Filing summary
Important identification note: The supplied filing is OvaScience, Inc.’s Form 10-K for the fiscal year ended December 31, 2015, filed February 26, 2016. It is not a Tempest Therapeutics filing. The period is the full 2015 fiscal year, with quarterly data for Q4 included.
Business context and reporting period
OvaScience was a development-stage fertility company commercializing AUGMENT outside the United States and developing OvaPrime and OvaTure, based on its EggPC-cell technology. AUGMENT was the only treatment generating revenue; the company reported limited commercial activity and no U.S. availability after the FDA advised it to file an IND. The company described its underlying science and treatment efficacy as unproven.
Key financial metrics
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $0.277 million | $0 |
| Costs of revenue | $2.249 million | $0 |
| Research and development | $18.433 million | $21.784 million |
| Selling, general and administrative | $51.594 million | $26.149 million |
| Operating loss | $71.999 million | $47.933 million |
| Net loss | $73.219 million | $49.520 million |
| Net loss per share, basic and diluted | $2.70 | $2.19 |
| Operating cash flow | $(50.286) million | $(30.588) million |
| Cash, cash equivalents and short-term investments at year-end | $126.662 million | $60.231 million |
| Working capital at year-end | $118.618 million | $51.704 million |
| Total liabilities at year-end | $11.763 million | $10.247 million |
FY 2015 gross loss was approximately $1.972 million, or a gross margin of approximately negative 712% of revenue; revenue was too small for this percentage to be a meaningful indicator of mature unit economics. No borrowings or funded debt are listed in the balance sheet data provided. Management said year-end cash and investments were expected to fund its current operating plan for at least 12 months, while cautioning that actual needs could be higher and additional funding might be required.
Q4 2015 revenue was $157,000, costs of revenue were $1.158 million, and net loss was $20.601 million, or $0.76 per share. Q4 operating expenses were $20.397 million.
Material changes versus prior comparable period
- Revenue began to be recognized in 2015, totaling $277,000, compared with none in 2014. Management expected near-term revenue growth to be modest and dependent on clinic enrollment, treatment volume, and pricing.
- Net loss increased 48% year over year. SG&A nearly doubled, rising $25.445 million (97%), primarily from hiring, international commercial expansion, and launch-related costs.
- R&D spending decreased 15%, or $3.351 million, mainly due to lower stock-based compensation and costs reclassified as commercial activity expanded.
- Operating cash use increased to $50.286 million from $30.588 million. The January 2015 public offering generated $124.1 million in net proceeds and was the primary reason year-end cash and investments rose to $126.7 million.
- Capital expenditures were $5.229 million, compared with $2.804 million in 2014. The company reported $19.337 million of stock-based compensation expense in 2015.
Outlook, risks, contingencies, and unusual items
- Management planned to expand AUGMENT in Japan, Western Europe, and Canada. A controlled, double-blind, randomized study with the IVI Group was expected to continue enrolling in 2016; the filing provides no definitive efficacy conclusion.
- OvaPrime began a non-commercial preceptorship program in December 2015, but only biopsies had been performed by the filing date. Management expected to decide by year-end 2016 whether to advance the program. OvaTure remained in preclinical development, with further work and regulatory permissions needed to define a clinical path.
- Regulatory classification is a major uncertainty. The company believed AUGMENT and potentially OvaPrime could be offered in certain non-U.S. markets without traditional premarket approval, but authorities could disagree and require trials or marketing authorization. The FDA’s 2013 untitled letter prompted suspension of U.S. AUGMENT activity.
- In 2015, the company wrote off $0.4 million of supplies due to lower-than-expected AUGMENT cycles and a further $0.5 million due to an anticipated manufacturing-process change. These charges were included in costs of revenue.
- A securities class action filed in October 2015 alleged misstatements and omissions related to the January 2015 offering. The company intended to defend the case; it said potential losses could not be estimated. The court remanded the case to Massachusetts Superior Court in February 2016.
- OvaXon, a 50/50 joint venture with Intrexon, generated a $1.561 million equity-method loss in 2015. Each party contributed an additional $0.8 million in January 2016.
- The company reported no off-balance-sheet arrangements. Contractual obligations totaled $5.509 million, mainly operating leases. Auditors gave unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Confirm the issuer: the supplied report is for OvaScience, Inc., not Tempest Therapeutics.
- Review subsequent clinical and independent evidence on AUGMENT’s safety and effect on pregnancy and live-birth outcomes, rather than relying on early or company-described results.
- Track treatment volumes, realized pricing, deferred revenue, and whether commercial revenue can grow enough to offset operating and processing costs.
- Monitor cash burn and financing needs against management’s stated 12-month runway, including costs of international expansion and development programs.
- Check country-by-country regulatory decisions and progress of the IVI study, OvaPrime program, and OvaTure development.
- Follow the class action’s outcome and any material change in the company’s legal exposure.