# Savara Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Savara Inc](/companies/svra.md) (CIK 1160308)
- Form: 10-Q
- Filed: 2023-05-15
- Accepted by EDGAR: May 15, 2023, 08:15 ET
- Period: 2023-03-31
- Accession: 0000950170-23-021981
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1160308/000095017023021981/svra-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1160308/000095017023021981/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$12.1m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$10.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 152,781,580 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$12.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $4.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $34.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $117.6m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $129.4m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $4.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $31.1m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $26.1m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-03-31 | $98.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,563 characters.

### Cautionary Statement Concerning Forward-Looking Statements

*This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein that involve risks and uncertainties, such as Savara’s plans, objectives, expectations, intentions, and beliefs should be considered forward-looking statements. Savara’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those identified below, the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the risks associated with the process of conducting clinical trials and developing, obtaining regulatory approval for and commercializing drug candidates that are safe and effective for use as human therapeutics, the timing and ability to raise additional capital as needed to fund continued operations, natural disasters, pandemics, geopolitical events, and those discussed in the section entitled “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission ("SEC") on March 30, 2023, all of which are difficult to predict.*

*Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.*

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Overview

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our lead program, molgramostim, is an inhaled granulocyte-macrophage colony-stimulating factor in Phase 3 development for aPAP. Savara, together with its wholly-owned subsidiaries, which include Aravas and Savara ApS, operate in one segment with its principal office in Austin, Texas as of March 31, 2023, though a majority of our employees work remotely.

Since inception, we have devoted our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to March 31, 2023, we have raised net cash proceeds of approximately $392.9 million, primarily from public offerings of our common stock, private placements of convertible preferred stock, and debt financings.

We have never been profitable and have incurred operating losses every year since inception. Our net losses for the three months ended March 31, 2023 and 2022 were $10.6 million and $8.3 million, respectively, and the net loss for the year ended December 31, 2022 was $38.2 million. As of March 31, 2023, we had an accumulated deficit of approximately $349.2 million. Our operating losses primarily resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we continue the clinical development of, and seek regulatory approval for, our primary product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to the timing of clinical development programs and efforts to achieve regulatory approval.

As of March 31, 2023, we had cash and cash equivalents of $34.0 million and short-term investments of $80.8 million. We will continue to require additional capital to continue our clinical development and potential commercialization activities. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

### COVID-19 Update

The World Health Organization (WHO) announced on May 5, 2023 that COVID-19 is no longer a public health emergency of international concern. However, the WHO expects that the COVID-19 virus will continue to transmit and experience variants. While we are working to complete the IMPALA-2 trial as quickly and as safely as possible, we are closely monitoring the impact of COVID-19 and emerging variants on our trial, including enrollment and timelines.

### Recent Events

### International Conflict

In February 2022, Russia commenced a military invasion of Ukraine. The ongoing conflict and political and physical conditions in Ukraine and Russia, as well as in neighboring countries, may disrupt our supply chain and increase our costs, which may adversely affect our ability to conduct our ongoing clinical trial and impact patients’ ability to partake in our clinical trial. While we do not believe this conflict will have a material impact on our current operations, given the rapidly evolving situation and the potential to expand beyond Ukraine and Russia, the full impact of the conflict remains uncertain.

### Bank Failures and Global Monetary Impacts

During 2023, the financial services industry experienced several failures of banking institutions requiring the FDIC and other U.S. government agencies to take actions to protect customer deposits and the respective liquidity of the distressed banks. Certain distressed banks have since been acquired by other banking institutions. However, there have been reports of instability at other banks across the globe. Despite the steps taken to date by U.S. government agencies to protect depositors, the follow-on effects of the events surrounding the bank failures and pressure on other banks are unknown, could include failures of other financial institutions which could create more exposure, and may lead to significant disruptions to the global monetary and banking system. The extent of such impacts is uncertain, and there may be additional risks that we have not yet identified. We are taking steps to identify any potential impact and minimize any disruptions to our operations. However, we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from the foregoing events or other impacts on financial institutions and global monetary and banking system.

### Financial Operations Overview

### Research and Development Expenses

The largest component of our operating expenses has historically been our investment in research and development activities. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:

- expenses incurred under agreements with contract research organizations (“CROs”), consultants, and clinical trial sites that conduct research and development activities on our behalf;
- laboratory and vendor expenses related to the execution of our clinical trials;
- contract manufacturing expenses, primarily for the production of clinical supplies; and
- internal costs that are associated with activities performed by our research and development organization and generally benefit multiple programs. Where appropriate, these costs are allocated by product candidate and consist primarily of:
- personnel costs, which include salaries, benefits, and stock-based compensation expense;
- facilities and other expenses, which include expenses for maintenance of facilities; and
- regulatory expenses and technology license fees related to development activities.

We expect research and development expenses will remain significant in the future as we advance our molgramostim product candidate into and through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of a second source manufacturer and clinical supplies.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of molgramostim.

### General and Administrative Expenses

General and administrative expenses primarily consist of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal and investor relations, and professional and consulting fees for accounting, legal, investor relations, business development, commercial strategy and research, human resources, and information technology services. Other general and administrative expenses include facility lease and insurance costs.

### Critical Accounting Policies and Estimates

There have not been any material changes during the three months ended March 31, 2023, to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. Please read *Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates* in our Annual Report on Form 10-K for the year ended December 31, 2022, for further description of our critical accounting policies.

### Results of Operations – Comparison of Three Months Ended March 31, 2023 and 2022

*(in thousands)*

| Operating expenses: | For the Three Months Ended March 31, 2023 | 2022 | Dollar Change |
| --- | ---: | ---: | ---: |
| Research and development | $8,738 | $5,684 | $3,054 |
| General and administrative | 3,366 | 2,354 | 1,012 |
| Depreciation and amortization | 8 | 8 | - |
| Total operating expenses | 12,112 | 8,046 | 4,066 |
| Loss from operations | (12,112) | (8,046) | (4,066) |
| Other income (expense), net | 1,555 | (254) | 1,809 |
| **Net loss** | **$(10,557)** | **$(8,300)** | **$(2,257)** |

### Research and Development

Research and development expenses increased by $3.1 million, or 53.7%, to $8.7 million for the three months ended March 31, 2023 from $5.7 million for the three months ended March 31, 2022. This increase is primarily due to performance of tasks related to our molgramostim program which includes approximately $2.0 million of costs related to our chemistry, manufacturing, and controls activities, $0.5 million of costs related to our IMPALA-2 trial, including CRO-related activities, and $0.6 million due to an increase in personnel and related costs.

### General and Administrative

General and administrative expenses increased by $1.0 million, or 43.0%, to $3.4 million for the three months ended March 31, 2023 from $2.4 million for the three months ended March 31, 2022. The increase is primarily attributable to the strategic addition of personnel and related costs for key positions to facilitate the management of our business and operations.

### Other Income (Expense), Net

Other income (expense), net increased by $1.8 million to $1.6 million for the three months ended March 31, 2023 from $0.3 million expense for the three months ended March 31, 2022. The change is primarily related to a $1.3 million increase in *Interest income (expense)* during the three months ended March 31, 2023, as a result of an increase in interest rates of our cash, cash equivalents, and short-term investments combined with the lower interest rate associated with the Amended Loan Agreement and an increase in *Tax credit income* of approximately $0.4 million.

### Liquidity and Capital Resources

As of March 31, 2023, we had $34.0 million of cash and cash equivalents, $80.8 million in short-term investments, and an accumulated deficit of approximately $349.2 million. As discussed in *Note 6. Long-term Debt* in the notes to the condensed consolidated financial statements included in this Quarterly Report, we entered into a Loan Agreement with Silicon Valley Bank during the year ended December 31, 2017. During April 2022, we entered into an Amended Loan Agreement with Silicon Valley Bank (the “Amended Loan Agreement”) that provided for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.

We have used and intend to use our liquidity and capital for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial, we will continue to monitor our liquidity and capital requirements.

### Cash Flows

The following table summarizes our cash flows for the periods indicated:

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cash used in operating activities | $(12,026) | $(8,425) |
| Cash provided by (used in) investing activities | (6,095) | 53,665 |
| Cash provided by (used in) financing activities | 26 | (1) |
| Effect of exchange rate changes on cash and cash equivalents | (21) | (24) |
| **Net change in cash and cash equivalents** | **$(18,116)** | **$45,215** |

### Cash flows from operating activities

Cash used in operating activities for the three months ended March 31, 2023 was $12.0 million, consisting of a net loss of $10.6 million and net $1.5 million in changes due to operating assets and liabilities. This was partially offset by approximately two thousand dollars of net noncash charges (comprised of depreciation and amortization including right-of-use assets, amortization on premium to short-term investments, amortization of debt issuance costs, foreign currency and stock-based compensation).

### Cash flows from investing activities

Cash used in investing activities of $6.1 million for the three months ended March 31, 2023 was primarily associated with cash used for purchases of short-term investments partially offset by proceeds from the maturities of short-term investments.

### Cash flows from financing activities

Cash provided by financing activities was minimal for the three months ended March 31, 2023.

### Future Funding Requirements

We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.

As of March 31, 2023, we had cash, cash equivalents, and short-term investments of approximately $114.8 million. Although we have sufficient capital to fund our planned activities, including those discussed in *Note 9. Commitments – Manufacturing and Other*, of the condensed consolidated financial statements in this Quarterly Report, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

Although we believe we are well capitalized based on our current operations, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market our product candidate to third parties that we would otherwise prefer to develop and market ourselves.

### Recent Accounting Pronouncements

See *Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements*, of the condensed consolidated financial statements in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.

## Market risk

As filed, 3,818 characters.

We have market risk exposure related to our cash, cash equivalents, and short-term investment securities. Such interest-earning instruments carry a degree of interest rate risk; however, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 1% change in interest rates during any of the periods presented would not have a material impact on our condensed consolidated financial statements. Additionally, our investment securities are fixed income instruments denominated and payable in U.S. dollars and have short-term maturities, typically less than twelve months, and typically carry credit ratings of “A” at a minimum by two of three Nationally Recognized Statistical Rating Organizations, specifically Moody’s, Standard & Poor’s, or Fitch. As such, we do not believe that our cash, cash equivalents, and short-term investment securities have significant risk of default or illiquidity.

We also have interest rate exposure related to our long-term debt. The Amended Loan Agreement bore interest equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%, which was 7.5% on March 31, 2023. Changes in the prime rate would have impacted our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on March 31, 2023, were to have occurred, this change would not have had a material effect on our interest expense with respect to outstanding borrowed amounts.

We have ongoing operations in Europe and pay those vendors in local currency, including Euros or Danish Krone. At times, we seek to limit the impact of foreign currency fluctuations through the use of derivative instruments and short-term foreign currency forward exchange contracts not designated as hedging instruments. We did not recognize any significant exchange rate losses during the three months ended March 31, 2023 and 2022. A 10% change in the Euro-to-dollar or Krone-to-dollar exchange rate on March 31, 2023, would not have had a material effect on our results of operations or financial condition.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.

The Company currently maintains depository accounts and has a debt facility with Silicon Valley Bank, as acquired by First Citizens BancShares, Inc. On March 10, 2023, the FDIC took control of Silicon Valley Bank and created the National Bank of Santa Clara to hold the deposits of Silicon Valley Bank after Silicon Valley Bank was unable to continue its operations.

On March 27, 2023, First Citizens BancShares, Inc. (Nasdaq: FCNCA) announced that it had entered into an agreement with the FDIC to purchase all of the assets and liabilities of Silicon Valley Bank and all bank deposits.

In order to mitigate risks associated with our banking deposits, the Company maintains a significant portion of its liquidity in U.S. Treasury money market funds and other short-term investments with custodial services provided by U.S. Bank, N.A. The Company continues to monitor the circumstances surrounding First Citizens BancShares, Inc. and its acquisition of Silicon Valley Bank and has not experienced nor anticipates any material impacts on its financial condition or operations.

Despite the aforementioned banking failure, we do not believe that we are currently exposed to material changes in the risks related to our cash, cash equivalents, and short-term investment securities, interest rates of our long-term debt, or foreign currency exchange rates. We are cautiously and actively monitoring potential risks associated with these instruments.

## Controls and procedures

As filed, 2,249 characters.

### Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2023, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2023, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

### Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in *Internal Control – Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of March 31, 2023 based on criteria in *Internal Control – Integrated Framework* (2013) issued by the COSO.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 838 characters.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2022, and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2022, or our other SEC filings.

Filed May 15, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-021981. Last ingested by Listed: Oct 24, 2026, 15:05 ET. No prices; not investment advice.