Oragenics, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; quarterly figures below are unaudited. Filed March 29, 2019. Oragenics is a development-stage biotechnology company focused on AG013 for oral mucositis and OG716, an antibiotic candidate for C. difficile infections. It reported no product-candidate revenue in 2018 or 2017.
Financial results and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.97 million | $3.54 million |
| General and administrative expense | $4.02 million | $3.18 million |
| Total operating expenses | $9.99 million | $6.72 million |
| Net loss | $9.91 million | $6.73 million |
| Net loss applicable to common shareholders | $11.33 million | $6.73 million |
| Operating cash used | $9.08 million | $6.36 million |
| Cash and cash equivalents at year-end | $20.21 million | $6.17 million |
| Working capital | $20.77 million | $6.29 million |
- For Q4 2018, the filing reports operating expenses of $2.82 million, net loss of $2.76 million and basic and diluted loss per share of $0.09. Q4 revenue was $0.
- Common-shareholder loss includes a $1.41 million deemed dividend related to Series D preferred stock; it is not included in reported net loss.
- Year-end current liabilities were $1.17 million, including $124,213 in short-term notes payable. The filing reports no off-balance-sheet arrangements.
- Operating expenses rose 48.8% year over year, driven mainly by higher R&D costs under collaboration agreements and increased compensation-related and other G&A costs. Revenue remained zero; no revenue margin is applicable.
- Financing provided $23.25 million of cash in 2018, including $12.4 million net proceeds from the July offering and about $9.5 million from warrant exercises. The March 25, 2019 offering subsequently raised approximately $12.5 million gross; the company stated that, after the offering, it had approximately $29.8 million available.
Business developments, outlook and risks
- AG013: Phase 2 trial for oral mucositis was ongoing, with enrollment clearance in the United Kingdom, Belgium and Germany received in late 2018 and enrollment there beginning in early 2019. An interim safety review found similar adverse-event distributions between AG013 and placebo; the independent safety board recommended proceeding without study changes. This was a safety review, not a reported efficacy result. Management expected top-line Phase 2 results in early 2020, subject to enrollment milestones.
- OG716: Remained in nonclinical development for C. difficile. Management expected to pursue an IND in 2020, contingent on completing required studies and having sufficient funding. The company reported encouraging animal-model findings, which do not establish human safety or efficacy.
- Management anticipated that year-end cash plus the March 2019 offering proceeds would fund operations as then structured through Q4 2020. The company expects continued losses and negative operating cash flow and will need additional financing for longer-term development; financing may be unavailable or dilutive.
- The financial statements assume continued operations. The filing states that substantial doubt remains about the company’s ability to continue as a going concern beyond its expected funding period. The 2018 auditor gave an unqualified opinion on the financial statements; the filing notes a prior-year going-concern explanatory paragraph.
- Key risks include clinical-trial failure or delay, patient-enrollment and manufacturing challenges, dependence on Intrexon/ActoBio and other third parties, regulatory approval uncertainty, limited intellectual-property protection, and the need to raise capital. The Phase 2 site expansion may increase trial costs.
- Intrexon-related agreements include significant contingent approval milestone payments: $27.5 million for oral mucositis and $25 million for the lantibiotic program, plus additional indication/product milestones. None had been achieved at year-end. Series C preferred stock carries a 12% annual payment-in-kind dividend, scheduled to increase to 20% after May 10, 2019, and ranks senior in liquidation.
- Equity financing materially increased potential dilution. Common shares outstanding were 29.43 million at December 31, 2018 and 46.11 million at March 25, 2019; the March offering also included warrants. The company completed a 1-for-10 reverse split effective January 19, 2018.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Actual cash, burn rate and financing runway after the March 2019 offering, including whether trial spending or enrollment delays change the Q4 2020 runway estimate.
- AG013 Phase 2 enrollment progress, protocol endpoints and timing and results of the planned top-line readout; distinguish safety findings from efficacy evidence.
- OG716 nonclinical-study completion, manufacturing readiness and whether funding supports the anticipated IND filing.
- Potential dilution and capital structure, including outstanding warrants, preferred-stock rights and the Series C dividend escalation.
- Terms, timing and potential funding impact of collaboration milestone obligations, and the status of the company’s going-concern assessment.