Business Context and Reporting Period
Company: Tekmira Pharmaceuticals Corporation (filing as Tekmira; previously referenced as Arbutus Biopharma Corp in metadata, but filing text confirms Tekmira).
Reporting Period: Fiscal year ended December 31, 2010.
Business Overview: Tekmira is a biopharmaceutical company focused on developing RNA interference (RNAi) therapeutics and providing lipid nanoparticle (LNP) delivery technology to partners. The company has no approved products for sale and relies on collaboration revenue, government contracts, and milestone payments. Key internal programs include TKM-PLK1 (cancer), TKM-Ebola (infectious disease), and TKM-ApoB (cholesterol).
Accounting Standard: Effective December 31, 2010, the company adopted U.S. GAAP, recasting all comparative historical data. A significant difference from Canadian GAAP is the expensing of in-process research and development (IPR&D) acquired from Protiva in 2008, rather than capitalizing it.
Key Financial Metrics (Year Ended Dec 31, 2010)
| Metric | 2010 (CDN$) | 2009 (CDN$) |
|---|---|---|
| Revenue | $21.35 million | $14.43 million |
| Total Expenses | $33.87 million | $22.91 million |
| Net Loss | $(12.42) million | $(8.75) million |
| Loss Per Share (Basic & Diluted) | $(1.20) | $(0.85) |
| Cash and Cash Equivalents | $12.35 million | $24.40 million |
| Working Capital | $7.6 million | $19.1 million |
| Total Liabilities | $10.29 million | $6.82 million |
| Stockholders' Equity | $10.73 million | $22.46 million |
Note: All figures are in Canadian Dollars (CDN$) unless otherwise noted. The company reported no debt obligations in the contractual obligations table.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 48% to $21.35 million, driven primarily by a one-time $5.92 million license amendment payment from Talon Therapeutics (settling a contingent obligation) and the initiation of a U.S. Government contract for TKM-Ebola ($3.56 million recognized).
- Expense Increase: Total expenses rose to $33.87 million. Research and development costs increased to $22.13 million due to the TKM-Ebola program and increased reimbursable costs for the Alnylam collaboration. General and administrative expenses increased to $4.78 million, largely due to NASDAQ listing fees.
- One-Time Loss: The company recorded a $5.92 million "Loss on purchase and settlement of exchangeable and development notes" in 2010, corresponding to the payment made to former note holders to settle the Talon contingent obligation.
- Cash Position: Cash and cash equivalents decreased by approximately $12 million to $12.35 million. Operating activities used $11.25 million in cash, primarily due to increased operating expenses.
- Share Consolidation: On November 4, 2010, the company completed a 5-for-1 consolidation of its common shares. All per-share data has been restated retroactively.
Guidance, Outlook, and Risks
Liquidity Outlook: Management believes current funds, combined with expected income from collaborators and the U.S. Government, are sufficient to fund operations into the second quarter of 2012. Substantial additional capital will be required to continue active development of pipeline products.
Key Collaborations & Contracts:
- U.S. Government: Signed a contract on July 14, 2010, for up to US$34.7 million to develop TKM-Ebola through Phase 1. The government has an option to extend funding to US$140 million for full development.
- Alnylam: A major partner providing revenue through manufacturing agreements and milestone payments. Alnylam revenue represented 29% of 2010 operating revenue.
- Roche: In November 2010, Roche announced it would discontinue RNAi R&D, effectively ending product development with Tekmira, though stability studies will continue.
- Bristol-Myers Squibb (BMS): Signed a new agreement in May 2010 for US$3.0 million to provide LNP batches over four years.
Material Risks & Contingencies:
- Alnylam Litigation: On March 16, 2011, Tekmira filed a lawsuit against Alnylam alleging misappropriation of trade secrets and unfair competition. Alnylam filed a counterclaim. The outcome is uncertain and could materially affect the business and financial position.
- Development Risk: No products are approved. Success depends on clinical trial results and regulatory approvals for RNAi therapeutics, which is an unproven technology.
- Financing Risk: The company has incurred losses since inception (accumulated deficit of $248.9 million) and requires additional capital to fund operations beyond mid-2012.
Investor Verification Checklist
- Alnylam Litigation Status: Verify the current status of the lawsuit filed against Alnylam and the potential financial impact of the counterclaims.
- TKM-Ebola Contract Funding: Confirm the timing and certainty of reimbursements from the U.S. Government contract, as this is a primary revenue driver.
- Cash Runway: Assess the sufficiency of the $12.35 million cash balance to fund operations through Q2 2012, considering the high burn rate and potential legal costs.
- Roche Termination Impact: Evaluate the long-term revenue impact of Roche discontinuing its RNAi program.
- Talon Settlement: Confirm that the $5.92 million payment to former note holders fully extinguished the contingent obligation and that future milestones from Talon are retained by Tekmira.