ORIC Pharmaceuticals, Inc. — Fiscal 2020 Form 10-K Summary
Business context and reporting period
ORIC Pharmaceuticals is a clinical-stage biopharmaceutical company developing therapies intended to overcome cancer treatment resistance. This Form 10-K covers the fiscal year ended December 31, 2020; it is an annual filing rather than a quarterly Q4 filing. The company had no approved products and no product revenue.
- Lead program: ORIC-101, a glucocorticoid receptor antagonist in two Phase 1b combination trials.
- Pipeline: ORIC-533, ORIC-944 and ORIC-114 were in preclinical or IND-enabling development.
- Employees: 61 full-time employees at December 31, 2020, including 45 in research and development.
Financial performance, liquidity and capital structure
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $35.9 million | $22.8 million | +$13.1 million |
| Acquired in-process R&D | $24.8 million | $0 | +$24.8 million |
| General and administrative expense | $13.4 million | $5.7 million | +$7.7 million |
| Total operating expenses | $74.2 million | $28.6 million | +$45.6 million |
| Net loss | $73.7 million | $26.9 million | Loss increased $46.8 million |
| Net loss per share | $3.36 | $14.15 | Not directly comparable due to 2020 share issuance and preferred-stock conversion |
| Operating cash flow | $(45.3) million | $(23.5) million | Cash use increased $21.7 million |
- Cash and liquidity: Cash and cash equivalents were $78.4 million and short-term investments were $215.2 million at year-end, for total cash, cash equivalents and short-term investments of $293.6 million.
- Balance sheet: Total assets were $299.0 million, total liabilities were $9.2 million and stockholders’ equity was $289.8 million. The filing does not report outstanding debt.
- Financing: The April 2020 IPO generated approximately $125.2 million of net proceeds; the November 2020 follow-on offering generated approximately $124.8 million net.
- Cash flow investing: Investing cash use was $216.0 million, primarily reflecting purchases of short-term investments.
- Contractual obligations: Operating lease commitments totaled $2.6 million, primarily due in 2021 and 2022.
Material changes versus the prior comparable period
- R&D expense rose 57%, principally because of increased ORIC-101 development activity, exploratory programs and personnel costs.
- The company recorded $24.8 million of acquired in-process R&D expense for the Mirati and Voronoi license transactions. The amount comprised $13.0 million related to Mirati and $11.8 million related to Voronoi; much of the consideration was equity-based and non-cash.
- G&A expense increased 134%, reflecting higher personnel, professional-service and public-company costs.
- The company completed its IPO and follow-on offering, converted all outstanding preferred stock into common stock and increased common shares outstanding to 36.7 million at December 31, 2020 from 2.0 million at December 31, 2019.
- Operating cash burn increased as development activities expanded. Interest income declined to $0.3 million from $1.4 million, primarily due to lower interest rates.
Guidance, outlook, commentary and unusual items
- Management expected existing cash, cash equivalents and short-term investments to fund the current operating plan into the second half of 2023. This estimate is subject to significant assumptions and the company stated that additional capital will be required.
- ORIC-101 dose expansion began for the nab-paclitaxel combination in December 2020, with interim safety, efficacy and translational data expected in the first half of 2021. Dose expansion for the enzalutamide combination began in January 2021, with interim data expected in the second half of 2021.
- Management expected to file an IND for ORIC-533 in the first half of 2021, an IND for ORIC-944 in the second half of 2021 and a CTA for ORIC-114 in the second half of 2021.
- In the ORIC-101/nab-paclitaxel trial, the initial dose level produced two dose-limiting toxicities, including one death involving Grade 5 hepatic failure in the setting of rapid disease progression. The protocol was amended and lower dosing was used.
- COVID-19 caused temporary enrollment suspensions at certain sites, operational inefficiencies, increased expenses, supply-chain delays and delays in collecting and analyzing clinical data.
- ORIC-944 was licensed from Mirati for worldwide rights without milestone or royalty payments. ORIC-114 was licensed from Voronoi for rights outside China, Hong Kong, Macau and Taiwan, with potential development and commercial milestones of up to $608 million for the first and possible second licensed products, plus tiered royalties.
- The CFO and Chief Business Officer received SEC subpoenas in their personal capacities concerning an investigation unrelated to ORIC. The filing states that the subpoenas did not indicate a conclusion regarding their conduct.
- A third party inquired about a potential breach of a confidentiality agreement relating to the CD73 inhibitor program; the filing states that the matter could progress to a claim.
Key risks and investor verification items
- Verify the company’s cash runway against actual quarterly cash burn, planned clinical expansion and the timing and terms of any future financing.
- Verify whether ORIC-101 clinical trials demonstrate adequate safety, efficacy and biomarker-defined benefit, particularly following the initial combination-toxicity findings.
- Verify the status and timing of the planned IND and CTA submissions for ORIC-533, ORIC-944 and ORIC-114.
- Review dilution from the IPO, follow-on offering, license-related stock issuances and outstanding options; 3.996 million options were outstanding at year-end.
- Assess dependence on third-party manufacturers, CROs, clinical sites and suppliers, including single-source supply exposure.
- Review the economic and termination provisions of the Mirati and Voronoi licenses, including milestone, royalty, diligence and intellectual-property obligations.
- Monitor COVID-19 effects on enrollment, clinical timelines, manufacturing and regulatory submissions.
- Evaluate intellectual-property validity, freedom-to-operate concerns and the potential confidentiality inquiry related to ORIC-533.
- Consider that the company has incurred recurring losses, has no commercial revenue and may never achieve regulatory approval or profitability.