Outlook Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Third fiscal quarter and nine months ended June 30, 2020; comparative periods ended June 30, 2019. The filing was signed August 14, 2020. Outlook is a late clinical-stage biopharmaceutical company developing ONS-5010 (bevacizumab-vikg), an investigational ophthalmic formulation for retinal diseases. It had no approved products and no product-sale revenue.
Financial performance and position
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Collaboration revenue | $0 in 2020; $0.584 million in 2019 | $0 in 2020; $2.293 million in 2019 |
| Research and development expense | $8.488 million; $4.343 million in 2019 | $18.719 million; $16.350 million in 2019 |
| General and administrative expense | $3.287 million; $1.835 million in 2019 | $7.581 million; $6.588 million in 2019 |
| Net loss | $3.015 million; $4.441 million in 2019 | $25.318 million; $24.428 million in 2019 |
| Net loss per common share | $0.03; $0.20 in 2019 | $0.69; $1.74 in 2019 |
| Cash used in operating activities | Not presented for the quarter | $19.712 million; $26.348 million in 2019 |
- Revenue comparisons reflect the completion of recognition of deferred collaboration revenue in fiscal 2019; the company reported no collaboration revenue in the 2020 periods.
- For the nine months, higher ONS-5010 development spending was partly offset by lower other R&D and compensation costs. Operating loss widened to $26.827 million from $23.607 million. The reported quarterly net loss was lower year over year despite higher operating expenses, primarily reflecting a $6.164 million debt-extinguishment gain and a larger income tax benefit.
- Margins are not meaningful because the company had no product sales and no revenue in 2020.
- At June 30, 2020, cash was $23.953 million, total current assets $28.235 million, current liabilities $18.454 million, and total liabilities $19.278 million. Stockholders’ equity was $10.965 million, versus a $16.129 million deficit at September 30, 2019.
- Cash increased by $15.938 million during the nine months: $36.550 million provided by financing activities, offset by $19.712 million used in operations and $0.900 million used for the PRC joint venture investment. Financing included equity offerings and placements, warrant exercises, and a $0.904 million PPP loan.
- The company reported $3.613 million of stockholder notes due on demand at June 30. It also had a $0.904 million PPP loan, due May 2022, and equipment debt. Convertible senior secured notes were converted into 12.201 million common shares during the quarter; none remained outstanding at June 30.
Material changes, outlook and risks
- Management said June 30 cash plus $1.0 million received in July from a Syntone private placement was expected to fund operations through the first quarter of fiscal 2021. The filing also states substantial additional financing is needed and identifies substantial doubt about the company’s ability to continue as a going concern. Funding options include partnerships, licensing, and equity or debt financing; success is not assured.
- Equity issuance materially increased shares outstanding: 126.360 million at June 30, 2020, compared with 28.610 million at September 30, 2019. Common stock issued in financings, warrant exercises, debt conversion, and preferred-stock conversion contributed to the increase and diluted existing holders.
- Clinical milestones were conditional plans, not guaranteed outcomes: NORSE 1 enrollment was complete and top-line data were expected later in August 2020; NORSE 2 enrollment was complete, with initial top-line data expected in July 2021; NORSE 3 was planned to begin in the third calendar quarter of 2020. If the program succeeds, the company planned to seek approvals in multiple markets in 2021.
- COVID-19 had caused a brief NORSE 2 enrollment delay, but management reported the trials and manufacturing-related activities remained active and said it did not expect a current impact on NORSE 2 completion. Future disruption remained uncertain.
- The company terminated its Cranbury lease in May 2020, relocated its headquarters, and recorded lease-related charges and obligations. Management estimated the termination would reduce cash needs by approximately $14 million over the original lease’s remaining term.
- On July 20, 2020, Liomont filed a breach-of-contract complaint related to the former ONS-3010 and ONS-1045 biosimilar program, seeking $3 million. Outlook disputes the claims and intends to defend itself.
- The $0.904 million PPP loan may not be forgiven. The company disclosed possible repayment, eligibility, regulatory, reputational, and enforcement risks associated with the loan.
- Other material risks include clinical-trial and regulatory uncertainty, competition, need for further funding, potential market acceptance and reimbursement challenges, and possible limitations on use of tax attributes. No formal financial guidance was provided beyond the stated cash runway estimate.
Important facts for investors to verify
- Whether NORSE 1 results and NORSE 2 milestones met the stated timelines, and whether the trials support planned regulatory filings.
- Cash use after June 30, the timing and availability of additional financing, and whether the stated runway estimate remains valid.
- The amount and repayment status of notes due on demand, and any forgiveness or repayment obligation for the PPP loan.
- Potential dilution from outstanding warrants, options, and further equity financing; the filing reports 7.052 million common-stock warrants outstanding at June 30.
- Developments in the $3 million Liomont litigation claim and the company’s lease-termination obligations.