Business context and reporting period
This filing is OvaScience, Inc.’s Form 10-K for the fiscal year ended December 31, 2017—not a filing under the requested company name, Tempest Therapeutics, Inc. The company was developing fertility treatments based on egg precursor cells; its principal programs were OvaPrime (clinical development), OvaTure (preclinical development), and AUGMENT. The filing presents annual results and unaudited fourth-quarter data.
Financial performance and position
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $0.295 million | $0.653 million |
| Research and development expense | $18.337 million | $21.641 million |
| Selling, general and administrative expense | $27.744 million | $49.223 million |
| Restructuring expense | $4.030 million | $5.400 million |
| Operating loss | $50.606 million | $81.012 million |
| Net loss | $50.975 million | $82.260 million |
| Net loss per share | $1.43 | $2.56 |
| Cash, cash equivalents and short-term investments at year-end | $67.203 million | $114.388 million |
| Cash used in operating activities | $45.551 million | $61.734 million |
Revenue was solely from AUGMENT. Cost of revenue was $0.790 million, exceeding revenue by $0.495 million; revenue was immaterial relative to operating costs. The company reported a $1.018 million loss from its equity-method investment in OvaXon. Year-end working capital was $60.977 million, total liabilities were $8.555 million, and no borrowings are separately reported on the balance sheet. Accumulated deficit was $301.480 million.
For Q4 2017, revenue was $0.091 million, operating loss was $8.684 million, net loss was $8.527 million, and basic and diluted loss per share was $0.24.
Material changes versus prior period
- Revenue decreased 55% year over year, while net loss narrowed 38%, mainly alongside lower commercial activity and reduced operating expenses.
- R&D expense decreased 15%; SG&A decreased 44%, reflecting workforce reductions and lower marketing and commercial spending.
- Operating cash outflow improved to $45.551 million from $61.734 million, but cash and short-term investments fell by $47.185 million. There were no financing cash inflows in 2017; 2016 included $53.925 million of net proceeds from a public offering.
- The company shifted its focus to OvaPrime and OvaTure, discontinued AUGMENT commercial efforts outside North America, and closed its U.K. headquarters. It announced another workforce reduction of approximately 50% in January 2018.
Outlook, risks and unusual items
- Management said year-end cash and short-term investments were expected to fund the then-current operating plan for at least 12 months. The filing also said the January 2018 restructuring was intended to extend the cash position into 2020; this is an estimate, not a guarantee. Additional capital will likely be needed, with no committed external funding source.
- OvaPrime interim safety results in 20 patients followed for six months showed no treatment-related serious adverse events or adverse events attributed to the EggPC cells. Management did not expect strong signals on secondary endpoints in the original Phase 1 trial, citing a potentially suboptimal cell dose. The company planned a Phase 1b/2a study using a higher dose and expected further data in 2018–2019.
- OvaTure remained experimental: the company had not demonstrated fertilization of EggPC-derived eggs, and needed authorization outside the U.S. to attempt human-egg fertilization for research. The Intrexon collaboration was terminated effective 90 days after notice given February 1, 2018; future OvaXon arrangements remained under discussion. Potential OvaTure royalties may apply if Intrexon intellectual property is used.
- AUGMENT was available in Japan under a one-year agreement, but was not available in the U.S. In March 2018, Health Canada said offering AUGMENT violated Canadian law and requested that the company cease offering it; the company said it was no longer offering the treatment in Canada.
- The filing identifies substantial scientific, clinical, regulatory, commercialization, reimbursement, manufacturing and financing risks. The company reported multiple shareholder class and derivative lawsuits and said potential losses could not be estimated. Its 2017 restructuring expense was $4.030 million; the January 2018 restructuring was expected to add one-time costs, with estimates varying in the filing (approximately $0.5–$1.0 million in the subsequent-events note and $1.0–$1.5 million elsewhere).
Important facts for investors to verify
- Confirm the issuer: this filing identifies OvaScience, Inc. (Nasdaq: OVAS), not Tempest Therapeutics, Inc.
- Reconcile the differing estimates for January 2018 restructuring costs and confirm actual costs, savings, and cash runway.
- Review subsequent OvaPrime safety and efficacy data, including whether improved cell processing and higher dosing produce meaningful clinical signals.
- Track OvaTure’s ability to mature and fertilize eggs, the required regulatory permissions, and the consequences of ending the Intrexon collaboration.
- Monitor AUGMENT’s Japan agreement, regulatory status in other markets, and any continuing restrictions in Canada or the U.S.
- Assess future cash burn, financing needs and dilution risk, as well as developments and any eventual loss estimates for the outstanding litigation.