Business context and reporting period
This is OncoGenex Pharmaceuticals, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2014—not a filing in the name of Achieve Life Sciences, Inc. OncoGenex was a clinical-stage biopharmaceutical company developing cancer therapies. It had no product-sales revenue; reported revenue came from its Teva collaboration, principally reimbursement of development costs.
Financial results and position
| Metric | Q1 2014 | Q1 2013 / prior balance date |
|---|---|---|
| Collaboration revenue | $11.7 million | $5.1 million |
| Research and development expense | $16.9 million | $10.9 million |
| General and administrative expense | $2.8 million | $2.5 million |
| Net loss | $8.6 million | $6.7 million |
| Basic and diluted loss per share | $0.59 | $0.46 |
| Cash used in operating activities | $1.7 million | $10.7 million |
| Cash, cash equivalents and short-term investments | $37.6 million | $39.2 million at Dec. 31, 2013 |
| Total assets / liabilities | $49.8 million / $20.2 million | $55.7 million / $18.5 million at Dec. 31, 2013 |
Operating margin and product-level margins were not meaningful because the company had no product sales. The filing reports total long-term obligations of $4.4 million, including current obligations of $1.1 million; these include lease-related obligations. Stockholders’ equity was $29.6 million, down from $37.2 million at year-end.
Material changes versus comparable periods
- Revenue more than doubled year over year, reflecting increased Teva-reimbursed activity, particularly for the AFFINITY trial.
- R&D expense rose 56%, mainly from AFFINITY combination-drug purchases and increased investigator-sponsored trial costs; lower Borealis-1 costs partly offset the increase.
- Operating cash use fell substantially, which management attributed to increased Teva reimbursements. Investing cash inflow largely reflected maturities of investments, not operating earnings.
- A $0.7 million warrant revaluation loss in Q1 2014 compared with a $1.4 million gain in Q1 2013; this non-cash item contributed to the larger reported net loss.
Outlook, commentary and risks
Management believed available cash, investments and Teva receivables would fund currently planned operations beyond Q1 2015. That estimate depended on assumptions that could prove incorrect; additional financing could be needed if trials cost more, plans expand, or funding or collaboration arrangements change. Potential funding sources included licensing, partnerships, equity or debt offerings, with no assurance of availability on acceptable terms.
A significant clinical development was the April 2014 announcement that the Phase 3 SYNERGY trial of custirsen did not meet its primary endpoint of statistically significant overall-survival improvement. Median survival was 23.4 months with custirsen versus 22.2 months in the control group; hazard ratio was 0.93 and one-sided p-value 0.207. Further analysis was underway. The filing described ongoing AFFINITY and ENSPIRIT custirsen trials and multiple apatorsen studies; expected enrollment and data timing remained subject to trial progress.
Teva held exclusive worldwide development and commercialization rights to custirsen and funded costs beyond OncoGenex’s completed $30 million contribution. Teva concentration is material: it was the source of all reported revenue, and $7.6 million of the $8.6 million receivable at quarter-end was unbilled Teva reimbursement. OncoGenex had exercised its option to negotiate a U.S. and Canada co-promotion arrangement. Potential milestone payments of up to $370 million were uncertain, and the company disputed Isis’s view of its share of those payments.
Other notable risks include continuing losses, clinical and regulatory failure, dependence on Teva and third-party manufacturers, financing and dilution risk, and intellectual-property and licensing obligations. The company reported effective disclosure controls and no material changes in internal control during the quarter. No material subsequent events requiring disclosure were identified.
Important facts for investors to verify
- Confirm the issuer identity: this supplied filing is for OncoGenex Pharmaceuticals, Inc., despite the request metadata naming Achieve Life Sciences, Inc.
- Review final analyses and subsequent updates on SYNERGY, and progress or results for AFFINITY, ENSPIRIT and apatorsen trials.
- Assess the assumptions behind management’s cash runway estimate beyond Q1 2015 and the timing and collectability of Teva reimbursements.
- Verify Teva’s continued funding and development commitments, co-promotion negotiations, and the status of potential milestones and disputed Isis obligations.
- Consider potential dilution, including the disclosed at-the-market offering program of up to $25 million, and outstanding warrants for 1,587,301 shares at $20 per share, expiring October 2015.