Business context and reporting period
Trovagene, Inc. (the company named in the filing; the request metadata identifies Cardiff Oncology, Inc.) filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2017. Trovagene was a precision-medicine biotechnology company developing oncology therapeutics and circulating-tumor-DNA diagnostics. Its lead drug candidate, PCM-075, was licensed for development initially in acute myeloid leukemia (AML).
Financial performance and liquidity
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 |
|---|---|---|
| Revenue | $102,011 | $197,049 |
| Operating loss | $5.89 million | $16.01 million |
| Net loss attributable to common shareholders | $8.05 million | $18.06 million |
| Basic loss per share | $0.26 | $0.58 |
| Net cash used in operating activities | — | $13.36 million |
For the six months, revenue was primarily royalties ($110,636) and diagnostic services ($84,363); cost of revenue was $954,629, exceeding revenue by $757,580. At June 30, cash and cash equivalents were $7.78 million, working capital was $1.19 million, and total assets were $12.56 million. Short-term investments had been sold. Total liabilities were $9.05 million, including $1.64 million of equipment-line debt classified as current and in default. The separate $15.0 million term loan was repaid in June after lenders declared a default, using $16.67 million withdrawn from company bank accounts.
Changes versus prior comparable periods
First-half revenue declined 12% from $223,886 in 2016, mainly because of lower royalty receipts and reduced clinical research services, partly offset by higher diagnostic-service revenue. First-half net loss narrowed to $18.05 million from $20.46 million; operating expenses fell, particularly research and development and selling and marketing costs following restructuring. This improvement was partly offset by a $1.66 million loss on extinguishment of debt, higher interest expense, and a $2.1 million litigation-settlement accrual. Second-quarter net loss improved to $8.05 million from $10.20 million in 2016.
Outlook, risks, contingencies and unusual items
- Management said existing resources, including approximately $6.5 million of net proceeds from a July 2017 equity offering, were expected to fund planned operations only through the first quarter of 2018. The filing states that substantial doubt exists about the company’s ability to continue as a going concern and that additional capital is necessary.
- On July 19, 2017, the company completed an offering of 6,191,500 common shares and warrants for up to 4,643,626 shares; the combined offering generated approximately $6.5 million net. Dilution and future financing availability are material risks.
- The equipment lender declared default on June 20. The company was discussing a waiver; the lender could accelerate repayment or foreclose on equipment. The filing also says Trovagene disputed the separate term-loan lenders’ default claim, although that loan had been paid off.
- A settlement with former executives was reached July 28, with approximately $2.1 million net cost accrued at June 30; the company had not paid it as of July 31.
- First-half restructuring charges were approximately $1.7 million, including termination costs and an impairment charge; total restructuring charges were estimated at approximately $2.0 million. The company also expensed a $2.0 million PCM-075 license fee and committed a further $1.0 million for future services by June 30, 2019.
- The FDA approved the PCM-075 AML Phase 1b/2 trial IND on July 24, 2017. The filing describes development plans but provides no quantified revenue or earnings guidance.
- The company regained NASDAQ minimum-bid-price compliance in July 2017. Management reported effective disclosure controls as of June 30, 2017.
Most important facts for investors to verify
- Confirm issuer identity: the supplied filing is for Trovagene, Inc., not Cardiff Oncology, Inc.
- Assess cash runway and financing needs against the stated first-quarter 2018 funding horizon, including the status of any subsequent financing.
- Check the resolution and terms of the equipment-line default and any remaining lender claims or liens.
- Verify payment and final settlement terms for the former-executive litigation.
- Track PCM-075 trial execution, costs, and regulatory milestones, as well as diagnostic and royalty revenue trends.