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Windtree Therapeutics Reports Third Quarter 2017 Financial Results

WARRINGTON, Pa., Nov. 14, 2017 /PRNewswire/ -- Windtree Therapeutics, Inc. (OTCQB: WINT), a biotechnology company focused on developing aerosolized KL4 surfactant therapies for respiratory diseases, today reported financial results for the third quarter ended September 30, 2017.

Windtree Therapeutics, Inc. - Striving to deliver hope for a lifetime

"The third quarter was an important quarter for Windtree as we implemented a financial restructuring plan to better position the company for long-term stability and growth. The plan included securing short-term cash needed to continue funding operations, eliminating the financial overhang of $25 million long-term secured debt, closing a $10 million share purchase with an affiliate of Lee's Pharmaceutical Holdings Limited, and lowering non-program related cash burn. With the successful completion of these strategic transactions, we believe we have an improved capital structure, and are better positioned to secure the additional capital necessary to realize the full potential of our KL4 surfactant and aerosol delivery platforms, beginning with AEROSURF.  We also now are part of a well-resourced organization in Lee's Pharm that we believe is committed to the diversification and growth of Windtree," commented Craig Fraser, President and Chief Executive Officer. "In addition, we continue to advance our AEROSURF development program with a 2018 focus on delivering our Next Generation phase 3 / "go-to-market" aerosol delivery system (ADS), conducting a bridging and confirmation to confirm that our device and adding to our data base and work with regulators on phase 3 planning."  

Select Financial Results for the Third Quarter ended September 30, 2017

For the quarter ended September 30, 2017, the Company reported an operating loss of $4.8 million, compared to $7.7 million for the third quarter of 2016.

Grant revenue for the third quarter of 2017 was $17,000 compared to $1.0 million for the third quarter of 2016.

Research and development expenses were $3.1 million for the third quarter of 2017, compared to $7.1 million for the third quarter of 2016. The decrease was due to (i) a decrease in AEROSURF phase 2 clinical development program costs; (ii) a decrease in costs related to development activities under our collaboration agreement with Battelle; and (iii) our ongoing efforts, initiated in the second quarter of 2016, to conserve cash and reduce costs.

General and administrative expenses were $1.7 million for the third quarter of 2017, compared to $1.6 million for the third quarter of 2016.

Interest expense for the third quarter of 2017 and 2016 was $0.6 million and primarily represents interest expense on $25 million of long-term debt.

The Company reported a net loss of $5.4 million for the third quarter of 2017, compared to a net loss of $8.4 million for the comparable period in 2016.

In addition, in the third quarter of 2017, the Company reported a $1.9 million non-cash deemed dividend on preferred stock, resulting in a net loss attributable to common shareholders of $7.4 million ($0.69 per basic share) on 10.6 million weighted-average common shares outstanding, compared to a net loss attributable to common shareholders of $8.4 million ($1.00 per basic share) on 8.4 million weighted average common shares outstanding for the comparable period in 2016.

As of September 30, 2017, the Company had cash and cash equivalents of $1.8 million. In addition, as of September 30, 2017, the Company reported current liabilities of $29.5 million (including $12.5 million of long-term debt, current portion and $2.6 million loan payable to Lee's Pharm) and long-term debt of $12.5 million. Prior to the restructuring, the current portion of long-term debt was due in February 2018 and the non-current portion of long-term debt was due in February 2019.  Both obligations were eliminated as part of the financial restructuring.

Financial Restructuring Program

The Company recently announced completion of a financial restructuring plan to provide short-term financing and improve the Company's capital structure, including through a purchase by LPH Investments Limited ("LPHIL"), a wholly-owned subsidiary of Lee's Pharmaceutical Holdings Limited ("Lee's Pharm) of $10 million of the Company's common stock, giving Lee's Pharm a controlling interest in the Company, and a simultaneous restructuring and retirement of $25 million of long-term debt under the 2013 secured loan facility agreement between the Company and affiliates of Deerfield Management Company, L.P. ("Deerfield").

Under terms of the share purchase agreement, LPHIL purchased from the Company $10 million of newly-issued common stock to acquire a controlling interest of the Company at a price per share of $0.2163, representing a 15 percent premium to the average 10-day volume weighted average price per share (VWAP) through October 27, 2017. As partial consideration for the share purchase, Lee's Pharm cancelled $3.9 million principal outstanding under an August 2017 loan agreement, which Lee's Pharm had advanced in three equal installments in August, September, and October 2017, to support AEROSURF development activities and sustain the Company's operations through October 31, 2017, while the parties negotiated the share purchase agreement. 

To facilitate the share purchase by Lee's Pharm, Deerfield agreed to restructure its $25 million secured loan to the Company effective as of the closing of the share purchase agreement. Under the loan restructuring agreement, in exchange for return and cancellation of the Deerfield notes, the Company paid to Deerfield $2.5 million in cash, and issued to Deerfield shares of common stock representing two percent of the Company's common stock post-closing on a fully-diluted basis, as defined in the loan restructuring agreement. In addition, Deerfield will be entitled to receive up to $15 million in future AEROSURF regulatory and commercial milestones, beginning with the filing for marketing approval in the United States.

In addition, the Company entered into a nonbinding memorandum of understanding with Battelle Memorial Institute (Battelle MOU) outlining potential terms to restructure payment terms of certain accounts payable related to the Company's device development activities with Battelle.  In connection with the Battelle MOU, Battelle executed and delivered a waiver of its rights to receive payments under a liquidation preference pursuant to Series A Convertible Preferred Stock held by Battelle and the related Certificate of Designation of Preferences, Rights and Limitations effective February 15, 2017.

After implementation of the financial restructuring, as of November 1, 2017, the Company had cash and cash equivalents of $5.4 million.  The Company believes that, before any additional financings, it will have sufficient cash resources to support development activities, partially satisfy existing obligations and fund operations into January 2018.

Readers are referred to, and encouraged to read in its entirety, the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 which was filed with the Securities Exchange Commission on November 14, 2017, and includes discussion about the Company's business plans and operations, financial condition and results of operations.

About Windtree Therapeutics
Windtree Therapeutics, Inc. is a clinical-stage biotechnology company focused on developing novel surfactant therapies for respiratory diseases and other potential applications. Windtree's proprietary technology platform includes a synthetic, peptide-containing surfactant (KL4 surfactant) that is structurally similar to endogenous pulmonary surfactant and novel drug-delivery technologies being developed to enable noninvasive administration of aerosolized KL4 surfactant. Windtree is focused initially on improving the management of respiratory distress syndrome (RDS) in premature infants and believes that its proprietary technology may make it possible, over time, to develop a pipeline of KL4 surfactant product candidates to address a variety of respiratory diseases for which there are few or no approved therapies.

For more information, please visit the Company's website at www.windtreetx.com.

Forward-Looking Statements
To the extent that statements in this press release are not strictly historical, all such statements are forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results, including projections of future cash balances and anticipated cash outflows, to differ materially from the statements made.  Examples of such risks and uncertainties include: the risk that, as a development company, with limited resources and no operating revenues, the Company's ability to continue as a going concern in the near term is highly dependent upon the success of AEROSURF clinical trials and whether they are sufficient to support a strategic or financing transaction and enable initiation of phase 3 development; risks that Windtree will be unable to secure significant additional capital as and when needed, if at all, whether through debt or equity financings or other strategic transaction; risks related to having the Company's common stock quoted on the  OTCQB® market; risks related to Windtree's  AEROSURF development program and other development programs in the future, which may involve time-consuming and expensive pre-clinical studies and clinical trials and which may be subject to potentially significant delays or regulatory holds, or fail; risks related to the development of aerosol delivery systems (ADS) and related components; risks related to technology transfers to contract manufacturers and problems or delays encountered by Windtree, contract manufacturers or suppliers in manufacturing, testing and releasing drug products, drug substances, and ADS on a timely basis and in sufficient amounts; risks relating to rigorous regulatory requirements, including those of: (i) the FDA or other regulatory authorities that may  require significant additional activities, or may not accept or may withhold or delay consideration of applications, or may not approve or may limit approval of Windtree's products, and (ii) changes in the national or international political and regulatory environment may make it more difficult to gain regulatory approvals; and other risks and uncertainties described in Windtree's filings with the Securities and Exchange Commission including the most recent reports on Forms 10-K, 10-Q and 8-K, and any amendments thereto.

 




Windtree Therapeutics, Inc.




Condensed Consolidated Statement of Operations




(in thousands, except per share data)














Three Months Ended


Nine Months Ended




September 30,


September 30,




(unaudited)


(unaudited)




2017


2016


2017


2016

Revenues:










Grant revenue

$         17


$             961


$         1,383


$        1,142











Operating expenses:









Research and development

3,062


7,081


14,958


25,757


General and administrative

1,749


1,613


5,475


7,053


               Total expenses

4,811


8,694


20,433


32,810











Operating loss

(4,794)


(7,733)


(19,050)


(31,668)











Change in fair value of common stock warrant
liability


 


 


 


 

223










Other income / (expense):










Interest income

3


3


9


15


Interest expense

(652)


(648)


(1,878)


(1,907)


Other income


15



449

Net loss

$      (5,443)


$    (8,363)


$    (20,919)


$    (32,888)









Deemed dividend on preferred stock

(1,915)



(6,051)










Net loss attributable to common shareholders

$      (7,358)


$    (8,363)


$    (26,970)


$    (32,888)









Net loss per common share – basic and diluted

$        (0.69)


$        (1.00)


$        (2.76)


$        (3.98)









Weighted avg. common shares outstanding – basic
and diluted

10,647


8,355


9,766


8,262












                       

 

Windtree Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands)






September 30,


December 31,






2017


2016






(unaudited)



ASSETS





Current Assets:






Cash and cash equivalents


$                  1,752


$                5,588


Prepaid interest, current portion


1,094


1,094


Prepaid expenses and other current assets


248


512


               Total current assets


3,094


7,194









Property and equipment, net


930


1,054

Restricted cash


225


225

Prepaid interest, non-current portion


408


1,226


               Total Assets


$                 4,657


$                9,699









LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:






Accounts payable, collaboration payable, accrued expenses, deferred
revenue


$              14,388


$              13,391


Loan payable


2,600



Long-term debt, current portion


12,500










Long-term debt, non-current portion


12,500


25,000

Other liabilities


117


138

Stockholders' Equity


(37,448)


(28,830)


               Total Liabilities and Stockholders' Equity


$                4,657


$               9,699

 

 

SOURCE Windtree Therapeutics, Inc.

For further information: John Tattory, Senior Vice President and Chief Financial Officer, 215.488.9418 or jtattory@windtreetx.com

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