Business context and reporting period
This is Trovagene, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2019. Although the request metadata identifies Cardiff Oncology, the filing is issued under Trovagene, Inc. The company describes itself as a clinical-stage oncology therapeutics company developing onvansertib, a PLK1 inhibitor, across prostate cancer, colorectal cancer and acute myeloid leukemia (AML).
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $51,687 | $88,361 | $152,055 | $300,310 |
| Research and development expense | $2.82 million | $1.83 million | $8.30 million | $5.67 million |
| Selling, general and administrative expense | $1.44 million | $1.67 million | $4.24 million | $6.32 million |
| Net loss | $4.14 million | $3.77 million | $12.17 million | $12.30 million |
| Net loss attributable to common stockholders | $4.15 million | $3.78 million | $12.46 million | $15.09 million |
| Loss per common share, basic and diluted | $0.71 | $1.10 | $2.46 | $8.27 |
- At September 30, cash and cash equivalents were $9.03 million, working capital was $5.81 million, and total liabilities were $5.27 million. Lease liabilities totaled $1.93 million; the filing reports no interest expense in the first nine months of 2019 and says the equipment line of credit had been paid off.
- Nine-month operating cash use was $9.99 million, investing cash use was $67,622, and financing cash provided was $7.64 million. Cash declined by $2.42 million from year-end 2018.
- Cost of revenue was zero in 2019; the filing does not present a meaningful operating margin for this clinical-stage business. Revenue consisted almost entirely of royalties.
Material changes versus comparable periods
- Q3 revenue fell $36,674 year over year, primarily because of lower royalty accruals and the prior disposition of the CLIA laboratory. Nine-month revenue fell $148,255, mainly because service revenue declined after that disposition.
- Q3 R&D expense rose $988,383, chiefly from clinical-trial and outside-service costs. For the first nine months, R&D increased $2.63 million as the company advanced two trials and initiated a third.
- Nine-month SG&A declined $2.08 million, reflecting lower headcount, stock-based compensation and facilities costs; the 2018 comparison included one-time severance and option-grant expenses. Q3 SG&A declined $224,861.
- Q3 net loss attributable to common stockholders increased $371,981. The nine-month amount improved $2.63 million, principally because of a lower deemed dividend than in 2018, alongside lower operating expenses.
- Common shares outstanding rose from 3.83 million at December 31, 2018 to 6.44 million at September 30, 2019. The filing also reports 7,742,355 shares issued and outstanding as of October 31, 2019.
Outlook, commentary and risks
- Management estimated that then-current resources would fund planned operations into the third quarter of 2020, but stated that recurring losses and dependence on additional capital raised substantial doubt about the company’s ability to continue as a going concern. The estimate depends on assumptions that could prove wrong; funding may not be available on acceptable terms and equity financing could dilute shareholders.
- On October 30, 2019, after quarter-end, the company closed a private placement for approximately $5.0 million gross proceeds, selling common stock or common-stock equivalents and Series G and H warrants. This financing adds liquidity but also potential dilution.
- Management expected significant losses and continued operating cash outflows, with R&D costs likely to increase as onvansertib trials advance. If additional capital is unavailable, the company may delay, scale back or discontinue programs, seek earlier-stage collaborations, or relinquish rights.
- Clinical updates reported in the filing included completion of AML Phase 1b dose escalation, selection of a 60 mg/m² recommended Phase 2 dose, and initiation of an approximately 32-patient Phase 2 trial with decitabine. The company also reported complete response or complete response with incomplete count recovery in 5 of 21 AML patients treated in Phase 1b, and biomarker-associated responses in its AML data. These are preliminary clinical findings, not established efficacy.
- The company reported preliminary mCRC data: all four patients completing their first treatment cycle had decreases in tumor KRAS mutational burden. It also described preliminary prostate-cancer findings. Trial results remain subject to clinical and regulatory uncertainty.
- A related-party matter to note: the CEO was a principal stockholder of Leucadia Life Sciences, and the company recorded approximately $745,000 of R&D expense for Leucadia and a related consulting engagement during the first nine months of 2019.
- The filing reported no material litigation, no material change to the prior annual-report risk factors, and effective disclosure controls as of September 30, 2019.
Important facts for investors to verify
- Confirm the issuer identity and relationship between Trovagene, Inc. in this filing and Cardiff Oncology in the request metadata.
- Review cash runway assumptions, going-concern disclosure, and the terms and dilution effects of the October 2019 placement and outstanding warrants.
- Track clinical-trial enrollment, safety, biomarker definitions, response durability and whether preliminary onvansertib findings are confirmed in larger studies.
- Assess the sustainability and variability of royalty revenue after the CLIA laboratory disposition and the pace of clinical spending.
- Review the related-party Leucadia expenses and the company’s lease obligations when evaluating future cash needs.