Oragenics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. The company is a pre-revenue biotechnology developer focused on the TerraCoV2 COVID-19 vaccine candidate and lantibiotic antibiotics. It reported no significant operating revenue.
Financial performance and position
| Metric | Q3 2020 / Sep. 30, 2020 | Comparable period / prior year-end |
|---|---|---|
| Revenue | No significant operating revenue reported | No clear revenue value provided |
| Operating expenses | $4.51 million for Q3; $22.09 million for nine months | $3.92 million and $12.22 million, respectively, in 2019 |
| Net loss | $4.50 million for Q3; $22.02 million for nine months | $3.84 million and $11.97 million, respectively, in 2019 |
| Net loss per share | $0.08 for Q3; $0.42 for nine months | $0.08 and $0.29, respectively, in 2019 |
| Operating cash flow | Used $13.32 million in the first nine months | Used $9.08 million in the first nine months of 2019 |
| Cash and cash equivalents | $10.04 million | $18.27 million at Dec. 31, 2019 |
| Working capital | $9.43 million surplus | $16.99 million surplus at Dec. 31, 2019 |
| Total assets / equity | $11.28 million / $9.64 million | $19.75 million / $17.23 million at Dec. 31, 2019 |
| Short-term notes payable | $472,148 | $143,864 at Dec. 31, 2019 |
Gross margin is not meaningful given the absence of significant revenue. The company also reported $712,917 in operating lease liabilities ($173,536 current and $539,381 long-term). No income tax benefit was recorded.
Changes and unusual items
- Nine-month R&D expense more than doubled, rising 100.4% to $18.76 million. The increase primarily reflected the May acquisition of Noachis Terra and TerraCoV2 development; the acquisition’s $9.96 million fair-value consideration was expensed as in-process R&D. R&D also included $1.22 million in contingent consideration paid to the former Noachis Terra shareholder following warrant exercises.
- Q3 R&D increased 14.0% to $3.50 million; G&A rose 18.4% to $1.01 million. Nine-month G&A increased 16.7% to $3.34 million.
- Cash declined by $8.22 million during the first nine months. Financing provided $5.10 million, mainly from warrant exercises; Q3 exercises generated $5.15 million gross proceeds. The company issued 14.88 million net additional common shares between year-end 2019 and September 30, 2020, including acquisition shares and warrant exercises.
- At September 30, 20.51 million warrants remained outstanding. The 9.2 million acquisition-related warrants have a $1.25 exercise price and exercise conditions; exercise would increase dilution.
Outlook, risks and contingencies
- Liquidity and going concern: Management said cash, together with proceeds from recent warrant exercises, was expected to fund the business as structured into the first quarter of 2021. The filing states there is substantial doubt about the company’s ability to continue as a going concern beyond that point. Additional funding is not committed and may be unavailable or dilutive; failure to raise capital could force program reductions or delays.
- TerraCoV2: In October 2020, the FDA broadly supported the planned preclinical approach in feedback to a Type B Pre-IND meeting request. The company anticipated filing an IND in Q2 2021 and beginning Phase 1 after FDA approval. Development at the planned pace depends on additional financing.
- BARDA: In September, BARDA declined to enter negotiations, citing a combination of factors including funding availability, despite noting alignment with its mission.
- Other pipeline: OG716 remained in nonclinical development for C. difficile. The company said timing of an IND depends on available human, material and financial resources.
- Other obligations and risks: Forgiveness of the $132,088 PPP loan was pending. The NIH license includes royalties and milestone obligations and may be terminated or modified for specified breaches or missed milestones. The Lantibiotic ECC includes substantial contingent milestone payments, none achieved by September 30, 2020. COVID-19 could disrupt supply, research, manufacturing or clinical timelines. Management reported disclosure controls were effective and no material change in internal controls during the quarter.
Key facts for investors to verify
- Current cash runway and any financing completed after September 30, 2020, including terms, dilution and resulting liquidity.
- Whether the TerraCoV2 IND filing and Phase 1 start remain on schedule, and the funding required to reach those milestones.
- Progress toward BARDA, grant, licensing or partnership funding after BARDA declined negotiations.
- Warrant exercise activity, remaining potential dilution, and contingent payments owed to the former Noachis Terra shareholder.
- Status of PPP loan forgiveness and any material changes to NIH or lantibiotic license obligations.