Oragenics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The company is a development-stage biotechnology business focused on an intranasal COVID-19 vaccine candidate, NT-CoV2-1, and preclinical antibiotic candidates based on lantibiotics. Financial statements are unaudited. Historical share and per-share data reflect the 1-for-60 reverse stock split effective January 2023.
Financial performance and position
| Metric | Q1 2023 | Q1 2022, restated |
|---|---|---|
| Grant revenue | $17,024 | $15,083 |
| Research and development expense | $1,672,576 | $3,293,661 |
| General and administrative expense | $1,249,263 | $1,331,549 |
| Operating loss | $2,904,815 | $4,610,127 |
| Net loss | $2,844,837 | $4,590,993 |
| Basic and diluted loss per share | $1.41 | $2.29 |
| Cash used in operating activities | $2,108,695 | $5,636,952 |
Revenue was limited to grant income; the company reported no meaningful commercial revenue or profit. R&D fell 49%, primarily due to approximately $1.5 million lower COVID-vaccine development costs. Net other income was $59,978, including $62,201 interest income. No income tax benefit was recorded. The filing does not provide meaningful gross-margin metrics.
At March 31, 2023, cash and cash equivalents were $9,158,340, down from $11,426,785 at year-end 2022. Working capital was $9,922,471, versus $12,675,299 at year-end. Total assets were $12,129,476 and shareholders’ equity was $10,244,431. Current liabilities totaled $1,780,582. Short-term notes payable were $107,890; the company also reported $306,649 in operating lease liabilities, including current and long-term portions. Financing cash outflow was $159,750, primarily payments on insurance-premium financing.
Material changes and developments
- Management and the Audit Committee determined that Q1 2022 financial statements, along with Q2 and Q3 2022 statements, required restatement. Vendor prepayments for R&D had been expensed instead of recorded as prepaid assets. The company filed amendments on April 14, 2023; Q1 2022 comparative figures here are restated.
- The company entered an exclusive worldwide commercial license with Inspirevax in February 2023 for its BDX301 intranasal adjuvant. The agreement includes milestone payments and royalties; disclosed milestone obligations range from $0.1 million to $7.25 million. The filing text does not provide a clear value for the upfront signing fee.
- Oragenics entered a new ATM sales agreement with Ladenburg Thalmann in February 2023. It sold no shares under the ATM in Q1. The prior ATM agreement with AGP was terminated in December 2022.
- At March 31, 2023, 2,024,657 common shares were outstanding. The company reported 2,024,657 shares outstanding as of May 9, 2023.
Outlook, risks and contingencies
- Management said available working capital was expected to fund the business as then structured through Q4 2023, and disclosed substantial doubt about the company’s ability to continue as a going concern beyond that point. Continued operations depend on additional financing or profitable operations; no committed financing was available.
- The company anticipated filing an IND in the United States and/or a clinical trial application in Canada, and beginning a Phase 1 study of NT-CoV2-1 in the second half of 2023. Further clinical development depends on additional funding, grants, partnerships or other financing. Timelines are forward-looking and subject to funding, regulatory and development risks.
- The lantibiotics program remains preclinical; management expected to reduce its focus on further development until additional capital is raised. The company also reported favorable third-party preclinical testing results, which do not establish clinical efficacy or regulatory approval.
- Management concluded disclosure controls and internal control over financial reporting were not effective because of a material weakness in reviewing R&D contracts and vendor prepayments. It had not provided a completion date or assurance that remediation would succeed.
- Other risks include recurring losses and negative operating cash flow, potential dilution or restrictive financing terms, dependence on third-party research and manufacturing, clinical and regulatory uncertainty, and possible delays or increased costs. License agreements also create future milestone and royalty obligations. The company reported no material pending legal proceedings.
Key facts for investors to verify
- Cash burn, spending plans and the stated Q4 2023 funding runway, including whether new financing or partnerships have been secured.
- Progress toward the NT-CoV2-1 regulatory filing and Phase 1 study, and the remaining clinical, manufacturing and regulatory requirements.
- Remediation of the material weakness and the effects of the 2022 restatements on reported R&D expenses, prepaid assets and internal controls.
- Terms and potential financial impact of the Inspirevax license, including the upfront fee, milestones, royalties and development commitments.
- Potential share dilution from future ATM or other financings, and the rights and conversion terms of outstanding preferred stock and warrants.