Cardiff Oncology (then Trovagene, Inc.) — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. The filing was submitted under Trovagene, Inc.; the company announced its change of name to Cardiff Oncology, Inc. and ticker to CRDF effective May 8, 2020.
Business context and financial performance
The company is a clinical-stage oncology biotech developing onvansertib, an oral PLK1 inhibitor. Its three active trials were in KRAS-mutated metastatic colorectal cancer, metastatic castration-resistant prostate cancer, and acute myeloid leukemia. Revenue was limited to royalties; the company reported no product sales.
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue, all royalties | $67,704 | $62,021 |
| Research and development expense | $2.706 million | $2.649 million |
| Selling, general and administrative expense | $1.486 million | $1.375 million |
| Operating loss | $4.124 million | $3.962 million |
| Net loss | $4.089 million | $3.905 million |
| Net loss attributable to common shareholders | $4.095 million | $4.179 million |
| Basic and diluted loss per share | $0.41 | $1.02 |
| Net cash used in operating activities | $3.375 million | $3.360 million |
Operating margin is not meaningful as the company remained loss-making with minimal revenue. Management said R&D costs are expected to rise as onvansertib development advances.
Financial position and liquidity
- At March 31, cash and cash equivalents were $9.277 million, down from $10.195 million at December 31, 2019. Working capital was $5.402 million, versus $6.572 million at year-end.
- Q1 financing provided $2.456 million: $1.456 million from warrant exercises and $1.000 million from a common-stock-and-warrant sale. Cash declined by $918,267 during the quarter.
- Total liabilities were $5.672 million. The filing reports operating lease liabilities of $1.520 million; it does not report conventional borrowings at March 31.
- Management projected existing resources would fund planned operations into Q4 2020, but stated that substantial doubt existed about the company’s ability to continue as a going concern for at least one year from issuance. Additional capital was needed, and equity financing could dilute shareholders.
Material changes and subsequent events
- Compared with Q1 2019, royalty revenue rose $5,683, R&D expense rose $57,092, and SG&A expense rose $110,834. Net loss attributable to common shareholders improved by $84,478, principally because Q1 2019 included a $268,269 deemed dividend on Series C preferred stock; operating expenses increased in Q1 2020. Loss per share fell largely because weighted-average shares increased to 9.91 million from 4.09 million.
- Common shares issued and outstanding were 11,010,587 at March 31, versus 8,593,633 at December 31. The filing also lists 10,516,377 warrants outstanding at quarter-end, excluding pre-funded warrants.
- After quarter-end, the company reported approximately $1.085 million received from an April securities transaction and a $305,000 Paycheck Protection Program loan. Certain loan amounts could be forgiven if used for qualifying expenses. The company also reported exercises of pre-funded warrants on April 28.
- The April 9 financing included common shares, pre-funded warrants, and warrants, for approximately $1.084 million gross proceeds before expenses. Review the transaction documents for full terms and dilution implications.
Outlook, risks and notable items
- Management expected continued significant losses and operating cash outflows, and was evaluating equity offerings, new revenue initiatives, cost reductions, and strategic partnerships to improve liquidity.
- COVID-19 could disrupt clinical-trial enrollment and execution, suppliers and other operations, and access to capital. The company said the impact was uncertain; it warned that prolonged disruption could materially affect operations and liquidity.
- Management said inability to raise capital could require delaying, scaling back, or discontinuing product-candidate development, or pursuing collaborations or disposing of rights on unfavorable terms.
- In April, the company announced interim mCRC trial results: 12 patients enrolled, 7 of 8 evaluable patients with partial response or stable disease, and median progression-free survival of at least 6.5 months, with six patients still on treatment. These are company-reported interim clinical results, not Q1 financial results.
- Related-party R&D expense for services from Leucadia Life Sciences and a consultant associated with the CEO was approximately $276,000 in Q1 2020, compared with $245,000 a year earlier.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2020.
Investor verification priorities
- Confirm the actual cash runway and funding needs against the Q4 2020 runway estimate and going-concern disclosure.
- Review the April securities offering, warrant terms, subsequent warrant exercises, and resulting share dilution and potential warrant overhang.
- Check the PPP loan’s use, forgiveness eligibility, and repayment obligations.
- Track COVID-19 effects on trial enrollment, timelines, and financing access, alongside updated results from all three onvansertib trials.
- Assess whether the reported interim mCRC findings are sustained in larger cohorts and subsequent clinical updates.