Business context and reporting period
The supplied filing is OvaScience, Inc.’s Form 10-K for the fiscal year ended December 31, 2014, filed March 16, 2015. It does not appear to be a Tempest Therapeutics filing. OvaScience was developing fertility treatments based on egg precursor cells; its AUGMENT treatment had launched at select international IVF clinics, while OvaPrime and OvaTure remained in development.
Financial and operating results
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense | $21.8 million | $15.8 million |
| Selling, general and administrative expense | $26.1 million | $13.3 million |
| Total operating expenses | $47.9 million | $29.1 million |
| Net loss | $49.5 million | $29.0 million |
| Net loss per share, basic and diluted | $2.19 | $1.80 |
| Cash used in operating activities | $30.6 million | $18.1 million |
For Q4 2014, operating expenses were $18.3 million and net loss was $18.9 million, versus $11.0 million and $11.0 million, respectively, in Q4 2013. Q4 2014 loss per share was $0.79, compared with $0.64. Quarterly revenue was not reported; the company stated it had generated no revenue as of year-end.
At December 31, 2014, cash, cash equivalents and short-term investments totaled $60.2 million (including $6.4 million cash and $53.8 million short-term investments), versus $44.4 million a year earlier. Working capital was $51.7 million. Total liabilities were $10.2 million, including $10.2 million current liabilities; the filing reports no material borrowing or conventional debt balance. Current assets were $61.9 million. No meaningful revenue-based margin can be calculated because there was no revenue.
Changes versus the prior comparable period
- FY 2014 net loss increased 70% to $49.5 million; operating expenses rose 64% to $47.9 million.
- R&D expense increased 38%, while SG&A nearly doubled, reflecting product launch and international build-out costs, hiring and higher stock-based compensation.
- Operating cash use increased to $30.6 million. Investing cash use was $32.8 million, including purchases of short-term investments and $2.8 million of capital expenditures; financing provided $51.7 million, primarily from the March 2014 equity offering.
- Stock-based compensation was $12.4 million for 2014. Quarterly expense rose to $6.4 million in Q4, primarily due to the increase in the share price.
Outlook, commentary, risks and unusual items
- Management expected cash and investments at year-end, together with $124.1 million net proceeds from a January 2015 stock offering, to fund its current operating plan for at least 12 months. The company nevertheless expected continued significant losses and said additional capital may be needed.
- Management targeted 1,000 AUGMENT cycles in process by the end of 2015, expansion into additional international regions, and introduction of OvaPrime in at least one region outside the U.S. by year-end 2015. It expected most AUGMENT revenue, if achieved, in the second half of 2015, largely Q4, because revenue recognition followed delivery and typically lagged patient-tissue receipt by 30–120 days.
- OvaScience reported large-animal proof of concept for OvaPrime and human preclinical proof of concept for OvaTure in 2014. Neither OvaPrime nor OvaTure had been used in humans; the filing cautions that efficacy and safety had not been established in clinical trials.
- The FDA had issued an “untitled” letter in 2013 advising the company to file an IND for AUGMENT. OvaScience suspended its U.S. study and was focused on markets outside the U.S.; foreign regulators could also disagree with its view that the treatment was exempt from premarket approval.
- Significant risks include continued operating losses, uncertain adoption and out-of-pocket affordability, regulatory reclassification or required clinical trials, product liability, manufacturing and clinic execution, competition, and dependence on additional financing. A shareholder securities class action was refiled in 2014; the company’s motion to dismiss was pending at year-end, and management said the outcome could not be assessed.
- OvaScience recorded $1.6 million of its share of OvaXon joint-venture losses in 2014. It also paid Intrexon a $2.5 million cash technology-access fee in December 2014; the collaboration included potential future royalties and a commercial milestone.
Investor facts to verify
- Confirm issuer identity: the supplied document names OvaScience, Inc., not Tempest Therapeutics, Inc.
- Check subsequent AUGMENT cycle volumes, recognized revenue and deferred revenue against management’s 2015 targets and timing expectations.
- Review later regulatory determinations for AUGMENT and OvaPrime, and any required clinical studies or approvals.
- Track cash burn, spending growth and financing needs against the stated 12-month runway; include the January 2015 offering proceeds and resulting dilution.
- Assess clinical evidence, safety and live-birth outcomes for the treatments, and the resolution of the shareholder litigation.