Filing summary
Issuer discrepancy: The supplied filing is OncoGenex Pharmaceuticals, Inc.’s Form 10-Q for the quarter ended September 30, 2012—not a filing by Achieve Life Sciences, Inc. Confirm the intended company and filing before relying on this summary.
Business context and reporting period
OncoGenex is a clinical-stage biopharmaceutical company developing cancer therapies. Its candidates include custirsen, partnered with Teva, and OGX-427; OGX-225 was in preclinical development. The unaudited filing covers the three and nine months ended September 30, 2012, with comparisons to 2011. Financial amounts below are U.S. dollars.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Collaboration revenue | $6.6 million | $1.2 million | $10.3 million | $4.3 million |
| Research and development expense | $12.9 million | $3.8 million | $24.3 million | $14.1 million |
| General and administrative expense | $2.0 million | $1.5 million | $5.7 million | $4.5 million |
| Operating loss | $8.3 million | $4.1 million | $19.7 million | $14.3 million |
| Net loss (income) | $5.9 million loss | $4.5 million income | $17.0 million loss | $5.1 million loss |
| Basic loss (income) per share | $0.40 loss | $0.46 income | $1.29 loss | $0.52 loss |
At September 30, 2012, cash and cash equivalents were $11.4 million and short-term investments were $73.7 million, totaling $85.1 million; receivables were $1.1 million. Total current assets were $95.8 million and current liabilities $21.7 million. Total assets were $97.2 million, total liabilities $27.4 million, and shareholders’ equity $69.8 million. The balance sheet reports $7.2 million of long-term obligations, including current obligations; the filing’s notes identify a $6.4 million excess-facility lease liability. No conventional borrowing balance is separately identified.
For the first nine months, operating cash outflow was $34.0 million, financing cash inflow $54.2 million, and investing cash outflow $37.4 million, largely reflecting investment purchases and maturities. Cash and cash equivalents declined by $17.2 million to $11.4 million; the broader cash-and-investment position increased from $64.9 million at year-end 2011 to $85.1 million. The March 2012 stock offering generated approximately $53.8 million net proceeds.
Material changes versus prior period
- Nine-month collaboration revenue rose to $10.3 million from $4.3 million, reflecting Teva-related clinical development activity. Management expected the remaining $9.1 million of current deferred collaboration revenue to be recognized by the end of Q4 2012.
- Nine-month R&D expense increased to $24.3 million from $14.1 million, principally due to custirsen Phase 3 activity, OGX-427 studies and manufacturing, and personnel costs. G&A expense also increased.
- Despite higher collaboration revenue, the nine-month net loss widened to $17.0 million from $5.1 million. Operating loss increased as expenses grew faster than revenue.
- Noncash warrant revaluation gains were $2.5 million for the first nine months of 2012, versus $9.0 million in 2011. The smaller gain contributed to the weaker reported net result; Q3 2011 had reported net income, while Q3 2012 reported a loss.
- Assets and equity rose and liabilities fell versus December 31, 2011, mainly following the equity offering, recognition of deferred collaboration revenue, and lease-liability amortization. Shares outstanding increased to 14.7 million at September 30, 2012 from 9.7 million at year-end 2011.
Outlook, commentary, and risks
- Management believed resources available at September 30, 2012 would fund currently planned operations into 2015. This outlook covered specified clinical development activities, not necessarily all future trial results or expanded programs.
- OncoGenex had a remaining $9.1 million obligation toward the custirsen clinical development plan; Teva was responsible for other plan expenses. Teva could owe up to $370 million in development and commercial milestones and tiered royalties, but timing and likelihood were uncertain; management did not expect a milestone payment in 2012.
- Custirsen Phase 3 trials included SYNERGY (enrollment completed in Q4 2012; primary survival results then projected for Q4 2013), AFFINITY (initiated August 2012), and ENSPIRIT (initiated September 2012). Trial outcomes, enrollment, safety, regulatory approval, and Teva’s continued participation are significant uncertainties.
- The company had no product-sale revenue and expected continued losses and rising R&D spending. It warned that later AFFINITY and ENSPIRIT results could fall beyond its projected cash runway, and additional or expanded development could require new funding.
- Isis may be entitled to 30% of certain non-royalty collaboration receipts; OncoGenex disputed the interpretation and said a lesser obligation might apply. Potential milestone-sharing obligations and license payments should be assessed against any future receipts.
- The Bothell office lease runs through 2017. The company was evaluating sublease or exit options and had recorded a $6.4 million excess-facility liability; inability to sublet could leave substantial lease payments. The filing also describes third-party manufacturing, clinical, regulatory, intellectual-property, competition, and financing risks.
- The company reported effective disclosure controls as of quarter-end and no material subsequent event requiring disclosure. It estimated a hypothetical 1% interest-rate increase would reduce investment fair value by $230,000 and a 10% Canadian-dollar strengthening would affect nine-month results by $63,000.
Important facts for investors to verify
- Whether this OncoGenex filing is actually the filing intended by the request for Achieve Life Sciences.
- Current cash runway assumptions and whether planned spending, trial timing, and Teva reimbursements remain consistent with the stated projection into 2015.
- Enrollment, data-event timing, results, and safety developments for SYNERGY, AFFINITY, ENSPIRIT, and OGX-427 studies.
- Teva’s continuing obligations and the status of the $9.1 million remaining company funding commitment, deferred revenue recognition, and any milestone prospects.
- The resolution and potential financial impact of the Isis revenue-sharing interpretation, as well as lease-subletting prospects and the recorded facility liability.
- Potential dilution and the noncash warrant valuation effects when assessing reported per-share results and future financing needs.