Business context and reporting period
The supplied filing is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2015—not a filing identified as Tempest Therapeutics, Inc. The company was developing fertility treatments based on egg precursor cells. AUGMENT had launched in select international IVF clinics; OvaPrime and OvaTure remained in development. AUGMENT was not available in the United States.
Financial results and liquidity
Unless otherwise stated, amounts are in U.S. dollars.
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $15,000 | $0 |
| Costs of revenue | $35,000 | $0 |
| Research and development | $5.747 million | $4.652 million; up 24% |
| Selling, general and administrative | $11.046 million | $2.998 million; up 268% |
| Operating loss | $16.813 million | $7.650 million |
| Net loss | $17.206 million | $7.814 million |
| Basic and diluted loss per share | $0.65 | $0.41 |
| Operating cash flow | $(14.394) million | $(4.961) million |
Revenue was minimal and costs of revenue exceeded revenue, so the filing does not indicate a meaningful positive gross margin. Cash, cash equivalents and short-term investments were $169.339 million at March 31, 2015, versus $60.231 million at December 31, 2014. Working capital was $164.725 million. Total liabilities were $6.683 million; the balance sheet reports no borrowings or debt. The company reported an accumulated deficit of $111.904 million.
Financing provided $124.787 million of cash, primarily from a January public offering of 2.645 million shares at $50 per share, yielding $124.1 million net proceeds. Investing activities provided $17.891 million, mainly due to maturities of short-term investments; capital expenditures were $389,000. Stock-based compensation expense was $6.367 million in the quarter.
Material changes versus the prior comparable period
- Net loss more than doubled, increasing by $9.392 million, while operating cash use rose by $9.433 million.
- SG&A increased by $8.048 million, primarily from added employee compensation, ACE program setup, consulting, legal and marketing costs.
- R&D rose by $1.095 million; the company cited stock-based compensation changes, partly offset by lower license fees.
- Cash and investments increased substantially following the January equity offering. Shares outstanding at March 31, 2015 were 27,030,370.
Outlook, commentary, risks and contingencies
- Management targeted 1,000 AUGMENT treatment cycles in process by year-end 2015 and planned expansion into additional international regions. It expected most 2015 treatment revenue and deferred revenue in the second half, particularly the fourth quarter; revenue recognition follows delivery of mitochondria, generally 30–120 days after tissue receipt.
- Management planned to optimize OvaPrime and introduce it to patients in at least one international region by year-end 2015, and to optimize OvaTure and define its development pathway during 2015. These were plans, not assured outcomes.
- The company expected its $169.3 million of cash and investments to fund its current operating plan at least into 2017, subject to assumptions that may prove incorrect. It had no committed external funding source and expected continued significant expenses and operating losses.
- Management cited early positive clinical experiences with AUGMENT reported by two treating physicians, including ongoing pregnancies. These reports do not establish treatment efficacy.
- Key risks include uncertain treatment development and regulatory requirements, failure to commercialize or achieve market acceptance, execution of the international clinic expansion, and the possibility of needing additional capital, potentially diluting shareholders.
- A shareholder class action alleging disclosure violations concerning AUGMENT’s regulatory classification was pending; the company moved to dismiss, the court had not ruled, and the company said the outcome could not be assessed.
- The filing reported effective disclosure controls, no material change in internal control over financial reporting, and no material changes to previously disclosed risk factors or contractual obligations.
Important facts for investors to verify
- Confirm the issuer: this source is OvaScience, Inc., despite the request metadata naming Tempest Therapeutics, Inc.
- Check subsequent filings for actual AUGMENT cycle volume, recognized revenue, clinic expansion, and evidence supporting treatment outcomes.
- Assess cash burn against the company’s stated runway, including spending growth and the assumptions behind funding into 2017.
- Review developments in OvaPrime/OvaTure research and applicable regulatory pathways, and the status and potential exposure of the shareholder litigation.