Ampio Pharmaceuticals, Inc. is a pre-revenue stage biopharmaceutical company focused on the development of a potential treatment for osteoarthritis as part of its OA-201 program. With a tumultuous history marked by setbacks and legal battles, Ampio has faced significant challenges in advancing its drug candidate through the development pipeline.

Business Overview and History

Ampio was founded in 2010 and is headquartered in Englewood, Colorado. The company’s primary strategy is to address the large and attractive opportunity for the treatment of osteoarthritis of the knee (OAK) and other joints. Ampio’s lead product candidate, OA-201, is a unique and proprietary small molecule formulation that the company is seeking to advance through pain and chondroprotection pre-clinical studies and the next phases of drug development.

Initially, Ampio focused on developing Ampion, a novel therapy for severe osteoarthritis of the knee. The company conducted several clinical trials, including the AP-13 study, to evaluate Ampion’s efficacy and safety. However, in 2022, Ampio announced that the AP-13 trial failed to demonstrate efficacy for the primary endpoints, and it was revealed that some employees were aware of the trial’s results but did not fully and timely report them.

This revelation led to the formation of a special board committee to investigate the statistical analysis of the AP-13 trial and the unauthorized provision of Ampion to individuals not participating in clinical trials. The company also faced a securities fraud class action lawsuit and several shareholder derivative lawsuits as a result of these issues. These lawsuits relate to allegations that the company made false and misleading statements regarding the efficacy, clinical trials, and FDA communications related to Ampion.

To address these challenges, Ampio implemented a reduction-in-force plan in 2022, resulting in a 78% decrease in its workforce. The company also began exploring strategic alternatives, including potential transaction opportunities, to enhance shareholder value. In 2023, Ampio entered into agreements with a contract development and manufacturing organization and a laboratory to conduct pre-IND enabling studies for OA-201, demonstrating its commitment to advancing its new lead candidate.

Over the years, Ampio has faced various challenges, including the need to raise capital to fund its research and development activities and the inability to obtain regulatory approval for its previous lead product candidate. The company’s ability to navigate these challenges and its ongoing efforts to develop OA-201 will be critical to its future success.

Financials

In addition to the legal troubles, Ampio has also grappled with financial challenges. As of December 31, 2023, the company had $4.09 million in cash and cash equivalents and an accumulated deficit of $242.53 million. The company’s auditors have included a going concern explanatory paragraph in their audit opinion, raising substantial doubt about Ampio’s ability to continue as a going concern.

For the fiscal year 2022, Ampio reported no revenue, a net loss of $16.34 million, and negative operating cash flow and free cash flow of $21.13 million. In the most recent quarter (Q3 2023), the company reported revenue of $245,000, a net loss of $2,054,000, and negative operating cash flow and free cash flow of $2,309,000. The revenue increase from $0 in Q3 2022 was due to the commencement of a sublease agreement in March 2023, which provided the company with rental income. Net income, operating cash flow, and free cash flow all decreased year-over-year, primarily due to lower research and development and general and administrative expenses as the company focused on cost-cutting measures.

Liquidity

Ampio’s financial ratios paint a concerning picture. As of September 30, 2023, the company’s current ratio and quick ratio both stood at 2.41, indicating potential liquidity issues. The company’s cash ratio, which measures the proportion of cash and cash equivalents to current liabilities, was 1.72, further highlighting the company’s reliance on its cash reserves.

The company’s cash flow situation is also worrisome. Ampio’s operating cash flow for the year ended December 31, 2023, was -$8.56 million, and its free cash flow was also negative at -$8.56 million. These figures, coupled with the company’s limited cash resources, raise significant doubts about Ampio’s ability to fund its ongoing operations and the development of OA-201.

As of September 30, 2023, Ampio had $6.4 million in cash and cash equivalents and an insurance recovery receivable of $0.5 million. The company’s debt-to-equity ratio was 0.08. Based on the current cash position, projections of operating expenses, and assumptions regarding the collectability of the insurance recovery receivable, the company believes it will have sufficient liquidity to fund business operations into the first quarter of 2024.

Quarterly Performance

In the most recent quarter ended September 30, 2023, Ampio reported a net loss of $1.23 million, a significant improvement from the $6.41 million net loss reported in the same quarter of the previous year. This reduction in net loss was primarily driven by a decrease in operating expenses, particularly in research and development (R&D) and general and administrative (G&A) costs.

R&D expenses decreased by $2.42 million, or 88%, in the third quarter of 2023 compared to the same period in 2022. This was largely due to a reduction in salaries and benefits, as the company implemented a reduction-in-force plan in the third quarter of 2022, resulting in a 78% decrease in its workforce. Additionally, the company saw a decrease in clinical trial and sponsored research expenses as it focused its efforts on the OA-201 program.

G&A expenses also decreased by $1.91 million, or 64%, in the third quarter of 2023 compared to the same period in the prior year. This reduction was primarily attributable to a decrease in legal and other defense costs associated with the SEC investigation and class action lawsuits, which were partially offset by insurance recoveries.

Risks and Challenges

Ampio faces several significant risks and challenges that could hinder its ability to successfully develop and commercialize OA-201. The company’s ongoing legal troubles, including the securities fraud class action lawsuit and shareholder derivative lawsuits, have the potential to divert management’s attention and resources, as well as result in substantial legal expenses. Additionally, the company is under investigation by the SEC.

Ampio’s limited cash resources and negative cash flow raise substantial doubt about its ability to continue as a going concern. The company may be required to seek additional financing, which could lead to significant dilution for existing shareholders or may not be available on favorable terms, if at all. Ampio’s management plans to address this by continuing to aggressively monitor operating expenses, utilize an outsourcing philosophy to minimize costs, and align future expenses with the timing and amount of capital raising activities.

The development of OA-201 also faces inherent risks associated with the drug development process, including the potential for failure in pre-clinical or clinical trials, regulatory hurdles, and competition from other therapies. The company’s recent announcement that the results from its pre-IND enabling studies did not support an IND submission as anticipated is a further setback in the development of its lead product candidate.

Industry Trends

Despite the challenges faced by Ampio, the osteoarthritis treatment market presents potential opportunities. The market is expected to grow at a compound annual growth rate (CAGR) of approximately 6% from 2022 to 2030, driven by the increasing prevalence of the condition and the development of new therapeutic options. However, Ampio’s ability to capitalize on this growth remains uncertain given its current circumstances.

Conclusion

Ampio Pharmaceuticals is a biopharmaceutical company navigating a challenging landscape as it seeks to develop a potential treatment for osteoarthritis. The company’s history of setbacks, legal battles, and financial constraints have created substantial doubt about its ability to continue as a going concern and successfully advance its lead product candidate, OA-201, through the development pipeline. While the company has made progress in reducing operating expenses, its long-term viability remains uncertain, and investors should closely monitor Ampio’s ability to secure the necessary financing and overcome the various risks and challenges it faces. The company’s success will largely depend on its ability to advance the OA-201 program, resolve ongoing legal issues, and secure additional funding to support its operations and drug development efforts.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.