Oragenics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Oragenics is a clinical-stage biotechnology company developing AG013 for oral mucositis and lantibiotic antibiotics. It reported no revenue for the quarter or six-month period.
Financial performance and liquidity
- Q2 2019: Operating expenses were $4.90 million, including research and development (R&D) of $3.88 million and general and administrative costs of $1.03 million. Net loss was $4.81 million, or $0.10 per share, compared with a $2.28 million loss, or $0.38 per share, in Q2 2018.
- First half 2019: Operating expenses were $8.30 million and net loss was $8.13 million, or $0.21 per share, versus $4.41 million and $4.40 million, or $0.80 per share, in the first half of 2018. R&D rose 142% to $6.29 million, principally reflecting collaboration and clinical-trial costs.
- Cash flow: First-half operating cash use was $5.70 million, up from $3.65 million a year earlier. Financing provided $11.22 million, mainly from the 2019 share and warrant offering. Cash and equivalents ended June at $25.72 million.
- Liquidity and liabilities: Working capital was $24.18 million. Short-term notes payable were $12,526; operating lease liabilities totaled $756,484. Accumulated deficit was $119.92 million. No operating margin is meaningful given the absence of revenue and continuing losses.
Material changes and financing
- The March 2019 underwritten offering generated approximately $12.5 million in gross proceeds and issued 16.67 million common shares plus warrants for up to 19.17 million shares. Common shares outstanding rose from 29.43 million at year-end 2018 to 46.12 million at June 30, 2019.
- Total warrants outstanding were 26.54 million at June 30, 2019. The filing identifies potential dilution from warrants and convertible Series A and B preferred stock. Series C preferred dividends payable to Intrexon increased from 12% to 20% annually effective May 10, 2019.
- Shareholders approved increasing the 2012 Equity Incentive Plan authorization to 8.25 million shares.
Outlook, risks and contingencies
- Management expects current working capital to support operations, as presently structured, through Q4 2020, but states there is substantial doubt about the company’s ability to continue as a going concern beyond that point. Additional financing will be needed; availability and terms are uncertain.
- AG013 Phase 2 enrollment reached 126 of a planned 200 patients. The company expected to complete enrollment in Q4 2019 and release top-line results in early 2020. These are forward-looking expectations, not guarantees.
- The company expects R&D spending and operating losses to increase. It planned further lantibiotic development, with the timing of an OG716 IND dependent on completion of studies and available capital.
- Intrexon agreements provide for substantial contingent milestone payments, including $25 million for specified lantibiotic regulatory approval and $27.5 million for oral mucositis regulatory approval, as well as potential royalties and sublicense payments. No milestones had been achieved by June 30, 2019.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The filing reported no material pending legal proceedings.
Key facts for investors to verify
- Whether AG013 enrollment and early-2020 top-line timing were achieved, and what the results show.
- Cash burn, financing runway, and the terms and dilution effects of any subsequent fundraising or warrant exercises.
- Progress and funding needs for OG716 and other lantibiotic development, including any IND plans.
- Potential obligations to Intrexon, Series C preferred-stock terms, and the extent of possible dilution from outstanding warrants and convertible preferred shares.