Business context and reporting period
This is Tekmira Pharmaceuticals Corporation’s unaudited Form 10-Q for the quarter ended March 31, 2014, prepared under U.S. GAAP and reported in U.S. dollars. The filing describes a biopharmaceutical company developing RNA interference (RNAi) therapeutics and licensing its lipid nanoparticle (LNP) delivery technology. The request identifies Arbutus Biopharma, but the registrant named in this 2014 filing is Tekmira Pharmaceuticals Corporation.
Financial results and position
Amounts below are in U.S. dollars, thousands, except per-share data and percentages.
| Metric | Q1 2014 | Q1 2013 / comparator |
|---|---|---|
| Revenue | $4,430 | $2,132 |
| Operating expenses | $10,388 | $5,126 |
| Operating loss | $(5,958) | $(2,994) |
| Net loss | $(17,984) | $(2,546) |
| Basic and diluted loss per share | $(0.91) | $(0.18) |
| Operating cash flow | $9,155 provided | $2,840 used |
| Cash and cash equivalents | $134,357 at March 31 | $68,717 at December 31, 2013 |
| Total assets / liabilities | $138,522 / $33,039 | $71,716 / $12,522 at December 31, 2013 |
Revenue was 73% from the U.S. Department of Defense (DoD), with collaboration and contract revenue also including Monsanto and Bristol-Myers Squibb (BMS). The filing reports no conventional debt balance in the presented balance sheet; it discusses contingent promissory notes that are payable only if specified license payments are received. Operating and net margins were approximately negative 134% and negative 406%, respectively, reflecting the operating loss and a substantial noncash warrant revaluation loss.
Material changes versus the prior comparable period
- Revenue more than doubled, primarily due to higher DoD activity and new Monsanto revenue, plus Acuitas milestone and Marqibo royalty income.
- Operating expenses approximately doubled as research and development activity expanded, including work on TKM-HBV, TKM-ALDH2, TKM-Ebola and Monsanto-related research.
- Net loss widened substantially, mainly because the warrant liability’s fair value increased by $13,616, compared with a $308 decrease in Q1 2013. The filing attributes the remeasurement largely to the rise in the company’s share price; it is not an operating cash outflow.
- Cash increased following a public offering that generated $56,477 net proceeds, alongside $14.5 million received from Monsanto and proceeds from option and warrant exercises. The offering issued 2,125,000 shares at $28.50 per share.
- Operating cash flow turned positive, largely because of cash received from Monsanto and increased deferred revenue; it should not be read as evidence that the business had reached operating profitability.
Outlook, management commentary, risks and unusual items
- Management said cash resources were sufficient for at least the next 12 months, while noting that substantial additional funding would be needed to continue developing its pipeline. Financing availability and terms are not assured.
- Management expected TKM-HBV preclinical data and an IND filing in the second half of 2014, with Phase I data anticipated in 2015. It also planned a TKM-ALDH2 IND filing in the second half of 2014 and expected interim TKM-PLK1 data in the second half of 2014; these were forward-looking expectations, not reported outcomes.
- TKM-Ebola had entered a Phase I safety study and received FDA Fast Track designation. A DoD contract modification signed April 22, 2014, after quarter-end, raised stage-one targeted funding by $2.1 million to $43.8 million. Further funding and program advancement remain subject to contract terms and development outcomes.
- The Monsanto arrangement provides payments over an expected four-year option period and has a stated potential transaction value of up to $86.2 million contingent on successful milestones. Monsanto may terminate its option; the filing does not present the potential value as assured revenue.
- Tekmira was in arbitration with Alnylam over a disputed $5 million milestone related to ALN-VSP. No revenue for that milestone had been recorded.
- Revenue is dependent on collaborations, government contracts, milestones and royalties and is expected to fluctuate. Key risks include clinical and regulatory setbacks, manufacturing issues, partner decisions, intellectual-property disputes and the need for additional capital.
- The company’s functional currency was Canadian dollars, while its reporting currency was U.S. dollars from October 1, 2013. Currency translation adjustments affected comprehensive loss; warrant fair-value changes affected reported net loss and may continue to fluctuate.
Important facts for investors to verify
- Confirm the issuer identity: this filing is by Tekmira Pharmaceuticals Corporation, despite the request’s Arbutus Biopharma label.
- Review the cash runway assumption against expected research spending, collaboration receipts and the company’s stated need for future financing.
- Track DoD contract funding, TKM-Ebola clinical progress, and the April 2014 funding modification, which occurred after the reporting date.
- Assess whether Monsanto payments and contingent milestones are earned over time and whether Monsanto continues its option.
- Monitor the Alnylam arbitration and any accounting or cash consequences of its resolution.
- Separate recurring operating performance from noncash warrant remeasurement and assess potential dilution from outstanding warrants, options and share issuances.