been excluded from the computation of diluted weighted average shares outstanding because such securities would have an anti-dilutive impact for all periods presented.

Potential common shares issuable upon conversion, vesting or exercise of unvested restricted stock, RSUs, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding, as they are anti-dilutive, are as follows:

Six Months Ended

June 30, 

2023

2022

Common stock warrants

 

145,600

 

145,600

Common stock options

 

4,838,961

 

3,372,768

Restricted stock units

 

620,417

472,150

Restricted stock

 

 

33,636

10. Commitments and Contingencies

Spitfire Acquisition

In July 2019, the Company entered into the Spitfire merger agreement to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”). As part of the agreement, the Company is obligated to make payments of up to $80.0 million upon the achievement of specified worldwide net sales of all products developed using the technology acquired from Spitfire Pharma Inc. (the “Sales Milestone”) within ten years following the approval of a new drug application filed with the FDA.

The contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, the Company will recognize the Sales Milestones when the contingency is probable and the amount can be reasonably estimated.

Litigation

The Company is a party in various contracts and subject to disputes, litigation, and potential claims arising in the ordinary course of business none of which are currently reasonably possible or probable of material loss.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes for the year ended December 31, 2022 included in our Annual Report on Form 10-K, which was filed with the SEC on February 28, 2023.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “may,” “will,” “should,” “could,” “target,” “strategy,” “intend,” “project,” “guidance,” “likely,” “usually,” “potential,” or the negative of these words or variations of such words, similar expressions, or comparable terminology are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. A further list and description of risks, uncertainties and other factors that could cause actual results or events to differ materially from the forward-looking statements that we make is included in the cautionary statements herein and in our other filings with the SEC, including those set forth under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

We have based the forward-looking statements included in this Quarterly Report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements, other than as required by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Overview

Altimmune, Inc. is a clinical stage biopharmaceutical company focused on developing treatments for obesity and liver diseases. Our lead product candidate, pemvidutide (formerly known as ALT-801), is a GLP-1/glucagon dual receptor agonist that is being developed for the treatment of obesity and non-alcoholic steatohepatitis (“NASH”). In addition, we are developing HepTcell, an immunotherapeutic agent designed to achieve a functional cure for chronic hepatitis B. Except where the context indicates otherwise, references to “we,” “us,” “our,” “Altimmune” or the “Company” refer to the company and its subsidiaries.

Recent Business Update

Pemvidutide

On August 1, 2023 we announced that we enrolled the first subject in the Phase 2b IMPACT trial evaluating the safety and efficacy of pemvidutide in subjects with NASH. The biopsy-driven trial is expected to enroll approximately 190 subjects with and without diabetes randomized 1:2:2 to receive either 1.2 mg, 1.8 mg pemvidutide or placebo weekly for 48 weeks. The key efficacy endpoints are NASH resolution and fibrosis improvement after 24 weeks of treatment, with subjects followed for an additional 24 weeks to a total of 48 weeks for assessment of safety and additional biomarker responses. Top-line results from this trial are expected in the first quarter of 2025.

On March 21, 2023 we announced the topline results from a Week 24 interim analysis of 160 subjects in our 48-week MOMENTUM Phase 2 obesity trial of pemvidutide. The MOMENTUM Phase 2 obesity trial is being conducted at 30 sites across the U.S., designed to enroll approximately 320 subjects with subjects randomized 1:1:1:1 to 1.2 mg, 1.8 mg, 2.4 mg pemvidutide or placebo administered weekly for 48 weeks in conjunction with diet and exercise. A pre-specified interim analysis was conducted after 160 subjects completed 24 weeks of treatment.

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At Week 24, subjects receiving pemvidutide achieved mean weight losses of 7.3%, 9.4% and 10.7% at the 1.2 mg, 1.8 mg, and 2.4 mg doses, respectively, with the placebo group experiencing a mean weight loss of 1.0% (efficacy estimand using a mixed model of repeated measures (“MMRM”) analysis). Approximately 50% of subjects achieved 10% or more weight loss and approximately 20% of subjects achieved 15% or more weight loss at Week 24 at the 1.8 mg and 2.4 mg doses. Robust reductions in waist circumference (a measure of visceral fat) and serum lipids were also observed, and clinically meaningful reductions in blood pressure were achieved without clinically significant increases in heart rate.

On March 21, 2023, we also announced the results of the 12-week Phase 1b safety trial of pemvidutide in subjects with type 2 diabetes. The Phase 1b trial, which was conducted to evaluate the safety profile of pemvidutide in overweight and obese subjects with type 2 diabetes, was comprised of 54 subjects randomized 1:1:1:1 to 1.2 mg, 1.8 mg, 2.4 mg pemvidutide or placebo administered weekly for 12 weeks.

Subjects receiving pemvidutide achieved mean weight losses of 4.4%, 6.1% and 7.7% at the 1.2 mg, 1.8 mg, and 2.4 mg doses, respectively, over only 12 weeks of treatment, with the placebo group experiencing a mean weight gain of 0.8% (efficacy estimand using MMRM analysis).

HepTcell

On April 11, 2023, we announced the completion of enrollment in our Phase 2 clinical trial of HepTcell, an immunotherapeutic for the treatment of chronic hepatitis B (“CHB”). With the achievement of this milestone, data readout is planned for the first quarter of 2024.

The multicenter clinical trial, which is being conducted at 26 sites in North America, Europe and Southeast Asia, enrolled approximately 80 subjects with inactive CHB and low levels of hepatitis B surface antigen (“HBsAg”). Subjects were randomized 1:1 to HepTcell or placebo. The primary endpoint of the trial is clinical response, defined as a 1-log or greater reduction or clearance in HBsAg. Secondary endpoints include changes in the levels of hepatitis B virus (“HBV”) DNA, pre-genomic RNA and other markers of virologic response.

Results of Operations

Comparison of the three months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended

June 30, 

    

2023

    

2022

    

Increase (Decrease)

 

Revenue

$

6

$

8

$

(2)

 

(25)

%

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

13,253

 

15,993

 

(2,740)

 

(17)

%

General and administrative

 

4,760

 

4,410

 

350

 

8

%

Total operating expenses

 

18,013

 

20,403

 

(2,390)

 

(12)

%

Loss from operations

 

(18,007)

 

(20,395)

 

2,388

 

12

%

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(2)

 

(65)

 

63

 

97

%

Interest income

 

1,835

 

328

 

1,507

 

459

%

Other income (expense), net

 

113

 

25

 

88

 

352

%

Total other income (expense), net

 

1,946

 

288

 

1,658

 

576

%

Net loss

$

(16,061)

$

(20,107)

$

4,046

 

20

%

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Revenue

We have not generated any revenues from the sale of any products to date. Our revenue in previous years consisted primarily of government and foundation grants and contracts that supported our efforts on specific research projects.

Research and development expenses

Research and development expense decreased by $2.7 million, or 17%, for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. The decrease was primarily the result of:

a decrease of $3.1 million due to the development activities for pemvidutide primarily due to the NAFLD trials, which were ongoing during the three months ended June 30, 2022 and which substantially completed by March 31, 2023, offset by startup costs related to the IMPACT Phase 2b trial in NASH;
a decrease of $1.9 million due to change in the three months ended June 30, 2022 of the fair value of contingent consideration liability with respect to the acquisition of pemvidutide, which was fully paid on June 10, 2022;
an increase of $0.4 million due to development activities for HepTcell; and
a net increase of $1.8 million due primarily to costs associated with non-project specific research and development costs such as employee compensation including stock compensation, contractors and electronic document management system (“EDMS”) implementation and service costs.

General and administrative expenses

General and administrative expense increased by $0.4 million, or 8% for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to increase in stock compensation and other labor related expense.

Total other income (expense), net

Total other income (expense), net increased by $1.7 million or 576%, for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to increase in interest income earned on our cash equivalents and short-term investments.

Comparison of the six months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022 (in thousands):

Six Months Ended

June 30, 

    

2023

    

2022

    

Increase (Decrease)

 

Revenue

$

27

$

40

$

(13)

 

(33)

%

Operating expenses:

 

  

 

  

 

  

 

Research and development

 

30,502

 

31,097

 

(595)

 

(2)

%

General and administrative

 

9,291

 

8,837

 

454

 

5

%

Total operating expenses

 

39,793

 

39,934

 

(141)

 

(0)

%

Loss from operations

 

(39,766)

 

(39,894)

 

128

 

0

%

Other income (expense):

 

  

 

  

 

 

  

Interest expense

 

(4)

 

(127)

 

123

 

97

%

Interest income

 

3,503

 

349

 

3,154

 

904

%

Other income (expense), net

 

132

 

135

 

(3)

 

2

%

Total other income (expense), net

 

3,631

 

357

 

3,274

 

(917)

%

Net loss

$

(36,135)

$

(39,537)

$

3,402

 

9

%

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Revenue

We have not generated any revenues from the sale of any products to date. Our revenue in previous years consisted primarily of government and foundation grants and contracts that supported our efforts on specific research projects. We are closing out one of the remaining such contracts and any revenue reported during the six months ended June 30, 2023 and 2022 were for indirect rate adjustments.

Research and development expenses

Research and development expense decreased by $0.6 million, or 2%, for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022. The decrease was primarily the result of:

a decrease of $4.5 million due to the development activities for pemvidutide primarily due to the NAFLD trials, which were ongoing during the six months ended June 30, 2022 and which substantially completed by March 31, 2023, offset by startup costs related to the IMPACT Phase 2b trial in NASH; and
a net increase of $3.6 million due primarily to costs associated with non-project specific research and development costs such as employee compensation including stock compensation, contractors and EDMS implementation and service costs.

General and administrative expenses

General and administrative expense increased by $0.5 million, or 5% for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to a $0.7 million increase in stock compensation and other labor related expense.

Total other income (expense), net

Total other income (expense), net increased by $3.3 million or 917%, for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to increase in interest income earned on our cash equivalents and short-term investments.

Liquidity and Capital Resources

Overview

Our primary sources of cash during the six months ended June 30, 2023 were from equity transactions, interest and dividends from our money market funds and short-term investments, and proceeds from maturity of our short-term investments. Our cash, cash equivalents, restricted cash and short-term investments were $160.0 million as of June 30, 2023. We believe, based on the operating cash requirements and capital expenditures expected for 2023 and 2024, our cash on hand as of June 30, 2023, together with expected cash receipts from our income tax refunds and R&D incentives, are sufficient to fund operations for at least a twelve-month period from the issuance date of our June 30, 2023 consolidated financial statements.

We have not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales. In the past, our sources of revenue have consisted of grant revenues under our arrangements with BARDA for the development of NasoShield, MTEC for a clinical trial and development work on T-COVID, and to a lesser degree from other licensing arrangements. The MTEC contract was closed out in June 2021 and we are currently closing out the BARDA contract which was not renewed after December 31, 2021. We have incurred significant losses since we commenced operations. As of June 30, 2023, we had an accumulated deficit of $414.0 million. In addition, we have not generated positive cash flows from operations. We have had to rely on a variety of financing sources, including the issuance of debt and equity securities. As capital resources are consumed to fund our research and development activities, we may require additional capital beyond our currently anticipated amounts. In order to address our capital

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needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.

Sources of Liquidity

Public Offering

On July 16, 2020, we offered and sold (i) 3,369,564 shares of our common stock, at a price to the public of $23.00 per share, and (ii) Pre-Funded Warrants, at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of common stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to us. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by us. On January 24, 2022, 760,870 of the Pre-Funded Warrants were exercised, resulting in the issuance of 760,870 shares of common stock. As of June 30, 2023, there were 869,566 remaining Pre-Funded Warrants unexercised.

Shelf Registrations

On February 28, 2023, we filed a shelf registration statement on Form S-3ASR, which was declared effective immediately. This shelf registration allows us to offer and sell any amount of our common stock, preferred stock, debt securities, warrants, rights and units (the “2023 Shelf”) for a period of 3 years from effectiveness or until such determination that we no longer qualify as a well-known seasoned issuer.

On December 31, 2020, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on January 11, 2021. This shelf registration statement covered the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”).

At-the-Market Offerings

On February 28, 2023, we entered an Equity Distribution Agreement (“the 2023 Agreement”) with Evercore Group L.L.C., JMP Securities LLC and B. Riley Securities, Inc., serving as sales agents, with respect to an at-the-market offerings program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $150.0 million. During the six months ended June 30, 2023, we sold 3,364,631 shares of common stock under the 2023 Agreement resulting in approximately $13.4 million in net proceeds, and as of June 30, 2023, $136.2 million remained available to be sold under the 2023 Shelf.

On February 25, 2021, we entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C. and B. Riley Securities, Inc., serving as sales agents, with respect to an at-the-market offerings program under which we offered and sold shares of our common stock, having an aggregate offering price of up to $125.0 million. Under the 2021 Agreement, we sold 10,004,869 shares of common stock resulting in approximately $121.0 million in proceeds, net of $4.0 million commission and other offering costs. As of June 30, 2023, there were no remaining 2021 Shares available under the 2021 Agreement.

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Cash Flows

The following table provides information regarding our cash flows for the six months ended June 30, 2023 and 2022:

Six Months Ended

June 30, 

(in thousands)

    

2023

    

2022

Net cash (used in) provided by:

 

  

 

  

Operating activities

$

(38,790)

$

(30,230)

Investing activities

 

17,289

 

(48,977)

Financing activities

 

12,763

 

24,764

Net decrease in cash and cash equivalents and restricted cash

$

(8,738)

$

(54,443)

Operating Activities

Net cash used in operating activities was $38.8 million for the six months ended June 30, 2023 compared to $30.2 million during the six months ended June 30, 2022. The primary uses of cash from our operating activities include payments for labor and labor-related costs, professional fees, research and development costs associated with our clinical trials and other general corporate expenditures. The increase in cash used in operations of $8.6 million year over year is due to changes in working capital accounts of $12.2 million, partially offset by an increase in net loss as adjusted for non-cash items of $3.7 million.