Oric Pharmaceuticals, Inc. — Q2 2020 Form 10-Q Summary
Business context and reporting period
ORIC is a clinical-stage biopharmaceutical company developing therapies intended to overcome cancer treatment resistance. The filing covers the quarter and six months ended June 30, 2020, with financial statements presented under U.S. GAAP and unaudited. The company had no approved products and had generated no revenue.
- Lead program: ORIC-101, a glucocorticoid receptor antagonist in two Phase 1b combination trials.
- Other programs: ORIC-533, a CD73 inhibitor in preclinical development, and ORIC-944, a PRC2 inhibitor licensed after quarter-end.
- Common shares outstanding: 29,956,050 as of July 31, 2020.
- The company remained an emerging growth company and elected extended accounting-standard transition periods.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $7.7 million | $15.0 million |
| General and administrative expense | $3.4 million | $5.3 million |
| Total operating expenses | $11.1 million | $20.3 million |
| Net loss | $11.0 million | $19.9 million |
| Net loss per share | $0.51 | $1.68 |
| Net cash used in operating activities | Not provided for the quarter | $17.9 million |
- Cash and cash equivalents were $196.6 million at June 30, 2020, compared with $89.2 million at December 31, 2019.
- Total assets were $201.5 million; total liabilities were $6.3 million. The filing does not disclose material interest-bearing debt.
- Accumulated deficit was $112.6 million.
- Operating cash burn increased from $11.0 million in the first six months of 2019 to $17.9 million in the comparable 2020 period.
- Gross margin and operating margin are not meaningful because the company had no revenue.
- Net cash provided by financing activities was $125.4 million, primarily from the IPO. Net cash increased $107.5 million during the first six months.
Material changes versus the prior comparable period
- Second-quarter research and development expense increased $2.7 million, or approximately 53%, driven by ORIC-101 clinical development, ORIC-533 preclinical work, and higher personnel costs.
- Six-month research and development expense increased $4.7 million, or approximately 46%.
- Second-quarter general and administrative expense increased $2.1 million, or approximately 159%, primarily due to public-company costs, professional services, additional personnel, and stock-based compensation.
- Six-month general and administrative expense increased $2.9 million, or approximately 117%.
- Second-quarter net loss increased $5.1 million from the prior-year period; the six-month net loss increased $7.9 million.
- Other income declined to $0.1 million for the quarter and $0.4 million for the six months, principally because of lower interest rates.
- On April 28, 2020, ORIC completed its IPO of 8.625 million shares at $16.00 per share, generating $138.0 million of gross proceeds and approximately $125.2 million of net proceeds.
- All outstanding convertible preferred stock converted into 19.3 million common shares in connection with the IPO.
Guidance, outlook, commentary, risks and unusual items
- Management expected cash and cash equivalents to fund the current operating plan into the fourth quarter of 2022, although actual cash usage may differ materially.
- Management expected significant operating losses and increasing research and development expenses for the foreseeable future and stated that meaningful revenue was not expected unless a product is approved and commercialized.
- ORIC expected interim data from its two ORIC-101 Phase 1b trials in the first and second halves of 2021, respectively, subject to trial execution and COVID-19-related delays.
- Management expected to file an IND for ORIC-533 in the first half of 2021. The filing also described a planned second-half 2021 IND for ORIC-944, which was licensed after the reporting date.
- COVID-19 caused work-from-home arrangements, reduced laboratory efficiency, suspended or delayed enrollment at certain clinical sites, supply-chain delays, and delays in collecting and analyzing clinical data. Further disruption could delay development and regulatory timelines.
- In one ORIC-101 combination trial, two patients experienced dose-limiting toxicities; one patient experienced Grade 3 fatigue and discontinued treatment, while another experienced Grade 4 neutropenia and thrombocytopenia and Grade 5 hepatic failure amid rapid disease progression. The protocol was amended and a lower revised dose level was evaluated.
- On August 3, 2020, after the reporting period, ORIC entered into a worldwide exclusive license agreement with Mirati for a PRC2 program, including ORIC-944. Consideration consisted of 588,235 ORIC shares issued at an attributed price of $34.00 per share; no milestones or royalties were payable under the disclosed terms.
- The company relied on third parties for clinical trials and manufacturing, including a single-source manufacturer for ORIC-101, and had no long-term supply agreement disclosed for that product.
- Two officers received SEC subpoenas in their personal capacities concerning an investigation unrelated to ORIC. The filing states that no conclusion had been reached and that the potential impact could not be predicted.
- No material litigation was pending according to management, and disclosure controls and procedures were considered effective at June 30, 2020.
Most important facts for investors to verify
- Cash runway assumptions, quarterly cash burn, and the timing and size of any future financing needs.
- Enrollment, safety, dose selection, and efficacy data from both ORIC-101 Phase 1b trials, including the implications of the reported serious adverse events.
- Whether COVID-19 disruptions affected clinical enrollment, data collection, manufacturing, or the projected 2021 IND timelines.
- Development progress, ownership and obligations under the Mirati license for ORIC-944, including the impact of the 588,235-share issuance on dilution.
- Reliance on single-source manufacturers, CROs, clinical sites, and other third parties.
- Potential dilution from outstanding options, future equity financings, and shares subject to lock-up expiration or registration rights.
- Status and potential implications of the SEC inquiries involving two officers, despite management’s statement that the matter was unrelated to ORIC.
- Patent and freedom-to-operate risks, including potential claims relating to ORIC-101 and any future licensed programs.