Oric Pharmaceuticals, Inc. — Q1 2021 Form 10-Q Summary
Business context and reporting period
ORIC Pharmaceuticals is a clinical-stage biopharmaceutical company developing oncology therapies intended to overcome cancer treatment resistance. The filing covers the three months ended March 31, 2021 and was filed May 6, 2021. The company had 36.7 million common shares outstanding as of April 30, 2021 and operated as an emerging growth company.
The pipeline included ORIC-101 in Phase 1b combination trials, ORIC-533 in preclinical development, and licensed programs ORIC-944 and ORIC-114. The company had no approved products and had not generated revenue.
Financial results and key metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $11.7 million | $7.3 million | +$4.4 million |
| General and administrative expense | $4.9 million | $1.9 million | +$2.9 million |
| Total operating expenses | $16.6 million | $9.2 million | +$7.4 million |
| Net loss | $16.5 million | $8.9 million | Loss increased by $7.6 million |
| Net loss per share | $0.45 | $4.46 | Improved due primarily to higher share count |
| Net cash used in operating activities | $14.9 million | $8.3 million | Use increased by $6.6 million |
Operating and net margins are not meaningful because the company generated no revenue. Research and development expense increased primarily from greater external spending on ORIC-101 and other programs, as well as higher personnel and stock-based compensation costs. General and administrative expense increased due to higher personnel costs, including stock-based compensation, and greater professional costs associated with operating as a public company.
Stock-based compensation was $2.7 million in Q1 2021, compared with $0.5 million in Q1 2020. Unrecognized stock-based compensation was $41.8 million at March 31, 2021, expected to be recognized over a weighted-average period of 2.93 years.
Liquidity, cash flow, debt and balance sheet
- Cash and cash equivalents were $104.2 million at March 31, 2021, compared with $78.4 million at December 31, 2020.
- Short-term investments were $173.9 million, consisting of U.S. Treasury securities. Total cash, cash equivalents and short-term investments were $278.1 million.
- Total assets were $284.0 million and total stockholders’ equity was $276.1 million at March 31, 2021.
- Total liabilities were $7.9 million. The filing does not report conventional funded debt.
- Operating lease liabilities totaled approximately $2.1 million, including $1.9 million classified as current and $0.6 million as long term on the balance sheet; amounts differ from the total present value presentation due to accrued liability classification.
- Operating cash use was $14.9 million. Investing cash flow was positive $40.6 million, primarily reflecting $66.0 million of investment maturities and $25.2 million of investment purchases. Financing cash flow was positive $0.02 million, primarily from stock option exercises.
- Management expected existing cash, cash equivalents and short-term investments to fund the current operating plan into the second half of 2023, while noting that this estimate is subject to substantial uncertainty.
Material changes versus the prior comparable period
- Net loss increased 86% to $16.5 million from $8.9 million, driven by higher research and development and general and administrative spending.
- Research and development expense increased 61% to $11.7 million. External costs increased by $3.6 million, including higher ORIC-101 spending of $1.8 million.
- General and administrative expense increased 152% to $4.9 million, reflecting increased public-company infrastructure and personnel costs.
- Operating cash burn increased to $14.9 million from $8.3 million.
- Cash and investments declined modestly from $293.6 million at December 31, 2020 to $278.1 million at March 31, 2021, despite a $25.8 million increase in cash and cash equivalents, because the company redeployed investments and funded operations.
- The company adopted ASC 842 on January 1, 2021 and recognized operating lease right-of-use assets of approximately $1.7 million and lease liabilities of approximately $2.5 million.
Guidance, outlook, commentary and risks
- ORIC expected to report interim safety, efficacy and translational data from the ORIC-101 plus nab-paclitaxel trial in the second quarter of 2021 and from the ORIC-101 plus enzalutamide trial in the second half of 2021.
- Management expected to submit an IND for ORIC-533 in Q2 2021, an IND for ORIC-944 in the second half of 2021, and a CTA for ORIC-114 in the second half of 2021.
- The company expected research and development expenses and operating losses to increase substantially as its programs advance and additional personnel and infrastructure are added.
- ORIC-101 combination development includes material safety risk. The filing describes Grade 3 fatigue, Grade 4 neutropenia and thrombocytopenia, and a Grade 5 hepatic failure event in a nab-paclitaxel trial participant; the company stated that the toxicities were well-described for nab-paclitaxel and amended the protocol after determining the initial dose exceeded the maximum tolerated combination dose.
- COVID-19 caused or could cause clinical enrollment delays, supply-chain interruptions, reduced site productivity, delayed data collection and regulatory or development timeline changes.
- The company will require substantial additional capital and had no committed external source of funding. Additional equity or debt financing could dilute stockholders or impose restrictive covenants; collaboration financing could require relinquishing rights to product candidates.
- Material risks include clinical and regulatory failure, dependence on ORIC-101, reliance on third-party manufacturers and clinical research organizations, single-source supply for ORIC-101, competition, intellectual-property challenges, license-compliance obligations, and the ability to retain key personnel.
- The CFO and Chief Business Officer had received SEC subpoenas in their personal capacities relating to an investigation into trading of securities of other companies. The filing states that the inquiry was unrelated to ORIC and that no conclusion had been reached regarding their conduct.
- The company reported no material pending litigation and concluded that disclosure controls and procedures were effective as of March 31, 2021.
Most important facts for investors to verify
- Whether ORIC-101 interim data support safety, efficacy and continued development in the two Phase 1b combination trials.
- Whether the planned ORIC-533, ORIC-944 and ORIC-114 regulatory submissions occurred on the stated timelines.
- Actual quarterly cash burn and whether the projected runway into the second half of 2023 remains credible as development spending increases.
- Future financing requirements, potential equity dilution and the terms of any collaboration, debt or licensing transactions.
- Clinical supply continuity, particularly the company’s reliance on a single third-party manufacturer for ORIC-101.
- Impact of COVID-19 or other operational disruptions on patient enrollment, trial execution, manufacturing and regulatory timelines.
- Progress and outcome of the SEC inquiry involving the CFO and Chief Business Officer.
- Milestone, royalty and termination obligations under the Voronoi license, including up to $111.0 million of development and regulatory milestones, up to $225.0 million of commercial milestones for the first licensed product, and up to $272.0 million of additional milestones for a second product.