Cardiff Oncology, Inc. — 2017 Form 10-K Summary
Issuer and period: The supplied filing is for Trovagene, Inc. (NASDAQ: TROV), not Cardiff Oncology, Inc. It covers the fiscal year ended December 31, 2017; quarterly data include the quarter ended December 31, 2017. The filing was signed February 26, 2018.
Business context
Trovagene described itself as a clinical-stage precision-oncology company. Its lead candidate, PCM-075, is an oral PLK1 inhibitor licensed from Nerviano in March 2017. The company was developing it in AML and metastatic castration-resistant prostate cancer (mCRPC), alongside its circulating tumor DNA diagnostics and laboratory services. No product candidate had been approved or commercially launched.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $505,404 | $381,072 |
| Cost of revenue | $1,811,424 | $1,730,512 |
| Loss from operations | $25,595,797 | $40,145,611 |
| Net loss attributable to common stockholders | $24,930,984 | $39,227,959 |
| Net loss per basic share | $0.72 | $1.30 |
| Cash used in operating activities | $23,281,067 | $31,039,855 |
- Revenue rose about 33%, but remained immaterial relative to expenses. Cost of revenue exceeded revenue by about $1.31 million, implying a negative gross margin; management attributed this to timing of cash collections and operating inefficiencies.
- Year-end cash and cash equivalents were $8.23 million, versus $13.92 million a year earlier. Short-term investments fell from $23.98 million to zero. Working capital declined to $5.52 million from $31.15 million.
- Total liabilities were $5.78 million and stockholders’ equity was $6.51 million at year-end. The $1.33 million equipment loan balance was classified as current and in default. The separate $15 million term loan was repaid in June 2017 after lenders demanded $16.67 million, including principal, interest and other amounts.
- Management said available resources were expected to fund planned operations only through the second quarter of 2018 and warned that estimates could prove wrong. The auditor’s report and management disclosed substantial doubt about the company’s ability to continue as a going concern.
Changes versus 2016
- Net loss narrowed by about $14.3 million, primarily as operating expenses fell. Operating expenses declined to $26.1 million from $40.5 million, reflecting restructuring and reduced staffing; the decline was partly offset by the $2.0 million PCM-075 license fee.
- Research and development expense fell to $7.88 million from $15.01 million, and selling and marketing expense to $2.74 million from $11.52 million. General and administrative expense was broadly flat at $11.50 million.
- The 2017 net loss included a $3.40 million noncash gain from revaluing warrant liabilities and a $1.66 million loss on debt extinguishment. The reported loss therefore does not solely reflect operating performance.
- The company raised approximately $10.6 million net from 2017 equity and warrant offerings, while issuing substantially more shares. Common shares outstanding were 52.79 million at year-end, compared with 30.70 million at the end of 2016; 55.29 million were outstanding as of February 12, 2018.
Outlook, developments and risks
- The AML Phase 1b/2 combination trial began in November 2017 after FDA clearance; PCM-075 received Orphan Drug Designation for AML. The Phase 2 mCRPC protocol combining PCM-075 with abiraterone and prednisone was submitted to the FDA in December 2017. These are development milestones, not evidence of clinical efficacy.
- The prior Phase 1 solid-tumor study reported a manageable safety profile, with thrombocytopenia and neutropenia as principal toxicities, generally reversible within about three weeks. Future efficacy and safety remain uncertain.
- Management was evaluating further equity or debt financing, partnerships, new diagnostic and NextCollect revenue, cost reductions and delayed spending. Failure to raise capital could force delays, reductions or discontinuation of programs and could increase dilution or worsen financing terms.
- Other notable items included a $2.17 million restructuring charge and a roughly $2.1 million settlement with former executives. The company also reported an unresolved default under its equipment loan and was seeking a waiver or resolution with SVB.
- Nasdaq had notified the company of a bid-price deficiency; the stated deadline to regain compliance was March 5, 2018. The closing share price was $0.36 on February 12, 2018. The filing also highlights clinical, regulatory, manufacturing, intellectual-property, financing and stock-dilution risks.
Investor verification points
- Confirm current cash, cash burn, financing raised since the filing, and whether the company remained funded beyond the disclosed second-quarter 2018 runway.
- Check the status and terms of the SVB equipment-loan default, any waiver or acceleration, and any subsequent debt repayment.
- Verify enrollment, safety findings and efficacy data from the AML and mCRPC trials; distinguish preclinical combination results from human clinical evidence.
- Review subsequent share and warrant issuances, exercise activity, and resulting fully diluted share count and dilution.
- Confirm Nasdaq listing compliance and any subsequent reverse split or delisting action.
- Review the settlement and restructuring cash costs, and any subsequent developments concerning the disclosed related-party legal fees.