Cocrystal Pharma, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Cocrystal is a clinical-stage antiviral drug developer with no products approved for sale. Amounts below are in U.S. dollars; financial statement figures are generally in millions.
Financial results and liquidity
- Revenue: $0, versus $461,000 in Q1 2020. The prior-year revenue related to the Merck collaboration; the company said it did not expect revenue in 2021 except potentially from collaboration milestones.
- Expenses and loss: R&D expense was $1.577 million, up $294,000 year over year, primarily reflecting increased COVID-19 and influenza program activity. G&A expense was $1.161 million, up $22,000. Net loss was $2.738 million, compared with $1.990 million. Basic and diluted loss per share was $0.04 versus $0.05; weighted-average shares rose to 71.248 million from 41.662 million.
- Margins: With no Q1 revenue, operating and profit margins are not meaningful.
- Cash flow: Operating cash use was $1.770 million, versus $2.188 million. Investing cash use was $25,000, versus $93,000. Financing provided $2.063 million, primarily from ATM share sales. Cash and restricted cash ended the quarter at $33.328 million.
- Balance sheet: Cash was $33.278 million; total assets were $53.851 million; total liabilities were $1.793 million; and stockholders’ equity was $52.058 million. Liabilities included $64,000 of finance lease obligations and $475,000 of operating lease obligations. The filing reports no conventional borrowing balance.
Material changes and business developments
- Merck completed its research obligations under the influenza A/B collaboration; Merck is responsible for further development. Cocrystal remains eligible for development, regulatory and sales milestone payments of up to $156 million and product royalties, but Merck may terminate the agreement before first commercial sale.
- Cocrystal sold 1.03 million shares through its ATM in January, receiving approximately $2.072 million net. After quarter-end, a 26-million-share offering closed on May 7, 2021, generating approximately $36.4 million net. The filing reports 97,468,755 shares outstanding as of May 14, 2021.
- Goodwill was $19.092 million. Management reported no impairment was required at March 31, 2021.
Outlook, risks and contingencies
- Management expected cash, including the May offering proceeds, to fund planned operations for more than 12 months. The company has no established revenue stream sufficient to cover costs and stated that additional financing may be needed; future financing may be unavailable or dilutive.
- Management planned to initiate a Phase 1 study of influenza candidate CC-42344 in Q3 2021, advance coronavirus candidate CDI-45205 toward pre-IND status, identify another oral SARS-CoV-2 preclinical lead during 2021, and complete a norovirus proof-of-concept animal study in the first half of 2021. These are forward-looking plans, not reported outcomes.
- COVID-19 had caused supply-chain and service-partner delays. The filing also cites risks from research and clinical development, regulatory approval, competition, collaboration milestones, financing needs and litigation.
- Pending matters included an insurer coverage dispute, an appeal in the Pederson litigation, and an AGP claim seeking damages estimated in excess of $1 million. The company said potential losses could not be reasonably estimated and recorded no loss contingency.
Important facts to verify
- Whether the May offering proceeds and reported share count reconcile with subsequent capitalization and dilution.
- Current cash runway against R&D spending plans and any additional financing needs.
- Progress and timing of the disclosed influenza, coronavirus and norovirus development milestones.
- Status and potential financial exposure of the pending legal matters, and any Merck development or milestone updates.