Filing summary
Entity and period: The supplied filing is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2012—not a filing identified in its text as Tempest Therapeutics, Inc. The company described itself as a development-stage life sciences company focused on female infertility. Its operations had generated no significant revenue.
Financial performance and position
| Metric | Three months ended Sept. 30, 2012 | Nine months ended Sept. 30, 2012 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.595 million | $3.892 million |
| General and administrative expense | $1.525 million | $5.428 million |
| Total operating expenses | $3.120 million | $9.320 million |
| Net loss | $3.118 million | $9.318 million |
| Net loss per share, basic and diluted | $0.42 | $2.69 |
| Operating cash used | Not separately provided for quarter | $7.672 million |
- At September 30, 2012, cash and cash equivalents were $35.119 million; total current assets were $35.579 million.
- Total assets were $36.326 million, total liabilities $1.914 million, and stockholders’ equity $34.412 million. The filing reported no debt balance.
- Cash used in investing activities was $0.797 million, including $0.704 million for property and equipment and $0.093 million of restricted cash. Financing provided $39.047 million during the first nine months.
- Cash rose from $4.541 million at December 31, 2011, primarily following preferred-stock and common-stock financings. Series A and Series B preferred shares converted into common stock in August 2012; the company also raised $4.055 million net in a common-stock private placement.
Changes versus prior comparable periods
- Third-quarter R&D expense increased from $0.404 million in 2011 to $1.595 million in 2012; G&A increased from $0.370 million to $1.525 million. Net loss rose from $0.774 million to $3.118 million. The filing’s 2011 comparison reflects an early-stage company and is not a full-year or equivalent operating history.
- For the nine months, R&D expense was $3.892 million versus $0.404 million for the period from inception through September 2011; G&A was $5.428 million versus $0.780 million. Management attributed increases chiefly to expanded development activity and staffing, external research services, public-company and Form 10 costs, and stock-based compensation.
- Cash and cash equivalents increased to $35.119 million from $4.541 million at year-end 2011. The company reported accumulated development-stage losses of $11.942 million.
Outlook, risks, and commitments
- Management expected existing cash to fund operating expenses and capital expenditures at least through the end of 2013, assuming no product revenue. It cautioned that this estimate depended on assumptions that could prove incorrect and that additional funding would be needed.
- AUGMENT, the lead candidate, was designed to use mitochondria from a patient’s egg precursor cells during IVF. Management planned a study of up to 40 women aged 38–42 by the end of 2012, commercial preparation in 2013, and potential revenue no earlier than the second half of 2014. These were plans, not reported achievements.
- Management expected R&D spending to continue increasing through 2013. It estimated $3.6–$4.6 million to complete the AUGMENT study and begin commercial activity under assumptions that included FDA treatment as a 361 HCT/P; an FDA requirement for an IND could increase costs substantially.
- OvaTure remained in program design/preclinical planning and would require regulatory approval. The underlying egg-precursor-cell science was new and disputed; neither product candidate had been proven safe and effective in humans.
- Key risks include clinical-study timing, enrollment and results; uncertainty over AUGMENT’s FDA classification; financing needs; third-party manufacturing and clinical-research dependence; intellectual-property and licensing risks; market acceptance and limited expected reimbursement; and competition. The company had no committed external funding source.
- Contractual obligations included a manufacturing agreement of $1.275 million and a lease obligation reported as approximately $1.358 million. The MGH license also carried potential milestone payments of up to $10.520 million, royalties, and a $1.000 million payment in connection with a qualifying public offering or change of control; contingent amounts were excluded from the obligations table.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. Management said disclosure controls were effective at the reasonable-assurance level and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the intended issuer: the filing text names OvaScience, Inc., whereas the request metadata names Tempest Therapeutics, Inc.
- Check whether the AUGMENT study began as planned, its regulatory classification, enrollment, safety and efficacy results, and any subsequent changes to the launch timeline.
- Reassess cash runway against actual cash burn, later financing, spending plans, and the significant contingent MGH payments.
- Verify manufacturing readiness and third-party capacity, as well as the company’s ability to meet applicable regulatory and quality requirements.
- Assess dilution and potential share supply: 14,262,276 common shares were outstanding as of November 5, 2012, and the filing described substantial shares available or expected to become eligible for resale.