Business context and reporting period
This unaudited Form 10-Q is for the quarter and nine months ended September 30, 2017, and was filed November 6, 2017. The filing is by ZIOPHARM Oncology, Inc. (not Alaunos Therapeutics, Inc., as specified in the request metadata). ZIOPHARM was a development-stage biopharmaceutical company focused on immuno-oncology, including gene and cell therapies; it reported minimal collaboration revenue and no product sales.
Financial performance and position
| Metric | Q3 2017 | Nine months 2017 | Comparable 2016 |
|---|---|---|---|
| Collaboration revenue | $1.6 million | $4.8 million | $1.6 million quarter; $5.3 million nine months |
| Research and development expense | $11.1 million | $33.9 million | $9.0 million quarter; $148.4 million nine months |
| General and administrative expense | $3.6 million | $10.9 million | $3.5 million quarter; $11.1 million nine months |
| Net loss | $12.7 million | $41.1 million | $10.9 million quarter; $154.1 million nine months |
| Net loss applicable to common stockholders | $17.6 million | $55.0 million | $14.4 million quarter; $157.7 million nine months |
| Basic and diluted loss per share | $0.13 | $0.41 | $0.11 quarter; $1.21 nine months |
Cash and cash equivalents were $84.4 million at September 30, 2017, versus $81.1 million at December 31, 2016. Current assets were $114.9 million and current liabilities $18.2 million, yielding working capital of $96.7 million. The balance sheet reported total liabilities of $57.3 million, including $2.4 million of derivative liabilities; it did not report conventional borrowings or debt.
For the first nine months, operating cash use was $42.5 million, investing cash use $0.5 million, and financing cash provided $46.3 million. Financing included $47.3 million net proceeds from a May 2017 common-stock offering. The company had an accumulated deficit of $699.2 million. Series 1 preferred stock was presented as mezzanine equity, with a $139.4 million liquidation value at quarter-end; $13.9 million of preferred dividends were paid in additional preferred shares during the nine-month period.
Margins are not meaningful indicators of commercial performance given the company’s development-stage operations and lack of product sales.
Material changes versus the prior comparable period
- Q3 R&D expense rose 24% year over year, primarily reflecting clinical-trial activity, the NCI collaboration, and increased headcount.
- Nine-month R&D expense fell 77% year over year. The main reason was a $119.0 million noncash charge in 2016 for Series 1 preferred stock issued to Intrexon under collaboration amendments, which did not recur in 2017; underlying 2017 development spending increased in some areas.
- Nine-month revenue declined 9%, mainly because 2016 included revenue recognized under the Solasia and Predictive Therapeutics agreements that was fully recognized by 2016. Q3 revenue was unchanged, at $1.6 million, and came from the Ares Trading collaboration.
- Nine-month net loss improved substantially against 2016, primarily due to the nonrecurring preferred-stock-related R&D charge. The company still incurred a $41.1 million net loss in 2017.
Outlook, management commentary, and risks
- Management estimated that available cash would fund operations into the fourth quarter of 2018, but stated that additional capital would be needed to complete development and commercialization plans. There were no committed sources of additional capital, and management concluded that substantial doubt existed about the company’s ability to continue as a going concern.
- Management planned a randomized controlled registration trial of Ad-RTS-hIL-12 plus veledimex for recurrent glioblastoma, targeted for initiation by year-end 2017, subject to funding and collaboration arrangements. The filing described active discussions with potential collaborators. Previously reported Phase 1 data included median overall survival of 12.5 months in a 15-patient, 20 mg cohort; these were interim, small-sample results and not evidence of approval or confirmed efficacy.
- Other stated development priorities included a pediatric brain-tumor Phase 1 study, CD19 CAR-T point-of-care development targeted for 2018, an open CD33 CAR-T Phase 1 study, and an NCI neoantigen TCR program with IND submission anticipated in Q1 2018. The company paused further development of its off-the-shelf, non-genetically modified primary NK program for AML while continuing genetically modified NK research.
- After quarter-end, the company reported that the first patient had been dosed in its pediatric brain-tumor Phase 1 study on October 16, 2017, and announced upcoming scientific presentations. These are post-period developments, not Q3 financial results.
- Key risks include the need for financing and potential dilution; clinical, regulatory, and manufacturing uncertainty in novel gene and cell therapies; reliance on Intrexon, MD Anderson, NCI, and other collaborators; competition; intellectual-property and licensing risks; and potential dilution and preferred-holder protections associated with Series 1 preferred stock. Preferred shares accrue monthly dividends in additional preferred shares and may convert into common stock upon a specified U.S. product approval.
- Contractual obligations totaled $16.6 million as of September 30, 2017, including $5.6 million related to the NCI CRADA and $7.6 million of royalty and license fees, primarily MD Anderson payments. No material legal proceedings were identified by management; no material subsequent events affecting the financial statements were reported.
- The company expected adoption of the new revenue-recognition standard in 2018 to decrease collaboration revenue and increase deferred revenue; the impact assessment was ongoing.
Most important facts for investors to verify
- Confirm the issuer identity and reporting period: this source is ZIOPHARM Oncology, Inc.’s Q3 2017 10-Q, despite the Alaunos Therapeutics metadata.
- Assess cash runway assumptions, expected spending, financing needs, and the stated going-concern substantial doubt; verify whether subsequent financing or partnerships changed the outlook.
- Review the terms, dividend accrual, conversion mechanics, liquidation rights, and potential common-stock dilution of the Series 1 preferred stock held by Intrexon.
- Verify the status, design, funding, and regulatory feedback for the planned recurrent-GBM randomized trial and other pipeline milestones; distinguish interim clinical findings from final, controlled results.
- Reconcile the sharp year-over-year R&D and loss comparisons for the noncash 2016 preferred-stock charge, and monitor recurring cash burn and contractual commitments.