Oragenics, Inc. — 2019 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2019, filed March 4, 2020. Oragenics is a clinical-stage biotechnology company with no product revenue. Its lead clinical program is AG013 for oral mucositis in cancer patients; its OG716 lantibiotic antibiotic program remains preclinical.
Key financial metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $12.12 million | $5.97 million |
| General and administrative expense | $3.76 million | $4.02 million |
| Net loss | $15.57 million | $9.91 million |
| Net loss per common share, basic and diluted | $0.37 | $0.87 |
| Net cash used in operating activities | $13.01 million | $9.08 million |
| Cash and cash equivalents at year-end | $18.27 million | $20.21 million |
| Working capital | $16.99 million | $20.77 million |
Margins are not meaningful because the company had no revenue. At December 31, 2019, total assets were $19.75 million, total shareholders’ equity was $17.23 million, and accumulated deficit was $127.35 million. Current liabilities were $1.85 million; these included $143,864 of short-term notes and $165,096 of current operating lease liabilities. Long-term operating lease liabilities were $670,690. The filing reports no off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Net loss increased 57% to $15.57 million, principally as R&D expense more than doubled, largely reflecting AG013 clinical-trial and lantibiotic work. G&A expense declined 6.6%.
- Operating cash use rose by $3.93 million. Financing provided $11.10 million in 2019, primarily from the March public offering; cash declined by $1.94 million during the year.
- Common shares outstanding increased from 29.43 million to 46.12 million, largely following the 2019 offering of 16.67 million shares. The company also had 26.54 million warrants outstanding at year-end.
- Series C preferred stock dividends are paid in additional shares; the annual rate rose from 12% to 20% effective May 10, 2019.
Outlook, management commentary, risks and unusual items
- AG013: The Phase 2 trial enrolled approximately 200 patients; all had completed the trial by February 27, 2020. The company expected top-line results early in the second quarter of 2020. Interim safety reviews permitted the trial to continue without changes, but the trial remained blinded and its efficacy outcome was unknown.
- OG716: Development toward an IND is contingent on sufficient funding and completion of required studies. The company said certain studies began in late 2019 and manufacturing work would be a focus. Preclinical and animal findings are not evidence of clinical efficacy in people.
- Funding and going concern: Management expected year-end cash to fund operations as then structured through the second quarter of 2021, but stated additional funding would be needed. The financial-statement notes say there is substantial doubt about the company’s ability to continue as a going concern beyond that period without additional funding. Financing may be unavailable or dilutive, and could require reductions or delays to development.
- Collaboration economics: The AG013 agreement includes a $27.5 million regulatory-approval milestone and additional $5 million milestones; the lantibiotic agreement includes a $25 million approval milestone and additional $5 million milestones. None had been achieved at year-end. The agreements also provide for royalties or sublicense revenue shares.
- Post-period development: In January 2020, Precigen assigned the lantibiotic collaboration and related agreements to ILH Holdings, and subsequently divested the assets, including ILH, to TS Biotechnology Holdings. The company expected collaboration efforts to continue with ILH.
- Other key risks: No approved products or revenue; dependence on external financing, collaborators and contract manufacturers; clinical and regulatory uncertainty; difficulty scaling lantibiotic production; potential share dilution and preferred-stock seniority; and NYSE American listing risk. The Series C preferred stock has a senior liquidation preference and accruing 20% dividend.
- Audit and controls: The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- AG013 Phase 2 top-line results, including treatment-versus-placebo efficacy, safety, and statistical significance.
- Actual cash burn, financing needs and runway relative to the stated second-quarter 2021 estimate; assess whether new funding terms create material dilution.
- Potential dilution from 26.54 million outstanding warrants, 2.49 million options, and convertible Series A and B preferred stock; review the Series C dividend and liquidation preference.
- Progress, cost and funding plan for OG716 manufacturing and preclinical work, and the status and terms of the ILH/TS Biotechnology collaboration after the restructuring.
- Contractual milestone and royalty obligations, and any changes in NYSE American listing compliance or going-concern disclosures.