Business context and reporting period
The supplied filing is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2018—not a Tempest Therapeutics filing, despite the request metadata. OvaScience was focused on fertility treatments, but had substantially reduced operations through repeated workforce restructurings. It reported limited revenue and no expectation of significant near-term revenue.
On August 9, 2018, OvaScience agreed to an all-stock merger with Millendo Therapeutics, intended to create a company developing treatments for orphan endocrine diseases. Closing was expected in Q4 2018, subject to shareholder approval and other conditions; a special meeting was scheduled for December 4, 2018.
Financial performance and position
| Metric | Q3 2018 | Nine months 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $55,000 | $203,000 | $56,000 and $204,000 |
| Net loss | $5.679 million | $20.752 million | $9.367 million and $42.447 million |
| Operating loss | $5.898 million | $21.384 million | $9.406 million and $41.922 million |
| Operating cash used | Not provided for quarter | $21.492 million | $37.579 million |
Q3 gross profit was approximately $11,000 (20% gross margin); nine-month cost of revenue exceeded revenue by approximately $7,000. Nine-month R&D expense was $6.695 million, down 55%, and SG&A was $11.045 million, down 52%, year over year. Nine-month restructuring expense was $3.637 million, including $2.2 million of asset impairment charges.
At September 30, cash and cash equivalents were $31.917 million, short-term investments $14.433 million, and restricted cash $789,000. Cash, cash equivalents, and short-term investments totaled $46.350 million, versus $67.203 million at year-end 2017. Working capital was $45.105 million. Total liabilities were $4.323 million; the balance sheet reports no debt balance. Management said available cash and investments should fund its current operating plan for at least 12 months from the filing date, while cautioning that estimates could prove wrong and additional funding might be needed.
Changes, outlook, risks, and unusual items
- Net loss improved year over year as R&D and SG&A costs fell following restructurings; the company also recorded a much smaller equity-method investment loss.
- Cash from investing activities was $37.706 million for the first nine months, mainly reflecting investment maturities net of purchases; it was not operating cash generation. Financing cash flow was zero.
- The company discontinued its OvaTure collaboration with Intrexon in February 2018. It had previously prioritized OvaPrime clinical development and OvaTure preclinical development, while discontinuing AUGMENT efforts outside North America.
- Management anticipated continued operating losses and said future funding could require equity, debt, collaborations, or licensing. No committed external funding source was available; financing could dilute shareholders or constrain operations.
- Nasdaq had notified the company of noncompliance with the $1.00 minimum bid-price rule. It transferred to the Nasdaq Capital Market effective October 31, 2018, with an additional compliance period and stated intent to effect a reverse stock split. Delisting could impair trading, capital raising, and the merger closing condition.
- Several shareholder lawsuits remained pending, including a securities class action whose motion to dismiss was denied. The company said it could not estimate potential losses. Two additional merger-disclosure suits were filed after quarter-end; the company disputed their claims.
- The filing disclosed a $2.2 million property impairment and a $300,000 attorney-fee payment under a derivative-action settlement. It reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer: the filing is for OvaScience, Inc.; the supplied company metadata names Tempest Therapeutics, Inc.
- Verify the merger’s final terms, shareholder approval, closing status, and any post-quarter financing or share-count effects.
- Assess the cash runway using subsequent cash use and the operating plan; management’s estimate was not a guarantee.
- Check Nasdaq bid-price compliance, any reverse stock split, and continued listing status.
- Review litigation developments, potential liabilities, and any material changes to the company’s restructuring or development plans.