Filing summary
Entity and period: The supplied filing is Tekmira Pharmaceuticals Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2014—not a filing under the name Arbutus Biopharma Corp. The company focused on RNA interference therapeutics and lipid nanoparticle (LNP) delivery technology. Amounts below are in U.S. dollars; financial-statement figures are in millions unless stated otherwise.
Financial performance and position
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $4.36 | $2.96 | $10.60 | $7.94 |
| Operating expenses | $11.21 | $6.61 | $32.83 | $17.65 |
| Operating loss | $(6.84) | $(3.65) | $(22.23) | $(9.72) |
| Net loss | $(8.60) | $(5.91) | $(32.67) | $(11.47) |
| Basic and diluted loss per share | $(0.39) | $(0.41) | $(1.53) | $(0.80) |
| Operating cash flow | $(6.72) | $(3.67) | $(5.58) | $(9.30) |
- Q3 revenue rose about 47% year over year; nine-month revenue rose about 34%. Revenue came mainly from DoD contracts, Monsanto, BMS, other collaborations, and licensing and royalties.
- Operating expenses increased about 69% in Q3 and 86% for the nine-month period. Management attributed the increase primarily to expanded research and development programs, clinical-trial activity, staffing, and stock-based compensation.
- At September 30, cash and cash equivalents were $78.2 million, with short- and long-term investments of $42.3 million, for combined cash and investments of $120.5 million. Current assets were $111.7 million and current liabilities $19.5 million. The balance sheet reports no conventional borrowings; it includes an $8.7 million warrant liability.
- Total assets were $125.1 million and stockholders’ equity was $95.5 million. Nine-month financing cash flow was $60.2 million, including $56.5 million net proceeds from a public offering. Investing cash outflow of $44.0 million largely reflected purchases of guaranteed investment certificates.
Changes, unusual items, and outlook
- Net loss increased year over year, reflecting higher operating costs and a larger noncash warrant revaluation charge. The warrant liability fair-value increase was $5.1 million in Q3 and $12.9 million for the first nine months. Q3 also included $3.1 million in foreign-exchange gains; these items make reported earnings volatile.
- Monsanto collaboration and option agreements, signed in January 2014, provide for payments over an approximately four-year option period and have a stated maximum potential transaction value of $86.2 million subject to milestones. At quarter-end, deferred revenue was $15.0 million, including $10.1 million classified as long-term.
- The BMS agreement expired after BMS declined an offered extension; Q3 revenue included release of the remaining deferred balance. The DoD’s initial TKM-Ebola funding target had been increased to $43.8 million. After quarter-end, in November 2014, the DoD exercised an option and awarded an additional $7 million for scale-up and GMP manufacture of an Ebola Guinea variant for approximately 500 treatment courses.
- Management stated that cash and investments were sufficient for at least the next 12 months, while noting that substantial additional funding would be needed for continued product development. Revenue was expected to fluctuate with contract activity and the timing of licensing, milestone, and royalty receipts.
- Pipeline plans included filing for TKM-HBV by year-end 2014 with clinical trials planned for early 2015, and reporting interim TKM-PLK1 data in Q4 2014. The company had deferred an IND filing for TKM-ALDH2 beyond 2014 and planned to identify another development candidate in Q4.
Risks and contingencies
- The FDA had placed the healthy-volunteer multiple-ascending-dose portion of the TKM-Ebola Phase I trial on partial clinical hold. The hold permitted potential use in people with suspected or confirmed Ebola infection, but the company cautioned it might not resolve the hold in 2014. The FDA could impose additional requirements or delays.
- Tekmira was pursuing arbitration with Alnylam over a disputed $5 million milestone related to ALN-VSP; no revenue had been recognized for the claim.
- The company’s development and commercialization depended on regulatory approvals, successful research, partner activity, and access to future financing. The filing cautioned that funding might not be available on acceptable terms and that programs could be delayed, reduced, or discontinued.
- Other disclosed obligations included a renewed facility lease with approximately $5.5 million in minimum rent and estimated operating costs, and contingent royalties payable to the Canadian government under an earlier funding agreement.
Important facts for investors to verify
- Confirm the issuer: the submitted text names Tekmira Pharmaceuticals Corporation, while the request identifies Arbutus Biopharma Corp.
- Review the status and outcome of the TKM-Ebola partial clinical hold, expanded-access use, and the subsequent $7 million DoD award.
- Track cash burn, the timing and recognition of Monsanto payments, DoD contract revenue, and whether management’s stated 12-month liquidity estimate was achieved.
- Check the outcome of the Alnylam arbitration and any effect on potential milestone revenue.
- Separate recurring operating performance from noncash warrant revaluations and foreign-exchange effects when assessing losses.