Business Context and Reporting Period
Company: Oncolytics Biotech Inc.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2015
Accounting Standard: International Financial Reporting Standards (IFRS)
Functional Currency: Canadian Dollars (Cdn$)
Oncolytics is a development-stage biopharmaceutical company focused on the discovery and development of pharmaceutical products for the treatment of cancers, specifically those with an activated Ras pathway. The company's primary product candidate is REOLYSIN®, a therapeutic reovirus. The company has no commercial product sales and relies on equity financing to fund operations.
Key Financial Metrics
| Metric | 2015 (Cdn$) | 2014 (Cdn$) |
|---|---|---|
| Revenues | — | — |
| Net Loss | (13,722,995) | (18,619,335) |
| Net Comprehensive Loss | (13,242,060) | (18,418,990) |
| Loss Per Share (Basic & Diluted) | (0.12) | (0.21) |
| Total Assets | 27,383,798 | 17,193,190 |
| Cash and Cash Equivalents | 24,016,275 | 14,152,825 |
| Short-Term Investments | 2,060,977 | 2,031,685 |
| Total Current Liabilities | 2,709,492 | 3,373,997 |
| Shareholders' Equity | 24,674,306 | 13,819,193 |
| Accumulated Deficit | (263,689,330) | (249,966,335) |
| Weighted Avg. Shares Outstanding | 112,613,845 | 87,869,149 |
Expense Breakdown (2015):
- Research and Development: $8,601,864
- Operating Expenses: $5,315,837
- Interest Income: $197,859
Financing Activities (2015):
- Proceeds from Share Purchase Agreement: $4,305,396
- Proceeds from "At the Market" (ATM) Agreement: $19,362,240
- Total Net Cash Proceeds from Equity: $23,667,636
Material Changes vs. Prior Period
- Improved Liquidity: Cash and cash equivalents increased by approximately $9.9 million (69%) from 2014 to 2015, driven primarily by equity financing activities.
- Reduced Net Loss: Net loss decreased by approximately $4.9 million (26%) compared to 2014. This improvement was largely due to a significant unrealized foreign exchange gain of $816,319 in 2015 (compared to a loss of $242,542 in 2014) and a reduction in share-based compensation expense ($429,537 in 2015 vs. $980,325 in 2014).
- Share Capital Expansion: The company issued 24,639,128 common shares in 2015, increasing the total outstanding shares to 118,151,622.
- Delisting from NASDAQ: On November 5, 2015, the company was delisted from the NASDAQ Capital Market for failing to maintain the minimum $1.00 bid price requirement. Trading subsequently moved to the OTCQX International market.
- Financing Facility Impact: The NASDAQ delisting rendered the existing Share Purchase Agreement and ATM equity distribution agreement (which required NASDAQ listing) unusable, limiting future capital raising options under those specific facilities.
Guidance, Outlook, Risks, and Contingencies
Outlook and Guidance:
The company does not provide specific financial guidance. Management anticipates continuing to incur significant losses in 2016 and the foreseeable future until, if ever, REOLYSIN® is successfully commercialized. The company expects to require additional financing to fund research and development and meet capital requirements.
Key Risks:
- Development Risk: REOLYSIN® is in the research and development stage. There is no assurance that clinical trials will demonstrate safety and efficacy or that regulatory approval will be obtained.
- Liquidity and Financing: The company has a history of losses and no operating revenues. Future operations depend on the ability to raise additional capital, which may be difficult given the delisting from NASDAQ and the "penny stock" status of the shares.
- Manufacturing Dependence: The company relies on third-party contract manufacturers for REOLYSIN® production. Disruptions could delay clinical trials.
- Regulatory and Tax: The company is likely classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which may have adverse tax consequences for U.S. shareholders.
Contingencies and Commitments:
- Contractual Obligations: Total contractual obligations as of December 31, 2015, were $2,743,154, primarily consisting of purchase obligations ($2,083,331) and operating leases ($659,823).
- Milestone Payments: A contingent milestone payment of $1.0 million is due to former shareholders upon receipt of marketing approval for REOLYSIN®.
- Royalties: The company has agreements requiring royalty payments to the Alberta Cancer Board and the Biotechnology Research Institute upon future sales.
Investor Verification Checklist
- Cash Runway: Verify the current cash balance against the projected burn rate to determine the timeline for the next required financing.
- Financing Capabilities: Assess the impact of the NASDAQ delisting on the company's ability to raise capital, noting the new $4.6 million ATM agreement entered into in February 2016 on the TSX.
- Clinical Trial Status: Review the latest status of ongoing Phase II and Phase III clinical trials for REOLYSIN® to gauge the probability of regulatory approval.
- Share Dilution: Monitor the number of shares outstanding and the terms of any new equity issuances, as the company relies heavily on equity financing.
- PFIC Status: Confirm the tax implications for U.S. investors regarding the company's status as a Passive Foreign Investment Company.