Business context and reporting period
The supplied filing is OncoGenex Pharmaceuticals, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2015—not a filing identified as Achieve Life Sciences, Inc. The company described itself as a clinical-stage cancer therapeutics developer, with candidates custirsen, apatorsen and OGX-225. No product-sales revenue had been generated.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Collaboration revenue | $6.7 million | $4.8 million | $12.1 million | $21.5 million |
| Research and development | $8.3 million | $9.6 million | $18.5 million | $36.4 million |
| General and administrative | $3.1 million | $2.5 million | $8.9 million | $7.9 million |
| Net loss | $4.6 million | $4.9 million | $15.1 million | $20.6 million |
| Basic and diluted loss per share | $0.16 | $0.23 | $0.60 | $1.21 |
Cash and cash equivalents were $42.5 million and short-term investments $23.5 million at September 30, 2015, totaling $65.9 million; total current assets were $67.6 million versus current liabilities of $29.3 million. Total liabilities were $29.5 million, including $11.0 million of deferred collaboration revenue. Long-term obligations were $0.1 million; the filing reports no material conventional debt balance. Operating cash flow was positive $1.6 million for the nine months, versus $10.4 million used in the prior-year period, mainly reflecting Teva’s advance reimbursement. Cash increased $14.6 million during the period. The filing gives no operating margin measure; the company remained loss-making.
Changes versus prior period
Nine-month revenue declined 44% year over year, while quarterly revenue increased, reflecting the timing of custirsen development-cost recognition. Nine-month R&D expense fell by about half, primarily as AFFINITY and Borealis-1 costs decreased with patients coming off treatment; lower costs were partly offset by the company taking responsibility for ENSPIRIT after the Teva collaboration ended. Nine-month G&A expense increased about 13%, mainly due to higher professional and consulting fees. Net loss narrowed year over year, also influenced by much smaller warrant revaluation gains than in 2014.
Cash resources rose from $47.1 million at December 31, 2014, supported by the Teva termination payment and approximately $17.6 million net proceeds under the Lincoln Park Capital share purchase arrangement. The company issued about 6.8 million shares under that arrangement; it was fully used by August 13, 2015.
Outlook, commentary and material risks
- Management estimated existing cash, cash equivalents and investments would fund currently planned operations into the first quarter of 2017. This estimate depended on assumptions; additional funding could be needed earlier if trials take longer or costs exceed expectations. The company stated that future financing or a new collaboration was not assured.
- Custirsen’s SYNERGY Phase 3 trial did not meet its primary overall-survival endpoint. AFFINITY continued after a futility review; an amended analysis added a poor-prognosis co-primary population, with that population’s final analysis projected by year-end 2015 and the overall-population analysis in the second half of 2016. ENSPIRIT continued after its revised futility analysis; final results were projected for the second half of 2016.
- Apatorsen’s Rainier study did not show a survival benefit in metastatic pancreatic cancer, and the company said it would not pursue further development in that indication. Spruce Phase 2 primary progression-free-survival data were expected in Q1 2016; Borealis-2 results were expected in 2016. OGX-225 had not been tested in humans.
- Teva paid approximately $23.2 million as an advance reimbursement when the collaboration ended, and the company regained custirsen rights and responsibility for subsequent development costs. The remaining $11.0 million deferred balance was to be recognized as costs were incurred; the filing expected only a nominal amount from the holdback.
- Isis claimed it was owed 30% of the Teva termination payment and asserted nonpayment was a material license-agreement breach. OncoGenex disputed that any payment was due, arguing the funds reimbursed research and development. The dispute could lead to litigation, payment obligations or jeopardize license rights.
- A $1.3 million contingent lease termination payment was recorded as a liability; it could be payable if specified clinical and financing conditions were met. The company also disclosed clinical efficacy, trial timing, manufacturing, financing, regulatory, intellectual-property and competitive risks. A $100 million shelf registration was filed in October 2015; no securities had been issued under it as of November 12.
Management reported disclosure controls and procedures were effective at quarter-end and no material change in internal control over financial reporting occurred during the quarter.
Investor verification points
- Confirm the issuer identity: the supplied document names OncoGenex Pharmaceuticals, Inc., while the request identifies Achieve Life Sciences, Inc.
- Check subsequent AFFINITY and ENSPIRIT trial results, timelines and any resulting financing or development decisions against the projections in this 2015 filing.
- Verify the resolution and financial or licensing consequences of the Isis payment dispute and the Teva holdback.
- Assess cash runway against actual trial costs, the company’s assumption-dependent first-quarter 2017 estimate, and later capital raises or collaborations.
- Confirm the status of the contingent $1.3 million lease payment and the October 2015 shelf registration’s subsequent use.