ORIC Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2020. The filing was signed May 20, 2020. ORIC is a clinical-stage biopharmaceutical company developing therapies intended to overcome cancer treatment resistance, primarily ORIC-101 and ORIC-533. The interim financial statements are unaudited.
Financial condition and results
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $7.3 million | $5.2 million | +$2.0 million |
| General and administrative expense | $1.9 million | $1.1 million | +$0.8 million |
| Total operating expenses | $9.2 million | $6.3 million | +$2.8 million |
| Net loss | $8.9 million | $6.0 million | +$2.9 million loss |
| Net loss per share | $4.46 | $3.32 | Higher loss per share |
| Net cash used in operating activities | $8.3 million | $5.5 million | +$2.7 million use |
| Cash and cash equivalents at period end | $79.4 million | $52.3 million | +$27.2 million year over year |
There was no meaningful margin analysis because the company had no revenue. The operating loss equaled operating expenses. Accumulated deficit was $101.6 million at March 31, 2020. Total liabilities were $5.4 million, principally accounts payable, accrued liabilities and deferred rent; the filing does not identify material interest-bearing debt.
Cash declined by $9.7 million during the quarter. Operating cash use was $8.3 million, investing activities provided $0.2 million, and financing activities used $1.6 million, primarily for IPO-related deferred offering costs. Management stated that working capital was sufficient to fund operations for at least the next twelve months as of the financial statement issuance date.
Material changes and business developments
- R&D expense increased 39% year over year, driven by approximately $1.2 million of higher personnel costs associated with adding a clinical development team and approximately $0.8 million of higher external costs related to ORIC-101 trials and ORIC-533 preclinical development.
- G&A expense increased 70% because of higher personnel and professional-service costs, including costs associated with becoming a public company.
- ORIC-101 was being evaluated in two Phase 1b combination trials: with enzalutamide in metastatic prostate cancer and with nab-paclitaxel in advanced or metastatic solid tumors. ORIC expected interim data from one trial in the first half of 2021 and the other in the second half of 2021.
- ORIC expected to file an IND for ORIC-533 in the first half of 2021.
- After quarter-end, on April 28, 2020, ORIC completed its IPO of 8,625,000 common shares at $16.00 per share, generating $138.0 million of gross proceeds before underwriting discounts, commissions and other offering expenses. All outstanding convertible preferred stock converted into 19,278,606 common shares.
- A one-for-four reverse stock split became effective April 21, 2020 and was applied retroactively in the financial statements.
Guidance, outlook, risks and unusual items
- Management expects significant and increasing R&D and operating losses for the foreseeable future and does not expect meaningful revenue unless and until a product candidate receives regulatory approval and is commercialized.
- Including IPO proceeds, management expected available cash to fund the current operating plan into 2023, but noted that this estimate depends on assumptions that may prove incorrect and that additional funding will eventually be required.
- COVID-19 caused most employees to work from home beginning the week of March 16, 2020. The company warned of potential delays in clinical enrollment, site operations, manufacturing, supply chains, regulatory timelines, ORIC-533 studies and clinical readouts.
- The ORIC-101 combination trial with nab-paclitaxel experienced two dose-limiting toxicities during the first cycle, including one death involving Grade 4 neutropenia and thrombocytopenia and Grade 5 hepatic failure in the setting of rapid disease progression. The protocol was amended and a revised starting dose was introduced following review.
- The company relies on third parties for clinical research, manufacturing and related services. ORIC-101 had a single third-party manufacturer and no alternative manufacturer in place, creating supply-chain risk.
- Two officers received SEC subpoenas in their personal capacities concerning an investigation into trading in securities of other companies. The filing states the matter is unrelated to ORIC, is non-public and fact-finding, and that no conclusion had been reached; potential effects could include management distraction, costs and reputational harm.
- A third party had inquired about a potential breach of a confidentiality agreement relating to the CD73 inhibitor program. No claim had been asserted as of the filing date, but litigation or loss of rights could affect development.
- The company reported no material pending litigation and stated that disclosure controls and procedures were effective as of March 31, 2020.
Important facts for investors to verify
- Net IPO proceeds, post-IPO cash balance and the updated cash runway after April 28, 2020.
- Actual enrollment, safety findings and interim data from both ORIC-101 Phase 1b trials, including any COVID-19-related delays.
- Progress toward the planned ORIC-533 IND filing in the first half of 2021.
- Whether additional financing will be needed before key clinical and regulatory milestones, and the resulting dilution or financing terms.
- Status and resolution of the SEC subpoenas involving two officers and the third-party confidentiality inquiry.
- Reliability and redundancy of manufacturing and clinical supply arrangements for ORIC-101 and other product candidates.
- Patent scope, freedom-to-operate issues and any claims involving third-party rights that could affect ORIC-101 or the CD73 program.