Oragenics, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Unaudited interim results. Oragenics is a development-stage biotechnology company focused on AG013 for oral mucositis and lantibiotic antibiotics; it reported no revenue from operations.
Financial performance and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $1.581 million | $0.996 million | $4.178 million | $2.724 million |
| General and administrative | $1.184 million | $0.925 million | $2.991 million | $2.582 million |
| Net loss | $2.758 million | $2.067 million | $7.159 million | $5.271 million |
| Net loss per share | $0.35 | $0.42 | $1.12 | $1.07 |
- Operating expenses rose 44% for the quarter and 35% for the nine-month period. Management attributed the increases principally to development work under its Intrexon collaborations, the AG013 clinical trial, and higher stock-based compensation.
- Q3 net loss applicable to common shareholders was $4.170 million, including a $1.412 million deemed dividend related to Series D preferred stock. This noncash deemed dividend increased common-shareholder loss; it did not change net loss.
- Cash and cash equivalents were $13.811 million at September 30, versus $6.166 million at December 31, 2017. Working capital was $13.915 million. Current liabilities were $1.557 million, including $190,407 of short-term insurance-financing notes. No material conventional long-term debt balance was reported.
- Operating cash use was $6.102 million for the first nine months, compared with $5.005 million in 2017. Investing cash use was $60,242; financing provided $13.807 million. The July public offering generated approximately $12.4 million net proceeds.
- Gross margin is not meaningful because the company had no operating revenue. Accumulated deficit was $108.618 million.
Material changes, outlook, and risks
- Financing and dilution: The July 2018 offering issued 4.436 million common shares, 9.364 million Series D preferred shares convertible one-for-one, and 13.8 million warrants exercisable at $1.00. By November 13, all Series D shares had converted and 9.506 million warrants had been exercised, generating about $9.506 million in additional gross cash proceeds after quarter-end. Common shares outstanding were 29,433,135 on that date. These transactions materially increased the share count and potential dilution.
- Runway and going concern: Management said cash, including the offering and subsequent warrant exercises, was expected to support the business plan through Q4 2019. The filing nevertheless states there is substantial doubt about the company’s ability to continue as a going concern beyond that period. Continued operations depend on additional financing, partnerships or other funding; none was committed, and availability and terms are uncertain.
- AG013: The Phase 2 oral mucositis trial continued after the independent monitoring board recommended proceeding without changes following an interim safety review. The filing describes the interim findings as safety data, not a definitive efficacy result. Belgium cleared enrollment in October 2018; approval in Germany and the UK was still being pursued. Management expected top-line Phase 2 results in late 2019. Expanding clinical sites was expected to increase trial costs.
- Lantibiotics: OG716 was the selected preclinical lead for C. difficile. An IND filing was contingent on completing required studies and sufficient funding. The timing remained uncertain.
- Contractual commitments: Intrexon agreements provide for substantial milestone payments upon regulatory approvals, including $25 million for a lantibiotic approval and $27.5 million for an oral mucositis approval, as well as revenue-sharing obligations. The disclosed milestones had not been achieved by September 30. Texas A&M license milestones, including a $50,000 payment tied to first Phase 1 enrollment by June 2019, also remained unachieved.
- Other risks: The company expects continuing losses and increasing development spending, has no product revenue, and may need to reduce or delay programs if financing is unavailable. Further equity issuance could dilute existing holders. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. No material pending legal proceedings were reported.
Most important facts for investors to verify
- Whether the post-quarter warrant proceeds, remaining cash, and actual spending support management’s stated runway through Q4 2019.
- AG013 enrollment pace, site expansion costs, regulatory clearances in Germany and the UK, and whether late-2019 trial results remain achievable.
- Progress and required funding for OG716 preclinical studies and any IND submission.
- Fully diluted share count, including remaining warrants and convertible preferred securities, and the resulting dilution risk.
- Potential financing needs and the terms, timing, and possible dilution or program restrictions associated with any funding.
- Future obligations under the Intrexon and Texas A&M agreements, including milestones, royalties, and any effect on liquidity.