Outlook Therapeutics, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended September 30, 2020. This filing reports annual results; it does not provide a separate fiscal fourth-quarter financial summary.
Business context and development
Outlook is a late clinical-stage biopharmaceutical company focused on ONS-5010 (bevacizumab-vikg), an investigational ophthalmic formulation of bevacizumab for retinal diseases. It had no approved products and no product-sales revenue. ONS-5010 was its only product candidate in active clinical development; legacy biosimilar programs were inactive.
NORSE ONE reported positive proof-of-concept topline results in August 2020. NORSE TWO, a pivotal Phase 3 wet AMD trial, completed enrollment of 227 patients in July 2020; NORSE THREE completed enrollment of 195 patients in October 2020. The company said all three studies needed for its planned wet AMD BLA were completed or fully enrolled.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Collaboration revenue | $0 | $8.1 million |
| Research and development expense | $26.3 million | $23.8 million |
| General and administrative expense | $10.0 million | $9.4 million |
| Operating loss | $36.8 million | $36.3 million |
| Net loss | $35.2 million | $34.5 million |
| Net cash used in operating activities | $31.8 million | $32.3 million |
There were no product sales, so product gross margin is not applicable. FY2020 collaboration revenue was nil because remaining deferred revenue from prior collaborations had been recognized in FY2019. R&D expense rose $2.5 million, principally as ONS-5010 trial and manufacturing scale-up costs increased; the FY2019 comparison included an $11.3 million property impairment, versus $0.5 million in FY2020.
At September 30, 2020, cash was $12.5 million, current assets $17.9 million and current liabilities $15.9 million; working capital was approximately $2.1 million. Total liabilities were $16.9 million and stockholders’ equity was $2.8 million. The balance sheet included $3.6 million of stockholder notes due on demand, a $0.9 million PPP loan, and $1.0 million of equipment and other debt. In November 2020, the company repaid the $3.6 million stockholder notes and received $10.0 million net proceeds from a new unsecured note bearing 7.5% interest and maturing January 2022.
Financing activities provided $37.2 million in FY2020, including equity offerings and the Syntone private placement; investing activities used $0.9 million, primarily for the planned China joint venture. Despite the subsequent note proceeds, management estimated available resources would fund operations only into March 2021. The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, negative operating cash flows and a $289.7 million accumulated deficit.
Material changes, outlook and risks
- Funding and dilution: Outlook said it needed substantial additional capital and was in late-stage discussions for ONS-5010 licensing or co-development. Failure to secure funding could force trial changes, workforce reductions, suspension of development or other steps, including seeking bankruptcy protection. FY2020 common shares outstanding increased to 127.2 million from 28.6 million a year earlier.
- Development outlook: Topline NORSE TWO results were expected in Q3 2021, and the company planned to submit a wet AMD BLA in the second half of calendar 2021, subject to successful results and regulatory review. It intended to begin the BRVO and DME registration studies in 2021 after the wet AMD BLA submission. These were plans, not assurances.
- Commercialization: The company retained ONS-5010 rights outside the planned China venture and was seeking a strategic partner. It had no sales and marketing organization and might need to build one if it did not secure a partner. Market uptake, pricing, reimbursement and continued off-label Avastin use could affect commercial prospects.
- COVID-19: Management reported a brief NORSE TWO enrollment delay but no significant financial impact to date. It cautioned that further disruption to patient follow-up, manufacturing, vendors or timelines remained possible.
- Contingency and unusual items: Liomont sued in July 2020, alleging breach of contract and seeking $3.0 million; Outlook disputed the claim and said it would defend itself. The company’s $0.9 million PPP loan was subject to eligibility review and possible forgiveness; forgiveness was not assured. FY2020 also included a $1.9 million debt-extinguishment loss, partly offset by fair-value gains on debt features and a $3.3 million tax benefit from selling New Jersey tax attributes.
- Other material risks: ONS-5010’s clinical and regulatory success, third-party manufacturing and trial execution, intellectual-property claims, competition, and dependence on external financing were significant uncertainties. BioLexis and an affiliate beneficially owned approximately 42.6% of common stock as of September 30, 2020 and could exert significant influence.
Important facts for investors to verify
- Whether NORSE TWO met its primary endpoint and whether the results support the planned BLA and timeline.
- Actual cash runway, subsequent financing terms, repayment obligations and access to additional capital beyond March 2021.
- Any licensing or co-development agreement for ONS-5010, including economics, retained rights and partner funding commitments.
- Regulatory feedback, BLA filing status, manufacturing readiness and timing of the planned DME and BRVO trials.
- Resolution and potential financial impact of the Liomont claim, and the PPP loan’s eligibility and forgiveness status.
- Potential dilution from future equity financing, warrants, equity awards and the company’s ownership concentration.