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ONCOSEC MEDICAL Inc (ONCSQ)·Q3 2017 Earnings Summary

Executive Summary

  • Q3 FY2017 net loss improved year over year and sequentially as OpEx declined: net loss was $(4.56) million or $(0.22) per share vs $(6.25) million or $(0.37) per share in Q3 FY2016 and $(5.39) million or $(0.27) per share in Q2 FY2017 .
  • Cash and cash equivalents fell to $16.11 million at April 30, 2017 (from $20.54 million at Jan 31, 2017), and management disclosed substantial doubt about going concern absent new financing; additional capital likely needed in 1Q calendar 2018 .
  • Strategic execution advanced: FDA Fast Track designation for ImmunoPulse IL-12, Merck KEYTRUDA supply collaboration signed, PISCES Phase II registration-directed trial targeted to open for enrollment in June 2017 with top-line data targeted for 4Q 2017 .
  • Clinical signals remain supportive: prior Phase II combo data in predicted anti–PD-1 non-responders showed 43% objective response and 48% best overall response at 24 weeks; 33% ORR in patients with prior checkpoint therapy .

What Went Well and What Went Wrong

  • What Went Well

    • Pivotal-enabling setup: Merck collaboration finalized to supply KEYTRUDA for the PISCES registration-directed Phase II; PISCES planned to open in June 2017 with BORR as primary endpoint .
    • Regulatory momentum: FDA Fast Track designation received for ImmunoPulse IL-12 in metastatic melanoma post-pembro/nivo progression, expediting interactions and potential review .
    • Cost discipline: YoY decreases in R&D ($2.66M vs $3.38M) and G&A ($1.90M vs $2.87M) drove a narrower quarterly loss YoY; management cited lower trial enrollments/management costs and reduced stock comp .
    • Management quote: “We have made significant progress this past quarter in advancing our clinical and regulatory pathway for ImmunoPulse IL-12…working diligently on…PISCES…puts us in a favorable position to secure the first approval in the anti-PD-1 non-responder patient population in advanced melanoma.” — Punit Dhillon, CEO .

  • What Went Wrong

    • Liquidity risk escalated: Cash declined to $16.11M, with disclosure of substantial doubt about going concern and an estimate that additional capital is needed in 1Q calendar 2018 .
    • Enrollment/execution headwinds: R&D decreased partly because of fewer enrolling trials and lower enrollments; TNBC study required protocol amendments to improve enrollment .
    • Cash burn remains material: Net cash used in operating activities was $12.71M for the first nine months; management projected $4.5M cash requirements for Q4 FY2017 ($1.5M/month) .

Financial Results

P&L snapshot (oldest → newest)

MetricQ3 FY2016Q1 FY2017Q2 FY2017Q3 FY2017
Revenue ($)$0 $0 $0 $0
R&D Expense ($)$3,376,757 $3,099,739 $2,882,611 $2,656,073
G&A Expense ($)$2,874,362 $2,502,455 $2,504,700 $1,904,899
Net Loss ($)$(6,251,409) $(5,603,585) $(5,387,311) $(4,560,972)
EPS (Basic & Diluted)$(0.37) $(0.29) $(0.27) $(0.22)
Weighted Avg Shares16,971,214 19,020,982 19,733,015 20,704,393

Balance sheet and liquidity (period-end)

MetricOct 31, 2016 (Q1 FY2017)Jan 31, 2017 (Q2 FY2017)Apr 30, 2017 (Q3 FY2017)
Cash & Cash Equivalents ($)$24,350,898 $20,541,455 $16,106,338
Total Assets ($)$28,089,745 $24,307,910 $19,971,538
Total Liabilities ($)$4,451,104 $4,606,984 $4,009,209
Total Stockholders’ Equity ($)$23,638,641 $19,700,926 $15,962,329
Working Capital ($)——$14,281,005

Additional operating cash flow

Metric9M FY2017
Net Cash Used in Operating Activities ($)$(12,712,409)

Notes:

  • Company operates a single segment focused on development of intratumoral immunotherapies .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cash runway / Going concernAs of Q2 FY2017 vs Q3 FY2017“Funds…sufficient to allow it to continue to operate its business for at least the next 12 months” (as of Jan 31, 2017) “Estimates it will need additional capital in the first calendar quarter of 2018; substantial doubt about ability to continue as a going concern” Lowered / More cautious
PISCES enrollment timingFY2017Objective to initiate Phase IIb registration-directed trial and finalize drug supply “PISCES…will be open for enrollment in June 2017” Firmed timeline
PISCES data timingFY2017—“Top-line data targeted for fourth quarter of 2017” New disclosure
OpEx / Cash requirementsQ4 FY2017—Cash requirements estimated at ~$4.5M for Q4 FY2017; expected average ~$1.5M/month for remainder of FY2017 New disclosure
Drug supply for PISCESFY2017—Merck to supply KEYTRUDA under collaboration & supply agreement New collaboration
Regulatory statusFY2017—FDA Fast Track designation granted for IL-12 in post–PD-1 melanoma Positive update

Earnings Call Themes & Trends

Note: No Q3 FY2017 earnings call transcript was published in the filings set; themes below reflect management disclosures across Q1–Q3 releases and the 10-Q.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Regulatory pathway/expediteQ1: Focus on initiating melanoma registration-directed study; positioned to meet milestones into calendar 2018 . Q2: Confident in pathway; Fast Track secured; focus on initiating Phase IIb and finalizing supply .Fast Track designation highlighted; PISCES to open June 2017; BORR primary endpoint; top-line targeted 4Q17 .Strengthening regulatory momentum
Merck collaboration—Collaboration & supply agreement with Merck to provide KEYTRUDA for PISCES .New strategic validation
R&D execution/costsQ1: Lower costs from completion of monotherapy trial and next-gen prototype work; leveraging in-house capabilities . Q2: R&D down from fewer enrollments/active trials; lower stock comp/salaries .R&D & G&A down YoY; initial site start-up in Australia; fewer enrolling trials; continued preclinical platform work .Leaner OpEx, targeted investments
Clinical signalsQ1: Early combo response data referenced qualitatively .43% objective response; 48% best overall response at 24 weeks in predicted non-responders; 33% ORR in prior checkpoint-treated subgroup .Supportive efficacy signals maintained
Liquidity/runwayQ1: At least 12 months runway as of Oct 31, 2016 . Q2: At least 12 months as of Jan 31, 2017 .Additional capital likely needed in 1Q CY2018; substantial doubt about going concern .Deteriorating runway

Management Commentary

  • Strategic focus and regulatory progress: “We have made significant progress this past quarter in advancing our clinical and regulatory pathway for ImmunoPulse IL-12…working diligently on…PISCES.” — Punit Dhillon, CEO .
  • Rationale for Merck alliance: “This collaboration is supported by our recent clinical data demonstrating the potential ability of ImmunoPulse IL-12 to rescue patients who do not initially respond to anti-PD-1 therapy in melanoma…By working with innovative immuno-oncology leaders, this alliance underpins OncoSec’s strategy…” — Punit Dhillon .
  • Q1 strategic priorities: “Based on our current cash runway, we are positioned to meet our value-driving clinical and regulatory milestones into calendar 2018…primary focus…initiate a melanoma registration-directed clinical study.” — Punit Dhillon .
  • Q2 execution outlook: “Since we’ve secured Fast Track designation, our main objectives are focused on initiating the Phase IIb registration-directed trial… and finalizing a drug supply agreement for this trial.” — Punit Dhillon .

Q&A Highlights

  • No Q3 FY2017 earnings call transcript was published in the filings set; no Q&A to report.

Estimates Context

  • Wall Street consensus (S&P Global) for EPS and revenue was not available for ONCSQ this quarter (coverage/mapping unavailable), so no beat/miss analysis could be performed relative to estimates.

Key Takeaways for Investors

  • Near-term catalyst path is clear: PISCES enrollment planned for June 2017 with top-line targeted for 4Q 2017; positive combo signals to date (43% OR; 48% best response at 24 weeks in predicted non-responders) set expectations for registrational trajectory .
  • Regulatory de-risking via Fast Track could accelerate timelines and reviews if clinical data are supportive .
  • Strategic validation and de-risked supply through the Merck KEYTRUDA collaboration support combination feasibility and trial execution .
  • Liquidity is the central risk: cash of $16.11M and management’s guidance that funding is needed by 1Q CY2018, with explicit going concern language; expect financing and/or non-dilutive sources to be a stock overhang/catalyst .
  • OpEx discipline is evident with YoY reductions in R&D and G&A and a smaller quarterly loss; however, cash burn remains substantial (~$12.7M used in operations over nine months; ~$4.5M projected for Q4 FY2017) .
  • Execution watch items: TNBC study enrollment (protocol amended), Australian site start-up costs, and timing discipline for PISCES milestones .
  • Trading lens: stock likely to react to trial initiation, interim data updates, and any balance sheet actions; given going concern disclosure, funding timing and terms are key tactical drivers .