Company Background and Early Development
Ampio Pharmaceuticals, Inc. is a biopharmaceutical company that has faced a tumultuous journey marked by significant setbacks and regulatory challenges. Founded in 2010, the company has primarily focused on the development of a potential treatment for osteoarthritis, but its path has been riddled with obstacles that have tested its resilience.
The company's history can be traced back to its incorporation in Delaware in 2010, with an initial focus on developing Ampion as a potential treatment for osteoarthritis of the knee. In its early years, Ampio conducted several clinical trials to evaluate the safety and efficacy of Ampion, including the AP-13 and AP-17 studies. However, the company faced significant challenges in getting Ampion through the clinical trial and regulatory approval process, reporting mixed results from its initial trials and failing to demonstrate efficacy on primary endpoints.
Despite these early setbacks, Ampio persevered in its research and development efforts. In 2019, the company initiated a new phase III clinical trial, the AP-19 study, to evaluate Ampion for the treatment of severe osteoarthritis of the knee. Unfortunately, this study also failed to meet its primary endpoints, dealing another blow to the Ampion program.
Challenges with Ampion Development
One of the company's most prominent challenges has been the development of its lead product candidate, Ampion, a potential treatment for severe osteoarthritis of the knee. After initial positive results from the AP-13 clinical trial, the company faced a significant setback when it announced in May 2022 that the trial did not demonstrate efficacy on the co-primary endpoints of pain and function. This revelation led to an internal investigation and the formation of a special board committee to examine the statistical analysis and reporting of the trial results.
The investigation uncovered that various employees were aware that the AP-13 trial did not demonstrate efficacy for Ampion's primary endpoints and did not fully and timely report the results of the trial and the timing of unblinding data from the trial. This disclosure led to a securities fraud class action lawsuit against the company and several of its current and former executives, alleging that they made false and misleading statements regarding Ampion's clinical trial results and the company's prospects.
Regulatory and Legal Challenges
In addition to the legal challenges, Ampio has also faced difficulties in maintaining compliance with the listing requirements of the NYSE American exchange. In 2023, the company was informed that it had fallen below the $6 million minimum stockholders' equity requirement, and it has been working to address this issue through various cost-cutting measures and capital-raising efforts.
The company is currently involved in several legal proceedings, including a securities fraud class action lawsuit filed in August 2022 (Kain v. Ampio Pharmaceuticals, Inc., et al.), two shareholder derivative lawsuits filed in October 2022 (Maresca v. Martino, et al. and Marquis v. Martino, et al.), and another shareholder derivative lawsuit filed in January 2023 (McCann v. Martino, et al.). These lawsuits relate to allegations of false and misleading statements regarding the Ampion product and clinical trials. Additionally, the company is subject to an SEC investigation that commenced in October 2022 regarding potential violations of securities laws.
Current Focus and OA-201 Program
Despite these setbacks, Ampio has remained focused on advancing its OA-201 program, a potential treatment for osteoarthritis that the company believes holds promise. The company has continued to pursue the development of OA-201, with plans to conduct preclinical and clinical studies to evaluate its efficacy and safety. Ampio's primary strategy is to address the large and attractive opportunity for treatment of osteoarthritis of the knee (OAK) and other joints.
Financials and Liquidity
Ampio's financial situation remains precarious. For the three months ended September 30, 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 decrease in revenue, net income, operating cash flow, and free cash flow compared to the prior period was primarily due to the company's continued focus on the development of its OA-201 program and reduction in force initiatives, which resulted in lower research and development and general and administrative expenses.
As of September 30, 2023, the company had $6.40 million in cash and cash equivalents and an insurance recovery receivable of $0.50 million. The company reported a net loss of $1.23 million for the three months ended September 30, 2023, and a net loss of $6.58 million for the nine months ended September 30, 2023.
The company's research and development expenses decreased significantly from $2.75 million in the three months ended September 30, 2022, to $0.33 million in the three months ended September 30, 2023. This decrease was primarily driven by a reduction in salaries and benefits, laboratory expenses, and clinical trial and sponsored research expenses as the company shifted its focus to the pre-clinical development of OA-201.
General and administrative expenses also decreased from $2.98 million in the three months ended September 30, 2022, to $1.07 million in the three months ended September 30, 2023. This was largely due to a decrease in professional fees associated with the SEC investigation and class action lawsuits that were initiated in the prior year.
In terms of liquidity, Ampio's debt-to-equity ratio stands at 0.08, with $6.4 million in cash. The company's current ratio and quick ratio are both 2.41. The company's independent auditor has included a going concern explanatory paragraph in its audit opinion, indicating substantial doubt about Ampio's ability to continue as a going concern.
Ampio believes it will have sufficient liquidity to fund business operations into the first quarter of 2024, but may require additional financing to fund the future development of the OA-201 program, which it intends to pursue through equity capital raises. The company's ability to continue as a going concern is dependent on its success in raising such additional funds.
Future Outlook and Investor Considerations
Ampio's future remains uncertain, as it navigates the regulatory landscape, addresses its legal challenges, and seeks to secure the necessary funding to advance its OA-201 program. The company's ability to overcome these obstacles and regain the trust of investors will be crucial in determining its long-term success or failure.
Investors in Ampio Pharmaceuticals must approach this investment with a high degree of caution, as the company's past performance and current challenges suggest a substantial risk profile. The company's ability to successfully develop and commercialize its OA-201 program, while resolving its legal and regulatory issues, will be paramount in determining its future prospects. The lack of a commercialized product and the company's pre-revenue stage status further underscore the speculative nature of an investment in Ampio at this time.