Business context and reporting period
This filing is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2018; it does not identify Tempest Therapeutics as the registrant. OvaScience was developing fertility treatments based on egg precursor cells. It reported limited treatment revenue and ongoing operating losses.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $67,000 | $63,000; up 6% |
| Operating loss | $7.582 million | $14.587 million |
| Net loss | $7.370 million; $0.21 per share | $14.895 million; $0.42 per share |
| Operating expenses | $7.649 million | $14.650 million |
| Cash used in operations | $8.934 million | $15.185 million |
- Research and development expense fell 55% to $2.621 million; selling, general and administrative expense fell 41% to $4.224 million, primarily reflecting workforce and cost reductions.
- At March 31, cash and cash equivalents were $19.721 million and short-term investments were $38.577 million, totaling $58.298 million. Working capital was $54.101 million.
- Total assets were $63.029 million; total liabilities were $5.696 million. The balance sheet reports no debt.
- Cash, cash equivalents and restricted cash totaled $20.512 million at quarter-end. Investing activities provided $12.954 million, mainly from investment maturities net of purchases; financing activities provided no cash.
- Revenue was too small for a meaningful operating margin. Accumulated deficit was $308.850 million.
Changes versus prior period
Net loss decreased by $7.525 million year over year, alongside lower R&D, SG&A and restructuring costs. Revenue increased only $4,000. Operating cash use improved by $6.251 million. The company also terminated its OvaTure collaboration with Intrexon in February 2018 and said it would pursue OvaTure development using internal capabilities and outside research organizations.
Outlook, risks and unusual items
- Management said the $58.3 million in cash, cash equivalents and short-term investments was expected to fund its then-current operating plan for at least 12 months from filing, while cautioning that assumptions could prove wrong and additional funding might not be available on acceptable terms.
- In a May 3, 2018 post-quarter update, OvaScience said it would pause its planned OvaPrime Phase 1b/2a trial and scale back R&D spending while completing preclinical work and monitoring participants in its ongoing Phase 1 trial. A small team would continue OvaTure work; AUGMENT would remain available in Japan through an exclusive license.
- The company began exploring strategic alternatives, including a potential sale or merger, and announced a workforce reduction of approximately 70%, expected mostly by June 30, 2018. It estimated $0.5 million–$1.0 million in one-time restructuring costs and anticipated annualized savings beginning in Q4 2018. No transaction was assured.
- Several shareholder class and derivative lawsuits remained pending or stayed; the company said it could not estimate potential losses. One derivative complaint was dismissed in April, with an amended complaint subsequently filed and the case stayed.
- Nasdaq notified the company on April 27 that its share price did not meet the $1.00 minimum bid requirement. The stated compliance period ran through October 24, 2018; failure to regain compliance could lead to delisting.
- Management assessed disclosure controls as effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for OvaScience, Inc., not Tempest Therapeutics, Inc.
- Track results from OvaPrime’s ongoing Phase 1 study and preclinical studies, as well as the status of the planned trial hold.
- Verify cash burn, liquidity runway and restructuring savings against subsequent filings; the 12-month runway estimate was based on the then-current operating plan.
- Monitor the strategic-alternatives process, related retention arrangements and any resulting transaction or costs.
- Check Nasdaq bid-price compliance and the status and potential financial exposure of pending litigation.