Oric Pharmaceuticals, Inc. — Q1 2022 Form 10-Q Summary
Business context and reporting period
ORIC Pharmaceuticals is a clinical-stage biopharmaceutical company focused on therapies intended to overcome cancer treatment resistance. The company has no approved products and has not generated revenue. The report covers the three months ended March 31, 2022, and was filed May 9, 2022.
- ORIC-533: Phase 1b single-agent trial in multiple myeloma; initial data expected in the first half of 2023.
- ORIC-114: Phase 1b trial in advanced solid tumors with EGFR or HER2 exon 20 alterations or HER2 amplifications; South Korean CTA cleared in Q1 2022; initial data expected in the first half of 2023.
- ORIC-944: Phase 1b single-agent trial in prostate cancer; initial data expected in the first half of 2023.
- As of March 31, 2022, the company had 79 full-time employees, including 57 in research and development.
Financial condition and key metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $16.8 million | $11.7 million | +$5.1 million |
| General and administrative expense | $6.4 million | $4.9 million | +$1.6 million |
| Total operating expenses | $23.3 million | $16.6 million | +$6.7 million |
| Net loss | $23.2 million | $16.5 million | Loss increased $6.7 million |
| Net loss per share | $0.59 | $0.45 | Loss per share increased |
| Operating cash used | $22.7 million | $14.9 million | Use increased $7.8 million |
- R&D represented approximately 72% of total operating expenses; G&A represented approximately 28%. Because the company has no revenue, gross and operating margins are not meaningful.
- Cash, cash equivalents and restricted cash were $113.1 million at March 31, 2022, compared with $226.5 million at December 31, 2021.
- Cash, cash equivalents and investments totaled $256.2 million at March 31, 2022, including $122.0 million of short-term investments and $21.6 million of long-term investments.
- Total assets were $275.1 million and total liabilities were $22.0 million. The filing does not report funded debt; liabilities primarily consisted of accounts payable, accrued liabilities and other long-term liabilities.
- Stockholders’ equity was $253.1 million, compared with $273.0 million at December 31, 2021. Accumulated deficit was $268.3 million.
- Net cash used in investing activities was $90.7 million, primarily due to purchases of investments. Financing cash flow was negligible at $16,000 from stock option exercises.
- Stock-based compensation expense was $3.9 million, compared with $2.7 million in Q1 2021.
Material changes versus the prior comparable period
- R&D expense increased 44%, primarily from higher external costs for ORIC-533, ORIC-114, ORIC-944 and other programs, as well as higher personnel and stock-based compensation costs.
- ORIC-101 costs declined by $0.7 million following discontinuation of the program in Q1 2022.
- G&A expense increased 32%, primarily because of higher personnel costs and stock-based compensation.
- Net loss increased 40% year over year, while basic and diluted loss per share increased from $0.45 to $0.59.
- Operating cash burn increased 52% year over year. The overall cash decline also reflected a shift of funds into investments, including approximately $99.9 million of investment purchases, partly offset by $10.0 million of sales and maturities.
- Shares outstanding increased modestly to 39.4 million at March 31, 2022, from 39.4 million at December 31, 2021; weighted-average shares increased to 39.4 million from 36.7 million.
Guidance, outlook, risks and unusual items
- Management expects current cash, cash equivalents and investments to fund the current operating plan into the second half of 2024. This is a forward-looking estimate and may change materially.
- The company expects significant losses and increasing R&D and G&A expenses for the foreseeable future and does not expect meaningful revenue unless a product candidate receives regulatory approval and is commercialized.
- Additional capital will likely be required. Potential sources include equity or debt financings, collaborations, strategic partnerships, licensing arrangements and grants. No committed external funding source is identified.
- The company may sell up to $150 million of common stock under its ATM agreement; it raised $50.0 million of gross proceeds under that agreement in July 2021, with net proceeds of $48.1 million.
- COVID-19 has caused temporary clinical-trial suspensions, delayed enrollment, shipping difficulties, higher costs and potential disruptions involving clinical sites, CROs and manufacturers.
- The company relies on third parties for clinical trials and manufacturing, generally using single-source manufacturers without long-term supply agreements, creating supply, quality, timing and cost risks.
- The Voronoi license includes potential development and regulatory milestone payments of up to $111.0 million for the first licensed product, commercial milestones of up to $225.0 million, up to $272.0 million for a second product, and royalties on net sales.
- There are no material legal proceedings currently expected by management to have a material adverse effect. However, a third party has inquired about a potential breach of a confidentiality agreement related to the CD73 inhibitor program; the filing states this could progress to a claim.
- The company disclosed an SEC civil enforcement action against its Chief Business Officer arising from an investigation unrelated to ORIC. Its Chief Financial Officer received notice that the SEC investigation as to him concluded without a recommendation for further action.
- Disclosure controls were assessed as effective as of March 31, 2022. The company implemented a new ERP system during Q1 2022 and modified related internal controls.
Most important facts for investors to verify
- Progress, enrollment and safety and efficacy data for the ORIC-533, ORIC-114 and ORIC-944 Phase 1b trials, including the expected 2023 data readouts.
- Actual quarterly cash burn and whether the projected funding runway into the second half of 2024 remains valid as trial activities expand.
- Availability and terms of future financing, including potential dilution under the ATM facility or other equity offerings.
- Clinical-trial enrollment, manufacturing supply, shipping and cost effects associated with COVID-19, inflation and geopolitical disruptions.
- Potential exposure under the Voronoi license for milestones and royalties, and continued compliance with the development obligations under both the Voronoi and Mirati licenses.
- Status and potential consequences of the disclosed confidentiality inquiry and the SEC enforcement action involving the Chief Business Officer.
- Patent ownership, scope and enforceability for the company’s three principal product candidates, including the three owned and three licensed U.S. issued patents disclosed in the filing.