Alaunos Therapeutics, Inc. (identified in this filing as ZIOPHARM Oncology, Inc.) — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. The financial statements are unaudited. The filing is by ZIOPHARM Oncology, Inc.; it does not identify the registrant as Alaunos Therapeutics.
Business context and key financial metrics
The company was a development-stage biopharmaceutical business focused on immuno-oncology, including controlled IL-12 gene therapy and engineered T-cell therapies. It reported minimal revenue, ongoing losses, and no approved products.
| Metric | Q3 2018 / September 30, 2018 | Comparable period / prior year-end |
|---|---|---|
| Collaboration revenue | $0 for Q3; $0.146 million for nine months | Q3 2017: $1.598 million; nine months 2017: $4.792 million |
| Operating expenses | $12.570 million for Q3; $41.290 million for nine months | Q3 2017: $14.676 million; nine months 2017: $44.849 million |
| Net loss | $12.585 million for Q3; $40.636 million for nine months | Q3 2017: $12.701 million; nine months 2017: $41.050 million |
| Net loss applicable to common stockholders | $18.659 million for Q3; $57.292 million for nine months | Q3 2017: $17.604 million; nine months 2017: $54.989 million |
| Basic and diluted loss per share | $0.13 for Q3; $0.41 for nine months | Same per-share loss in the corresponding 2017 periods |
| Cash and cash equivalents | $31.728 million; cash, cash equivalents and restricted cash totaled $32.117 million | Cash and cash equivalents: $70.946 million at December 31, 2017 |
| Operating cash use | $37.638 million for nine months | $42.513 million for nine months 2017 |
| Current assets / current liabilities | $47.161 million / $60.183 million; working capital was negative $13.0 million | $90.783 million / $20.856 million at December 31, 2017; working capital was $69.9 million |
Figures are in U.S. dollars. Revenue and loss comparisons are affected by adoption of ASC 606: the company recorded an $8.1 million cumulative adjustment to opening accumulated deficit, and recognized revenue at a different pace than under the prior accounting method. Accordingly, reported revenue fell sharply, but the filing attributes much of the period-to-period difference to accounting treatment rather than a comparable change in cash receipts. No debt balance or borrowing facility is identified in the provided filing text.
Material changes and unusual items
- Research and development expense declined 26% in Q3 and 24% for the nine months year over year, primarily reflecting reduced cell-therapy and GvHD program spending.
- General and administrative expense rose 21% in Q3 and 40% for the nine months, driven by outside services and, for the nine-month period, stock-option modifications and employee-related costs.
- Financing activities used $1.035 million in the first nine months of 2018, versus providing $46.327 million in 2017, when the company completed a common-stock offering.
- At September 30, contract liabilities were $49.513 million, all classified as current. The company expected remaining performance obligations to be met in Q4 2018 following its subsequent agreement with Precigen.
- After quarter-end, on October 5, 2018, the company entered into an exclusive license agreement with Precigen replacing specified prior agreements. It obtained rights covering IL-12, certain CAR products and TCR products, and assumed responsibility for most development costs. Terms include a $100,000 annual license fee, reimbursement of certain historical costs up to $1.0 million, potential milestone payments of up to $52.5 million per licensed program, royalties and a share of sublicensing income. The agreement also provided for Intrexon to forfeit and return its Series 1 preferred shares; the filing says none were outstanding as of the filing date.
- The company recorded $16.656 million in preferred-stock dividends during the first nine months, payable in additional preferred shares before their return. These dividends increased the loss applicable to common stockholders but were noncash.
Outlook, risks and contingencies
- Management expected existing cash to fund operations into the second quarter of 2019 and reported no committed additional capital. Management concluded there was substantial doubt about the company’s ability to continue as a going concern; additional financing or partnerships would be needed, with no assurance of availability or acceptable terms.
- Failure to raise funds could require delaying, reducing or stopping development programs. The company expected continuing losses and significant future research and development spending.
- Clinical updates included ongoing enrollment in IL-12 and investigator-led CAR-T trials. An FDA clinical hold remained on the point-of-care CD19 CAR-T trial; the company said it expected to respond to the FDA’s information request in the second half of 2019. The NCI planned a Sleeping Beauty TCR Phase 1 trial, with enrollment expected in mid-2019, subject to the NCI’s timeline.
- Key risks include early-stage technology and limited clinical evidence, clinical-trial and regulatory uncertainty, manufacturing and supply constraints, competition, dependence on licensors and collaborators, intellectual-property challenges, and the need for additional capital. The company also disclosed approximately $6.0 million of advisory fees due upon closing of the Precigen transaction and $3.1 million remaining on its NCI research agreement.
- No material legal proceeding was identified by management as likely to have a material adverse effect as of September 30, 2018. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Confirm the issuer identity: this source is a ZIOPHARM Oncology, Inc. filing, not a filing under the name Alaunos Therapeutics, Inc.
- Check subsequent filings for actual cash runway, financing, and whether the anticipated Q4 2018 revenue recognition and contract-liability release occurred.
- Review the executed Precigen license terms, transaction costs, development obligations, and the status of Intrexon’s returned preferred shares.
- Track the FDA clinical hold and subsequent regulatory status of the point-of-care CD19 CAR-T program, as well as trial enrollment and clinical data.
- Reconcile cash-flow disclosures: the financial statements report $545,000 of investing cash use for the nine months, while the MD&A text cites $536,000 in one passage.