Tekmira Pharmaceuticals Corporation — Q2 2014 Form 10-Q
Entity and period: The supplied filing is for Tekmira Pharmaceuticals Corporation, not Arbutus Biopharma Corp. It covers the quarter and six months ended June 30, 2014; amounts below are in U.S. dollars unless noted.
Business context
Tekmira was a clinical-stage biopharmaceutical company developing RNA interference therapeutics and partnering its lipid nanoparticle (LNP) delivery technology. Its programs included TKM-HBV, TKM-PLK1, TKM-ALDH2 and TKM-Ebola, alongside research and licensing collaborations.
Financial performance and liquidity
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $1.811 million | $2.844 million | $6.241 million | $4.975 million |
| Operating expenses | $11.234 million | $5.915 million | $21.622 million | $11.040 million |
| Operating loss | $9.423 million | $3.071 million | $15.381 million | $6.065 million |
| Net loss | $6.081 million | $3.014 million | $24.065 million | $5.560 million |
| Loss per share, basic and diluted | $0.28 | $0.21 | $1.15 | $0.39 |
- Q2 revenue was mainly DoD contract revenue ($0.861 million), Monsanto-related revenue ($0.909 million, including licensing and milestone revenue), and Spectrum royalties ($0.041 million). First-half revenue included $4.101 million from the DoD and $1.697 million from Monsanto.
- Research and development expense was $9.298 million in Q2 and $17.502 million in the first half, reflecting increased program activity; general and administrative expense also rose.
- Cash and cash equivalents were $85.267 million at June 30, 2014, with short- and long-term investments totaling $44.194 million, or $129.461 million in cash and investments combined. The filing reports no debt balance; warrant liability was $6.590 million.
- Operating activities used $8.010 million in Q2 but provided $1.145 million in the first half, largely reflecting cash receipts and deferred revenue. Investing activities used $43.573 million in the first half, primarily for investment purchases. Financing activities provided $59.523 million, including $56.477 million net proceeds from a public share offering.
- Management stated that available cash and investments were sufficient for at least the next 12 months, while noting that further funding would be needed for continued pipeline development.
Material changes and unusual items
- Compared with Q2 2013, Q2 2014 revenue declined 36%, while operating expenses rose about 90%; the operating loss widened. For the first half, revenue increased about 25%, but operating expenses nearly doubled and net loss increased substantially.
- Q2 net loss included a $5.813 million gain from a decrease in warrant fair value, offset in part by a $2.728 million foreign-exchange loss. First-half results included a $7.803 million warrant fair-value loss and a $1.285 million foreign-exchange loss. These non-cash and currency items made net loss volatile.
- The company completed a public offering of 2.125 million shares at $28.50 per share, generating $60.562 million gross and $56.477 million net. Shares outstanding were 22,079,727 at quarter-end and 22,105,977 as of August 12, 2014.
- Monsanto’s option and services arrangement had a potential stated value of up to $86.2 million subject to milestones. Revenue from upfront and other payments is recognized over the expected four-year option period; the company also agreed to pay Monsanto for research services, up to $5 million.
Outlook, risks and contingencies
- TKM-Ebola: After quarter-end, the FDA placed the program on clinical hold, then modified it to a partial hold in August. Potential use in people with confirmed or suspected Ebola infection was permitted, but the multiple-ascending-dose study in healthy volunteers remained on hold. The FDA sought information about potential cytokine release and protocol changes. Management expected resolution by Q4 2014; there was no assurance the hold would be lifted on that timeline or at all.
- Management expected to file an IND or equivalent for TKM-HBV in the second half of 2014, with a Phase I trial targeted for 2015. Interim TKM-PLK1 data were expected in the second half of 2014; a separate HCC Phase I/II trial began in May 2014. The company deferred an IND filing for TKM-ALDH2 beyond 2014 and was pursuing funding or partnering opportunities for TKM-Marburg.
- A $5 million Alnylam milestone related to technology transfer for ALN-VSP was disputed in arbitration and had not been recorded as revenue. The filing also describes royalty and milestone obligations under licensing arrangements and a contingent royalty obligation to the Canadian government.
- Revenue depends on contracts, collaborations, milestone and royalty receipts, and may fluctuate. The company warned that future funding availability was uncertain and that inadequate financing could require it to delay or reduce development programs.
Most important facts for investors to verify
- Confirm the issuer identity: this filing is Tekmira Pharmaceuticals Corporation, despite the request metadata naming Arbutus Biopharma Corp.
- Track the FDA’s TKM-Ebola hold status and any resulting clinical, regulatory or funding changes.
- Assess cash burn against management’s 12-month liquidity statement, including the distinction between cash and investments.
- Monitor R&D spending, collaboration receipts and dependence on the DoD and Monsanto arrangements.
- Follow the Alnylam arbitration over the unrecognized $5 million milestone and any resulting revenue or cash impact.
- Separate operating performance from warrant revaluation and foreign-exchange effects when evaluating reported losses.