Cocrystal Pharma, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Cocrystal is a clinical-stage antiviral drug developer with no approved products or established revenue source. Amounts below are in thousands of dollars, except per-share data.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No revenue reported | No revenue reported |
| Research and development expense | $2,361 | $2,557 | $5,233 | $3,957 |
| General and administrative expense, per financial statements | $1,375 | $1,271 | $2,708 | $2,609 |
| Net loss | $(24,428) | $(3,821) | $(28,636) | $(6,559) |
| Basic and diluted loss per share | $(0.25) | $(0.04) | $(0.29) | $(0.08) |
| Operating cash used | Not separately presented | Not separately presented | $(7,634) | $(4,394) |
- At June 30, 2022, cash was $51,033 and restricted cash was $75, versus cash of $58,705 and restricted cash of $50 at December 31, 2021. Management said unrestricted cash was sufficient for at least 36 months of planned operations.
- Total assets were $52,383, including no remaining goodwill after a $19,092 impairment. Total liabilities were $2,990 and stockholders’ equity was $49,393.
- No conventional borrowing is reported. Lease liabilities totaled $419, comprising $398 of operating leases and $21 of finance leases. The $1,600 settlement payable was a material current liability.
- There is no meaningful revenue or gross margin to assess. Operating expenses and cash use principally reflect ongoing drug development and corporate costs.
Material changes and unusual items
- Net loss increased substantially year over year, principally because the company recorded a non-cash $19,092 goodwill impairment after its market capitalization declined. Goodwill was reduced from $19,092 at year-end 2021 to zero.
- Six-month R&D expense increased $1,276, which management attributed to advancement of COVID-19 and influenza programs. Q2 R&D expense decreased $196, attributed to CC-42344 moving from preclinical discovery into clinical testing.
- Six-month operating cash use increased $3,240 versus 2021. The company attributed this mainly to increased costs for COVID-19 preclinical work and influenza clinical trials. Financing cash flow was a $13 outflow, versus $38,486 provided in the 2021 period, when equity offerings raised capital.
- Common shares outstanding were 97,469 at June 30, 2022, unchanged from December 31, 2021. The filing reports no ATM sales in the first half of 2022.
- The company recorded a $1,600 legal-settlement expense and payable relating to Liberty Insurance. After the quarter, it appealed the judgment and deposited $1,600 with the court as security; the filing states the judgment was $1,359,063.72.
Outlook, development updates and risks
- Management expected R&D expense to increase during 2022 as it advanced the influenza A candidate CC-42344 and progressed its preclinical COVID-19 program. It expected to report final Phase 1 results for CC-42344 in 2022; the single-ascending-dose portion was completed after quarter-end, and multiple-ascending-dose enrollment was underway.
- For COVID-19, the company was preparing CDI-45205 and oral protease inhibitor candidates for potential IND applications. It also entered a non-clinical evaluation agreement with NIAID in June 2022. These are development plans, not evidence of clinical efficacy or regulatory approval.
- The company has no products approved for sale and has incurred losses and negative operating cash flows since inception. Management stated future profitability depends on successful development, approval and commercialization; additional capital may be needed, and financing may be unavailable or dilutive.
- Management cited potential clinical, regulatory, collaboration and funding risks; COVID-19-related supply, CRO/CDMO, raw-material and test-animal delays; possible Australian trial delays; competition and viral mutations; and inflationary pressure. The filing says inflation had not materially affected operations to date.
- The Merck collaboration may provide milestone payments of up to $156 million plus royalties, but payments depend on development, regulatory and sales milestones; Merck may terminate the agreement before first commercial sale.
Most important facts to verify
- Reconcile the MD&A expense figures: it describes Q2 G&A expense of $2,975 and six-month G&A of $4,308, while the statements report $1,375 and $2,708, respectively. The MD&A amounts equal the statement G&A figures plus the separately reported $1,600 legal settlement.
- Confirm the status and cash treatment of the Liberty judgment, appeal and court deposit, including whether the deposited funds remain restricted or otherwise unavailable.
- Assess the assumptions underlying management’s stated 36-month cash runway against planned trial and development spending, and potential financing needs.
- Track CC-42344 Phase 1 results and the timing, cost and evidence required to advance the COVID-19 candidates toward clinical testing.
- Review the risk of future dilution and the conditions attached to potential Merck milestone and royalty payments.