Oragenics, Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Oragenics is a development-stage biotechnology company focused on AG013 for oral mucositis and lantibiotic antibiotic candidates. It sold its consumer probiotics business in 2016 and reported no revenue in the periods presented.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $996,477 | $924,800 | $2,724,349 | $2,978,775 |
| General and administrative expense | $925,043 | $1,101,870 | $2,581,586 | $2,855,822 |
| Net loss | $2,067,230 | $1,963,007 | $5,270,792 | $4,338,507 |
| Basic and diluted loss per share | $0.04 | $0.04 | $0.11 | $0.10 |
| Cash used in operating activities | — | — | $5,005,050 | $5,111,024 |
At September 30, 2017, cash and cash equivalents were $2.923 million, with an additional $1.408 million of restricted cash designated for AG013 research and trials. Current assets were $5.101 million, current liabilities $1.722 million, and reported working capital $3.379 million. Total assets were $5.135 million; shareholders’ equity was $1.013 million, and accumulated deficit was $99.940 million.
Debt included a $2.4 million unsecured note payable to Intrexon, due in two years and bearing 12% annual simple interest, plus $128,070 of short-term notes. The company raised $3.0 million gross through Series A preferred stock in two 2017 closings and received $2.4 million from the Intrexon note. Financing activities provided $3.848 million in the first nine months. The preferred stock is convertible into 12 million common shares at $0.25 per share; associated warrants cover 10.645 million shares at $0.31, with a further 483,870-share warrant issued for advisory services.
Changes versus prior comparable periods
- Q3 net loss increased by $104,223 year over year, despite lower general and administrative expense, as other expense shifted to $145,710 from $21,097 of other income. The filing attributes the change principally to higher interest expense and a derivative-liability fair-value charge.
- Nine-month net loss increased by $932,285. Operating expenses declined by $528,662, but 2016 included $1.475 million of profit from discontinued operations, including a $1.454 million gain on sale; there was no comparable 2017 contribution.
- Nine-month R&D expense declined by $254,426 overall, reflecting lower lantibiotic collaboration costs partly offset by $749,885 of higher Oral Mucositis ECC costs. Operating cash use was broadly similar to 2016.
- Cash and cash equivalents fell by $1.157 million from year-end 2016, while restricted cash increased to $1.408 million. The company also added the $2.4 million Intrexon debt and completed the preferred-stock financing.
Outlook, risks and notable items
- Funding and going concern: Management said available resources were expected to fund the business as structured through December 2017 and disclosed substantial doubt about the company’s ability to continue as a going concern beyond then. Additional financing is uncommitted and may not be available on acceptable terms; without it, programs could be curtailed. Management expects significant losses and negative operating cash flow to continue.
- Development programs: AG013’s Phase 2 study was enrolling patients in the United States; the filing describes a double-blind, placebo-controlled trial at approximately 30 sites, with enrollment described as up to 200 patients. The filing also refers to an expected range of 160–180 patients in its protocol discussion. OG716 was the selected lantibiotic lead for C. difficile; an IND was expected by year-end 2018, subject to available capital.
- Collaboration commitments: Under the amended Oral Mucositis ECC, the first Phase 2 milestone is a $3 million payment tied to the earlier of last-patient dosing or the 24-month anniversary of first-patient dosing. Further product milestones and sales-related payments to Intrexon may be substantial; none of the listed ECC milestones had been achieved by September 30, 2017.
- Listing risk: The company disclosed that it had not met NYSE MKT continued-listing equity standards and faced a November 10, 2017 deadline to regain compliance under its plan, with potential delisting if it failed.
- Dilution and priority: Conversion of preferred stock and exercise of warrants could materially dilute common shareholders. Debt and preferred stock rank ahead of common stock in liquidation; preferred holders also have specified protective rights.
- Other: Management reported disclosure controls were effective and no significant quarterly changes in internal control over financial reporting. The filing reports no material pending legal proceedings.
Investor verification priorities
- Confirm subsequent financing, cash runway, and whether the stated December 2017 funding horizon was extended.
- Verify AG013 trial enrollment, patient-count target, timing, and any clinical updates; clarify the filing’s differing enrollment descriptions.
- Check OG716 development timing and whether an IND was filed, given the stated dependence on capital.
- Review NYSE MKT compliance outcome and any resulting listing action.
- Assess the full dilution and potential cash obligations from preferred conversion, warrants, the Intrexon note, and collaboration milestones.
- Reconcile the filing’s inconsistent nine-month net-loss figure: the financial statements report $5,270,792, while one note states $5,270,292.