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Item 7. 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 Annual Report. Some of the information contained in this discussion and analysis contains forward-looking statements that involve substantial risks and uncertainties. See “Forward-looking statements” in Part I of this Annual Report and the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report for a discussion of certain factors that could cause actual results or events to differ materially from the forward-looking statements that we make.

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 metabolic dysfunction-associated steatohepatitis (“MASH”), previously termed non-alcoholic steatohepatitis (“NASH”). Except where the context indicates otherwise, references to “we,” “us,” “our,” “Altimmune” or the “Company” refer to the company and its subsidiaries.

Fiscal Year 2023 Business Update

On October 24, 2023, the U.S. Food and Drug Administration (“FDA”) granted fast track designation pemvidutide for the treatment of MASH.

Pemvidutide – IMPACT trial

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

Pemvidutide – MOMENTUM trial

48-Week Analysis

On November 30, 2023, we announced topline results from our 48-week MOMENTUM Phase 2 obesity trial of pemvidutide. The trial enrolled 391 subjects with obesity or overweight with at least one co-morbidity and without diabetes. Subjects were 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. The 1.2 mg and 1.8 mg doses were administered without dose titration, while a short 4-week titration period was employed for the 2.4 mg dose. Unlike other obesity studies with GLP-1 based agents, dose-reduction was not allowed. At baseline, subjects had a mean age of approximately 50 years, mean body mass index (“BMI”) of approximately 37 kg/m2 and mean body weight of approximately 104 kg. Approximately 75% of subjects were female. See Item 1. Business of this Annual Report for detailed discussion of the data readout.

12-Week Type 2 Diabetes Safety Trial

In March 2023, we announced the topline results from a 12-week Phase 1b safety trial of pemvidutide, which was conducted to evaluate the safety profile of pemvidutide in subjects with overweight or obesity and type 2 diabetes. The trial 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. See Item 1. Business of this Annual Report for detailed discussion of the data readout.

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”).

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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.

On March 27, 2024, we announced that the overall response in the Phase 2 trial was deemed to be insufficient to warrant further advancement in clinical trials. As a result, we have stopped any further development related to HepTcell.

Financial Operations Overview

The consolidated financial information presented below includes the accounts of Altimmune, Inc., Altimmune UK, Ltd, Spitfire Pharma, LLC. and Altimmune AU Pty, Ltd. All intercompany accounts and transactions have been eliminated in consolidation.

Revenue

We have not generated any revenue from the sale of any products to date. Our revenue has historically consisted primarily of government and foundation grants and contracts that supported our efforts on specific research projects. These grants and contracts generally provided for reimbursement of approved costs as those costs were incurred by us. Research grants and contracts and the related accounts receivable were recognized as earned when reimbursable expenses were incurred and the performance obligation was complete. Payments received in advance of services being provided were recorded as deferred revenue. We are closing out one such contract and any revenue reported during the year ended December 31, 2023 was for indirect rate adjustments.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, CROs and clinical sites.

We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates or if, when or to what extent we will generate sales from the commercialization of any of our product candidates if they receive regulatory approval. The successful development of our product candidates is highly uncertain and may never result in approved products. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

● significant and potentially changing government regulation; and

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● the timing and receipt of regulatory approvals, if any.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Additionally, we may conduct additional trials in support of sales and marketing of our product candidates.

We plan to increase our research and development expenses for the foreseeable future as we continue the development of clinical and preclinical candidates. Our current active and planned research and development activities include the following:

● conduct of a Phase 2 clinical trial for pemvidutide in MASH;

● conduct of clinical trials and nonclinical safety studies for pemvidutide;

● completion of a Phase 2 clinical trial for HepTcell; and

● manufacture of clinical trial materials in support of our clinical trials.

A significant portion of our research and development efforts have been related to the development of pemvidutide and HepTcell. The development of HepTcell was discontinued on March 27, 2024. We do not allocate personnel-related costs, costs associated with our general research platform improvements, depreciation or other indirect costs to specific programs.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance and human resource functions. Other general and administrative expenses include insurance expenses, facility-related costs and professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining our intellectual property.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development activities. We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and the SEC requirements, director and officer insurance, investor relations costs and other costs associated with being a public company. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we anticipate an increase in staffing and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

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Results of Operations

Comparison of years ended December 31, 2023 and December 31, 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31, ​

Operating expenses: ​ ​ ​ ​ ​

Impairment loss on intangible asset ​ ​ 12,419 ​ ​ — ​ ​ 12,419 ​ 100 %

Other income (expense): ​ ​ ​ ​ ​

Interest expense ​ (35) ​ (8) ​ (27) 338 %

Income tax expense (benefit) ​ — ​ (197) ​ 197 (100) %

​

Revenue

We have not generated any revenues from the sale of any products to date. Our revenue has historically consisted primarily of government and foundation grants and contracts that supported our efforts on specific research projects. We are closing out one such contract and any revenue reported during the years ended December 31, 2023 and 2022 were for indirect rate adjustments.

Research and development expenses

Research and development expenses for the years ended December 31, 2023 and 2022 consisted primarily of expenses related to product candidate development. Research and development expenses for the years ended December 31, 2023 and 2022 are summarized as follows:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31, ​

Product candidates 2023 2022 Increase (Decrease)

Total research and development expenses ​ $ 65,799 ​ $ 70,538 ​ $ (4,739) (7) %

The decrease in research and development expenses for pemvidutide was primarily due to a $13.7 million reduction in expenses associated with the metabolic dysfunction-associated steatotic liver disease (“MASLD”), previously termed non-alcoholic fatty liver disease (“NAFLD”), trials, a $6.8 million reduction in expenses associated with Phase 1 safety trials, all of which were ongoing during the year ended December 31, 2022, and which were substantially completed by March 31, 2023 and a $1.7 million reduction in expense associated with the MOMENTUM Phase 2 trial in obesity, which had commenced and was fully enrolled in the year ended December 31, 2022, but completed its in-life portion by September 30, 2023 and wound down in the year ended December 31, 2023. The decrease in these research and development expenses were partially offset by an $8.3 million increase related to the ramp up of the IMPACT Phase 2b

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trial in MASH, and a $2.8 million increase in net manufacturing expenses for production of Good Manufacturing Practice (“GMP”) drug substance materials.

The decrease in research and development expenses for HepTcell was primarily due to the winddown and completion of the in-life portion of the Phase 2 trial in 2023.

The increase in other non-project specific research and development expenses was primarily due to $3.3 million for labor related costs, $1.9 million in stock compensation, $1.0 million for electronic document management system (“EDMS”) implementation and service costs and $0.3 million for consultants.

General and administrative expenses

General and administrative expenses increased by $1.0 million, or 6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increased expense is primarily due to a $0.6 million increase in stock compensation and $0.3 million increase in other labor-related expenses.

Impairment loss on intangible asset

Impairment loss on intangible asset of $12.4 million reported during the year ended December 31, 2023 represents a non-cash impairment charge recorded for the in-process research and development (“IPR&D”) asset associated with HepTcell (See Note 2. Summary of Significant Accounting Policies). There were no impairment charges reported during the year ended December 31, 2022.

Total other income (expense), net

Total other income (expense), net increased by $4.7 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a $4.5 million increase in interest income earned on our cash equivalents and short-term investments and $0.2 million increase in gain from foreign currency exchange.

Income tax benefit

We recorded an income tax benefit of $0.2 million related to interest received and receivable on income tax refunds during the year ended December 31, 2022. Other than the income tax benefit related to interest, we did not record an income tax benefit in the years ended December 31, 2023 and 2022 due to a full valuation allowance.

Liquidity and Capital Resources

Overview

Our primary sources of cash for the year ended December 31, 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 $197.9 million as of December 31, 2023. We believe, based on the operating cash requirements and capital expenditures expected for 2024 and 2025, our cash on hand as of December 31, 2023, together with expected cash receipts from our income tax refunds and research and development incentives, are sufficient to fund operations for at least a twelve-month period from the issuance date of our December 31, 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. We have incurred significant losses since we commenced operations. As of December 31, 2023, we had an accumulated deficit of $466.3 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 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.

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Sources of Liquidity

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 three years from effectiveness or until such determination that we no longer qualify as a well-known seasoned issuer.

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 year ended December 31, 2023, we sold 20,454,516 shares of common stock under the 2023 Agreement resulting in approximately $86.6 million in net proceeds, and as of December 31, 2023, $60.6 million remained available to be sold under the 2023 Shelf.

Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

(in thousands) 2023 2022 Increase (Decrease)

Net cash provided by (used in): ​ ​ ​

​

Operating Activities

Net cash used in operating activities was $75.8 million for the year ended December 31, 2023 compared to $62.6 million during the year ended December 31, 2022. Our sources of cash provided by operations during the year ended December 31, 2023 was primarily cash receipts of research and development incentive credits. 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 operating activities of $13.2 million was due to a $22.4 million change in working capital accounts, partially offset by a $9.2 million decrease in net loss as adjusted for noncash items.

Investing Activities

Net cash provided by investing activities was $13.7 million for the year ended December 31, 2023 compared to $73.4 million net cash used during the year ended December 31, 2022. The net cash provided by investing activities during the year ended December 31, 2023 was primarily due to $102.4 million proceeds from sale and maturities of short-term investments, partially offset by $88.6 million purchase of short-term investments. The net cash used in investing activities during the year ended December 31, 2022 was primarily due to $73.3 million purchase of short-term investments.

Financing Activities

Net cash provided by financing activities was $86.1 million for the year ended December 31, 2023 compared to $56.8 million during the year ended December 31, 2022. The net cash provided by financing activities during the year ended December 31, 2023 was primarily the result of the receipt of $86.6 million in net proceeds from the issuance of common stock from our at-the-market offerings program and $0.2 million in proceeds from our employee stock purchase

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plan, partially offset by a $0.5 million payment for tax withholding obligations related to share-based compensation. The net cash provided by financing activities during the year ended December 31, 2022 was primarily the result of the receipt of $56.2 million in proceeds from the issuance of common stock from our at-the-market offerings program, $0.9 million in proceeds from exercise of stock options and $0.2 million in proceeds from employee stock purchase plan, partially offset by $0.5 million payment for tax withholding obligations related to share-based compensation.

Capital Resources

We have financed our operations to date principally through our equity offerings and proceeds from issuances of our preferred stock, common stock and warrants. As of December 31, 2023, we had $197.9 million of cash, cash equivalents, restricted cash and short-term investments. Accordingly, management believes that we have sufficient capital to fund our plan of operations for at least a twelve-month period from the issuance date of our December 31, 2023 consolidated financial statements. However, in order to address our capital needs in the long-term, 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.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.

Impairment of Indefinite-lived Intangible Assets

We evaluate our indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 350, Intangibles—Goodwill and Other (“ASC 350”).

We had one IPR&D asset, HepTcell, that we acquired in 2015. This candidate was a viral pathogen immunotherapy product for the treatment of chronic HBV. Since 2020, we have been conducting a Phase 2 clinical trial. However, the preliminary data from this trial that management analyzed in December 2023, indicates that the results are not sufficient to warrant moving forward with this product candidate. As a result, we expect to stop all further development related to HepTcell and do not anticipate that there would be any third-party interest in the asset. This decision rendered the probability of success, which is one of the key inputs in the fair value measurement of this asset, to be effectively zero or close to zero. With no alternative use nor any anticipated interest from third parties for this asset, management determined that the fair value of the IPR&D asset was deemed di minimis as of December 31, 2023. Accordingly, we recorded a non-cash impairment charge of $12.4 million, which was the carrying value of the IPR&D asset, in the accompanying Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023 under the caption “Impairment loss on intangible asset”. As of December 31, 2023, we had no indefinite-lived intangible assets.

Research and Development

Research and development costs are expensed as incurred. Research and development costs consist of payroll and personnel expense, consulting costs, external contract research and development expenses, which includes fees paid

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to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), raw materials, drug product manufacturing costs, laboratory supplies and allocated overhead, including depreciation and amortization, rent and utilities. Material research and development costs that are paid in advance of performance are capitalized as a prepaid expense and amortized over the service period as the services are provided.

Clinical trial costs are a significant component of research and development expenses, and we outsource a significant portion of these costs to third parties. Third-party clinical trial expenses include investigator fees, site and patient costs, CRO costs, costs for central laboratory testing, data management and CMO costs. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the Consolidated Balance Sheets as a prepaid asset or accrued expenses. These third-party agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. Material advance payments for goods or services that will be used or rendered for future research and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. When evaluating the adequacy of the accrued expenses, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period.

Stock-based Compensation

We account for all stock-based compensation granted to employees and non-employees using a fair value method. Compensation expense related to stock-based awards is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis, net of estimated forfeitures. The fair value of stock option awards to employees and directors is estimated using the Black Scholes option pricing model, which requires the input of subjective assumptions, including (1) the expected stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends.

We estimate forfeitures at the time of grant and, if necessary, revise the estimate in subsequent periods if actual forfeitures differ from those estimates. Estimates are based on our historical analysis of actual stock option forfeitures. The actual expense recognized over the vesting period is only for those options that vest. For the years ended December 31, 2023 and 2022, forfeiture rates were approximately 11% and 10% respectively.

We calculated the fair value of stock option awards using the Black Scholes option pricing model. The Black Scholes option pricing model requires the input of subjective assumptions, including stock price volatility and the expected life of stock options. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost. Our stock started being publicly traded under ALT beginning in June 2017, and as such we do not have sufficient history to estimate the volatility of our common stock price or the expected life of our options. The expected stock price volatility for stock option awards is based on a weighted-average volatility rate of historical volatility from a representative peer group of comparable companies and our stock price volatility until such time that we have sufficient history to rely on the volatility of our own stock. The average expected life of stock options was determined according to the “simplified method” as described in SAB 107, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate was determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. We have not paid and do not anticipate paying cash dividends. Therefore, the expected dividend rate is assumed to be 0%.

There is a high degree of subjectivity involved when using option pricing models to estimate stock-based compensation. If factors change and we employ different assumptions when valuing our options, the compensation expense that we record in the future may differ significantly from what we have historically reported.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.

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Item 8. Financial Statements and Supplementary Data

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ALTIMMUNE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

​

​

Consolidated Balance Sheets as of December 31, 2023 and 2022 99

Notes to Consolidated Financial Statements 103

1. Nature of Business and Organization 103

2. Summary of Significant Accounting Policies 103

3. Fair Value Measurement 109

4. Property and Equipment, Net 111

6. Accrued Expenses and Other Current Liabilities 112

7. Noncurrent Liabilities 112

10. Stock-Based Compensation 114

11. Employee Benefit Plans 117

13. Net Loss Per Share 119

14. Commitments and Contingencies 120

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Altimmune, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Altimmune, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Basis for opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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​ ​ ​

​ ​ Accrued and Prepaid Research and Development Expenses

​

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2017.

Tysons, Virginia

March 27, 2024

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ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

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

​ ​ ​ ​ ​ ​ ​

​ December 31,

ASSETS ​ ​

Current assets: ​ ​

Restricted cash ​ 41 ​ 34

Total cash, cash equivalents and restricted cash ​ 135,158 ​ 111,131

Accounts and other receivables ​ 1,111 ​ 173

Income tax and R&D incentive receivables ​ 3,742 ​ 2,368

Prepaid expenses and other current assets ​ 6,917 ​ 5,358

Property and equipment, net ​ 651 ​ 1,081

Indefinite-lived intangible asset ​ — ​ 12,419

LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​

Current liabilities: ​ ​

Accrued expenses and other current liabilities ​ 10,073 ​ 12,250

Commitments and contingencies (Note 14) ​ ​

Stockholders’ equity: ​ ​

Accumulated other comprehensive loss, net ​ (5,004) ​ (5,227)

Total liabilities and stockholders’ equity ​ $ 210,640 ​ $ 206,928

​

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

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Operating expenses: ​ ​

Impairment loss on intangible asset ​ 12,419 ​ —

Other income (expense): ​ ​

Interest expense ​ (35) ​ (8)

Other income (expense), net ​ 166 ​ (32)

Total other income (expense), net ​ 7,482 ​ 2,830

Income tax expense (benefit) ​ — ​ (197)

Net loss per share, basic and diluted ​ $ (1.66) ​ $ (1.81)

​

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

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total

​ Common Stock Paid-In Accumulated Comprehensive Stockholders’

​ ​ Shares ​ Amount ​ Capital ​ Deficit ​ Loss ​ Equity

Stock-based compensation — ​ — ​ 8,101 ​ — ​ — ​ 8,101

Other increase ​ 157 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ —

Stock-based compensation — ​ — ​ ​ 10,640 ​ ​ — ​ ​ — ​ 10,640

Exercise of stock options 39,303 ​ — ​ ​ 113 ​ ​ — ​ ​ — ​ 113

Unrealized gain (loss) on short-term investments — ​ — ​ ​ — ​ ​ — ​ ​ 223 ​ 223

​

The accompanying notes are an integral part of the consolidated financial statement

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​

Change in fair value of contingent consideration liability ​ — ​ 86

Impairment loss on intangible asset ​ 12,419 ​ —

Stock-based compensation expense ​ 10,640 ​ 8,101

Depreciation of property and equipment ​ 477 ​ 493

Accretion of discounts on short-term investments ​ ​ (2,471) ​ ​ (698)

(Gain) loss on foreign currency exchange ​ (154) ​ 34

Changes in operating assets and liabilities: ​ ​ ​ ​

Accounts receivable ​ (938) ​ 256

Prepaid expenses and other assets ​ (1,345) ​ 2,650

Accrued expenses and other liabilities ​ (1,883) ​ 5,393

Income tax and R&D incentive receivables ​ (1,374) ​ 3,042

Net cash used in operating activities ​ (75,810) ​ (62,586)

CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​

Proceeds from sales and maturities of short-term investments ​ 102,410 ​ —

Purchases of short-term investments ​ (88,631) ​ (73,273)

Purchases of property and equipment, net ​ (47) ​ (126)

Net cash provided by (used in) investing activities ​ 13,732 ​ (73,399)

CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​

Payments of deferred offering costs ​ ​ (195) ​ ​ —

Payment of conditional economic incentive ​ ​ (90) ​ ​ —

Proceeds from exercises of stock options ​ 113 ​ 950

Payments for tax withholding in share-based compensation ​ (539) ​ (516)

Net cash provided by financing activities ​ 86,105 ​ 56,781

​ ​ ​ ​ ​ ​ ​

SUPPLEMENTAL NON-CASH ACTIVITIES: ​ ​ ​ ​

​

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

​

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ALTIMMUNE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Organization

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 metabolic dysfunction-associated steatohepatitis (“MASH”), previously termed 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 (“R&D”), 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.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The accompanying 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.

Use of Estimates

The preparation of 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 consolidated financial statements include, but are not limited to, the valuation of share-based awards, income taxes, and accruals for R&D 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.

Segment Information

The Company is managed and operates as a single business focused on the R&D of treatments for various diseases and disorders, and vaccines. The Company is managed by a single management team, and consistent with its organizational structure, the Chief Executive Officer manages and allocates resources at a consolidated level. Accordingly, the Company views its business as one operating segment.

Cash Equivalents

The Company considers all highly liquid investments purchased with remaining maturities of 90 days or less on the purchase date to be cash equivalents, and includes amounts held in money market funds which are actively traded (a Level 1 input).

Restricted Cash

The Company had restricted cash of $41,000 and $34,000 as of December 31, 2023 and 2022, respectively, held in money market savings accounts as collateral. The restricted cash as of December 31, 2023 and 2022 is for the Company’s

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facility lease obligation. Restricted cash is classified as a component of cash, cash equivalents, and restricted cash in the accompanying Consolidated Balance Sheets and Consolidated Statements of Cash Flows.

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 December 31, 2023, none of the unrealized losses on the Company’s short-term investments are a result of credit loss, and therefore, any unrealized losses were recognized in OCI.

As of December 31, 2023, the Company had $0.1 million accrued interest on short-term investments included in “Accounts and other receivables” on the accompanying Consolidated Balance Sheets.

Accounts and Other Receivables

Accounts and other receivables include both billed and unbilled amounts, interest and other receivables. The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed. The Company’s receivables represent billings for rate adjustment under a government contract that is being closed out, as well as interest and other receivables. The Company believes that the credit risks associated with these receivables are not significant. To date, the Company has not experienced any losses associated with accounts and other receivables and does not maintain an allowance for credit loss.

Fair Value Measurements

The Company records certain financial assets and liabilities at fair value in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term.

Level 3 — Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment that the Company exercises

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in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There were no transfers into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2023 and 2022.

Financial Instruments

The Company’s financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, short-term investments, accounts payable, accrued expenses, and common stock warrants classified as equity. The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of those financial instruments. Short-term investments are recorded at fair value, with any unrealized holding gains or losses reported as accumulated other comprehensive income or loss.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses in these deposits.

Property and Equipment, Net

The Company records property and equipment at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to operations as incurred, whereas major improvements are capitalized as additions to property and equipment. Costs of assets under construction are capitalized but are not depreciated until the construction is substantially complete and the assets being constructed are ready for their intended use.

Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the assets, as follows:

​ ​ ​

Asset Category Estimated Useful Life

Computer and telecommunications 3 – 5 years

Software 3 years

Furniture, fixtures and equipment 5 years

Laboratory equipment 7 years

Leasehold improvements Lesser of lease term or estimated useful lives

​

Intangible Assets

The Company records intangible assets acquired in a business combination based on fair value on the date of acquisition. Acquired in-process research and development (“IPR&D”) assets that have alternative future use at the time of acquisition are capitalized as an indefinite-lived intangible asset and tested for impairment until the project is completed or abandoned. Upon completion of the project, the indefinite-lived intangible asset will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. If the project is abandoned, the indefinite-lived intangible asset will be charged to expense.

Intangible assets acquired in other transactions are recorded at cost. The Company capitalizes costs incurred in the course of obtaining patents and license issuance fees for the use of proprietary technologies. Costs incurred for obtaining patents are amortized on a straight-line basis over the estimated useful lives of the assets from the time of approval of the patent. Prior to approval, these costs are carried on the balance sheets and not amortized. In the event approval is denied, the cost of the denied application is expensed. License issuance fees are amortized on a straight-line basis over the estimated useful lives of the underlying licensed technology. Amortization costs are classified as R&D expenses.

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Impairment or Disposal of Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 360, Property, Plant and Equipment (“ASC 360”). The Company’s long-lived assets include properties and equipment and right of use (“ROU”) assets. For long-lived assets, impairment is recognized when the undiscounted cash flows used in the test for recoverability is less than their carrying value. In the event impairment exists, the long-lived asset will be written down to its fair value, and an impairment loss is recorded as the difference between the carrying value and fair value. For the years ended December 31, 2023 and 2022, the Company’s qualitative assessment of long-lived assets for impairment testing determined that no impairment indicators were present.

Impairment of Indefinite-lived Intangible Assets

The Company evaluates its indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable in accordance with the guidance in FASB Accounting Standard Codification Topic 350, Intangibles—Goodwill and Other (“ASC 350”).

The Company had one IPR&D asset, HepTcell, that it acquired in 2015. This candidate was a viral pathogen immunotherapy product for the treatment of chronic HBV. Since 2020, the Company has been conducting a Phase 2 clinical trial. However, the preliminary data from this trial that management analyzed in December 2023, indicates that the results are not sufficient to warrant moving forward with this product candidate. As a result, the Company expects to stop all further development related to HepTcell and does not anticipate that there would be any third-party interest in the asset. This decision rendered the probability of success, which is one of the key inputs in the fair value measurement of this asset, to be effectively zero or close to zero. With no alternative use nor any anticipated interest from third parties for this asset, management determined that the fair value of the IPR&D asset was deemed di minimis as of December 31, 2023. Accordingly, the Company recorded a non-cash impairment charge of $12.4 million, which was the carrying value of the IPR&D asset, in the accompanying Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023 under the caption “Impairment loss – intangible asset”. As of December 31, 2023, the Company had no indefinite-lived intangible assets.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are recorded as a current and long-term lease obligation, with a corresponding right of use lease assets.

Lease liabilities represent the Company’s obligation to make lease payments arising from leases. ROU assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities and ROU assets are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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.

Lease incentives and allowance provided by our landlord for the construction of leasehold improvements are recorded as lease incentive obligations as the related construction costs are incurred, up to the maximum allowance.

Stock-based Compensation

The Company accounts for all stock-based compensation granted to employees and non-employees using a fair value method. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model on the dates of grant. For restricted stock and restricted stock units granted, fair value is determined based on the grant date closing price of the Company’s common stock.

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Stock-based compensation awarded to employees is measured at the grant date fair value of stock option grants and is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis, net of estimated forfeitures. The Company estimates forfeitures at the time of grant and, if necessary, revises the estimate in subsequent periods if actual forfeitures differ from those estimates. Estimates are based on the Company’s historical analysis of actual stock option forfeitures. The actual expense recognized over the vesting period is only for those options that vest.

If awards are modified, the Company compares the fair value of the affected award measured immediately prior to modification to its value after modification. To the extent that the fair value of the modified award exceeds the original award, the incremental fair value of the modified award is recognized as compensation expense on the date of modification for vested awards, and over the remaining vesting period for unvested awards.

R&D Expense

R&D costs are expensed as incurred. R&D costs consist of payroll and personnel expense, consulting costs, external contract R&D expenses, which includes fees paid to other entities that conduct certain R&D activities on the Company’s behalf, such as clinical research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), raw materials, drug product manufacturing costs, laboratory supplies and allocated overhead, including depreciation and amortization, rent and utilities. Material R&D costs that are paid in advance of performance are capitalized as a prepaid expense and amortized over the service period as the services are provided.

Clinical trial costs are a significant component of R&D expenses, and the Company outsources a significant portion of these costs to third parties. Third party clinical trial expenses include investigator fees, site and patient costs, CRO costs, costs for central laboratory testing, data management and CMO costs. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations and other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the Consolidated Balance Sheets as a prepaid asset or accrued expenses. These third-party agreements are generally cancelable, and related costs are recorded as R&D expenses as incurred. Material advance payments for goods or services that will be used or rendered for future R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. When evaluating the adequacy of the accrued expenses, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period.

R&D Incentive Credits

The Company is eligible to obtain certain R&D incentive credits, through the participation in the U.K. R&D Small and Medium Enterprise tax relief program (“U.K. R&D credit”) and the Australian R&D incentive credit (the “Australia R&D credit”) program administered through the Australian Tax Office (the “ATO”).

The U.K. R&D credits are calculated as a percentage of qualifying R&D expenses and are payable in cash by the U.K. government to the Company. Qualifying R&D expenses consist of employment costs for research staff, consumables, a proportion of relevant, permitted sub-contract costs and certain internal overhead costs incurred as part of research projects for which the Company does not receive income. The Australia R&D credits provide for a cash refund based on a percentage of certain R&D activities undertaken in Australia by the Company’s wholly owned subsidiary, Altimmune AU Pty, Limited. Qualifying R&D expenses must be incurred within the country.

The U.K. and Australian incentive credits are available on the basis of specific criteria with which the Company must comply. The incentive credits are subject to future audits by the government authorities and a statute of limitations. Although the incentive credits may be administered through the local tax authority, the Company has accounted for the incentives outside of the scope of FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), since the incentives are not linked to the Company’s taxable income and can be realized regardless of whether the Company has generated taxable income in the respective jurisdictions. The Company accounts for these incentive credits as a government

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grant which analogizes with International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance.

The Company records qualifying U.K. R&D expenses as receivable and a corresponding reduction to R&D expense in the Consolidated Statement of Operations and Comprehensive Loss. During the years ended December 31, 2023 and 2022, the Company recognized $1.2 million and $1.8 million, respectively, of R&D credits as a reduction to R&D expense in the Consolidated Statement of Operations and Comprehensive Loss. As of December 31, 2023 and 2022, the Company had $3.0 million and $1.6 million, respectively, of R&D credits included in “Income tax and R&D incentive receivables” on the accompanying Consolidated Balance Sheets.

The Company records qualifying Australian R&D credits as receivable with a full valuation reserve. Cash receipts for Australia R&D credits are recorded as noncurrent liability until it either passes an audit performed by the ATO, or the statute of limitations ends, whichever occurs first. Upon successfully passing an audit or the expiration of the statute of limitations, the Company will clear the liability and a corresponding reduction to R&D expense unless recognition criteria is met in a later year, in which case the R&D credit will be recorded as other income in the Consolidated Statement of Operations and Comprehensive Loss. During the years ended December 31, 2023 and 2022, the Company received $0.4 million and $3.6 million in cash for R&D incentive, respectively. The 2023 incentive credit received is related to R&D costs that the Company incurred during the fiscal year 2022, whereas the 2022 incentive credit received is related to R&D costs that the Company incurred during the fiscal years and 2021 and 2020, both through the participation in the Australian R&D credit program, and is included in “Noncurrent liabilities” on the accompanying Consolidated Balance Sheets.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740. ASC 740 uses the asset and liability approach, which requires the recognition of future tax benefits or liabilities on the temporary differences between the financial reporting and tax bases of our assets and liabilities. Deferred tax assets and liabilities represent future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities and for loss carryforwards using enacted tax rates expected to be in effect in the years in which the differences reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company also recognizes a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. To date, the Company has not incurred interest and penalties related to uncertain tax positions. Should such costs be incurred, they would be classified as a component of provision for income taxes.

The Company conducts R&D activities potentially qualified to claim research tax credits for U.S. federal and state purposes under Internal Revenue Code Section 41. The Company has not performed a formal study claiming these credits in the tax returns because the Company does not yet have taxable profits. Once the Company becomes profitable, it will likely have a study prepared, and the amount of R&D tax credits available could generate income tax benefit, subject to an annual Section 383 limitation and valuation allowance for realizability of the deferred tax asset.

Comprehensive Loss

For the years presented, the total comprehensive loss includes net loss and other comprehensive income (loss) which represents unrealized gains or losses on short-term investments.

Net Loss per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period without consideration for potentially dilutive securities.

The Company computes diluted net loss per common share after giving consideration to all potentially dilutive common equivalents, including all unvested restricted stock, common stock warrants, and common stock options outstanding during the period except where the effect of such non-participating securities would be anti-dilutive.

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Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

Recently issued accounting pronouncements

Recently Adopted:

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. The adoption of this update did not have a material impact on the Company’s financial statements and related disclosures.

Not Yet Adopted:

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU No. 2023-07 requires public business entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The amendments in ASU 2023-07 also clarify that entities with a single reportable segment are subject to both new and existing segment reporting requirements under Topic 280. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. The amendments in this update are effective on the Company’s 2024 annual report and quarterly reports beginning on first quarter 2025. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU No. 2023-09 requires public business entities on an annual basis to (i) disclose in the rate reconciliation both percentages and amounts for certain categories in a tabular format, with further disaggregation of certain categories when the individual reconciling items meet a quantitative threshold, (ii) disclose income taxes paid, net of refunds received disaggregated by federal, state and foreign, with further disaggregation by individual jurisdictions that meet a qualitative threshold (iii) eliminates the requirement to disclose certain information when it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date or make a statement that an estimate of the range cannot be made and (iv) eliminates the requirement to disclose cumulative amount of each type of temporary difference in certain circumstances. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued. The amendments in ASU 2023-09 should be applied on a prospective basis, although retrospectively application is permitted. The amendments in this update are effective on the Company’s 2025 annual report. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.

3. Fair Value Measurement

The Company records cash equivalents and short-term investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability.

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The Company’s assets measured at fair value on a recurring basis as of December 31, 2023 consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fair Value Measurement at December 31, 2023

​ Total Level 1 Level 2 Level 3

Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash equivalents - money market funds ​ $ 123,233 ​ $ 123,233 ​ $ — ​ $ —

​

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 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 December 31, 2023 as shown below (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Amortized Cost ​ Unrealized (Loss) Gain ​ Credit loss ​ Market Value

Asset backed securities ​ 2,966 ​ (4) ​ — ​ 2,962

Agency debt securities ​ ​ 8,923 ​ ​ 4 ​ ​ — ​ ​ 8,927

​

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Amortized Cost ​ Unrealized (Loss) Gain ​ Credit Loss ​ Market Value

United States treasury securities $ 15,868 $ (86) $ — $ 15,782

Agency debt securities ​ ​ 1,928 ​ ​ 5 ​ ​ — ​ ​ 1,933

​

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 years ended December 31, 2023 and 2022, the Company had no assets or liabilities that were measured at fair value on a non-recurring basis.

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4. Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Furniture, fixtures and equipment $ 163 ​ 163

Laboratory equipment ​ 342 ​ 295

Computers and telecommunications ​ 194 ​ 194

Property and equipment, at cost ​ 2,626 ​ 2,579

Less: accumulated depreciation and amortization ​ ​ (1,975) ​ ​ (1,498)

Property and equipment, net ​ $ 651 ​ $ 1,081

​

Depreciation expense related to property and equipment for each of the years ended December 31, 2023 and 2022 was $0.5 million.

5. 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 these leases during each of the years ended December 31, 2023 and 2022 was $0.5 million, which 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.

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 years ended December 31, 2023 and 2022 was $0.5 million.

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

​ ​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Operating lease obligations (see Note 6 and 7) $ 671 $ 1,124 ​

Weighted-average remaining lease term (years) ​ 1.3 ​ 2.3 ​

Weighted-average discount rate ​ 7.2 % 7.2 %

​

Maturities of operating lease liabilities are as follows (in thousands):

​ ​ ​ ​

Year ending December 31, ​

Total operating lease payments ​ 702

Less: imputed interest ​ (31)

Total operating lease liabilities (see Note 6 and 7) ​ $ 671

​

​

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6. Accrued Expenses and Other Current Liabilities

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

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Accrued professional services $ 293 $ 276

Accrued payroll and employee benefits ​ 3,315 ​ 2,955

Accrued research and development ​ 5,845 ​ 7,295

Lease obligation, current portion (see Note 5) ​ 496 ​ 452

Excess tax refund payable ​ ​ — ​ ​ 1,169

Accrued interest and other ​ 124 ​ 103

Total accrued expenses and other current liabilities ​ $ 10,073 ​ $ 12,250

​

​

​

7. Noncurrent Liabilities

The Company’s noncurrent liabilities are summarized as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Research and development incentive credit ​ $ 4,023 ​ $ 3,599

Lease obligation, long-term portion (see Note 5) ​ 175 ​ 672

Conditional economic incentive grants ​ 160 ​ 250

Total noncurrent liabilities ​ $ 4,398 ​ $ 4,581

​

R&D incentive credit Program

During the years ended December 31, 2023 and 2022, the Company received a total of $0.4 million and $3.6 million in cash for R&D incentive credit, respectively. The 2023 incentive credit received is related to R&D costs that the Company incurred during the fiscal year 2022, whereas the 2022 incentive credit received is related to R&D costs that the Company incurred during the fiscal years and 2021 and 2020, both through the participation in the Australian R&D incentive credit program administered through the ATO. The Company recorded the receipt as noncurrent liability until there is reasonable assurance that the Company will comply with the conditions attached to the incentive credit.

Economic Incentive Grants

The Company had two conditional economic incentive grants for a total of $250,000 from Montgomery County, Maryland and the State of Maryland. The Montgomery County grant of $100,000 was received in May 2018, with a term expiring on February 28, 2028. The State of Maryland grant of $150,000 was received in October 2019, with a 10-year term expiring on December 31, 2029. These grants are conditional primarily based on the Company maintaining its current headquarter locations in addition to employing a required number of employees at different reporting dates through the term of the grants. The annual interest rate on both economic incentive grants is 3%.

During the year ended December 31, 2023, the Company repaid approximately $99,000 of the State of Maryland grant, including accrued interest, as the Company didn’t meet the required number of employees as of December 31, 2022 as per terms of the grant.

8. Common Stock

The Amended and Restated Certificate of Incorporation, as amended (“Charter”), authorized the Company to issue 200,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2023, the Company had 70,677,400 shares of common stock issued and outstanding.

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The Charter also authorized the Company to issue 1,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2023, the Company had no shares of preferred stock issued and outstanding.

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 year ended December 31, 2023, the Company sold 20,454,516 shares of common stock under the 2023 Agreement resulting in approximately $86.6 million in proceeds, net of $2.8 million commission and other offering costs, with, $60.6 million remaining available to be sold under the 2023 Agreement. As of December 31, 2023, there was $0.1 million in 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 December 31, 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 were classified as equity and were accounted for as a component of additional paid-in capital at the time of issuance. In January 2022, 760,870 of the Pre-Funded Warrants were exercised, resulting in the issuance of 760,870 shares of common stock. Furthermore, on October 18, 2023, warrant holders exercised the remaining 869,566 Pre-Funded Warrants in a net cashless exercise and were issued 869,530 shares of common stock (see Note 9).

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9. Warrants

The following common stock warrants were outstanding at December 31, 2023:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Number of ​ ​ ​ ​ ​ ​ ​

​ ​ Common ​ Per Share ​ ​ ​ ​

​ ​ Stock ​ Exercise ​ ​ ​ ​

​ ​ Warrants ​ Price ​ Issuance Date ​ Expiration Date

​

The following common stock warrants were outstanding at December 31, 2022:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Number of ​ ​ ​ ​ ​ ​ ​

​ ​ Common ​ Per Share ​ ​ ​ ​

​ ​ Stock ​ Exercise ​ ​ ​ ​

​ ​ Warrants ​ Price ​ Issuance Date ​ Expiration Date

​

On October 18, 2023, warrant holders exercised the remaining 869,566 Pre-Funded Warrants in a net cashless exercise and were issued 869,530 shares of common stock (see Note 8 Common Stock). In addition, in October 2023, 95,600 various other warrants with a weighted-average exercise price of $5.31 expired unexercised. On March 5, 2024, the remaining 50,000 warrants with an exercise price of $3.21 were fully exercised, resulting in the issuance of 50,000 shares of common stock.

A summary of warrant activity is as follows:

​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Weighted-Average

​ ​ ​ Weighted ​ Remaining

​ ​ Number of ​ ​ Average ​ Contractual Term

​ ​ Warrants ​ ​ Exercise Price ​ (Years)

Exercised (see Note 8) ​ (869,566) ​ ​ ​ ​ ​

​

​

10. Stock-Based Compensation

Stock Options

The Company established the 2001 Employee Stock Option Plan to provide incentive stock options and non-qualified stock options to employees, and the 2001 Non-employee Stock Option Plan to provide non-qualified stock options to the members of the board of directors and advisory board, and non-employees. The 2001 Employee Stock Option Plan and the 2001 Non-employee Stock Option Plan are collectively referred to as the “2001 Plans.” In connection with the Company’s merger with PharmAthene, Inc. in 2017, the Company issued options from its 2001 Plans to replace options previously granted. The Company de-designated common stock available for issuance under the 2001 Plans. No additional options or restricted stock will be granted under these plans. Options outstanding and unvested restricted stock granted or replaced under these plans will continue to vest over the remaining vesting period through the earlier of exercise, expiration or forfeiture. The replacement options issued after the 2017 mergers will continue to vest over the remaining

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vesting period through the earlier of exercise, expiration or forfeiture. Also, in connection with the 2017 mergers, the 2001 Plans were assumed by the Company.

In addition, the Company assumed the PharmAthene, Inc. Amended and Restated 2007 Long-Term Incentive Compensation Plan (the “2007 Plan”). Awards outstanding under the 2007 Plan remained outstanding in accordance with their applicable terms and conditions. No additional awards will be made under the 2007 Plan.

The Company established the 2017 Omnibus Incentive Plan (the “Omnibus Plan”) to provide incentive stock options, non-qualified stock options, restricted stock, and other stock-based awards denominated in shares of the Company’s common stock, and performance-based cash awards to eligible employees, consultants and directors. In 2018, the Company’s shareholders approved an amendment to the Omnibus Plan to increase the number of shares reserved for issuance from 1,500,000 to 5,000,000. The aggregate share reserve will be increased on January 1 of each year commencing in 2019 and ending on and including January 1, 2027 up to an amount equal to the lowest of (i) 4% of the total number of shares of common stock outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year, and (ii) such number of shares of common stock, if any, determined by the Company’s board of directors. Accordingly, on January 1, 2024, the number of shares of Common Stock reserved and available for issuance under the Omnibus Plan increased by 3,055,006. The maximum number of shares of common stock that may be issued under the Omnibus Plan in respect of Incentive Stock Option (“ISO”) is 5,000,000 shares. The maximum number of shares of common stock that may be granted to non-employee directors under the Omnibus Plan during any fiscal year is 2,000,000 shares.

On November 29, 2018, the Board approved and adopted the Altimmune Inc. 2018 Inducement Grant Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of equity or equity-based awards in the form of non-qualified stock options, restricted stock awards and other stock-based awards. The Inducement Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules.

The Board has reserved 2,000,000 shares of the Company’s common stock for issuance pursuant to awards granted under the Inducement Plan (subject to customary adjustments in the event of a change in capital structure of the Company), and the Inducement Plan will be administered by the Compensation Committee. In accordance with Rule 5635(c)(4) of the NASDAQ Listing Rules, awards under the Inducement Plan may be only made to an employee who has not previously been an employee or member of the Board or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.

The 2001 Plans, the 2007 Plan, the Omnibus Plan and the Inducement Plan are collectively referred to as the “Plans.” During the year ended December 31, 2023 under the Plans, a total of 1,760,026 options to purchase shares of common stock were granted. As of December 31, 2023, there were 1,605,642 and 1,309,275 shares of common stock available for future grants under the Omnibus Plan and the Inducement Plan, respectively.

The fair value of stock option issued to employees was estimated at the date of grant using Black-Scholes with the following weighted-average assumptions:

​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Expected term (years) 6.0 6.0 ​

Risk-free interest rate 3.8 % 2.4 %

Expected dividend yield 0.0 % 0.0 %

​

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A summary of stock option activity under the Plans is presented below (in thousands, except share and per share data):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Weighted-Average ​ ​

​ ​ ​ ​ Weighted- ​ Remaining ​ ​ ​

​ ​ Number of ​ Average ​ Contractual Term ​ Aggregate Intrinsic

​ ​ Stock Options ​ Exercise Price ​ (Years) ​ Value (In thousands)

​

The per share weighted-average grant date fair value of stock options granted during the years ended December 31, 2023 and 2022 were $7.86 and $7.07 per share, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2023 and 2022 was $0.2 million and $4.4 million, respectively. The total fair value of options vested during the years ended December 31, 2023 and 2022 was $7.0 million and $6.8 million, respectively. As of December 31, 2023, there was $16.0 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.5 years.

Restricted Stock Units (RSUs)

During the year ended December 2022, the Company granted 319,700 shares of RSUs with a weighted-average grant date fair value of $13.20 per share which vest over four years. During the year ended December 31, 2023, the Company issued 72,646 shares of common stock as a result of the vesting of 115,018 RSUs net of 42,372 shares of common stock withheld to satisfy tax withholding obligations. The fair value of RSUs vested during the years ended December 31, 2023 and 2022 was $1.4 million and $0.6 million, respectively.

A summary of RSUs activities is presented below:

​

​ ​ ​ ​ ​ ​

​ ​ Weighted-

​ ​ ​ ​ average

​ ​ ​ ​ Grant Date

​ ​ Shares ​ Fair Value

​

As of December 31, 2023, total unrecognized compensation expense related to RSUs was $4.6 million, which the Company expects to recognize over a weighted-average period of approximately 2.5 years.

2019 Employee Stock Purchase Plan

On March 29, 2019, the Board adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). A total of 403,500 shares of the Company’s common stock have been reserved for issuance under the 2019 ESPP. Subject to any plan limitations, the 2019 ESPP allows eligible employees to contribute through payroll deductions up to 10% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods begin in February and August of each year, with the initial offering period started on August 1, 2019. The common shares issuable under the 2019 ESPP were registered pursuant to a registration statement on Form S-8 on April 4, 2019.

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Unless otherwise determined by the administrator, the Company’s common stock will be purchased for the accounts of employees participating in the 2019 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. The 2019 ESPP estimated shares to be purchased fair value is included in stock-based compensation expense.

Employees have the ability to purchase shares of the Company’s common stock at a price equal to the lower of the first or last trading day of the offering period, which represents an option and, therefore, the 2019 ESPP is a compensatory plan under ASC 718-50, Employee Stock Purchase Plans. Accordingly, stock-based compensation expense is determined based on the option’s grant-date fair value, employee contributions, and the Company’s stock price and is recognized over the requisite service period of the option. The Company used the Black-Scholes valuation model to determine the fair value of ESPP.

During the year ended December 31, 2023, employees purchased 41,560 shares for $0.2 million under the 2019 ESPP. As of December 31, 2023, there were 218,784 shares of common stock available for future issuance under the 2019 ESPP Plan. The Company recognized stock-based compensation expense related to this plan of $0.2 million and $0.3 million for of the years ended December 31, 2023 and 2022, respectively.

Stock-based Compensation Expense

Stock-based compensation expense is classified in the accompanying Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022 as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Research and development ​ $ 4,758 ​ $ 2,835

General and administrative ​ 5,882 ​ 5,266

​

​

11. Employee Benefit Plans

The Company has a 401(k)-retirement plan in which substantially all of our employees in the United States are eligible to participate in. Eligible employees may elect to contribute up to the maximum limits, as set by the Internal Revenue Service, of their eligible compensation. During the years ended December 31, 2023 and 2022, the Company made discretionary plan contributions of $0.4 million and $0.3 million, respectively.

12. Income Taxes

The components of net loss before income tax benefit are as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ Year Ended December 31,

Net loss before income tax benefit ​ $ (88,447) ​ $ (84,910)

​

The components of the income tax expense (benefit) are as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

U.S. federal ​ ​

Current ​ $ — ​ $ (144)

U.S. state and local ​ ​

Current ​ — ​ (53)

Income tax expense (benefit) ​ $ — ​ $ (197)

​

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Reconciliation between the effect of applying the federal statutory rate and the effective income tax rate used to calculate the Company’s income tax benefit is as follows:

​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

State income taxes, net of federal benefit 8.74 (0.12) ​

Research and development tax credit (3.74) (2.22) ​

Acquired in process research and development — (0.02) ​

Rate change — 1.29 ​

Change in valuation allowance (28.90) (19.91) ​

Effective tax rate — % 0.23 %

​

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income and for tax carryforwards. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Deferred tax assets: ​ ​

Capitalized research and development costs ​ ​ 24,698 ​ ​ 11,996

Depreciation ​ 56 ​ —