Business context and reporting period
This is Trovagene, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2018. The filing identifies the company as a clinical-stage oncology therapeutics business developing onvansertib; it is not titled as a Cardiff Oncology filing, despite the request metadata naming Cardiff Oncology.
Financial performance and position
| Metric | Q3 2018 | Nine months 2018 |
|---|---|---|
| Revenue | $88,361 | $300,310 |
| Operating loss | $3.86 million | $12.95 million |
| Net loss | $3.77 million | $12.30 million |
| Net loss attributable to common stockholders | $3.78 million | $15.09 million |
| Basic and diluted loss per share | $0.18 | $1.38 |
At September 30, cash and cash equivalents were $15.07 million, working capital was $13.38 million, and total liabilities were $3.94 million. The equipment line of credit had been repaid in April 2018; no current or long-term debt balance is reported at quarter-end. Operating cash use was $9.59 million for the nine months. Net cash from financing was $16.40 million, mainly from equity and warrant proceeds. Gross margin is not stated; reported cost of revenues was $26,677 for Q3 and $597,457 for the nine-month period.
Material changes versus prior comparable period
- Q3 revenue declined 28% year over year, from $123,329 to $88,361; nine-month revenue declined 6%, from $320,378 to $300,310. Lower diagnostic revenue following closure of the CLIA laboratory was partly offset by royalties and clinical research revenue.
- Q3 operating expenses fell to $3.94 million from $5.92 million, while nine-month operating expenses fell to $13.25 million from $22.13 million. Lower SG&A and prior-year license, legal and restructuring costs contributed; R&D increased in Q3 as onvansertib clinical activity advanced.
- Nine-month net loss attributable to common stockholders improved from $22.36 million to $15.09 million. However, 2018 included a $2.77 million noncash deemed dividend tied to Series B preferred stock; excluding it, the company reported adjusted loss attributable to common stockholders of $12.32 million, or $1.13 per share.
- Common shares outstanding rose substantially after the June offering, conversion of Series B preferred stock and warrant exercises. The June offering included 20.7 million warrants exercisable at $1.10 per share.
Outlook, risks and unusual items
- Management expected existing resources to fund planned operations through July 2019, but stated that ongoing losses and funding needs raised substantial doubt about the company’s ability to continue as a going concern. Additional capital may not be available on acceptable terms; equity financing could dilute shareholders.
- Management expected significant continuing losses and higher R&D costs as it advanced onvansertib. Planned milestones included AML dose escalation and preliminary data, and further enrollment and data in a Phase 2 prostate cancer trial. These were forward-looking plans, not assured outcomes.
- NASDAQ had notified the company of potential delisting for failure to meet the minimum bid-price requirement. The company requested a hearing, scheduled for November 8, 2018; continued listing was not assured.
- The CLIA laboratory closure generated approximately $664,000 of restructuring charges over nine months, including impairment, asset-disposal and sublease costs.
- After quarter-end, the company arranged for Leucadia Life Sciences to develop an onvansertib AML assay at an expected cost of up to $575,000. The interim CEO was a principal stockholder of Leucadia; a possible consulting arrangement with the CEO’s son was also noted.
- The Series B beneficial-conversion deemed dividend and changes in the fair value of warrant liabilities affected reported results. The nine-month warrant remeasurement produced a $579,040 gain; Q3 remeasurement produced a $2,500 loss.
Most important facts for investors to verify
- Confirm the registrant’s identity: this filing is for Trovagene, Inc., not a filing bearing the Cardiff Oncology name.
- Review the going-concern disclosure, cash runway assumptions, and subsequent financing or spending developments.
- Check the outcome of the NASDAQ hearing and whether the company regained continued-listing compliance.
- Assess the share and warrant overhang, potential dilution, and the effect of the June 2018 financing.
- Track onvansertib trial progress and distinguish preliminary, small-cohort observations from established clinical efficacy.
- Review the Leucadia arrangement’s terms, approval process and related-party safeguards.