Cocrystal Pharma, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Cocrystal is a clinical-stage biopharmaceutical company developing antiviral drug candidates; it had no products approved for sale and generated no revenue in the quarter.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / prior balance-sheet date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.872 million | $1.577 million |
| General and administrative expense | $1.333 million | $1.161 million |
| Total operating expenses | $4.205 million | $2.738 million |
| Net loss | $4.208 million | $2.738 million |
| Basic and diluted loss per share | $0.04 | $0.04 |
| Operating cash used | $3.910 million | $1.770 million |
| Cash and restricted cash at period end | $54.839 million | $33.328 million |
| Total assets | $75.372 million | $79.392 million at Dec. 31, 2021 |
| Total liabilities | $1.792 million | $1.843 million at Dec. 31, 2021 |
Amounts are in U.S. dollars; financial statement figures are presented in thousands except per-share data. Cash and cash equivalents were $54.789 million at March 31, 2022, excluding $50,000 restricted cash. The company reported no income tax expense or benefit. Profit margins are not meaningful given the absence of revenue.
Cash used in investing activities was zero; cash used in financing activities was $6,000, primarily finance-lease payments. Lease liabilities totaled $477,000 ($449,000 operating and $28,000 finance). The filing reports no material borrowings. Management said available unrestricted cash was sufficient for planned operations for at least 36 months.
Changes versus the prior-year quarter
- R&D expense rose $1.295 million, which the company attributed primarily to advancement of its COVID-19 and influenza programs.
- G&A expense increased $172,000, primarily from higher insurance costs, partly offset by the conclusion of certain legal matters.
- Net loss increased $1.470 million. Operating cash use also increased, reflecting higher program costs, including COVID-19 preclinical work and commencement of influenza clinical trials.
- Weighted-average shares outstanding were 97.469 million versus 71.248 million. No shares were sold under the ATM program in Q1 2022; the company reported 97.469 million shares outstanding at March 31.
Programs, outlook and risks
- COVID-19: CDI-45205 was in scale-up and process-chemistry development, with an IND-enabling goal and planned progression to clinical trials in 2022. The company also selected oral candidates CDI-988 and CDI-873 for further development. FDA feedback on CDI-45205 covered preclinical, manufacturing, pharmacology, toxicology and clinical-development plans.
- Influenza: A Phase 1 study of oral candidate CC-42344 began enrolling healthy adults in Australia in March 2022. Preliminary results reported in April, after quarter-end, indicated favorable safety and pharmacokinetics; final results were expected in 2022. Merck continued development of influenza compounds under its collaboration agreement; Cocrystal may receive milestone payments of up to $156 million and royalties, but Merck may terminate the agreement before first commercial sale.
- Spending outlook: Management expected R&D expense to increase during 2022 as influenza clinical development advanced and the COVID-19 program moved toward clinical development. The filing provides no revenue or earnings guidance.
- Funding: The company has historically relied on equity financing and stated that future capital may be needed. Further financing may not be available on acceptable terms and equity issuance could dilute shareholders. The company reported $36.4 million of net proceeds from a May 2021 offering and an ATM agreement permitting up to $10 million of sales.
- Operating risks: COVID-19-related supply-chain, CRO/CDMO, raw-material and test-animal shortages had delayed R&D and could cause further delays. Other cited risks included clinical-trial recruitment and execution, Australian lockdowns, regulatory outcomes, competition, virus variants, and the ability to secure collaborations and financing.
- Legal contingencies: Liberty Insurance sued over coverage and recovery of approximately $1 million previously paid in connection with an SEC investigation; Cocrystal counterclaimed. Trial was set for July 2022. The company said outcomes and potential losses could not be estimated and recorded no loss contingency. The filing also describes prior Pederson litigation, including a February 2022 denial of rehearing in one appeal.
Most important facts to verify
- Whether cash burn and the stated 36-month runway remain consistent with actual clinical-development spending and financing needs.
- Progress and subsequent results for the CC-42344 Phase 1 study and CDI-45205 IND-enabling work, including any delays or additional costs.
- Resolution and financial consequences, if any, of the Liberty insurance dispute and other legal proceedings.
- Availability and terms of future financing, potential dilution, and any changes to the ATM capacity or share count.
- The cash-flow statement reports Q1 2022 operating cash use of $3.910 million, while MD&A states $3.909 million; confirm the intended figure.