OvaScience, Inc. — Form 10-Q Summary
Entity note: The supplied filing identifies the registrant as OvaScience, Inc., not Tempest Therapeutics, Inc. Verify that this is the intended filing.
Business context and reporting period
This unaudited quarterly report covers the three months ended March 31, 2013. OvaScience was a development-stage life sciences company developing fertility-related products based on egg precursor cells. It had no significant revenue and had not completed development of a product candidate.
Financial results and position
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.680 million | $0.946 million; up 183% |
| General and administrative expense | $2.495 million | $2.020 million; up 24% |
| Total operating expenses | $5.175 million | $2.966 million |
| Net loss | $5.157 million | $2.966 million |
| Operating cash used | $4.056 million | $0.818 million |
At March 31, 2013, cash and cash equivalents were $43.188 million and short-term investments were $16.515 million, totaling approximately $59.7 million. Current assets were $60.184 million versus current liabilities of $2.094 million. Total liabilities were $2.105 million; the filing reports no debt balance. The filing does not provide a meaningful operating margin because the company had no revenue.
Net cash provided by financing was $32.652 million, primarily from a March private placement of 3,888,880 common shares at $9.00 per share, generating $32.652 million net proceeds. Cash increased by $28.412 million during the quarter. Stock-based compensation expense included in operating expenses was $0.837 million.
Material changes versus the prior comparable period
- Net loss increased by $2.191 million year over year, reflecting higher operating expenses.
- R&D expense rose by $1.734 million, mainly from increased contract research, consulting, and payroll costs; substantially all R&D related to AUGMENT.
- G&A expense increased by $0.475 million, primarily due to stock-based compensation.
- Cash and investments rose from $31.391 million at December 31, 2012 to $59.703 million at March 31, 2013, largely following the common-stock financing.
Outlook, commentary, risks and unusual items
- Management expected existing cash, cash equivalents, and investments to fund its current operating plan through 2014, assuming no product revenue; additional funding would be needed thereafter. It cautioned that spending could exceed expectations and future financing might not be available on acceptable terms.
- The company expected R&D costs to continue increasing during 2013 as it enrolled patients in the AUGMENT human study. It planned, subject to positive study results, to begin generating AUGMENT revenue in the second half of 2014; revenue was not assured.
- AUGMENT was being studied in up to 40 U.S. women aged 38–42 with prior unsuccessful IVF cycles. The company believed it could be regulated as a 361 HCT/P without FDA premarket approval, but FDA disagreement could require an IND and substantially more time and expense. The filing says FDA had contacted the company on matters including AUGMENT’s regulatory status.
- OvaTure remained in preclinical development and was expected to require regulatory approval in the United States and EU. Its scientific premise and ability to produce fertilizable human eggs were uncertain.
- Key risks include clinical safety and efficacy, enrollment and timing, uncertain regulatory classification, lack of reimbursement and possible out-of-pocket affordability, dependence on third-party manufacturers and trial providers, need for additional capital, and scientific and commercialization uncertainty.
- The filing estimated $3.6 million to $4.6 million to complete the AUGMENT study and begin U.S. commercial activity, contingent on timely completion and favorable results and on the assumed regulatory pathway.
- No material legal proceedings or material subsequent events were reported. Management stated disclosure controls and procedures were effective at the reasonable-assurance level.
Most important facts for investors to verify
- Confirm the filing is for the intended issuer: the document names OvaScience, Inc., despite the request naming Tempest Therapeutics, Inc.
- Check AUGMENT study enrollment, final safety and efficacy results, and whether those results support the stated commercialization timeline.
- Verify FDA and other regulators’ determinations on AUGMENT’s classification and whether additional studies or approvals are required.
- Assess cash burn, remaining runway, and financing needs against management’s through-2014 estimate.
- Track dilution and resale supply following the March 2013 share issuance and the registration of shares for resale.