Business Context and Reporting Period
ORIC Pharmaceuticals, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2022. ORIC is a clinical-stage biopharmaceutical company developing oncology therapies designed to overcome cancer treatment resistance. Its lead clinical programs were ORIC-533, ORIC-114 and ORIC-944; ORIC-101 was discontinued in the first quarter of 2022. The company has no approved products and has not generated product revenue.
Key Financial Metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Research and development expense | $13.8 million | $30.7 million |
| General and administrative expense | $6.9 million | $13.3 million |
| Total operating expenses | $20.7 million | $44.0 million |
| Net loss | $20.3 million | $43.4 million |
| Net loss per share, basic and diluted | $0.51 | $1.10 |
| Net cash used in operating activities | Not separately provided | $40.5 million |
- Revenue was zero; the filing states that the company does not expect meaningful revenue unless and until a product is approved and commercialized.
- Cash, cash equivalents and investments totaled $237.8 million at June 30, 2022, including $49.1 million of cash and cash equivalents, $178.0 million of short-term investments and $10.8 million of long-term investments.
- Total assets were $259.7 million and total liabilities were $22.8 million. The filing does not report outstanding debt; liabilities primarily comprised accounts payable, accrued liabilities and other long-term liabilities.
- Accumulated deficit was $288.6 million at June 30, 2022.
- Stock-based compensation expense was $4.1 million for the quarter and $8.0 million for the six-month period.
- The company reported a $1.1 million unrealized loss on investments in other comprehensive loss for the six-month period.
Material Changes Versus the Prior Comparable Period
- Six-month research and development expense increased $3.4 million, or approximately 13%, to $30.7 million, driven by advancement of ORIC-533, ORIC-114 and ORIC-944, higher personnel costs and increased stock-based compensation. Lower ORIC-101 spending partially offset the increase.
- Six-month general and administrative expense increased $2.9 million, or approximately 28%, to $13.3 million, primarily due to higher personnel costs and stock-based compensation.
- Six-month total operating expenses increased $6.3 million, or approximately 17%, to $44.0 million.
- Six-month net loss increased $5.9 million, or approximately 16%, to $43.4 million, despite a $0.4 million increase in other income from higher interest income.
- Cash, cash equivalents and restricted cash declined $176.9 million during the first six months of 2022. The decrease primarily reflected $136.9 million of net investment purchases and $40.5 million of operating cash use.
- Research and development expense for the second quarter declined $1.7 million, while general and administrative expense increased $1.3 million; quarterly net loss improved by $0.7 million to $20.3 million.
- Short-term investments increased substantially from $11.0 million at December 31, 2021 to $178.0 million at June 30, 2022, while cash and cash equivalents declined from $226.0 million to $49.1 million, reflecting a shift into investments.
Guidance, Outlook, Risks and Unusual Items
- Management expects initial Phase 1b data for ORIC-533, ORIC-114 and ORIC-944 in the first half of 2023.
- Management expects current cash, cash equivalents and investments to fund the current operating plan into the second half of 2024. This is a forward-looking estimate and may change materially.
- The company expects significant losses and increasing research and development expenses for the foreseeable future and will require substantial additional capital. Potential funding sources include equity or debt offerings, collaborations, strategic partnerships, licensing arrangements and grants.
- Additional financing may dilute existing stockholders, impose restrictive covenants or require the company to relinquish rights to product candidates. Failure to obtain financing could delay, reduce or eliminate development programs.
- Under the Voronoi license, Voronoi opted out of funding future development activities after reaching the contractual development-cost threshold during the quarter. ORIC remains responsible for future development costs and may owe up to $111.0 million in development and regulatory milestones, $225.0 million in commercial milestones for the first product, additional milestones for a second product and royalties on net sales.
- On July 20, 2022, after the reporting date, the company completed a voluntary option exchange covering 4,406,732 shares underlying employee stock options.
- COVID-19, patient enrollment delays, clinical-trial execution, third-party manufacturing and supply-chain disruptions, inflation, competition, regulatory approval, intellectual-property challenges and dependence on third-party contractors remain material risks.
- The company disclosed that its Chief Business Officer is subject to an SEC civil enforcement action unrelated to ORIC. Management stated that no material litigation involving the company is currently expected to have a material adverse effect.
- Disclosure controls and procedures were determined to be effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Whether clinical enrollment and data-readout timelines for ORIC-533, ORIC-114 and ORIC-944 remain on schedule.
- Whether the projected cash runway through the second half of 2024 remains valid as development spending increases.
- The timing, terms and potential dilution of any future financing or strategic transaction.
- The financial and operational effect of Voronoi ceasing future development funding and the company’s continuing milestone and royalty obligations.
- Clinical safety, efficacy and enrollment results, particularly given the early-stage status of all lead programs.
- Potential effects of COVID-19, inflation, supply-chain constraints and reliance on single-source third-party manufacturers.
- Any developments involving the SEC enforcement action against the Chief Business Officer or the disclosed inquiry concerning potential confidential-information use in the CD73 program.