ORIC Pharmaceuticals, Inc. — Form 10-Q Summary
Business context and reporting period
Clinical-stage biopharmaceutical company focused on therapies intended to overcome cancer treatment resistance. The filing covers the quarter and nine months ended September 30, 2020; financial statements are unaudited. ORIC had no approved products and had generated no product revenue.
Lead candidate ORIC-101 was in two Phase 1b combination trials. ORIC-533 was in preclinical development, while ORIC-944 was licensed from Mirati in August 2020 and ORIC-114 was licensed from Voronoi in October 2020.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $8.8 million, versus $5.6 million | $23.8 million, versus $15.9 million |
| Acquired in-process R&D expense | $13.0 million, versus none | $13.0 million, versus none |
| General and administrative expense | $3.8 million, versus $1.5 million | $9.1 million, versus $3.9 million |
| Net loss | $25.5 million, versus $6.5 million | $45.4 million, versus $18.5 million |
| Net loss per share | $0.84 | $2.52 |
| Net cash used in operating activities | Not separately provided | $27.4 million, versus $16.4 million |
At September 30, 2020, cash and cash equivalents were $62.0 million and marketable securities were $124.6 million, for total cash, cash equivalents and marketable securities of $186.6 million. Total assets were $191.7 million, total liabilities were $7.3 million, and stockholders’ equity was $184.4 million. The company reported no debt. Accumulated deficit was $138.1 million.
Investing cash outflows were $124.7 million, primarily from purchases of U.S. Treasury securities. Financing cash inflows were $125.0 million, primarily from the April 2020 IPO. The IPO generated $138.0 million of gross proceeds and approximately $125.2 million of net proceeds after offering costs.
Material changes versus the prior comparable period
- Total operating expenses increased by $18.5 million in the quarter and $26.1 million for the nine-month period.
- Research and development spending increased as ORIC-101 advanced and ORIC-533 and exploratory programs progressed; personnel and stock-based compensation costs also increased.
- General and administrative expense increased due to higher personnel, professional services and public-company costs.
- The company recorded a $13.0 million non-cash acquired in-process R&D charge for the Mirati license, satisfied through issuance of 588,235 common shares.
- All outstanding preferred stock converted into 19.3 million common shares in connection with the IPO. Common shares outstanding increased to 30.5 million at September 30, 2020.
- Other income declined to $0.1 million in the quarter and $0.5 million year to date, primarily because of lower interest rates and the expiration of a sublease.
Guidance, outlook, risks and unusual items
Management expects significant operating losses and increasing research and development expenses for the foreseeable future and does not expect meaningful revenue unless a product candidate is approved and commercialized. Management expects existing cash, cash equivalents and marketable securities to fund the current operating plan into the second half of 2022, but states that additional capital will ultimately be required.
- Management expected interim ORIC-101 data in the first half and second half of 2021, respectively, for the two Phase 1b trials.
- Planned regulatory milestones included an IND for ORIC-533 in the first half of 2021, an IND for ORIC-944 in the second half of 2021 and a CTA for ORIC-114 in the second half of 2021.
- The COVID-19 pandemic caused work-from-home measures, reduced laboratory efficiency, suspended or delayed enrollment at certain sites, supply-chain delays and delays in clinical data collection and analysis.
- ORIC-101 is being developed in combination with other therapies and remains subject to early-stage safety, efficacy, enrollment, manufacturing and regulatory risks. The filing describes serious adverse events, including a patient death, in the nab-paclitaxel combination trial; the filing states that the events occurred in the setting of rapid disease progression and included toxicities known to be associated with nab-paclitaxel.
- The Voronoi license, entered into after the quarter, required a $5.0 million cash upfront payment, 283,259 shares, 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.
- Operating lease commitments totaled $3.0 million as of September 30, 2020. Management reported no material pending litigation, no off-balance-sheet arrangements and effective disclosure controls at quarter-end.
- Two officers received SEC subpoenas in their personal capacities concerning an unrelated securities-trading investigation. The filing states that the subpoenas do not indicate a conclusion of wrongdoing but that the outcome and potential impact cannot be predicted.
Important facts for investors to verify
- Cash runway assumptions, including the impact of advancing multiple clinical programs, the $5.0 million Voronoi payment and future milestone, royalty and manufacturing obligations.
- Enrollment status, safety data and interim results for both ORIC-101 Phase 1b trials, including the revised dosing strategy in the nab-paclitaxel study.
- Timing and regulatory progress for the planned ORIC-533, ORIC-944 and ORIC-114 submissions.
- Potential dilution from outstanding options, future equity financing and additional shares issued under license agreements.
- COVID-19 effects on clinical enrollment, trial timelines, supply availability and data quality.
- Intellectual-property rights and termination obligations under the Mirati and Voronoi license agreements, and any third-party claims relating to the CD73 program or ORIC-101.
- The scope and implications of the SEC inquiry involving two officers, including whether it expands or results in action against either individual.