Oragenics, Inc. — Q1 2017 Form 10-Q
Business context and period. This unaudited filing covers the three months ended March 31, 2017. Oragenics is a development-stage biotechnology company focused on novel antibiotics and treatments for oral mucositis. After selling its consumer probiotics business in June 2016, it reported no revenue for the quarter.
Financial performance and liquidity
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | $0 | No continuing-operation revenue; the filing does not provide a comparable continuing-operation revenue figure |
| Research and development expense | $1.122 million | $1.225 million |
| General and administrative expense | $865,195 | $849,840 |
| Total operating expenses / operating loss | $1.988 million | $2.075 million |
| Net loss | $1.983 million | $2.063 million |
| Net loss per share | $0.04 | $0.05 |
| Cash used in operating activities | $1.900 million | $1.620 million |
- Operating expenses declined about 4%; net loss narrowed about 4%. R&D expense fell roughly $102,000, while G&A rose about $15,000.
- Operating cash use increased about 17% year over year. Cash and cash equivalents were $2.175 million at March 31, down from $4.081 million at December 31, 2016.
- Working capital was $1.116 million, versus $2.878 million at year-end 2016. Total assets were $2.351 million and shareholders’ equity was $1.186 million.
- Quarter-end short-term notes payable were $62,848; the filing reports no other debt outstanding at March 31. Gross margin is not meaningful because the company reported no revenue.
Developments, outlook, and risks
- Pipeline: AG013, an oral rinse candidate for oral mucositis, had prior Phase 1b and pharmacokinetic study results described by management. The company said it had filed an IND update in March 2017 and planned to initiate a Phase 2 study in 2017, subject to adequate financing. OG716, a preclinical antibiotic candidate for C. difficile, was targeted for an IND filing by year-end 2017, also subject to capital availability.
- Funding and going concern: Management said March-quarter resources, together with financing arrangements completed after quarter-end, were expected to fund the business as presently structured through December 2017. The filing states there is substantial doubt about the company’s ability to continue as a going concern beyond that date; further financing is needed and is not assured.
- Subsequent financing: On May 10, 2017, the company received approximately $1.302 million at the first closing of a preferred-stock financing of up to $3 million. A second closing for approximately $1.698 million was contingent on shareholder approval. The preferred stock is convertible into common shares; warrants were also issued and additional warrants would be issued at the second closing. Separately, Oragenics issued Intrexon a $2.4 million unsecured note, due in two years at 12% simple annual interest, to fund AG013 research and clinical trials. The first oral-mucositis milestone payment to Intrexon was amended from $2 million upon first patient dosing to $3 million upon the earlier of last-patient dosing in Phase 2 or 24 months after first-patient dosing.
- Operational changes: The company reported eliminating eight laboratory positions supporting lantibiotic research and planned to use external vendors for clinical development, with three senior scientists remaining.
- Principal risks and commitments: Continued losses and cash burn, dependence on additional financing, potential shareholder dilution and senior claims from debt and preferred stock, clinical and regulatory uncertainty, and possible curtailment of development if funding is unavailable. Intrexon collaboration terms include revenue/profit sharing and milestone obligations; none of the disclosed Intrexon or Texas A&M development milestones had been achieved by March 31, 2017.
- Other disclosures: Management concluded disclosure controls were effective at March 31, 2017 and reported no significant quarterly change in internal control over financial reporting. The company reported no material pending legal proceedings.
Key facts for investors to verify
- Whether the second preferred-stock closing received shareholder approval and how much financing was ultimately raised.
- Current cash runway, burn rate, and financing needs beyond the stated December 2017 horizon.
- Terms and repayment capacity for the $2.4 million Intrexon note, including its impact on liquidity and senior claims.
- Progress, timing, funding, and regulatory status of the AG013 Phase 2 study and OG716 IND plan.
- Potential dilution from preferred-stock conversion, warrants, and future fundraising, as well as NYSE MKT listing compliance.