Oragenics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019, compared with the three months ended March 31, 2018. Oragenics is a development-stage biotechnology company focused on novel antibiotics and treatments for oral mucositis. It reported no revenue in either period.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $2.41 million | $1.33 million | Up 82.0% |
| General and administrative expense | $0.98 million | $0.80 million | Up 23.3% |
| Operating loss | $3.39 million | $2.12 million | Loss increased |
| Net loss | $3.33 million | $2.12 million | Loss increased about 56.9% |
| Basic and diluted loss per share | $0.11 | $0.42 | Lower loss per share, with a substantially higher weighted-average share count |
| Net cash used in operating activities | $2.21 million | $1.37 million | Cash use increased |
There are no meaningful revenue-based margins because the company had no revenue. Q1 2019 other income, net was $68,493, mainly from interest income, versus $2,307 in Q1 2018.
At March 31, 2019, cash and cash equivalents were $29.35 million, total current assets were $31.07 million, and working capital was $28.89 million. Total assets were $31.31 million and shareholders’ equity was $29.12 million. Current liabilities totaled $2.19 million, including $77,525 of short-term notes payable and $132,465 of operating lease liabilities. The filing reports no material long-term debt; the notes payable primarily finance insurance premiums.
Material changes and financing
- R&D expense rose by $1.09 million, primarily because of increased costs under collaboration agreements, including the AG013 clinical trial.
- G&A expense increased by $184,985, with higher consulting, stock-based compensation, insurance, and salary costs partly offset by lower non-employee stock-based compensation.
- On March 25, 2019, the company completed an underwritten offering with approximately $12.5 million in gross proceeds. Q1 financing activities provided $11.35 million net, including $11.42 million of net proceeds from common stock and warrants. Cash increased by $9.14 million during the quarter.
- The offering issued 16,666,668 common shares and warrants covering up to 19,166,668 shares. Common shares outstanding increased from 29.43 million at December 31, 2018 to 46.11 million at March 31, 2019. A further 26.54 million warrants were outstanding at quarter-end, creating potential dilution.
Outlook, commentary, and risks
- Management believes available working capital will fund the business as presently structured through the fourth quarter of 2020. 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 obtaining additional financing or achieving profitable operations; neither is assured.
- The company expects significant operating losses and increasing R&D and G&A expenses. It has an accumulated deficit of $115.11 million and has not generated significant operating revenue. It may seek funding through equity or debt offerings, partnerships, sublicensing, technology-rights transactions, and grants. Failure to obtain financing could force it to delay or curtail development.
- AG013 is in a Phase 2 trial for oral mucositis. The company reported enrollment of the 60th patient on March 15, 2019 and expected top-line results in early 2020. The trial’s site expansion may increase costs. A prior interim safety review cleared the study to proceed without changes; that review was not an efficacy result.
- OG716 remains in preclinical development. The timing of an IND filing and further studies depends on available capital. The company identified other oral-care and weight-loss technologies as not planned for further development without a partner.
- Series C preferred stock carries a 12% annual dividend payable in additional preferred shares; the rate is scheduled to rise automatically to 20% after May 10, 2019 if the stock is not earlier redeemed. Redemption could affect cash needs. The company also has contingent Intrexon milestone obligations, including $25 million for specified regulatory approval milestones under the Lantibiotic ECC and $27.5 million under the Oral Mucositis ECC; none had been achieved as of March 31, 2019.
- The MU1140 University of Florida license was due to expire in July 2019, and the company said the covered candidate was not directly under development. The Texas A&M license termination took effect in January 2019, with no further financial obligations under that agreement.
- Management concluded disclosure controls and procedures were effective as of March 31, 2019 and reported no significant quarterly changes in internal control over financial reporting. The company reported no material pending legal proceedings.
Important facts for investors to verify
- Whether cash, actual spending, and clinical-trial costs remain consistent with management’s projected runway through Q4 2020, and what financing is needed afterward.
- AG013 enrollment progress, trial costs, and timing and content of the expected early-2020 top-line results.
- Potential dilution from outstanding warrants and preferred-stock conversions, and the effect of Series C dividends or redemption obligations.
- Current status of the OG716 development and IND plans, and the status of the expiring MU1140 license.
- Whether any Intrexon milestone, royalty, or sublicensing payment obligations become payable as programs advance.