Filing summary
Registrant discrepancy: The supplied filing is OvaScience, Inc.’s Form 10-Q for the quarter ended March 31, 2017—not a filing identified as Tempest Therapeutics, Inc. Confirm the company and filing before relying on this summary.
Business context and reporting period
OvaScience develops fertility treatments based on EggPC cells. Its AUGMENT treatment was offered at select clinics outside the United States; OvaPrime was in a Canadian clinical trial, and OvaTure remained in development. The financial statements are unaudited and cover the three months ended March 31, 2017, with comparison to the same period in 2016.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 or prior date |
|---|---|---|
| Revenue | $0.063 million | $0.146 million |
| Operating loss | $14.587 million | $21.439 million |
| Net loss | $14.895 million | $21.758 million |
| Basic and diluted loss per share | $0.42 | $0.80 |
| Cash used in operations | $15.185 million | $15.410 million |
| Cash, cash equivalents and short-term investments | $99.102 million at March 31, 2017 | $114.388 million at December 31, 2016 |
| Working capital | $90.559 million at March 31, 2017 | $103.235 million at December 31, 2016 |
| Total liabilities | $11.597 million at March 31, 2017 | $14.325 million at December 31, 2016 |
Costs and expenses totaled $14.650 million, including $5.764 million in research and development, $7.129 million in selling, general and administrative costs, and $1.488 million in restructuring charges. The filing reports no financing cash flows and does not identify outstanding borrowings. Gross margin is not presented; costs of revenue were $0.269 million against revenue of $0.063 million.
Changes versus the prior comparable period
- Revenue fell 57%, reflecting the company’s decision to slow AUGMENT commercial expansion and reduced treatment activity.
- Net loss narrowed 32%. SG&A decreased 51%, mainly from lower employee-related and commercialization costs following restructuring; R&D decreased 3% as spending shifted toward research.
- Q1 2017 included $1.488 million of restructuring expense; none was recorded in Q1 2016. The company had incurred $6.9 million of cumulative restructuring costs and estimated total costs of $6.9 million to $7.3 million.
- Cash, cash equivalents and short-term investments decreased $15.286 million from year-end 2016. Operating cash use was broadly similar to the prior-year quarter.
Outlook, risks and unusual items
- Management expected the $99.1 million of cash, cash equivalents and short-term investments at quarter-end to fund its current operating plan for at least 12 months from the filing date. It cautioned that assumptions could prove wrong and additional funding might be needed; no external capital source was committed.
- The company did not anticipate significant near-term revenue. It expected SG&A to decline following restructuring and noted R&D spending could rise if programs advance.
- The FDA had previously advised the company to file an IND for AUGMENT; AUGMENT was not available in the United States. The company met with the FDA in Q2 2017 to discuss a potential regulatory pathway, with no assurance the agency would change its position.
- Three shareholder-related legal matters were disclosed: consolidated securities claims concerning the January 2015 offering, a stayed derivative action, and a class action filed in March 2017. The company said it could not estimate potential losses; an adverse resolution could materially affect results or financial position.
- OvaScience reported an accumulated deficit of $265.4 million and ongoing operating losses. It warned that treatment development, regulatory approval, commercialization, market acceptance, and future financing are uncertain.
Important facts for investors to verify
- Confirm the filing belongs to the intended issuer: the document names OvaScience, Inc., not Tempest Therapeutics, Inc.
- Review the assumptions behind the stated minimum 12-month cash runway and the company’s potential future financing needs.
- Track AUGMENT’s regulatory status and commercial activity, and clinical and development progress for OvaPrime and OvaTure.
- Monitor restructuring payments and remaining accruals, as well as the outcomes and potential financial effects of the disclosed lawsuits.