Filing summary
Entity and period: The supplied filing is Tekmira Pharmaceuticals Corporation’s Form 20-F for the fiscal year ended December 31, 2011, not an Arbutus Biopharma filing. It reports annual results and includes unaudited fourth-quarter data. Amounts are Canadian dollars unless otherwise stated; the financial statements use U.S. GAAP.
Business context and reporting period
Tekmira was a pre-commercial biopharmaceutical company developing RNA interference (RNAi) therapeutics and licensing lipid nanoparticle (LNP) delivery technology. It had no products approved for sale and depended on collaborations, licensing and government contracts for revenue. Its leading internal programs included TKM-PLK1, TKM-Ebola and TKM-ApoB.
Financial performance and liquidity
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Revenue | $16.65 million | $21.35 million |
| Operating expenses | $27.19 million | $33.87 million |
| Operating loss | $10.54 million | $12.52 million |
| Net loss | $9.94 million | $12.42 million |
| Loss per share, basic and diluted | $0.88 | $1.20 |
| Operating cash used | $7.68 million | $11.25 million |
| Cash and cash equivalents at year-end | $9.18 million | $12.35 million |
| Total assets | $13.99 million | $21.02 million |
| Total liabilities | $8.68 million | $10.29 million |
Revenue fell about 22%, primarily because 2010 included a $5.92 million Talon license amendment payment and Roche collaboration revenue that did not recur. Net loss narrowed about 20%. No meaningful operating margin was reported; the company remained loss-making. Revenue was led by the U.S. Government contract ($11.43 million, up from $3.56 million) and Alnylam collaborations and contracts ($4.14 million, down from $6.26 million). These sources accounted for 69% and 25% of 2011 operating revenue, respectively, according to the filing.
Year-end current assets were $11.79 million and current liabilities $6.99 million. Management reported $7.2 million of working capital excluding deferred revenue and expense balances. A US$3.0 million Silicon Valley Bank term facility, secured by company assets and carrying 8% interest, was available but undrawn at year-end. The company said cash, the February 2012 financing, expected partner and government receipts, and access to the facility were expected to fund operations into the second half of 2013. The February 29, 2012 private placement raised approximately $4.07 million gross.
Q4 2011 revenue was $3.7 million versus $6.2 million in Q4 2010; net loss was $1.8 million versus $1.9 million. Q4 2011 expenses were $5.5 million, including $3.7 million in research, development, collaborations and contracts and $2.0 million in general and administrative costs. Lower revenue reflected the end of Roche work and reduced Alnylam manufacturing activity; G&A rose mainly due to litigation fees.
No dividend was paid or planned. The filing gives no conventional debt balance at year-end because the SVB facility had not been drawn. A $0.57 million non-cash gain from revaluing offering warrants reduced the reported 2011 net loss.
Material changes, outlook and key risks
- U.S. Government contract revenue increased substantially as work on TKM-Ebola advanced; the FDA had cleared its IND in November 2011, and the Phase 1 trial began in February 2012. The contract’s initial phase provides for up to US$34.7 million, but reimbursement timing and funding remain subject to government decisions and cancellation rights.
- Roche discontinued RNAi development; remaining stability work ended in 2011. Alnylam’s three-year minimum manufacturing commitment ended in 2011, and Tekmira expected lower Alnylam revenue. Management expected 2012 collaboration and contract revenue to be similar overall to 2011, with higher U.S. Government and BMS revenue offsetting lower Alnylam revenue.
- Management expected research, development, collaborations and contract expenses to decrease modestly in 2012 and G&A to decrease, partly because of workforce reductions and a revised legal-fee arrangement. The filing provides no specific numerical expense forecast.
- Tekmira reported ongoing litigation with Alnylam and AlCana concerning alleged misuse of confidential LNP technology, as well as an Alnylam patent-infringement action. The company had not recorded an estimated liability for counterclaims or the infringement suit because loss likelihood and amount were uncertain. A success-based legal-fee contingency was disclosed at approximately $4.52 million at year-end.
- Major risks include continued financing needs and recurring losses; reliance on a small number of partners and government funding; uncertain clinical and regulatory outcomes; unproven RNAi technology; intellectual-property disputes and license dependence; and clinical, manufacturing and competitive risks. A contract research organization’s financial restructuring could affect TKM-Ebola timelines.
- Management assessed disclosure controls and internal control over financial reporting as effective at year-end; the external auditor was not required to attest to internal control effectiveness. KPMG issued an unqualified opinion on the financial statements.
Most important facts for investors to verify
- Confirm the issuer identity: this document names Tekmira Pharmaceuticals Corporation, not Arbutus Biopharma Corp.
- Reconcile reported year-end cash, working capital and the stated cash runway with actual subsequent spending, government reimbursements and the February 2012 financing.
- Track TKM-Ebola trial progress and the amount and timing of U.S. Government contract funding, including any extensions or cancellation.
- Assess the outcome, costs and potential liabilities of the Alnylam/AlCana disputes and their effects on collaboration revenue and intellectual-property rights.
- Verify the 2012 revenue and expense outlook against actual results, especially the expected mix of U.S. Government, BMS and Alnylam revenue.
- Review potential dilution from the 2011 and 2012 unit financings, warrants and outstanding options.