Cardiff Oncology, Inc. — Q2 2020 Form 10-Q
Business context and period: Clinical-stage oncology biotechnology company developing onvansertib, an oral PLK1 inhibitor, for cancer indications. This unaudited quarterly report covers the three and six months ended June 30, 2020; comparisons are with the same 2019 periods. The company changed its name from Trovagene, Inc. to Cardiff Oncology, Inc. in May 2020.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $42,633 | $38,348 | $110,337 | $100,369 |
| Operating expenses | $4.14 million | $4.26 million | $8.34 million | $8.28 million |
| Operating loss | $4.10 million | $4.22 million | $8.23 million | $8.18 million |
| Net loss | $4.12 million | $4.13 million | $8.21 million | $8.03 million |
| Net loss attributable to common stockholders | $7.40 million | $4.13 million | $11.49 million | $8.31 million |
| Basic and diluted loss per share | $0.51 | $0.76 | $0.94 | $1.75 |
Revenue consisted almost entirely of royalties and remained immaterial relative to expenses. Q2 R&D expense fell 13% to $2.48 million, mainly on lower clinical-trial, outside-service, travel and conference costs. Q2 SG&A rose 17% to $1.67 million, reflecting higher stock compensation, salaries and insurance costs. For the six-month period, R&D declined 5% while SG&A increased 13%.
Common-stockholder losses include non-cash deemed dividends on convertible preferred-stock beneficial conversion features: $3.27 million in Q2 and $3.27 million for the first half of 2020. Loss per share improved versus 2019 as weighted-average shares increased substantially; it should not be read as evidence of reduced cash burn.
Cash, liquidity and debt: Cash and cash equivalents were $27.75 million at June 30, up from $10.20 million at year-end 2019. Working capital was $23.86 million, versus $6.57 million at year-end. First-half operating cash use was $7.67 million, compared with $6.80 million in 2019; investing cash use was nil. Financing provided $25.23 million, including $18.80 million from stock, preferred stock and warrant sales and $6.13 million from warrant exercises. Management said cash should fund requirements for at least 12 months following issuance of the statements, but expected continuing losses and a need for further capital. The company had a $305,000 PPP loan at 0.98% interest, due April 2022, subject to potential forgiveness and eligibility review. Lease liabilities totaled $1.31 million. No off-balance-sheet arrangements were reported.
Material developments, outlook and risks
- Financing and dilution: The company completed multiple equity and warrant financings in 2020, including a June offering reported as $13.5 million gross proceeds. Common shares outstanding rose from 8.59 million at December 31, 2019 to 21.33 million at June 30, 2020; 23.23 million were reported outstanding as of August 6. Subsequent warrant exercises generated approximately $2.9 million net proceeds in July and August.
- Clinical programs: The company reported three active onvansertib trials: KRAS-mutated metastatic colorectal cancer (mCRC), metastatic castration-resistant prostate cancer (mCRPC), and relapsed/refractory acute myeloid leukemia (AML). It reported FDA Fast Track designation for second-line KRAS-mutated mCRC and initiated an expanded-access program. Company-reported interim mCRC data included clinical benefit in 10 of 11 evaluable patients at the May ASCO presentation; these are early-stage trial results, not confirmatory evidence of efficacy. For AML, the Phase 1b portion was complete, the recommended Phase 2 dose was set, and Phase 2 was enrolling.
- Outlook and funding risk: Cardiff expects operating losses and cash outflows for the foreseeable future and may need additional capital; future funding may not be available on acceptable terms and equity issuance could dilute stockholders. The filing provides no revenue, earnings or cash-flow guidance.
- COVID-19: Management said the impact remained uncertain. The pandemic could disrupt clinical-trial enrollment and operations, delay regulatory review, affect vendors, and reduce access to financing. It also contributed to an impairment charge of $34,169 on a vacated facility area after loss of sublease income and weaker commercial property conditions.
- Other items: Warrants classified as derivative liabilities were remeasured, producing a $42,037 first-half loss. A related-party arrangement with Leucadia Life Sciences and its associated consultant generated about $529,000 of first-half R&D expense. Management reported no material litigation accrual or disclosure, and no material change to previously disclosed risk factors other than COVID-19.
Important facts for investors to verify
- Whether interim mCRC, prostate cancer and AML findings hold up with larger samples, longer follow-up and complete trial disclosures.
- Clinical-trial enrollment, timelines and costs under COVID-19 conditions, and whether the stated cash runway remains adequate.
- The terms, potential conversion or exercise effects, and dilution associated with preferred stock, warrants and subsequent financings.
- PPP loan forgiveness eligibility and any repayment or penalty exposure.
- Whether low royalty revenue, ongoing operating cash burn and reliance on future financing materially change liquidity or the development plan.