ORIC Pharmaceuticals, Inc. — Fiscal 2021 Form 10-K Summary
Business context and reporting period
ORIC Pharmaceuticals is a clinical-stage biopharmaceutical company focused on therapies intended to overcome cancer treatment resistance. This filing covers the fiscal year ended December 31, 2021; it is an annual report rather than a quarterly filing. The company has no approved commercial products and has not generated product revenue.
At year-end, the pipeline included ORIC-533, an oral CD73 inhibitor in a Phase 1b multiple myeloma trial; ORIC-114, a brain-penetrant EGFR/HER2 exon 20 inhibitor being advanced toward Phase 1b trials; and ORIC-944, an allosteric PRC2/EED inhibitor being developed for prostate cancer. The company had 78 full-time employees, including 55 in research and development.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $56.9 million | $35.9 million | +$20.9 million |
| General and administrative expense | $22.0 million | $13.4 million | +$8.6 million |
| Acquired in-process R&D expense | $0 | $24.8 million | -$24.8 million |
| Total operating expenses | $78.9 million | $74.2 million | +$4.7 million |
| Net loss | $78.7 million | $73.7 million | +$5.0 million loss |
| Net loss per share | $2.07 | $3.36 | Improved on higher share count |
| Cash used in operating activities | $59.5 million | $45.3 million | Higher operating cash burn |
| Cash, cash equivalents and available-for-sale investments | $280.4 million | $293.6 million | -$13.2 million |
Research and development spending increased primarily because of greater external costs associated with ORIC-101, ORIC-533 and other programs, as well as higher personnel and stock-based compensation costs. Stock-based compensation was $12.9 million in 2021 versus $5.3 million in 2020.
Cash, cash equivalents and investments consisted primarily of money market funds, U.S. Treasury securities and certificates of deposit. Management stated that available resources were expected to fund the current operating plan into the second half of 2024, although this estimate is subject to clinical, regulatory, cost and financing risks.
The company reported no funded debt. Total liabilities were $25.7 million, including $12.4 million of operating lease liabilities. The filing does not disclose a conventional credit facility or term loan.
Material changes versus the prior comparable period
- R&D expense rose 58% to $56.9 million as the company advanced its clinical and preclinical programs.
- G&A expense rose 64% to $22.0 million, reflecting increased personnel, public-company and stock-based compensation costs.
- The 2020 period included $24.8 million of acquired in-process R&D charges related to the Mirati and Voronoi licenses; no comparable charge was recorded in 2021.
- Operating cash burn increased to $59.5 million from $45.3 million.
- In July 2021, the company raised $50.0 million gross, or $48.1 million net, through an at-the-market equity offering of 2,597,402 shares.
- Shares outstanding increased to 39.4 million at December 31, 2021 from 36.7 million at December 31, 2020, reflecting the ATM offering and option exercises.
- ORIC-533’s IND was cleared in the second quarter of 2021, ORIC-944’s IND was filed and cleared in the fourth quarter, and ORIC-114’s South Korean CTA was filed in the fourth quarter.
Guidance, outlook, risks and unusual items
- Management expected initial Phase 1b data from ORIC-533, ORIC-114 and ORIC-944 in the first half of 2023.
- The company expected significant future losses and higher R&D expenses as the programs advance into clinical development.
- Subsequent to year-end, in March 2022, ORIC announced that interim analyses showed ORIC-101 combination regimens lacked sufficient clinical activity and discontinued further development of ORIC-101. This is a material post-period change that shifts focus and resources toward ORIC-533, ORIC-114 and ORIC-944.
- ORIC-114’s South Korean CTA was cleared in the first quarter of 2022.
- Key risks include clinical failure, adverse events, patient enrollment delays, regulatory uncertainty, dependence on contract research and manufacturing organizations, single-source clinical supply, competition, intellectual-property challenges and the need for additional capital.
- COVID-19 caused or could cause clinical enrollment, supply-chain, site-operation and data-collection delays. The filing also identifies potential effects from inflation and the Russia-Ukraine conflict on manufacturing costs and supply availability.
- The company relies on third parties for manufacturing and generally uses single-source suppliers for active pharmaceutical ingredients and drug product, without redundant supply arrangements in place at year-end.
- The company disclosed an SEC civil enforcement action against its Chief Business Officer arising from an investigation unrelated to ORIC. The SEC had concluded its investigation of the Chief Financial Officer without recommending further action.
- A third party had inquired about a potential breach of a confidentiality agreement relating to the CD73 program; the filing states that the matter could potentially progress to a claim.
- The financial statements were audited by KPMG LLP with an unqualified opinion. Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021; no auditor attestation was required because ORIC remained an emerging growth company.
Most important facts for investors to verify
- Confirm current cash, investment balances, quarterly cash burn and whether the stated funding runway into the second half of 2024 remains valid after the ORIC-101 discontinuation and any changes in development plans.
- Review clinical-trial enrollment, safety, pharmacokinetic and efficacy updates for ORIC-533, ORIC-114 and ORIC-944, including the expected 2023 data readouts.
- Assess the financial and pipeline implications of discontinuing ORIC-101.
- Review potential dilution from the remaining $150 million ATM capacity, stock options and future equity financings.
- Evaluate milestone and royalty obligations under the Voronoi license, including up to $111.0 million of development and regulatory milestones, up to $225.0 million of commercial milestones, additional potential milestones for a second product and royalties on net sales.
- Monitor manufacturing concentration, supply-chain resilience and the impact of clinical delays or regulatory requirements.
- Review the SEC enforcement action involving the Chief Business Officer and the potential confidentiality-related intellectual-property matter.
- Consider whether the company’s patent protection, licensed rights and competitive positioning support the commercial potential of the three remaining clinical programs.