Business context and reporting period
This is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2014—not a Tempest Therapeutics filing, despite the request metadata. OvaScience was developing fertility treatments based on egg precursor cells. It had launched AUGMENT through clinics in three international regions; the treatment was not available in the United States. The company reported no revenue.
Financial performance and position
Amounts are in U.S. dollars; financial statement figures are in millions unless noted.
| Metric | Q3 2014 / September 30, 2014 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None to date |
| Operating expenses | $12.399; R&D $5.325, SG&A $7.074 | Q3 2013: $6.925 |
| Net loss | $12.923; $0.54 per share | Q3 2013: $6.891; $0.40 per share |
| Nine-month net loss | $30.630 | Nine months 2013: $18.044 |
| Cash from operations | $(20.064) for nine months | Nine months 2013: $(13.406) |
| Cash, cash equivalents and short-term investments | $72.166; working capital $64.811 | December 31, 2013: $44.427; working capital $39.303 |
| Total liabilities | $8.874, including $8.803 current liabilities | December 31, 2013: $5.844 |
| Stockholders’ equity | $68.625 | December 31, 2013: $41.701 |
Margins are not meaningful because the company had no revenue. The filing does not present interest-bearing debt; its reported liabilities primarily comprise accounts payable and accruals. Cash and investments were $72.166 million, while cash alone was $12.125 million.
Material changes versus prior comparable periods
- Q3 operating expenses rose 79% year over year; R&D increased 63% and SG&A increased 93%. Nine-month operating expenses increased to $29.644 million from $18.121 million.
- Management attributed higher R&D costs mainly to personnel and stock compensation, OvaTure collaboration work, grants, and a license milestone payment. SG&A growth reflected hiring, AUGMENT access-program setup, and professional and marketing costs.
- Cash used in operations increased to $20.064 million for the first nine months. The company raised $51.554 million net from a March 2014 public stock offering, compared with $32.488 million from a 2013 private placement.
- Shares outstanding were 23,787,221 at September 30, 2014, up from 17,541,126 at December 31, 2013.
Outlook, commentary, risks and unusual items
- Management said the $72.2 million of cash, cash equivalents and marketable securities was expected to fund its current operating plan into 2016; additional funding might be needed for 2016 and beyond. The estimate depends on assumptions that may prove incorrect, and no committed external funding source was available.
- Management reported more than 60 patients receiving AUGMENT, above its 40–60 patient year-end target. It expected to transition access-program clinics to commercial centers by year-end 2014, generating initial revenue, and expand availability in additional international clinics in 2015.
- OvaScience expected proof-of-concept results for OvaPrime and OvaTure by the end of 2014 and planned a possible OvaPrime introduction in select international centers in the second half of 2015. These were forward-looking plans, not guaranteed outcomes.
- The FDA had issued an “untitled” letter in September 2013 advising the company to file an Investigational New Drug application for AUGMENT. Management anticipated further FDA discussions; disagreement by regulators could lead to delay, expense, or abandonment of the treatment in a region.
- A shareholder class action alleging misrepresentations about AUGMENT’s regulatory status was refiled in June 2014; an amended complaint was filed October 31, 2014. The company intended to defend the action, but stated that outcome and materiality could not be assessed.
- OvaXon, a 50/50 joint venture with Intrexon, generated $0.915 million of equity-method losses for the first nine months. A $2.5 million cash technology-access payment to Intrexon was due in December 2014; a further $0.5 million license-fee payment to Massachusetts General Hospital was due in March 2015.
- Management identified no material change in risk factors from its prior filings. It reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for OvaScience, Inc., not Tempest Therapeutics, Inc.
- Check subsequent evidence on AUGMENT’s regulatory pathway, clinical outcomes, commercial adoption, and revenue generation.
- Assess whether operating losses and cash burn remain consistent with management’s stated runway into 2016, and whether additional financing was required.
- Review later developments in the shareholder litigation and the Intrexon collaborations, including milestones, costs, and obligations.
- Verify whether the stated OvaPrime and OvaTure research milestones and anticipated launch plans were achieved.