Filing summary
Filing identity: The supplied filing is OvaScience, Inc.’s Form 10-Q, not a Tempest Therapeutics filing. It covers the quarter ended March 31, 2014; the financial statements are unaudited. OvaScience described itself as a development-stage life sciences company developing fertility treatments based on egg precursor cells.
Financial results and position
| Metric | Q1 2014 | Q1 2013 / prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $4.652 million | $2.680 million |
| General and administrative expense | $2.998 million | $2.495 million |
| Total operating expenses | $7.650 million | $5.175 million |
| Net loss | $7.814 million | $5.157 million |
| Basic and diluted loss per share | $0.41 | $0.39 |
| Cash and cash equivalents | $56.134 million | $18.078 million at Dec. 31, 2013 |
| Short-term investments | $33.331 million | $26.349 million at Dec. 31, 2013 |
| Working capital | $83.783 million | $39.303 million at Dec. 31, 2013 |
| Total liabilities | $6.361 million | $5.844 million at Dec. 31, 2013 |
| Operating cash flow | $(4.961) million | $(4.056) million |
| Investing cash flow | $(8.644) million | $(0.184) million |
| Financing cash flow | $51.661 million | $32.652 million |
Amounts are in U.S. dollars; financial statement figures are in thousands unless shown otherwise. Gross or operating margins are not meaningful because the company reported no revenue. The filing does not disclose borrowings; liabilities included accounts payable, accrued expenses and other non-current liabilities.
Changes versus prior period
- Net loss increased $2.657 million, or 52%, year over year. R&D expense rose 74%, primarily due to a $1.0 million Massachusetts General Hospital license milestone, increased personnel and stock-based compensation, and higher outside services and lab costs.
- G&A expense increased 20%, mainly reflecting increased personnel costs and commercial preparation expenses, partly offset by lower stock-based compensation.
- Cash and short-term investments increased to $89.465 million from $44.427 million at year-end, primarily following a March public offering that generated $51.7 million in net proceeds.
- Operating cash use increased from $4.056 million to $4.961 million. Q1 2014 investing cash use included the $1.5 million OvaXon joint-venture investment and investment portfolio activity.
Outlook, risks and notable items
- Management said available cash, cash equivalents and marketable securities of approximately $89.5 million were expected to fund the current operating plan into 2016, but additional funding might be needed thereafter. This estimate depends on assumptions that could prove incorrect; no committed external funding source was disclosed.
- OvaScience had no significant treatment revenue and expected revenue, if any, no earlier than the second half of 2014. It expected at least 40 AUGMENT cycles through access-program clinics in four or more international regions in 2014, with a planned transition to commercial centers by year-end. OvaPrime was expected to be introduced outside the United States in 2015.
- The U.S. AUGMENT study was suspended after an FDA “untitled” letter in September 2013 advising the company to file an Investigational New Drug application. Management anticipated further FDA discussions. International availability could also face regulatory disagreement, delay or added expense.
- OvaScience expected continued significant expenses and operating losses. Key risks included development and regulatory uncertainty, commercialization and market acceptance, further financing needs and potential dilution, and protection of intellectual property.
- The Intrexon OvaTure collaboration includes a $2.5 million cash technology-access payment due in December 2014, capped-budget R&D reimbursements, and a potential mid-single-digit royalty on net sales if specified data are delivered. A $1.0 million MGH license milestone was triggered by the financing; $0.5 million was paid in April 2014 and $0.5 million was due in March 2015.
- Unusual stock-compensation items included a $0.3 million charge related to founders’ shares receiving nonemployee accounting treatment and a net $0.6 million reversal related to an executive’s departure, forfeitures and option modification. A senior executive resigned during the quarter; a board member resigned on May 7, 2014.
- Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting. No legal proceedings were reported, and the company said there were no material changes to its previously disclosed risk factors.
Key facts for investors to verify
- Confirm the issuer: the source document is OvaScience, Inc., not Tempest Therapeutics.
- Check progress and regulatory status of AUGMENT, including the FDA’s requested IND pathway and the status of the suspended U.S. study.
- Validate the assumptions behind the stated cash runway into 2016 and monitor operating cash use and future financing needs.
- Track whether planned AUGMENT access-program cycles and commercial-center transitions, and the OvaPrime 2015 target, were achieved.
- Review obligations and economics under the Intrexon and MGH agreements, including upcoming payments, R&D funding and potential royalties.