Business context and reporting period
This is OvaScience, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2015, not a filing identified in the request as Tempest Therapeutics, Inc. OvaScience was developing fertility treatments based on EggPC cells. Its AUGMENT treatment was offered in select international IVF clinics; OvaPrime and OvaTure remained in development. AUGMENT was not available in the United States.
Financial performance and liquidity
| Metric | Q3 2015 | Nine months 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $75,000 | $120,000 | None reported |
| Net loss | $17.9 million | $52.6 million | $12.9 million and $30.6 million |
| Net loss per share | $0.66 | $1.95 | $0.54 and $1.38 |
| Operating cash used | Not separately provided for quarter | $39.0 million | $20.1 million |
| Cash, cash equivalents and short-term investments | $141.7 million at September 30, 2015 | $60.2 million at December 31, 2014 |
For Q3, operating expenses were $17.8 million, including $0.9 million of cost of revenue against $75,000 of revenue; for the first nine months, costs of revenue were $1.1 million against $120,000 of revenue. These figures imply gross losses of approximately $865,000 and $971,000, respectively. Research and development expense was $4.0 million for Q3 and $13.8 million year to date; selling, general and administrative expense was $12.9 million and $37.0 million, respectively.
At September 30, total assets were $152.8 million, total liabilities $10.2 million, and stockholders’ equity $142.6 million. The filing reports no debt balance. Working capital was $135.5 million. The company raised $124.1 million net from a January 2015 common-stock offering. Management estimated existing cash and investments would fund its current operating plan at least into 2017, subject to assumptions; the company had no committed external funding source.
Material changes versus prior periods
- Q3 net loss increased 39% year over year; nine-month net loss increased 72%.
- Q3 SG&A rose 82% and nine-month SG&A rose 145%, primarily due to hiring and international commercialization costs. R&D fell 25% in Q3 and 5% year to date.
- The company reported limited AUGMENT revenue for the first time in 2015. A $0.4 million charge for supplies expiring before commercial use reflected lower-than-expected treatment cycles.
- Cash and investments increased from $60.2 million at year-end 2014, largely reflecting the January equity offering. Nine-month operating cash use increased from $20.1 million to $39.0 million.
Outlook, commentary, risks and unusual items
- On September 28, OvaScience said it did not expect to meet its 2015 target of 1,000 AUGMENT cycles. Management cited evolving market conditions, clinic mergers and acquisitions, and difficulty driving volume, including anticipated reimbursement uptake. It planned to expand regions and clinics, pursue reimbursement and broader use, and optimize manufacturing and commercial operations.
- Management planned to introduce OvaPrime through a preceptorship program in at least one international region by year-end 2015, and to optimize OvaTure and define its development pathway. These were plans, not assured outcomes.
- The company expected continued significant expenses and operating losses for at least several years. It said development costs and timing were uncertain and that additional financing might be required; equity financing could dilute shareholders.
- A securities class action relating to the January 2015 offering was filed on October 9, 2015. The company said it intended to defend the case and could not estimate potential losses. A separate earlier shareholder action was dismissed with prejudice on September 28, 2015.
- A new Waltham office and laboratory lease runs through November 2020, with minimum payments listed at approximately $0.1 million for the remainder of 2015 and $0.9–$1.0 million annually for 2016–2020. A $1.2 million tenant improvement allowance was available.
- Stock-based compensation was $14.4 million for the first nine months. A senior executive’s departure resulted in forfeiture of unvested options and a $0.9 million net reversal of compensation expense in Q3.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for OvaScience, Inc., whereas the request names Tempest Therapeutics, Inc.
- Track AUGMENT treatment volumes, recognized revenue, unit economics, clinic adoption and reimbursement progress against management’s stated commercialization plans.
- Assess the assumptions behind management’s projected funding runway into 2017, ongoing cash burn and potential need for additional capital.
- Monitor progress, regulatory requirements and development costs for OvaPrime and OvaTure, as well as the status and potential financial exposure of the January 2015 offering lawsuit.