Outlook Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter, three months ended December 31, 2021. Unaudited results are compared with the three months ended December 31, 2020. Outlook is a late clinical-stage biopharmaceutical company developing ONS-5010 (bevacizumab-vikg), an investigational ophthalmic treatment for retinal diseases. It has no products approved for sale and reported no product revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $9.87 million | $11.95 million |
| General and administrative expense | $3.28 million | $2.24 million |
| Operating loss | $13.15 million | $14.19 million |
| Net loss | $14.46 million | $14.46 million |
| Basic and diluted loss per share | $0.08 | $0.12 |
| Cash used in operating activities | $10.99 million | $13.32 million |
| Cash and cash equivalents, quarter-end | $70.15 million | $5.57 million |
Liquidity and debt: At December 31, 2021, current assets were $77.47 million and current liabilities were $19.95 million. Total liabilities were $29.85 million. Debt, net of unamortized loan costs, was $22.32 million, including $12.72 million classified as current; the filing also reports $22.1 million of principal and accrued interest on unsecured notes and a $0.50 million PPP loan. The company reported an accumulated deficit of $357.35 million and stated that recurring losses and negative operating cash flows raise substantial doubt about its ability to continue as a going concern.
Margins: Not meaningful because the company reported no product revenue.
Material changes versus the prior comparable period
- R&D expense decreased $2.08 million, mainly because NORSE TWO and NORSE THREE were completed; this was partly offset by starting NORSE SEVEN.
- G&A expense increased $1.03 million, primarily reflecting the prior-year lease-termination gain and higher compensation costs.
- Operating cash use improved by $2.33 million. Financing provided $66.66 million, versus $6.36 million in the prior-year quarter, principally from an equity offering, ATM sales and a new note.
- Net loss was nearly unchanged, despite a $1.03 million debt-extinguishment loss, higher interest expense and a fair-value loss on the amended note; a favorable $0.25 million change in warrant liability partly offset these items.
- Common shares outstanding increased from 176.46 million at September 30, 2021 to 224.26 million at December 31, 2021. The November public offering issued 46.0 million shares; ATM sales added approximately 1.77 million shares.
Outlook, risks and unusual items
- Management said the $70.2 million of cash at quarter-end was expected to fund operations through anticipated ONS-5010 BLA approval in the first calendar quarter of 2023. The filing describes a planned BLA submission in the first calendar quarter of 2022. These are expectations, not assurances.
- Management said substantial additional financing would be needed for future operations and commercialization. Potential sources include equity or debt issuance, partnerships, licensing or marketing arrangements; there is no assurance funding will be obtained. Failure to secure funding could force reductions, program delays or discontinuation, asset sales or bankruptcy protection.
- ONS-5010’s three trials required for the planned wet AMD BLA were reported complete. NORSE SEVEN enrollment began in November 2021, and additional BRVO and DME registration trials were intended to begin in 2023, following anticipated wet AMD approval.
- The amended 2020 note was extended to January 1, 2023, with interest rising to 10% starting January 1, 2022. Beginning July 1, 2022, the lender may redeem up to $2 million per month in shares at a price based on 75% of the lowest closing bid price in the preceding three trading days, subject to limitations. A separate 2021 note bears 9.5% interest and also matures January 1, 2023.
- The company recorded a $1.03 million loss on extinguishment related to the note amendment. The amended note is measured at fair value, with a $12.21 million balance at December 31, 2021.
- A prior Liomont lawsuit was settled and dismissed; a further $750,000 settlement payment is contingent on future events. The filing states there were no material pending legal proceedings.
- Management said COVID-19 had not significantly affected the quarter’s financial results, but acknowledged possible future disruption to clinical, manufacturing and regulatory timelines. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor facts to verify
- Progress, timing and FDA outcome for the ONS-5010 BLA, including reconciliation of the stated submission and anticipated approval timelines.
- Cash runway assumptions, financing needs and the going-concern uncertainty, including debt maturities and the noteholder’s potential share-redemption rights.
- Clinical, manufacturing, regulatory and commercial risks, and whether additional trials or delays require more capital.
- Potential dilution from future equity financing, outstanding warrants and stock options; quarter-end common shares were 224.26 million.
- Whether the contingent Liomont settlement payment becomes due and whether any other material contingencies arise.