Business context and reporting period
This is OncoGenex Pharmaceuticals, Inc.’s Form 10-K for the fiscal year ended December 31, 2015, filed March 9, 2016. The request metadata names Achieve Life Sciences, Inc., but the supplied filing is for OncoGenex, not Achieve Life Sciences. OncoGenex was a clinical-stage oncology company with no products approved for sale and no product-sales revenue. Its pipeline comprised phase 3 custirsen, phase 2 apatorsen, and preclinical OGX-225.
Financial and operating results
| Metric | 2015 | 2014 |
|---|---|---|
| Collaboration revenue | $18.2 million | $27.1 million |
| Research and development expense | $25.1 million | $46.2 million |
| General and administrative expense | $11.8 million | $10.6 million |
| Net loss | $16.8 million | $26.2 million |
| Basic and diluted loss per share | $0.64 | $1.45 |
| Cash, cash equivalents and short-term investments at year-end | $55.2 million | $47.1 million |
| Total assets / total liabilities at year-end | $58.2 million / $20.8 million | $56.3 million / $22.2 million |
All 2015 revenue was collaboration revenue, principally recognition of Teva’s advance reimbursement as custirsen-related development costs were incurred; no product revenue was reported. Gross margin is not meaningful for this development-stage business. The company reported a $1.9 million non-cash gain on warrant revaluation, which reduced the reported loss. Accumulated deficit was $176.8 million.
Net cash used in operating activities was $9.1 million, compared with $17.3 million in 2014; financing activities provided $17.6 million, primarily through Lincoln Park Capital equity sales. The company reported working capital of approximately $36.6 million, based on current assets of $57.3 million and current liabilities of $20.7 million. The balance sheet lists $157,000 of long-term obligations, including current and noncurrent portions; operating-lease commitments were separately reported at $782,000. No material conventional funded debt is identified in the supplied filing text.
For the fourth quarter of 2015, revenue was $6.0 million and net loss was $1.7 million, compared with $5.7 million revenue and $5.7 million net loss in fourth-quarter 2014.
Material changes versus the prior comparable period
- Annual collaboration revenue declined about 33% from 2014, reflecting lower AFFINITY reimbursement as patients came off treatment; the Teva termination also shifted future custirsen costs to OncoGenex.
- R&D expense fell about 46%, mainly as AFFINITY and Borealis-1 costs declined with treatment activity; lower spending was partly offset by OncoGenex taking responsibility for ENSPIRIT costs.
- Net loss narrowed about 36%. G&A expense rose approximately 11%, primarily due to higher consulting and legal fees.
- Cash and short-term investments increased by $8.1 million. The company received approximately $23.2 million from Teva as advance reimbursement and raised approximately $18.0 million gross through Lincoln Park Capital, while continuing to fund development and other operations.
- Shares outstanding rose from approximately 22.6 million to 29.8 million during 2015, reflecting equity financing and share awards.
Outlook, management commentary, risks and unusual items
- Management estimated existing cash, cash equivalents and short-term investments would fund currently planned operations into the third quarter of 2017. This forecast depended on trial timing and costs; additional funding could be needed sooner if studies run longer or cost more, or if development plans expand.
- In February 2016, the company announced an 11-person workforce reduction, about 27% of pre-reduction headcount, and estimated $0.4 million of severance costs. It expected the reductions and other expense cuts to extend its cash runway into the third quarter of 2017.
- Custirsen: The completed SYNERGY phase 3 trial failed its primary overall-survival endpoint. In AFFINITY, the prospectively defined poor-prognosis subgroup did not meet the specified survival criteria in December 2015; the trial continued after the interim analysis, with final intent-to-treat results expected in third-quarter 2016. ENSPIRIT final survival results were expected in the first half of 2017. These dates were estimates and depended on event timing.
- Apatorsen: The phase 2 Rainier pancreatic-cancer study did not show an overall-survival benefit; the company said it did not intend to pursue further pancreatic trials at that time. In January 2016, Spruce did not meet the statistical threshold for its progression-free-survival endpoint, though a potential signal was reported in a high-baseline-Hsp27 subgroup; overall-survival data were expected in the second half of 2016. Borealis-2 results were also expected in the second half of 2016.
- Teva termination: The April 2015 termination returned custirsen rights to OncoGenex and left the company responsible for custirsen expenses from January 1, 2015 onward. The filing said only nominal further holdback receipts were expected.
- Ionis litigation: Ionis sued in January 2016, seeking at least $10 million and a declaration that it could terminate the relevant license, alleging it was owed a share of Teva termination consideration. OncoGenex disputed the claim and intended to defend it; the company said it could not estimate a reasonably possible loss range.
- Nasdaq listing: In February 2016, the company received notice that its share price had been below the $1 minimum bid requirement for 30 consecutive trading days, with until August 23, 2016 to regain compliance.
- Additional risks include clinical-trial failure, dependence on external manufacturers and research partners, financing and dilution risk, intellectual-property and regulatory uncertainty, competition, and potential delays or added costs. The independent auditor gave an unqualified opinion on the financial statements and internal controls; management also concluded controls were effective at year-end.
Most important facts for investors to verify
- Confirm the issuer: the supplied 10-K is OncoGenex Pharmaceuticals, Inc., not Achieve Life Sciences, Inc.
- Review final AFFINITY and ENSPIRIT results against the stated timelines, including the implications of AFFINITY’s poor-prognosis subgroup result and SYNERGY’s failed primary endpoint.
- Track cash burn, remaining liquidity, and the assumptions supporting management’s third-quarter 2017 runway estimate, especially after Teva’s exit and the workforce reduction.
- Monitor the Ionis lawsuit, including potential damages, license-termination exposure, and any effects on development plans.
- Verify Nasdaq bid-price compliance and assess the impact of past and potential future equity issuance on dilution.
- Assess whether apatorsen’s subgroup signals are supported by further results, given the negative overall results reported for Rainier and the Spruce progression-free-survival endpoint.