Oric Pharmaceuticals, Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
Oric Pharmaceuticals is a clinical-stage biopharmaceutical company focused on therapies intended to overcome cancer treatment resistance. The company has no approved products and has not generated revenue from product sales. The filing covers the quarter and nine months ended September 30, 2023, and was filed November 6, 2023.
The primary clinical programs are ORIC-114, targeting EGFR/HER2 exon 20 alterations; ORIC-533, targeting CD73 in multiple myeloma; and ORIC-944, targeting PRC2/EED in advanced prostate cancer. All remain in clinical development.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $22.4 million | $14.7 million | $60.7 million | $45.4 million |
| General and administrative expense | $6.3 million | $6.0 million | $18.7 million | $19.3 million |
| Acquired in-process R&D expense | $0 | $5.0 million | $0 | $5.0 million |
| Total operating expenses | $28.7 million | $25.7 million | $79.4 million | $69.6 million |
| Other income, net | $3.2 million | $0.9 million | $7.0 million | $1.4 million |
| Net loss | $25.5 million | $24.8 million | $72.4 million | $68.3 million |
| Net loss per share | $0.44 | $0.63 | $1.46 | $1.73 |
Gross and operating margins are not meaningful because the company has no revenue. The increased quarterly and year-to-date losses primarily reflect higher clinical development spending, partly offset by increased interest income and the absence of the $5.0 million Voronoi development milestone expense recorded in 2022.
Cash, liquidity, debt and cash flow
- Cash and cash equivalents were $26.2 million at September 30, 2023, compared with $66.8 million at December 31, 2022.
- Cash, cash equivalents and investments totaled $256.2 million, including $201.1 million of short-term investments and $28.9 million of long-term investments.
- The company reported no debt; total liabilities were $26.9 million, including $18.9 million of current liabilities.
- Net cash used in operating activities was $61.4 million for the first nine months of 2023, compared with $59.8 million in the prior-year period.
- Net cash used in investing activities was $64.4 million, primarily reflecting purchases of investments, compared with $137.5 million in 2022.
- Net cash provided by financing activities was $85.2 million, primarily from the June 2023 private placement.
- Cash, cash equivalents and restricted cash decreased by $40.6 million during the first nine months of 2023, ending at $26.7 million including $0.5 million of restricted cash.
Material changes versus the prior comparable period
- Quarterly R&D expense increased $7.7 million, or approximately 52%, driven by higher external clinical and development costs for ORIC-114, ORIC-533 and ORIC-944, plus higher personnel costs.
- Nine-month R&D expense increased $15.3 million, or approximately 34%, with the largest program-related increases associated with ORIC-114 and ORIC-944.
- Quarterly net loss increased $0.6 million, while the nine-month net loss increased $4.1 million.
- Other income increased substantially because of higher interest income on cash and investments.
- G&A expense decreased $0.6 million year to date, primarily due to lower professional fees.
- Shares outstanding increased from 45.1 million at December 31, 2022 to 54.5 million at September 30, 2023, reflecting equity financing and other share issuances. The June financing also included pre-funded warrants for 2.9 million shares, all outstanding at quarter-end.
Financing, outlook and management commentary
- In June 2023, Oric completed a private placement of common stock and pre-funded warrants for gross proceeds of $85.0 million and net proceeds of $84.8 million.
- Management expects current cash, cash equivalents and investments to fund the current operating plan into late 2025. This estimate is subject to clinical, regulatory, manufacturing, enrollment and spending uncertainties.
- The company expects significant additional capital will be required to continue development and pursue potential commercialization. Additional financing could dilute shareholders or impose debt covenants, and financing may not be available on acceptable terms.
- Management expects R&D expenses and operating losses to increase as programs advance, clinical trials expand and manufacturing and personnel needs grow.
- Management expected to report initial ORIC-533 Phase 1b data at the December 2023 ASH meeting, initial ORIC-944 data in the first quarter of 2024, and updated ORIC-114 data in the first half of 2025. These are forward-looking expectations, not reported results in this filing.
- The Pfizer collaboration supports potential development of ORIC-533 in combination with Pfizer’s investigational elranatamab. Oric retains full economic ownership and control of ORIC-533.
- The Mirati license is expected to continue following Bristol Myers Squibb’s announced acquisition of Mirati, which the parties expected to close by the first half of 2024.
Risks, contingencies and unusual items
- Oric has an accumulated deficit of $406.6 million and substantial recurring operating losses. Its financial statements do not include adjustments related to a potential inability to continue as a going concern, although management believed available working capital was sufficient for at least the next twelve months from issuance of the financial statements.
- The company depends on successful development, regulatory approval and commercialization of a limited number of product candidates. Clinical failure, safety issues, enrollment delays or regulatory delays could materially reduce the value of the pipeline.
- Oric relies on third parties for clinical trials and manufacturing, with single-source manufacturers and no long-term supply agreements for certain materials and drug products.
- License agreements impose development and commercialization obligations. The Voronoi agreement includes potential development and regulatory milestones of up to $111.0 million, commercial milestones of up to $225.0 million for the first product, additional potential milestones for a second product, and royalties on net sales.
- The company disclosed a third-party inquiry concerning a potential breach of a confidentiality agreement relating to its CD73 inhibitor program; no formal claim was reported in the filing.
- The company reported no material litigation likely to have a material adverse effect, but disclosed an SEC civil enforcement action against its Chief Business Officer relating to matters unrelated to Oric.
- Disclosure controls and procedures were assessed as effective as of September 30, 2023, with no material changes in internal control over financial reporting identified during the quarter.
Important facts investors should verify
- Whether clinical data for ORIC-114, ORIC-533 and ORIC-944 support continued development, including safety, efficacy, enrollment and timing of future readouts.
- Whether the projected cash runway into late 2025 remains valid after incorporating clinical-trial expansion, manufacturing commitments and other operating changes.
- The potential timing, size and dilutionary effect of future equity, debt or partnership financing.
- The status of the Pfizer collaboration, the ORIC-533 combination study and the effect of the Mirati acquisition on the ORIC-944 license.
- Outstanding pre-funded warrants and equity awards, including their potential dilution to common shareholders.
- Potential obligations under the Voronoi license, including milestones, royalties and termination provisions.
- Any developments regarding the confidentiality inquiry, the SEC enforcement action involving the Chief Business Officer, and other legal or compliance matters.