UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ______________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 29, 2022, the registrant had
Table of Contents
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Page |
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PART I. |
3 |
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Item 1. |
3 |
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3 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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36 |
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i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the section titled “Risk Factors” under Part II, Item 1A, below and under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, under Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and under similar captions in our periodic reports filed with the SEC from time to time. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
1
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to new information, actual results or changes in our expectations, except as required by law.
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ONCORUS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except for par value data)
(unaudited)
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JUNE 30, |
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DECEMBER 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use asset |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Lease liability - current portion |
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Total current liabilities |
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Term loan, non-current |
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Lease liability - net of current portion |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
3
ONCORUS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Other income (expense): |
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Other income (expense) |
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( |
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Interest income (expense) |
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( |
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( |
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Total other income (expense), net |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Comprehensive loss: |
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Net unrealized loss on investments |
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$ |
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$ |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share—basic and diluted |
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$ |
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$ |
( |
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$ |
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$ |
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Weighted-average number of common shares outstanding—basic and diluted |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
4
ONCORUS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
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COMMON STOCK |
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SHARES |
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AMOUNT |
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ADDITIONAL |
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ACCUMULATED OTHER COMPREHENSIVE LOSS |
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ACCUMULATED |
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TOTAL |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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Proceeds from issuance of common stock, net of issuance costs of $ |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted common stock |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options to purchase common stock |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted common stock |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options to purchase common stock |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of stock options to purchase common stock |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of stock options to purchase common stock |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock under employee stock purchase plans |
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— |
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— |
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— |
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Issuance of warrants in connection with term loan financing |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
5
ONCORUS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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SIX MONTHS ENDED |
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2022 |
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2021 |
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Operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Loss on disposal of assets |
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Stock-based compensation |
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Non-cash interest expense related to term loan |
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Amortization of premium/discount on investments |
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Non-cash interest income |
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( |
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Changes in: |
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Prepaid expenses and other assets |
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Operating lease right-of-use asset |
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Tenant improvement allowance reimbursements |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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( |
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Operating lease liability |
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( |
) |
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Net cash used in operating activities |
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( |
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( |
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Investing activities |
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Purchase of property and equipment |
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( |
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( |
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Proceeds from sales and maturities of investments |
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Net cash provided by (used in) investing activities |
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( |
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Financing activities |
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Proceeds from exercise of stock options to purchase common stock |
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Proceeds from purchases of common stock under employee stock purchase plan |
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Proceeds from borrowings under term loan, net of issuance costs |
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Proceeds from issuance of common stock, net of issuance costs |
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Net cash provided by financing activities |
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Increase (decrease) in cash and cash equivalents |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash investing and financing activities |
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Issuance of warrants in connection with term loan financing |
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$ |
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$ |
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Purchase of property and equipment in accrued expenses and accounts payable |
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$ |
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$ |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
6
ONCORUS, INC.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts, unless otherwise noted)
1. Nature of the Business and Liquidity
Oncorus, Inc. (the “Company”) is a clinical-stage biopharmaceutical company focused on developing next-generation viral immunotherapies to transform outcomes for cancer patients. Using its two platforms, the Company is developing a pipeline of intratumorally and intravenously administered product candidates designed to selectively attack and kill tumor cells.
The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring and developing the Company’s technology, establishing the Company’s intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies, commencing a clinical trial and manufacturing scale-up activities. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.
On October 6, 2020, the Company completed an initial public offering (“IPO”), in which the Company issued and sold
Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into
In February 2021, the Company completed a follow-on public offering of its common stock in which it sold
In November 2021, the Company entered into an open market sale agreement pursuant to which the Company may issue and sell shares of its common stock from time to time for aggregate gross proceeds of up to $
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, possible failure of preclinical studies or clinical trials, the need to obtain marketing approval for its product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the need to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company expects to continue to incur losses from operations for the foreseeable future and additional capital will be required to fund future operations. The Company expects that its cash and cash equivalents as of June 30, 2022, will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months from the date these financial statements were issued.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals and estimates that impact the financial statements) which are considered necessary to present fairly the Company’s financial position as of June 30, 2022, its results of operations for the three and
7
six months ended June 30, 2022 and 2021, its changes in stockholders’ equity for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K (the "Annual Report") filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2022. The condensed consolidated balance sheet data as of December 31, 2021 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by GAAP. The results for the three and six months ended June 30, 2022, are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, included in its Annual Report. Any changes to the Company’s significant accounting policies are further discussed below.
COVID-19 Pandemic
With the ongoing COVID-19 global pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business, including its preclinical studies, its ongoing clinical trial, and its regulatory filings. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risks of COVID-19 transmission. Given the global impact and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition and results of operations could be materially adversely affected. The Company continues to closely monitor the COVID-19 pandemic and evolve its business continuity plans, clinical development plans and response strategy to mitigate any potential impact. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.
Going Concern
At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.
Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Oncorus Securities Corporation. All intercompany transactions have been eliminated in consolidation. The Company has
Use of Estimates
Deferred Offering Costs
The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances or debt financings as deferred offering costs until such equity issuances or debt financings are consummated. After consummation, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance or debt financing.
Debt Related Costs
The carrying value of the Company’s Term Loan is recorded net of issuance costs and discount relating to the issuance of warrants and fees paid to the lender. Debt related costs are amortized over the term of the debt using the effective interest method and recognized as interest expense.
8
Warrants
In accordance with ASC Topic 470-20-25, when the Company issues debt with warrants, the Company treats the warrants as a debt discount, recorded as a contra-liability against the debt, and amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the statements of operations. The offset to the contra-liability is recorded as additional paid-in capital in the Company’s consolidated balance sheet if the warrants are not treated as a derivative or as liability warrants. The Company determines the fair value of the warrants at issuance using the Black-Scholes option pricing model.
Concentration of Credit Risk and of Significant Suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments. The Company has all of its cash at one financial institution that management believes to be of high credit quality, in amounts that exceed federally insured limits. The Company invests its excess cash, in line with its investment policy, primarily in money market funds and high credit quality debt instruments.
The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for pre-clinical and clinical studies. The Company believes that its relationships with these organizations are satisfactory, and that alternative suppliers of these services are available in the event of the loss of one or more of these suppliers.
Restricted Cash
The Company maintains a balance in a segregated bank account in connection with a letter of credit for the benefit of the landlord in connection with an operating lease. As of June 30, 2022, restricted cash consisted of $
The Company includes its restricted cash balance in the cash, cash equivalents and restricted cash reconciliation of operating, investing, and financing activities in the unaudited interim condensed consolidated statements of cash flows.
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JUNE 30, |
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2022 |
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2021 |
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(in thousands) |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash shown in the unaudited interim consolidated statements of cash flows |
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$ |
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$ |
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Short-term investments consist of commercial paper, corporate bonds, asset-backed securities, and U.S. treasury securities with original maturities greater than three months. The Company may sell investments at any time for use in current operations even if the investments have not yet reached maturity. As a result, the Company classifies its investments, including securities with maturities beyond twelve months, as current assets. As of June 30, 2022, all investments are classified as available-for-sale securities, which are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are reported as a net amount in accumulated other comprehensive income or loss in stockholders’ equity until realized. Purchase premiums and discounts are amortized to interest income over the terms of the related securities. Realized gains and losses and declines in fair value that are deemed to be other than temporary are reflected in the statements of operations and comprehensive loss using the specific-identification method. The Company periodically reviews all available-for-sale securities for other than temporary declines in fair value below the cost basis whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company also evaluates whether it has plans or is required to sell short-term investments before recovery of their amortized cost bases. For the six months ended June 30, 2022, the Company has not identified any other than temporary declines in fair value of its short-term investments.
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
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Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly, such as quoted market prices, interest rates, and yield curves.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.
To the extent a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company believes that the carrying amounts of prepaid expenses, other current assets, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of those instruments.
Operating Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. The lease liability is measured at the present value of future lease payments, discounted using the discount rate as of the lease commencement date. Future lease payments may include payments that depend on an index or a rate (such as the consumer price index or other market index). The Company initially measures payments based on an index or rate by using the applicable rate at lease commencement and subsequent changes in such rates are recognized as variable lease costs. Variable payments that do not depend on a rate or index are not included in the lease liability and are recognized as they are incurred. The Company’s contracts typically do not have variable payments based on index or rate. The Company’s contracts that include a lease component generally include additional services that are transferred to the lessee (e.g., common-area maintenance services), which are non-lease components. Contracts typically also include other costs and fees that do not provide a separate service to the lessee, such as costs paid by the lessee to reimburse the lessor for administrative costs or payment for the lessor’s costs for property taxes, insurance related to the leased asset, and other lessor costs. The Company elected the practical expedient to account for the lease and its associated non-lease components as a single lease component for its real estate leases, including the office, lab, and its manufacturing space.
When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease. As the Company's leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the lease term and economic environment at the lease commencement date. The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. With limited exceptions, the nature of the Company's facility leases is such that there are no economic or other conditions that would indicate that it is reasonably certain at lease commencement that the Company will exercise options to extend the term.
The Company recognizes a corresponding right-of-use (“ROU”) asset, initially measured as the amount of lease liability, adjusted for any initial lease costs or lease payments made before or at the commencement of the lease, and reduced by any lease incentives. In certain instances when there is unpredictability of payout of leasehold improvement reimbursements, the ROU asset and lease liability will be adjusted on a prospective basis as construction related to leasehold improvements is performed over the life of the lease.
The Company’s leases consist of only operating leases. Operating leases are recognized on the balance sheet as ROU assets, lease liabilities current and lease liabilities non-current. Fixed rents are included in the calculation of the lease balances while certain variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected lease term on a straight-line basis. For leases with a term of one year or less, or short-term leases, the Company has elected to not recognize the lease liability for these arrangements and the lease payments are recognized in the consolidated statements of operations and comprehensive loss.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This amendment simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. It also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and simplifies the diluted earnings per share calculation in certain areas. ASU No. 2020-06 is effective for public companies for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. The Company early adopted the provisions of ASU 2020-06 effective January 1, 2022, using the modified retrospective method for transition with no significant impact to its consolidated financial statements at the time of adoption.
3. Cash Equivalents and Investments
The following tables summarize the amortized cost and fair value of the Company's cash equivalents and investments (in thousands):
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JUNE 30, 2022 |
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AMORTIZED COST BASIS |
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GROSS UNREALIZED GAINS |
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GROSS UNREALIZED LOSSES |
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ESTIMATED FAIR VALUE |
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Cash Equivalents |
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Money market funds |
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$ |
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