OvaScience, Inc. — Form 10-Q Summary
Entity note: The filing provided is for OvaScience, Inc., not Tempest Therapeutics, Inc. It covers the quarter and six months ended June 30, 2017; financial statements are unaudited.
Business context and reporting period
OvaScience is a development-stage fertility company with limited treatment revenue. Its programs include OvaTure, in preclinical development, and OvaPrime, in clinical development. In June 2017, the company decided to discontinue ongoing AUGMENT efforts outside North America and reduce its workforce by approximately 50%, refocusing resources on OvaTure and OvaPrime.
Financial performance and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0.084 million | $0.189 million | $0.147 million | $0.335 million |
| Operating loss | $17.930 million | $18.241 million | $32.517 million | $39.680 million |
| Net loss | $18.186 million | $18.568 million | $33.081 million | $40.326 million |
| Net loss per share | $0.51 | $0.62 | $0.93 | $1.41 |
| Operating cash used | Not separately stated | Not separately stated | $27.275 million | $31.329 million |
- Q2 costs and expenses were $18.014 million, including $1.992 million in restructuring charges. For the first half, costs and expenses were $32.664 million, including $3.480 million in restructuring charges.
- Research and development expense was $4.997 million in Q2 and $10.761 million for the first half. Selling, general and administrative expense was $10.751 million and $17.880 million, respectively.
- Revenue declined 56% year over year for both Q2 and the first half. The company attributed lower costs of revenue partly to fewer biopsies and its changed AUGMENT priorities. It does not expect significant near-term revenue.
- At June 30, cash and cash equivalents were $22.937 million and short-term investments were $63.622 million, totaling $86.559 million, down from $114.388 million at year-end 2016. Working capital was $77.275 million.
- First-half investing cash inflow was $6.282 million, principally reflecting net maturities of short-term investments. Financing cash flow was zero in the first half of 2017; the prior-year period included $54.060 million of financing proceeds, mainly from an equity offering.
- Total liabilities were $12.744 million, including $11.819 million of current liabilities. The balance sheet reports no debt balance. Stockholders’ equity was $81.141 million.
Material changes and outlook
- The June restructuring followed a December 2016 workforce reduction of approximately 30%. The company expected total costs for the June 2017 restructuring of approximately $2.4 million to $2.9 million and anticipated substantially completing it by Q3 2017. The June 30 restructuring accrual was $2.467 million.
- Management said $86.6 million of cash, cash equivalents and short-term investments was expected to fund the current operating plan for at least 12 months from the filing date. This estimate depends on assumptions; no external capital source was committed, and further funding may be needed.
- OvaPrime enrollment reached the target of 70 patients. The company expected to complete biopsies in the 70 patients and announce initial safety data from the first 20 by year-end 2017.
- Management said it believed OvaTure goals remained on track, including a goal to fertilize a bovine EggPC-derived egg by year-end 2017. Intrexon was to continue bovine EggPC work under the OvaTure collaboration, while the parties discussed the future of the OvaXon joint venture.
- The FDA had previously advised the company to file an IND for AUGMENT in the United States. Following a Q2 2017 meeting, the company said it would continue discussions about the potential U.S. regulatory pathway; it cautioned that the FDA might not change its position.
Risks, contingencies and unusual items
- The company has a $283.6 million accumulated deficit, a history of operating losses, limited revenue and ongoing development and commercialization uncertainty. It warned that available capital could be used sooner than expected and future financing could dilute shareholders or require unfavorable terms.
- Several shareholder class and derivative actions were pending, including litigation related to the January 2015 offering and claims concerning director compensation. The company said it could not estimate potential losses; an adverse resolution could materially affect financial position or results.
- Q2 results included $2.8 million of share-based compensation expense tied to an executive advisory agreement, including accelerated recognition of previously unrecognized compensation. First-half stock-based compensation expense was $5.918 million.
- The company reported $0.875 million of first-half losses from its equity-method investment in OvaXon. It also recorded a $0.250 million property impairment charge related to restructuring.
- Management reported effective disclosure controls as of June 30, 2017, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the filing belongs to OvaScience, not Tempest Therapeutics, before relying on this summary.
- Track cash use, restructuring payments and whether management’s stated 12-month funding runway remains achievable.
- Check progress and data disclosures for the OvaPrime trial and OvaTure development, including the stated timing for initial safety data.
- Monitor FDA communications and any change in the regulatory path for AUGMENT, as well as the status of the OvaXon relationship.
- Review developments in the pending lawsuits and any subsequent disclosure of estimated exposure or resolution.