Filing summary
Entity and period: The supplied filing is MEI Pharma, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2018—not a Lite Strategy, Inc. filing for 2016 Q3. Financial amounts below are in millions of dollars unless stated otherwise. The nine-month period is the nine months ended March 31, 2018, compared with the same period in 2017.
Business context
MEI Pharma is a clinical-stage oncology company. Its four clinical-stage candidates were pracinostat, ME-401, voruciclib and ME-344. Helsinn licenses pracinostat and primarily funds its development and commercialization; MEI is responsible for the development costs of its other candidates.
Financial results and liquidity
| Metric | Quarter ended March 31, 2018 | Quarter ended March 31, 2017 | Nine months ended March 31, 2018 | Nine months ended March 31, 2017 |
|---|---|---|---|---|
| Total revenue | $0.433 | $4.505 | $1.074 | $22.800 |
| Operating expenses | $6.487 | $5.175 | $22.187 | $15.978 |
| Operating income (loss) | $(6.054) | $(0.670) | $(21.113) | $6.822 |
| Net income (loss) | $(5.948) | $(0.602) | $(20.815) | $7.013 |
| Net income (loss) per diluted share | $(0.16) | $(0.02) | $(0.56) | $0.19 |
- Revenue and earnings: No license revenue was recognized in the 2018 periods. Revenue consisted of R&D revenue under the Helsinn agreement. The sharp year-over-year revenue decline reflects 2017 recognition of Helsinn upfront license fees, including $20.9 million in the nine-month period. Revenue is not product-sale revenue.
- Expenses: Nine-month R&D expense increased to $12.6 million from $5.2 million, driven mainly by ME-401 manufacturing and development, $2.9 million of Presage license payments, and voruciclib development. Nine-month G&A expense was $7.3 million versus $6.8 million. The filing does not provide a conventional product gross margin.
- Cash flow: Operating activities used $17.6 million in the first nine months of 2018, versus $6.6 million provided in 2017, which included Helsinn upfront payments. Investing activities provided $15.1 million, primarily from maturities of short-term investments; financing activities provided $0.2 million. Cash and cash equivalents decreased by $2.3 million to $6.2 million.
- Liquidity and debt: Cash, cash equivalents and short-term investments totaled $36.2 million at March 31, 2018, down from $53.6 million at June 30, 2017. Current assets were $37.1 million and current liabilities $4.5 million. The balance sheet reports no debt. Management expected available funds to support operations through at least the second calendar quarter of 2019, while anticipating a future need for financing, licensing or strategic partnerships.
- Equity: Stockholders’ equity was $32.9 million, compared with $50.8 million at June 30, 2017; accumulated deficit was $195.1 million. Common shares outstanding were 37,323,441 as of May 8, 2018.
Material changes, outlook and risks
- Pracinostat was in a global Phase III registration study for newly diagnosed AML, with approximately 500 patients planned. MEI expected first-stage Phase II MDS data in the second calendar quarter of 2018. Helsinn was eligible for up to $444 million in milestones plus royalties.
- ME-401 was expected to advance into a single-agent registration study in calendar 2018. Management reported response rates above 50% in the ongoing Phase Ib study, based on a limited number of evaluable patients; data presentations and an FDA meeting were expected in 2018.
- Voruciclib’s IND was cleared in January 2018; MEI planned to initiate a Phase I study in the second calendar quarter of 2018 and evaluate combination use with venetoclax. Its Presage license carries up to $179 million of potential milestones, plus tiered royalties; the filing identifies these obligations and development costs as risks.
- ME-344’s investigator-initiated breast cancer study continued after an interim review of 20 patients; further interim data were expected in June 2018. These program statements are forward-looking and do not establish clinical success or approval.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, dependence on collaborators and third parties, need for additional financing, and substantial contingent milestone and royalty obligations. MEI reported no legal proceedings. Its office lease had $1.2 million of remaining contractual obligations; further contingent payments under the Presage, S*Bio and CyDex arrangements were not accrued.
- A provisional $13.6 million tax-related deferred-tax remeasurement was recorded with a corresponding valuation allowance; the company said its analysis of the tax legislation was ongoing. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer and period: the source is MEI Pharma’s March 31, 2018 Form 10-Q, despite the request metadata naming Lite Strategy and 2016 Q3.
- Review cash runway assumptions and the timing, amount and terms of any future financing; management’s stated runway was through at least Q2 2019.
- Track clinical-trial enrollment, efficacy, safety and regulatory milestones for pracinostat, ME-401, voruciclib and ME-344; reported early-stage results are not proof of later success.
- Assess the potential cash and economic impact of Presage, S*Bio and Helsinn milestones, royalties and collaboration obligations.
- Check subsequent filings for final tax accounting and any changes to the provisional tax remeasurement or deferred-tax valuation allowance.