Outlook Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended March 31, 2022. The company is a pre-commercial biopharmaceutical business developing ONS-5010 (bevacizumab-vikg; LYTENAVA), an investigational ophthalmic treatment for retinal diseases. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Three months ended March 31, 2022 | Six months ended March 31, 2022 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $12.2 million | $22.1 million |
| General and administrative expense | $6.7 million | $10.0 million |
| Net loss | $19.7 million | $34.2 million |
| Net loss per share, basic and diluted | $0.09 | $0.17 |
| Net cash used in operating activities | Not presented for the quarter | $25.3 million |
- For the comparable 2021 periods, quarterly and six-month net losses were $13.1 million and $27.6 million, respectively. Quarterly operating expenses rose by $6.3 million; six-month operating expenses rose by $5.2 million.
- Quarterly R&D expense increased $3.7 million, chiefly from $3.1 million in BLA submission fees and higher stock-based compensation. Six-month R&D increased $1.6 million: BLA fees and compensation increases were partly offset by lower development costs following completion of NORSE TWO and NORSE THREE.
- Quarterly G&A increased $2.6 million and six-month G&A increased $3.6 million, reflecting stock compensation, additional headcount, pre-launch preparation and other costs.
- Cash and cash equivalents were $58.4 million at March 31, 2022, versus $14.5 million at September 30, 2021. Total current assets were $66.5 million and current liabilities $31.4 million. Stockholders’ equity was $36.0 million.
- Six-month financing cash inflow was $69.3 million. It included approximately $54.0 million net from a November 2021 public offering, $6.4 million net from ATM sales and $9.4 million net from a new unsecured note. Operating cash use was similar to the prior-year period ($25.3 million versus $25.1 million).
- Debt net of loan costs was $22.8 million, all classified as current; this includes a fair-valued convertible note of $12.6 million. The notes mature January 1, 2023. The PPP loan balance was $0.2 million at quarter-end and was repaid May 2, 2022.
- Margins are not meaningful because the company had no product sales. No clear revenue or product-margin amount is reported for the period.
Business developments, outlook and risks
- The company submitted a BLA to the FDA in March 2022 for ONS-5010 for wet AMD. Management anticipated an FDA decision in the first calendar quarter of 2023; approval and timing were uncertain. The company also planned regulatory submissions in Europe and other major markets beginning in late 2022.
- Management said $58.4 million of cash at March 31 was expected to fund operations into the first calendar quarter of 2023. However, recurring losses, negative operating cash flows and debt due in January 2023 led the company to conclude that substantial doubt existed about its ability to continue as a going concern. Additional financing is required, and success is not assured.
- Potential funding sources include ATM sales, extending note maturities, licensing or collaboration arrangements, equity or additional debt. Failure to obtain funding could require scaling back or stopping development, workforce reductions, asset sales or bankruptcy proceedings; equity financing could dilute shareholders.
- The amended convertible note bears 10% annual interest from January 1, 2022 and allows the holder, beginning July 1, 2022, to redeem up to $2.0 million per month in shares at a price tied to 75% of the lowest closing bid price in the preceding three trading days, subject to limitations. The other note bears 9.5% interest, compounding daily. A $1.0 million debt-extinguishment loss was recorded in the six-month period.
- NORSE ONE, TWO and THREE were completed and supported the BLA submission. NORSE SEVEN, comparing vials with pre-filled syringes, was enrolling; vial-arm enrollment was complete. Further planned trials for BRVO and DME were intended to follow anticipated approval.
- COVID-19 had not significantly affected reported results, according to management, though future trial, supply and operational disruptions remained possible. The company also cited potential effects of the Russia-Ukraine conflict on markets, supply chains and its ability to raise capital; no material operational interruption had occurred by the filing.
- A prior Liomont lawsuit was settled and dismissed. The company accrued a $750,000 settlement payment at March 31 and paid it in April 2022; it reported no remaining future obligations. No material pending legal proceedings were reported.
Important facts for investors to verify
- Current FDA review status, any information requests, and the timing and outcome of the ONS-5010 BLA.
- Available cash, actual cash burn, financing plans and whether the company can extend or repay the January 2023 notes.
- Terms and potential dilution from the convertible note’s share-redemption feature and future ATM or equity issuance.
- Commercial manufacturing readiness, launch costs, reimbursement prospects and regulatory plans outside the United States.
- Whether clinical, regulatory, supply-chain or geopolitical developments alter timelines or funding needs.