UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-32157

 

Savara Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-1318182
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6836 Bee Cave Road, Building III, Suite 201 Austin, TX	78746
(Address of principal executive offices)	(Zip Code)

(512) 614-1848

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SVRA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 11, 2022, the registrant had 114,042,642 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
Exhibit Index		26
Signatures		27

i

PART I—FINANCIAL INFORMATION

Item I. Financial Information

Savara Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	June 30, 2022			December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	95,153		$	34,012
Short-term investments		47,286			127,159
Prepaid expenses and other current assets		2,946			3,829
Total current assets		145,385			165,000
Property and equipment, net		61			73
In-process R&D		10,379			11,274
Other non-current assets		952			251
Total assets	$	156,777		$	176,598
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	805		$	1,443
Accrued expenses and other current liabilities		2,901			4,884
Current portion of long-term debt		—			8,333
Total current liabilities		3,706			14,660
Long-term liabilities:
Long-term debt		25,942			17,323
Other long-term liabilities		87			117
Total liabilities		29,735			32,100
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value, 300,000,000 authorized as of June 30, 2022 and    December 31, 2021; 114,041,271 and 114,036,892 shares issued and outstanding    as of June 30, 2022 and December 31, 2021, respectively		116			116
Additional paid-in capital		445,927			444,898
Accumulated other comprehensive (loss) income		(1,016	)		5
Accumulated deficit		(317,985	)		(300,521	)
Total stockholders’ equity		127,042			144,498
Total liabilities and stockholders’ equity	$	156,777		$	176,598

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

1

Savara Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

	For the three months ended June 30,						For the six months ended June 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	6,418		$	7,252			12,102			14,841
General and administrative		2,957			3,153			5,311			5,931
Depreciation and amortization		8			47			16			94
Total operating expenses		9,383			10,452			17,429			20,866
Loss from operations		(9,383	)		(10,452	)		(17,429	)		(20,866	)
Other income (expense)
Interest expense, net		(284	)		(558	)		(854	)		(1,150	)
Foreign currency exchange gain (loss)		42			43			29			(15	)
Tax credit income		461			26			790			873
Total other income (expense), net		219			(489	)		(35	)		(292	)
Net loss	$	(9,164	)	$	(10,941	)	$	(17,464	)	$	(21,158	)
Net loss per share:
Basic and diluted	$	(0.06	)	$	(0.07	)	$	(0.11	)	$	(0.18	)
Weighted-average common shares outstanding:
Basic and diluted		152,771,103			152,460,531			152,770,434			114,934,938
Other comprehensive loss:
(Loss) gain on foreign currency translation		(745	)		83			(953	)		(348	)
Unrealized gain (loss) on short-term    investments		20			24			(68	)		(2	)
Total comprehensive loss	$	(9,889	)	$	(10,834	)	$	(18,485	)	$	(21,508	)

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

2

Savara Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Periods Ended June 30, 2022 and 2021

(In thousands, except share amounts)

(Unaudited)

	Stockholders’ Equity
	Common Stock
	Number of Shares			Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance on December 31, 2021		114,036,892		$	116	$	444,898		$	(300,521	)	$	5		$	144,498
Issuance of common stock   for settlement of RSUs		3,688			—		—			—			—			—
Repurchase of shares for   minimum tax withholdings		(720	)		—		(1	)		—			—			(1	)
Stock-based compensation		—			—		574			—			—			574
Foreign exchange translation   adjustment		—			—		—			—			(208	)		(208	)
Unrealized loss on short-   term investments		—			—		—			—			(88	)		(88	)
Net loss		—			—		—			(8,300	)		—			(8,300	)
Balance on March 31, 2022		114,039,860		$	116	$	445,471		$	(308,821	)	$	(291	)	$	136,475
Issuance of common stock   for settlement of RSUs		1,812			—		—			—			—			—
Repurchase of shares for   minimum tax withholdings		(401	)		—		—			—			—			—
Stock-based compensation		—			—		456			—			—			456
Foreign exchange translation   adjustment		—			—		—			—			(745	)		(745	)
Unrealized gain on short-   term investments		—			—		—			—			20			20
Net loss		—			—		—			(9,164	)		—			(9,164	)
Balance on June 30, 2022		114,041,271		$	116	$	445,927		$	(317,985	)	$	(1,016	)	$	127,042

3

Savara Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (continued)

Periods Ended June 30, 2022 and 2021

(In thousands, except share amounts)

(Unaudited)

	Stockholders’ Equity
	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance on December 31, 2020		54,152,955	$	55	$	320,893		$	(257,507	)	$	942		$	64,383
Issuance of common stock   and pre-funded warrants in   public offering, net of   offering costs (1)		57,479,978		57		121,770			—			—			121,827
Repurchase of outstanding   pre-funded warrants		—		—		(3,909	)		—			—			(3,909	)
Net issuance of common   stock upon exercise of   stock warrants, net		1,737,450		2		2,544			—			—			2,546
Issuance of common stock   for settlement of RSUs		5,563		—		—			—			—			—
Issuance of common stock   upon exercise of stock   options		202,708		—		2			—			—			2
Stock-based compensation		—		—		946			—			—			946
Foreign exchange   translation adjustment		—		—		—			—			(431	)		(431	)
Unrealized loss on short-   term investments		—		—		—			—			(26	)		(26	)
Net loss		—		—		—			(10,217	)		—			(10,217	)
Balance on March 31, 2021		113,578,654	$	114	$	442,246		$	(267,724	)	$	485		$	175,121
Issuance of common stock   and pre-funded warrants in   public offering, net of   offering costs		—		—		321			—			—			321
Issuance of common stock   for settlement of RSUs		203,687		—		—			—			—			—
Issuance of common stock   upon exercise of stock   options		65,191		—		3			—			—			3
Stock-based compensation		—		—		771			—			—			771
Foreign exchange   translation adjustment		—		—		—			—			83			83
Unrealized gain on short-   term investments		—		—		—			—			24			24
Net loss		—		—		—			(10,941	)		—			(10,941	)
Balance on June 30, 2021		113,847,532	$	114	$	443,341		$	(278,665	)	$	592		$	165,382

(1)As discussed in Note 8. Stockholders’ Equity, the Company sold (i) an aggregate of 57,479,978 shares of the Company’s common stock, par value $0.001 per share and (ii) pre-funded warrants to purchase an aggregate of 32,175,172 shares of the Company's common stock at an exercise price, equal to the par value, of $0.001 per share.

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

4

Savara Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the six months ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(17,464	)	$	(21,158	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		16			94
Amortization of right-of-use assets		66			116
Foreign currency (gain) loss		(29	)		15
Amortization of debt issuance costs		198			277
Amortization on premium to short-term investments		371			668
Stock-based compensation		1,030			1,717
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,337			(170	)
Non-current assets		(803	)		(890	)
Accounts payable and accrued expenses and other current liabilities		(2,463	)		(2,413	)
Long-term liabilities		—			(47	)
Net cash used in operating activities		(17,741	)		(21,791	)
Cash flows from investing activities:
Purchase of property and equipment		(5	)		(6	)
Purchase of available-for-sale securities, net		(16,004	)		(114,445	)
Maturity of available-for-sale securities		83,593			33,280
Sale of available-for-sale securities, net		11,276			—
Net cash provided by (used in) investing activities		78,860			(81,171	)
Cash flows from financing activities:
Repurchase of outstanding pre-funded warrants		—			(3,909	)
Repayment of long-term debt (1)		(26,350	)		—
Proceeds from long-term debt, net (1)		26,438
Issuance of common stock and pre-funded warrants in public offering, net of offering costs		—			122,148
Proceeds from exercise of stock options		—			5
Issuance of common stock upon exercise of warrants, net		—			2,546
Repurchase of shares for minimum tax withholdings		(1	)		—
Net cash provided by financing activities		87			120,790
Effect of exchange rate changes on cash and cash equivalents		(65	)		(55	)
Increase in cash and cash equivalents		61,141			17,773
Cash and cash equivalents beginning of period		34,012			22,880
Cash and cash equivalents end of period	$	95,153		$	40,653
Supplemental disclosure of cash flow information:
Cash paid for interest	$	857		$	974

(1)As discussed in Note 6. Long-term Debt, the Amended Loan Agreement (as defined herein) was accounted for as a modification. The Company used the proceeds from the Amended Loan Agreement to repay the outstanding amounts under the Loan Agreement from Silicon Valley Bank.

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

5

Savara Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Nature of Operations

Description of Business

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s lead program, molgramostim nebulizer solution (“molgramostim”), a novel inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Austin, Texas.

Since inception, Savara has devoted its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has no product revenue from inception to date. The Company has not yet commenced commercial operations.

Previously, the Company's pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments that are necessary to fairly present the statements of financial position, operations and cash flows for the periods presented. The results of operations for interim periods shown in this report are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted from these condensed consolidated financial statements, as permitted by rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The Company believes the disclosures made in these condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these condensed consolidated financial statements be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements. There have been no changes to the Company's significant accounting policies since the date of those financial statements.

Principles of Consolidation

The interim condensed consolidated financial statements of the Company are stated in U.S. dollars and are prepared under U.S. GAAP. These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive income in the condensed consolidated balance sheet. All intercompany transactions and accounts have been eliminated in consolidation. The condensed consolidated balance sheet at June 30, 2022 has been derived from the Company's audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements.

Liquidity

As of June 30, 2022, the Company had an accumulated deficit of approximately $318 million. The Company used cash in operating activities of approximately $17.7 million during the six months ended June 30, 2022. The cost to further develop and obtain regulatory approval for any drug is substantial and, as noted below, the Company may have to take certain steps to maintain a positive cash position. Although the Company has sufficient capital to fund many of its planned activities, it may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, its product candidate and begin to commercialize any approved product.

6

The Company is currently focused on the development of molgramostim for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this program. If the clinical trial for the Company’s product candidate fails or produces unsuccessful results and the product candidate does not gain regulatory approval or, if approved, fails to achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments and, potentially, through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders.

The Company’s cash and cash equivalents of $95.2 million and short-term investments of $47.3 million as of June 30, 2022 are sufficient to fund the Company’s operations for the twelve months subsequent to the issuance date of these condensed consolidated financial statements. The Company may continue to raise additional capital as needed through the issuance of additional equity securities and potentially through borrowings and strategic alliances with partner companies. However, if such additional financing is not available timely and at adequate levels, the Company will need to reevaluate its long-term operating plans. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management’s estimates include, but are not limited to, those related to the accrual of research and development expenses and general and administrative costs, certain financial instruments recorded at fair value, the valuation of stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience, changes in circumstance and facts, and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.

Risks and Uncertainties

The product candidate being developed by the Company requires approval from the U.S. Food and Drug Administration (“FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it may have a material adverse impact on the Company’s business, results of operations, and its financial position.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s products. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its cash and cash equivalents with a limited number of high-quality financial institutions and at times may exceed the amount of insurance provided on such deposits.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company's chief operating decision maker is the Chief Executive Officer. We have one operating segment, specialty pharmaceuticals within the respiratory system.

Recent Accounting Pronouncements

There are no recent accounting pronouncements issued by the FASB, the AICPA, or the SEC that are believed by the Company's management to have a material effect, if any, on the Company’s condensed consolidated financial statements.

7

3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	June 30, 2022		December 31, 2021
Prepaid contracted research and development costs	$	1,578	$	1,902
R&D tax credit receivable		771		838
VAT receivable		159		306
Prepaid insurance		260		427
Deposits and other		178		356
Total prepaid expenses and other current assets	$	2,946	$	3,829

Prepaid Contracted Research and Development Costs

As of June 30, 2022, Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for molgramostim for the treatment of aPAP. This includes prepaid amounts paid under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers that provide services in connection with the Company's research and development activities.

R&D Tax Credit Receivable

The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of June 30, 2022. Under Danish tax law, Denmark remits a research and development tax credit equal to 22% of qualified research and development expenditures, not to exceed established thresholds. During the year ended December 31, 2021, the Company generated a Danish tax credit of $0.8 million which is included in R&D tax credit receivable and is expected to be received in the fourth quarter of 2022. During the six months ended June 30, 2022, the Company generated a Danish tax credit of $0.8 million which is recorded in Other non-current assets in the condensed consolidated balance sheet and is expected to be received in the fourth quarter of 2023.

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of (in thousands):

	June 30, 2022		December 31, 2021
Accrued contracted research and development costs	$	1,145	$	1,623
Accrued compensation		1,143		2,526
Accrued general and administrative costs		513		600
Lease liability		100		135
Total accrued expenses and other current liabilities	$	2,901	$	4,884

Accrued Contracted Research and Development Costs

As of June 30, 2022, Accrued contracted research and development costs are primarily comprised of costs associated with molgramostim for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.

Accrued Compensation

As of June 30, 2022, Accrued compensation includes amounts to be paid to employees for salary, vacation and non-equity performance-based compensation. At the end of any period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, timing of payments to employees and vacation usage.

8

5. Short-term Investments

The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. The following table summarizes, by major security type, the Company’s investments (in thousands):

As of June 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments
U.S. government securities	$	16,105	$	—	$	(88	)	$	16,017
Corporate securities		10,613		—		(29	)		10,584
Commercial paper		20,685		—		—			20,685
Total short-term investments	$	47,403	$	—	$	(117	)	$	47,286
As of December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments
U.S. government securities	$	12,205	$	—	$	(15	)	$	12,190
Asset backed securities		11,349		—		(3	)		11,346
Corporate securities		49,095		—		(29	)		49,066
Commercial paper		54,557		—		—			54,557
Total short-term investments	$	127,206	$	—	$	(47	)	$	127,159

The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive income in the condensed consolidated balance sheet. Classification as short-term or long-term is based upon whether the initial maturity of the debt securities is less than or greater than twelve months.

There were no significant realized gains or losses related to investments for the three and six months ended June 30, 2022 and 2021.

6. Long-term Debt

On April 28, 2017, the Company and its subsidiary, Aravas Inc. (“Aravas”) entered into a loan and security agreement with Silicon Valley Bank, as amended by the First Amendment to the Loan and Security Agreement on October 31, 2017, the Second Amendment to the Loan and Security Agreement on December 4, 2018, the Third Amendment on January 31, 2020, and the Fourth Amendment on March 30, 2021 (the “Loan Agreement”), pursuant to which Silicon Valley Bank provided a term loan to us in the principal amount of $25 million.

On April 21, 2022, the Company and Aravas, entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”), as co-borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated the Loan Agreement in its entirety. The Amended Loan Agreement provides for a $26.5 million term loan facility. The Company used the proceeds from the Amended Loan Agreement to repay outstanding amounts under the Loan Agreement from Silicon Valley Bank, including principal of $25 million, a prepayment fee of $0.1 million, and an end of term charge of $1.4 million.

Pursuant to the Amended Loan Agreement, the loan has an interest-only monthly payment through April 21, 2026 (the “Interest-Only Period”) and thereafter equal monthly installments of principal plus interest over 12 months until April 21, 2027 (the “Maturity Date”). However, the Company may elect to extend the Interest-Only Period until the Maturity Date if it maintains cash and cash equivalents equal to at least 1.75 times the outstanding principal amount of the loan during the fifth year. If the Interest-Only Period is extended, all principal and unpaid interest is due and payable on the Maturity Date.

The loan bears interest at a floating rate equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Savara is obligated to pay customary closing fees and a final payment of 2.75% of the principal amount advanced under the facility. The Company may prepay the loan in whole or in part at any time, subject to a prepayment fee of 4.25% if prepaid within the first anniversary of the closing date and 1.0% if prepaid between the first and second anniversaries of the closing date. Following the second anniversary, there is no prepayment fee.

Silicon Valley Bank was granted a perfected first priority lien in all of the Company's assets with a negative pledge on intellectual property. The Amended Loan Agreement contained customary affirmative and negative covenants, including among others, covenants that limit the Company's and its subsidiaries’ ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to certain exceptions. Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if the Company’s balance of cash and cash

9

equivalents falls below $40 million, the Company is required to maintain cash and cash equivalents equal to at least (i) six months of operating expenses and (ii) 1.2 times the outstanding principal amount of the loan (or 1.75 in the final year of the loan if the Interest-Only Period is extended).

In accordance with FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, the Company evaluated the Amended Loan Agreement to determine whether it should be accounted for as a modification or extinguishment. As a result of this analysis, the Amended Loan Agreement was accounted for as a modification. Accordingly, no gain or loss is recognized. Approximately $0.1 million of fees paid to the lender were capitalized and will be amortized over the term of the Amended Loan Agreement. Expenses paid to third parties associated with the Amended Loan Agreement were immediately expensed and recorded in the Interest expense line item in our condensed consolidated statement of operations.

Summary of Carrying Value

The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands):

Future minimum payments due during the year ended December 31,	June 30, 2022			December 31, 2021
2022	$	—		$	8,333
2023		—			18,167
2024		—			—
2025		—			—
2026		17,667			—
2027		9,562			—
Total future minimum payments		27,229			26,500
Unamortized end of term charge		(704	)		(694	)
Debt issuance costs		(535	)		(85	)
Debt discount related to warrants		(48	)		(65	)
Total debt		25,942			25,656
Current portion of long-term debt		—			(8,333	)
Long-term debt	$	25,942		$	17,323

7. Fair Value Measurements

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

•Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

•Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

•Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired in-process research and development (“IPR&D”) and other long-lived assets that are written down to fair value if they are impaired.

IPR&D is considered an indefinite-lived intangible asset and is assessed for impairment annually, or more frequently if impairment indicators exist. In accordance with ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), the Company utilizes a two-step method, which allows the Company to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the IPR&D is more likely than not less than the carrying value, a quantitative impairment test is required.

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During the six months ended June 30, 2022 and 2021, the Company experienced a decrease of approximately $0.9 million and $0.4 million, respectively, in the carrying value of IPR&D due to foreign currency translation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.

Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

The fair value of these instruments as of June 30, 2022 and December 31, 2021 was as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of June 30, 2022
Cash equivalents:
U.S. Treasury money market funds	$	94,433	$	—	$	—	$	94,433
Short-term investments:
U.S. government securities		16,017		—		—		16,017
Corporate securities		—		10,584		—		10,584
Commercial paper		—		20,685		—		20,685
As of December 31, 2021
Cash equivalents:
U.S. Treasury money market funds	$	30,853	$	—	$	—	$	30,853
Short-term investments:
U.S. government securities		12,190		—		—		12,190
Asset backed securities		—		11,346		—		11,346
Corporate securities		—		49,066		—		49,066
Commercial paper		—		54,557		—		54,557

8. Stockholders’ Equity

Public Offering of Common Stock

On March 15, 2021, the Company sold (i) an aggregate of 57,479,978 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) for $1.45 per share, of which 11,694,150 shares were issued pursuant to the underwriters’ option to purchase additional shares, and (ii) pre-funded warrants to purchase an aggregate of 32,175,172 shares of Common Stock at an exercise price of $0.001 per share (the “2021 Pre-Funded Warrants”) for $1.449 per warrant (collectively, the “Public Offering”).

The Company determined that the securities issued in the Public Offering were free-standing and that the 2021 Pre-Funded Warrants did not contain any settlement obligations that would result in liability classification under ASC 480, Distinguishing Liability from Equity and ASC 815-40, Contracts in Entity’s Own Equity. The shares encompassed in the 2021 Pre-Funded Warrants were sold at the same price as the underlying common stock, less $0.001 (which represents the exercise price of the warrants).

The Public Offering resulted in net proceeds to the Company of approximately $122.2 million, after deducting final underwriting discounts, commissions and offering expenses, as follows (in thousands):

Financial instruments	Proceeds
Common stock	$	83,346
2021 Pre-funded Warrants		46,622
Total		129,968
Offering expenses		(7,737	)
Net proceeds	$	122,231

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The Company intends to use the net proceeds from the Public Offering to fund the clinical development of molgramostim for the treatment of aPAP and other general corporate purposes.

Milestone Warrants

Immediately prior to the Public Offering, the Company entered into separate, privately-negotiated warrant repurchase agreements with certain holders of its outstanding milestone warrants, each dated as of December 24, 2019. On March 15, 2021, the Company paid $3.9 million ($0.15 per share of Common Stock underlying each milestone warrant) to repurchase milestone warrants with 26,061,769 shares of Common Stock underlying such warrants, and the warrants were terminated. The warrant repurchase was accounted for as an equity transaction and resulted in a reduction to Additional paid-in capital in the condensed consolidated statement of stockholders’ equity.

On August 13, 2021, thirty days following the achievement of a defined clinical milestone, the remaining 3,474,902 milestone warrants dated December 24, 2019 expired and therefore such milestone warrants have been terminated and are no longer outstanding or exercisable.

Termination of Wainwright Common Stock Sales Agreement

On April 28, 2017, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, which was subsequently amended on June 29, 2018 (the “Wainwright Sales Agreement”), pursuant to which the Company could offer and sell, from time to time, through Wainwright, shares of Common Stock having an aggregate offering price of not more than $60 million, in addition to the $2.3 million in shares sold prior to the amendment.

The Company terminated the Wainwright Sales Agreement effective July 12, 2021.

Evercore Common Stock Sales Agreement

On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore Group L.L.C., (“Evercore”), as sales agent (the “Evercore Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Common Stock (the “Shares”), having an aggregate offering price of not more than $60 million. The Evercore Sales Agreement was effective on July 16, 2021, the date the Company’s shelf registration agreement on Form S-3, as filed with the SEC on July 6, 2021 ("New Registration Statement"), was declared effective by the SEC. The Shares will be offered and sold pursuant to the New Registration Statement. Subject to the terms and conditions of the Evercore Sales Agreement, Evercore will use commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Evercore with customary indemnification rights, and Evercore will be entitled to a commission at a fixed commission rate equal to 3% of the gross proceeds per Share sold. Sales of the Shares, if any, under the Evercore Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Evercore Sales Agreement or terminate the Evercore Sales Agreement.

During the six months ended June 30, 2022 and 2021, the Company did not sell any shares common stock under either the Wainwright Sales Agreement or the Evercore Sales Agreement.

Common Stock Reserved for Issuance

The Company’s shares of common stock reserved for issuance as of the periods indicated were as follows:

	June 30, 2022		December 31, 2021
April 2017 Warrants		24,725		24,725
June 2017 Warrants		41,736		41,736
December 2018 Warrants		11,332		11,332
2017 Pre-funded Warrants		775,000		775,000
Pre-funded PIPE Warrants		5,780,537		5,780,537
2021 Pre-funded Warrants		32,175,172		32,175,172
Stock options outstanding		6,064,278		6,218,841
Issued and nonvested RSUs		1,141,875		1,272,375
Total shares reserved		46,014,655		46,299,718

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Warrants

The following table summarizes the outstanding warrants for the Company’s common stock as of June 30, 2022:

Expiration Date	Shares Underlying Outstanding Warrants		Exercise Price
October 2024		775,000	$	0.01
April 2027		24,725	$	2.87
June 2027		41,736	$	2.87
December 2028		11,332	$	2.87
None		37,955,709	$	0.001
		38,808,502

Accumulated Other Comprehensive Income (Loss) Information

The components of accumulated other comprehensive income (loss) as of the dates indicated and the change during the period were (in thousands):

	Foreign Exchange Translation Adjustment			Unrealized Gain (Loss) on ST Investments			Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2020	$	941		$	1		$	942
Change		(887	)		(50	)		(937	)
Balance, December 31, 2021		54		$	(49	)		5
Change		(953	)		(68	)		(1,021	)
Balance, June 30, 2022	$	(899	)	$	(117	)	$	(1,016	)

9. Commitments

Manufacturing and Other

The Company is subject to various royalties and manufacturing and development payments related to its product candidate, molgramostim. Under a manufacture and supply agreement with the active pharmaceutical ingredients (“API”) manufacturer for molgramostim, the Company must make certain payments to the API manufacturer upon achievement of the milestones outlined in the table set forth below. Additionally, upon first receipt of marketing approval by the Company from a regulatory authority in a country for a product containing the API for therapeutic use in humans and ending the earlier of (i) ten years thereafter or (ii) the date a biosimilar of such product is first sold in such country, the Company shall pay the API manufacturer a royalty equal to low-single digits of the net sales in that country.

The Company is also subject to certain contingent milestone payments, disclosed in the following table, payable to the manufacturer of the nebulizer used to administer molgramostim. In addition to these milestones, the Company will owe a royalty of three-and one-half percent (3.5%) to the manufacturer of the nebulizer based on net sales.

The following table summarizes manufacturing commitments and contingencies as of the period indicated (in thousands):

	June 30, 2022
Molgramostim manufacturer:
Achievement of certain milestones related to validation of API and regulatory approval of     molgramostim	$	2,600
Molgramostim nebulizer manufacturer:
Achievement of various development activities and regulatory approval of nebulizer utilized     to administer molgramostim		521
Total manufacturing and other commitments	$	3,121

The milestone commitments disclosed above reflect the activities that have not been recognized at June 30, 2022 because they are not deemed probable and reasonably estimable.

On December 10, 2020, the Company announced that the Phase 3 trial of vancomycin in people living with cystic fibrosis who have MRSA lung infection did not meet the primary endpoint. On January 7, 2021 the Company issued a termination notice to GlaxoSmithKline Trading Services Limited (“GSK”), which manufactures the drug product from bulk vancomycin powder.

Contract Research

On March 5, 2021, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials.

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Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 trial. Under that work order and subsequent change orders, the Company will pay Parexel service fees, pass-through expenses, and investigator fees estimated to be approximately $33 million over the course of the IMPALA-2 clinical trial.

Risk Management

The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to certain risks associated with operating the Company’s business to an acceptable level.

10. Stock-Based Compensation

Equity Incentive Plans

2008 Stock Option Plan

The Company adopted the Savara Inc. Stock Option Plan (the “2008 Plan”), pursuant to which the Company reserved shares for issuance to employees, directors, and consultants. The 2008 Plan includes (i) the option grant program providing for both incentive and non-qualified stock options, as defined by the Internal Revenue Code, and (ii) the stock issuance program providing for the issuance of awards that are valued based upon common stock, including restricted stock, dividend equivalents, stock appreciation rights, phantom stock, and performance units. The 2008 Plan also allows eligible persons to purchase shares of common stock at an amount determined by the plan administrator. Upon a participant’s termination, the Company retains the right to repurchase nonvested shares issued in conjunction with the stock issuance program at the fair market value per share as of the date of termination.

The Company previously issued incentive and non-qualified options and restricted stock to employees and non-employees under the 2008 Plan. The terms of the stock options, including the exercise price per share and vesting provisions, were determined by the board of directors. Stock options were granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant based upon objective and subjective factors including: third-party valuations, preferred stock transactions with third parties, current operating and financial performance, management estimates, and future expectations.

The Company no longer issues stock-based awards under the 2008 Plan.

Amended and Restated 2015 Omnibus Incentive Option Plan

The Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended with approval by the Company's stockholders. The Amended and Restated 2015 Plan provides for the grant of incentive and non-statutory stock options, as well as share appreciation rights, restricted shares, restricted stock units (“RSUs”), performance units, shares, and other stock-based awards. Share-based awards are subject to terms and conditions established by board of directors or the compensation committee of board of directors. As of June 30, 2022, the number of shares of common stock available for grant under the 2015 Plan was 4,354,175 shares.

Under both the 2008 Plan and 2015 Plan, stock options typically vest quarterly over four years and expire ten years from the grant date and RSUs typically vest quarterly over four years or cliff vest after two years.

2021 Inducement Equity Incentive Plan

The Company adopted the 2021 Inducement Equity Incentive Plan in May 2021 and amended it in September 2021 (as amended, the “Inducement Plan”) . The Inducement Plan provides for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, or performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement grant in accordance with Nasdaq Listing Rule 5635(c)(4). As of June 30, 2022, the number of shares of common stock available for grant under the Inducement Plan was 406,250 shares.

Under the Inducement Plan, stock options typically vest quarterly over four years and expire ten years from the grant date and RSUs typically cliff vest after two years.

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Stock-Based Awards Activity

The following table provides a summary of stock-based awards activity for the six months ended June 30, 2022:

Stock Options:

Outstanding at December 31, 2021	6,218,841
Granted	95,000
Exercised	—
Expired/cancelled/forfeited	(249,563	)
Outstanding at June 30, 2022	6,064,278

The total compensation cost related to non-vested stock options not yet recognized as of June 30, 2022 was $2.7 million, which will be recognized over a weighted-average period of approximately 2.5 years.

RSUs:

Outstanding at December 31, 2021	1,272,375
Granted	—
Vested	(5,500	)
Forfeited	(125,000	)
Outstanding at June 30, 2022	1,141,875

The total compensation cost related to unvested RSUs not yet recognized as of June 30, 2022 was $0.9 million, which will be recognized over a weighted-average period of approximately 1.4 years.

Stock-Based Compensation

Stock-based compensation expense is included in the following line items in the accompanying statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021 (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Research and development	$	71	$	291	$	247	$	755
General and administrative		385		480		783		962
Total stock-based compensation	$	456	$	771	$	1,030	$	1,717

11. Net Loss per Share

Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. For periods in which the Company generated a net loss, the Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive.

The following equity instruments were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

	Six months ended June 30,
	2022		2021
Awards under equity incentive plan		6,064,278		5,125,189
Non-vested restricted shares and restricted stock units		1,141,875		357,022
Warrants to purchase common stock		77,793		3,552,695
Total		7,283,946		9,034,906

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The following table calculates basic earnings per share of common stock and diluted earnings per share of common stock for the three and six months ended June 30, 2022 and 2021 (in thousands, except share and per share amounts):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Net loss	$	(9,164	)	$	(10,941	)	$	(17,464	)	$	(21,158	)
Net loss attributable to common    stockholders		(9,164	)		(10,941	)		(17,464	)		(21,158	)
Undistributed earnings and net loss    attributable to common stockholders,    basic and diluted		(9,164	)		(10,941	)		(17,464	)		(21,158	)
Weighted-average common shares    outstanding, basic and diluted		152,771,103			152,460,531			152,770,434			114,934,938
Basic and diluted EPS	$	(0.06	)	$	(0.07	)	$	(0.11	)	$	(0.18	)

12. Subsequent Events

The Company has evaluated subsequent events through the date these condensed consolidated financial statements were issued. The Company determined there were no events that required disclosure or recognition in these condensed consolidated financial statements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein that involve risks and uncertainties, such as Savara’s plans, objectives, expectations, intentions, and beliefs should be considered forward-looking statements. Savara’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those identified below, the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the risks associated with the process of conducting clinical trials and developing, obtaining regulatory approval for and commercializing drug candidates that are safe and effective for use as human therapeutics, the timing and ability to raise additional capital as needed to fund continued operations, natural disasters, pandemics, geopolitical events, and those discussed in the section entitled “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 30, 2022, all of which are difficult to predict.

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

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our lead program, molgramostim nebulizer solution (“molgramostim”), a novel inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Savara, together with its wholly-owned subsidiaries, operate in one segment with its principal office in Austin, Texas.

Since inception, we have devoted our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to June 30, 2022, we have raised net cash proceeds of approximately $392.9 million, primarily from public offerings of our common stock, private placements of convertible preferred stock, and debt financings.

Previously, our pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis.

We have never been profitable and have incurred operating losses every year since inception. Our net losses for the three months ended June 30, 2022 and 2021 were $9.2 million and $10.9 million, respectively. Our net losses for the six months ended June 30, 2022 and 2021 were $17.5 million and $21.2 million, respectively, and the net loss for the year ended December 31, 2021 was $43.0 million. As of June 30, 2022, we had an accumulated deficit of approximately $318 million. Our operating losses primarily resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

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

As of June 30, 2022, we had cash and cash equivalents of $95.2 million and short-term investments of $47.3 million. We will continue to require additional capital to continue our clinical development and potential commercialization activities. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many

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factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

COVID-19 Update

The continuing COVID-19 global pandemic poses risks to our business. As we continue enrollment of our Phase 3 trial for the use of molgramostim for the treatment of aPAP, there remains a general uncertainty regarding the impact of COVID-19 on the aPAP patient population, health care providers, and clinical trial staff and personnel. Patients suffering from aPAP lung disease are prone to underlying lung conditions and are often treated by infectious disease specialists and pulmonologists. Some aPAP patients may be hesitant to enroll in the study due to the study requiring multiple clinical site visits, which may lead to COVID-19 exposure. Further, if an aPAP patient enrolled in the study contracted COVID-19, they may experience an interruption in treatment or need to discontinue their participation. There could also be delays in treatment associated with quarantine requirements if a staff member at an enrollment site contracts COVID-19 or treating physicians may need to refocus their attention on COVID-19 as new variants emerge.
 

We are unable to quantify the impact this situation will have on our future financial performance; the public health actions being undertaken to reduce the spread of the virus have created, and may continue to create, challenges and disruptions to our operations. Management, on an on-going basis, is evaluating our liquidity position, communicating with and monitoring the actions of our service providers, manufacturers, and suppliers and reviewing our near-term financial performance as we manage Savara through the uncertainty related to COVID-19.
 

As of the date of this report:

•management monitors local conditions and establishes appropriate policies to help ensure the health and safety of our employees;

•our third-party service providers, manufacturers, and suppliers may experience similar circumstances, which could negatively impact our supply chain and progress of our development pipeline; and

•COVID-19 and related safety concerns could delay recruitment of our clinical trial.

The COVID-19 pandemic remains extremely fluid and we are continuing to re-assess the impact on our operations by monitoring the spread of COVID-19, emerging COVID-19 variants, and the actions implemented to combat the virus in various regions throughout the world. Where possible and appropriate, we are making necessary operational and strategic decisions in an attempt to mitigate the negative impact of the virus on our operations.

Recent Events

Amended and Restated Loan Agreement

On April 21, 2022, we entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”) between Savara and our subsidiary, Aravas Inc. ("Aravas"), as borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated in its entirety the Loan and Security Agreement between Savara and Aravas, as borrowers, and the Lender dated April 28, 2017, as subsequently amended on October 31, 2017, December 4, 2018, January 31, 2020, and March 30, 2021 (the “Loan Agreement”). The Amended Loan Agreement provides for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.

Pursuant to the Amended Loan Agreement, the loan has an interest-only monthly payment through April 21, 2026 (the “Interest-Only Period”) and thereafter equal monthly installments of principal plus interest over 12 months until April 21, 2027 (the “Maturity Date”). However, we may elect to extend the Interest-Only Period until the Maturity Date if we maintain cash and cash equivalents equal to at least 1.75 times the outstanding principal amount of the loan during the fifth year. If the Interest-Only Period is extended, all principal and unpaid interest is due and payable on the Maturity Date.
 

The loan bears interest at a floating rate equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Savara is obligated to pay customary closing fees and a final payment of 2.75% of the principal amount advanced under the facility. The Company may prepay the loan in whole or in part at any time, subject to a prepayment fee of 4.25% if prepaid within the first anniversary of the closing date and 1.0% if prepaid between the first and second anniversaries of the closing date. Following the second anniversary, there is no prepayment fee.

Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if our balance of cash and cash equivalents falls below $40 million, we are required to maintain cash and cash equivalents equal to at least (i) six

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months of operating expenses and (ii) 1.2 times the outstanding principal amount of the loan (or 1.75 in the final year of the loan if the Interest-Only Period is extended).

Innovation Passport in United Kingdom ("UK") for Molgramostim

In June 2022, we announced molgramostim has been awarded an Innovation Passport for the treatment of aPAP by the UK's Medicines and Healthcare Products Regulatory Agency. Innovation Passport is the entry point to the Innovative Licensing and Access Pathway, a novel program aimed at accelerating the time to market and facilitating patient access to medicines in the UK.

International Conflict

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

Financial Operations Overview

Research and Development Expenses

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

•expenses incurred under agreements with contract research organizations (“CROs”), consultants, and clinical trial sites that conduct research and development activities on our behalf;

•laboratory and vendor expenses related to the execution of our clinical trials;

•contract manufacturing expenses, primarily for the production of clinical supplies; and

•internal costs that are associated with activities performed by our research and development organization and generally benefit multiple programs. Where appropriate, these costs are allocated by product candidate and consist primarily of:

opersonnel costs, which include salaries, benefits, and stock-based compensation expense;

ofacilities and other expenses, which include expenses for maintenance of facilities; and

oregulatory expenses and technology license fees related to development activities.

The following table shows our research and development expenses for the periods indicated:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
Product candidates:
Molgramostim	$	6,418	$	7,155	$	12,102	$	12,246
Vancomycin		—		97		—		2,595
Total research and development expenses	$	6,418	$	7,252	$	12,102	$	14,841

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

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the

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duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of molgramostim.

General and Administrative Expenses

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

Critical Accounting Policies and Estimates

There have not been any material changes during the six months ended June 30, 2022 to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Please read Part II, Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 for further description of our critical accounting policies.

Results of Operations — Comparison of Three Months Ended June 30, 2022 and 2021

	For the Three Months Ended June 30,						Dollar
	2022			2021			Change
	(in thousands)
Operating expenses:
Research and development	$	6,418		$	7,252		$	(834	)
General and administrative		2,957			3,153			(196	)
Depreciation and amortization		8			47			(39	)
Total operating expenses		9,383			10,452			(1,069	)
Loss from operations		(9,383	)		(10,452	)		1,069
Other income (expense), net		219			(489	)		708
Net loss	$	(9,164	)	$	(10,941	)	$	1,777

Research and Development

Research and development expenses decreased by $0.8 million, or 11.5%, to $6.4 million for the three months ended June 30, 2022 from $7.3 million for the three months ended June 30, 2021. This decrease is due to an approximately $0.7 million decrease associated with molgramostim, which is primarily due to the timing of certain CRO-related costs. Additionally, there was an approximately $0.1 million decrease associated with the close-out and wind-down of inhaled vancomycin development activities.

General and Administrative

General and administrative expenses decreased by $0.2 million, or 6.2%, to $3.0 million for the three months ended June 30, 2022 from $3.2 million for the three months ended June 30, 2021. The decrease is primarily attributable to decreased administrative and compensation costs associated with streamlining certain operational activities, which was initiated during the third quarter of 2021.

Other Income (Expense), Net

Other income (expense), net increased by $0.7 million to income of $0.2 million for the three months ended June 30, 2022 from an expense of $0.5 million for the three months ended June 30, 2021. The change is primarily related to a $0.4 million increase in Tax credit income during the three months ended June 30, 2022, which is a result of increased spend in our Danish subsidiary during the quarter. During 2021, the maximum tax credit amount was recognized during the first quarter resulting in no such income during the three months ended June 30, 2021. Additionally, Interest expense, net decreased by approximately $0.3 million as a result of the lower interest rate associated with the Amended Loan Agreement.

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Results of Operations — Comparison of Six Months Ended June 30, 2022 and 2021

	Six months ended June 30,						Dollar
	2022			2021			Change
	(in thousands)
Operating expenses:
Research and development	$	12,102		$	14,841		$	(2,739	)
General and administrative		5,311			5,931			(620	)
Depreciation		16			94			(78	)
Total operating expenses		17,429			20,866			(3,437	)
Loss from operations		(17,429	)		(20,866	)		3,437
Other expense, net		(35	)		(292	)		257
Net loss	$	(17,464	)	$	(21,158	)	$	3,694

Research and Development

Research and development expenses decreased by $2.7 million, or 18.5%, to $12.1 million for the six months ended June 30, 2022 from $14.8 million for the six months ended June 30, 2021. The decrease is primarily attributable to an approximately $2.6 million decrease in costs associated with the close-out and wind-down of vancomycin activities.

General and Administrative

General and administrative expenses decreased by $0.6 million, or 10.5%, to $5.3 million for the six months ended June 30, 2022 from $5.9 million for the six months ended June 30, 2021. The decrease is primarily attributable to decreased administrative and compensation costs associated with streamlining certain operational activities, which was initiated during the third quarter of 2021.

Other Expense, Net

Other expense, net decreased by $0.3 million, or 97%, during the six months ended June 30, 2022 from the six months ended June 30, 2021. The change is primarily related to a $0.3 million decrease in Interest expense, net during the six months ended June 30, 2022, which is a result of the lower interest rate associated with the Amended Loan Agreement.

Liquidity and Capital Resources

As of June 30, 2022, we had $95.2 million of cash and cash equivalents, $47.3 million in short-term investments, and an accumulated deficit of approximately $318 million. As discussed in Note 6. Long-term Debt in the notes to the condensed consolidated financial statements included in this Quarterly Report, we entered into a Loan and Security Agreement with Silicon Valley Bank during the year ended December 31, 2017, which was amended a fourth time in March 2021, under which we have drawn a total of $25 million. During April 2022, we entered into the Amended Loan Agreement that provided for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.

On March 11, 2021, we completed a public issuance of our common stock and pre-funded warrants for gross proceeds of approximately $130 million and net proceeds, after deducting underwriting discounts, commissions and offering expenses, of approximately $122.2 million as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report. Since 2017, we have completed four public offerings with combined net proceeds, after deducting the underwriting discounts and commissions and offering expenses, of approximately $257.6 million.

We have used and intend to use the net proceeds from these offerings for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial and given the uncertainty created by the COVID-19 global pandemic, we will continue to monitor our liquidity and capital requirements.

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Cash Flows

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

	Six Months Ended June 30,
	2022			2021
	(in thousands)
Cash used in operating activities	$	(17,741	)	$	(21,791	)
Cash provided by (used in) investing activities		78,860			(81,171	)
Cash provided by financing activities		87			120,790
Effect of exchange rate changes		(65	)		(55	)
Net change in cash	$	61,141		$	17,773

Cash flows from operating activities

Cash used in operating activities for the six months ended June 30, 2022 was $17.7 million, consisting of a net loss of $17.5 million, a net $1.9 million decrease in changes in operating assets and liability predominately associated with a decrease in Accounts payable and Accrued expenses and other current liabilities relating to the wind-down or completion of our non-aPAP trials. This was partially offset by approximately $1.7 million of noncash charges (comprised of depreciation and amortization including right-of-use assets, accretion on discount to short-term investments, amortization of debt issuance costs and stock-based compensation).

Cash flows from investing activities

Cash provided by investing activities of $78.9 million for the six months ended June 30, 2022 was primarily associated with cash provided by proceeds from the maturities and net sales of short-term investments partially offset by cash used for purchases of short-term investments.

Cash flows from financing activities

Cash provided by financing activities was minimal for the six months ended June 30, 2022. The change from the six months ended June 30, 2021 is primarily related to $122.1 million in net proceeds from the public issuance of common stock and pre-funded warrants in March 2021 and $2.5 million in net proceeds from the exercise of warrants. This was partially offset by the payment of $3.9 million to repurchase outstanding warrants, as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report.

Future Funding Requirements

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

As of June 30, 2022, we had cash, cash equivalents, and short-term investments of approximately $142.4 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 9. Commitments - Manufacturing and Other, of the condensed consolidated financial statements in this Quarterly Report, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

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

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Recent Accounting Pronouncements

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

We also have interest rate exposure related to our long-term debt. As of June 30, 2022, the Amended Loan Agreement bore interest equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Changes in the prime rate would have impacted our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on June 30, 2022 were to have occurred, this change would not have had a material effect on our interest expense with respect to outstanding borrowed amounts.

We have ongoing operations in Europe and pay those vendors in local currency, including Euros or Danish Krone. At times, we seek to limit the impact of foreign currency fluctuations through the use of derivative instruments and short-term foreign currency forward exchange contracts not designated as hedging instruments. We did not recognize any significant exchange rate losses during the six months ended June 30, 2022 and 2021. A 10% change in the Euro-to-dollar or Krone-to-dollar exchange rate on June 30, 2022 would not have had a material effect on our results of operations or financial condition.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. While certain costs have increased during 2022, we do not believe that inflation had a material effect on our results of operations during the periods presented.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2022, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of June 30, 2022 based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. We are not currently a party to any material pending litigation or other material legal proceeding.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021, and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2021 or our other SEC filings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

An Exhibit Index has been attached as part of this report and is incorporated by reference.

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Exhibit Index

Exhibit Number	Description
3.1	Composite Amended and Restated Certificate of Incorporation, as amended, of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-3 filed on July 6, 2021.)
3.2	Composite Amended and Restated Bylaws, as amended, of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 26, 2014.)
10.1	Amended and Restated Loan and Security Agreement, dated April 21, 2022, between the Registrant and its subsidiary, Aravas Inc., as borrowers, and Silicon Valley Bank (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on May 11, 2022.).
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Savara Inc.
Date: August 11, 2022	By:	/s/ Matthew Pauls
		Matthew Pauls
		Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer)

Date: August 11, 2022	By:	/s/ David Lowrance
		David Lowrance
		Chief Financial Officer (Principal Financial and Accounting Officer)

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