Cocrystal Pharma, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. Unless otherwise noted, financial amounts are in millions of dollars; the filing presents them in thousands. Cocrystal is a clinical-stage antiviral drug developer with no products approved for sale.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0.554 | $0 | $1.015 |
| Research and development expense | $2.747 | $1.976 | $4.324 | $3.259 |
| General and administrative expense | $1.081 | $2.028 | $2.242 | $3.167 |
| Net loss | $3.821 | $3.495 | $6.559 | $5.485 |
| Basic and diluted loss per share | $0.04 | $0.07 | $0.08 | $0.12 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $4.394 | $4.388 |
Revenue was entirely collaboration revenue from Merck in 2020; Cocrystal completed its primary research obligations in January 2021. Merck is responsible for further development under the collaboration. No operating margin is meaningful given zero revenue and ongoing operating losses.
At June 30, 2021, cash was $67.062 million and restricted cash was $0.050 million. Total assets were $87.417 million, total liabilities $2.669 million, and stockholders’ equity $84.748 million. Liabilities chiefly comprised accounts payable, accrued expenses, and operating and finance lease obligations; the filing reports no material conventional debt balance. Management said available cash was sufficient for at least 36 months of planned operations.
Operating cash use was nearly unchanged year over year. Financing provided $38.486 million in the first half, primarily from common-stock sales: approximately $2.072 million net from the ATM in January and $36.4 million net from a May offering of 26 million shares. Investing cash use was $0.040 million. Cash and restricted cash totaled $67.112 million at period end.
Material changes and business developments
- Compared with Q2 2020, Q2 2021 revenue fell by $0.554 million to zero, R&D expense rose $0.771 million, and G&A expense fell $0.947 million. Net loss increased by $0.326 million. For the first half, net loss increased $1.074 million year over year.
- R&D spending increased as influenza and COVID-19 programs advanced. G&A declined, mainly because professional fees fell following the conclusion of certain prior legal matters.
- Common shares outstanding increased from 70.439 million at December 31, 2020 to 97.469 million at June 30, 2021. After quarter-end, the company increased authorized common shares from 100 million to 150 million.
- Goodwill was $19.092 million; management reported no impairment required at June 30, 2021.
Outlook, risks, and contingencies
- Management expected R&D expense to continue rising in 2021. It planned to start a Phase 1 study of influenza candidate CC-42344 in Q3 2021, initiate IND-enabling work for COVID-19 candidate CDI-45205 in the first half of 2022, and complete a norovirus proof-of-concept animal study by year-end 2021. These are forward-looking plans, not reported outcomes.
- The company said it did not expect 2021 revenue other than possible Merck milestone payments. Merck’s agreement allows it to terminate before first commercial sale at its discretion and without cause; Cocrystal may earn up to $156 million in development, regulatory, and sales milestones, plus royalties.
- Management cautioned that the company has no established recurring revenue source, has incurred losses and negative operating cash flows, may never achieve profitability, and may need further financing. Additional equity financing could materially dilute shareholders, and funding may not be available on acceptable terms.
- COVID-19 had caused supply-chain and service-provider delays. Disclosed risks include impacts on personnel, research materials, access to third-party laboratories, CRO/CDMO capacity, clinical-trial recruitment, and possible delays in Australia.
- Pending matters include an insurance-coverage dispute, an appeal in the Pederson II litigation, and an AGP lawsuit seeking damages estimated above $1 million plus attorneys’ fees. The company said outcomes could not be predicted, potential losses could not be reasonably estimated, and no loss contingency was recorded.
- The company reported effective disclosure controls as of June 30, 2021 and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the stated 36-month cash runway remains adequate as clinical and preclinical spending increases.
- Progress and timing of CC-42344’s Phase 1 study and the COVID-19 and norovirus development milestones.
- Whether Merck continues development and whether any collaboration milestones or royalties become payable.
- Cash burn, future financing needs, and dilution following the 2021 share offerings and increase in authorized shares.
- Developments in the disclosed litigation and any resulting financial exposure.