Business Context and Reporting Period
This Form 8-K, filed on November 26, 2018, by OvaScience, Inc. (the "Registrant"), details the planned reverse merger with Millendo Therapeutics, Inc. ("Millendo"). Upon closing, OvaScience will change its name to Millendo Therapeutics, Inc. The filing supplements disclosures regarding the merger, scheduled for a stockholder vote on December 4, 2018. The financial data presented primarily reflects Millendo's operations for the nine months ended September 30, 2018, alongside unaudited pro forma combined financial statements assuming the merger occurred on September 30, 2018.
Key Financial Metrics
Millendo Historical Results (Nine Months Ended Sept 30, 2018):
- Revenue: $0 (No product sales).
- Net Loss: $17.3 million ($16.6 million attributable to common stockholders).
- Operating Expenses: $17.2 million (R&D: $9.8 million; G&A: $7.3 million).
- Cash and Restricted Cash: $9.8 million (down from $17.6 million at Dec 31, 2017).
- Debt: Total debt of $8.2 million, consisting primarily of $8.0 million in convertible promissory notes issued in August 2018.
- Liquidity: Management stated cash was sufficient to fund operations through Q4 2018, though substantial doubt regarding going concern status exists without additional funding.
Pro Forma Combined Results (Nine Months Ended Sept 30, 2018):
- Pro Forma Cash: $74.9 million (including proceeds from Pre-Closing and Post-Closing financings).
- Pro Forma Net Loss: $35.1 million.
- Pro Forma Revenue: $0.2 million (attributable to OvaScience).
Material Changes and Transactions
- Merger Agreement: Millendo will merge into a subsidiary of OvaScience. Millendo is the accounting acquirer in a reverse recapitalization.
- Financing Activities:
- Pre-Closing Financing: Approximately $29.5 million raised (including $8.0 million in convertible notes issued August 2018).
- Post-Closing Financing: Agreed private placement of approximately $20.0 million to extend cash runway into the second half of 2020.
- Debt Conversion: The $8.0 million convertible promissory notes are set to automatically convert into common stock upon the closing of the merger.
- Management Change: Louis Arcudi III was hired as Millendo's Chief Financial Officer effective November 5, 2018, and will serve as CFO of the combined organization.
Outlook, Risks, and Contingencies
Guidance and Strategy: The combined company intends to use financing proceeds to advance two key assets: livoletide (for Prader-Willi syndrome) and nevanimibe (for congenital adrenal hyperplasia). A pivotal Phase 2b/3 trial for livoletide is expected to initiate between the merger closing and H2 2020, with results anticipated in H1 2020.
Risks and Contingencies:
- Going Concern: Millendo has incurred losses since inception and faces substantial doubt about its ability to continue as a going concern without the merger and associated financings.
- Merger Conditions: The transaction is contingent upon OvaScience stockholder approval (scheduled Dec 4, 2018) and other customary conditions.
- Exchange Ratio Uncertainty: The final exchange ratio depends on OvaScience's net cash at closing, estimated at approximately 0.1070 shares of OvaScience stock for each Millendo share.
- Development Risks: Standard biopharmaceutical risks apply, including potential failure of clinical trials and regulatory approval uncertainties.
Investor Verification Checklist
- Verify the outcome of the OvaScience stockholder vote scheduled for December 4, 2018.
- Confirm the closing of the $20 million Post-Closing Financing and the final net cash position of OvaScience at closing.
- Monitor the initiation and enrollment progress of the livoletide Phase 2b/3 trial in Prader-Willi syndrome.
- Review the final exchange ratio calculation once OvaScience's net cash at closing is determined.
- Assess the combined company's burn rate post-merger to validate the projected cash runway into H2 2020.