ONCOGENEX PHARMACEUTICALS INC. - COMMON SHARES Reports Operating Results (10-Q)

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Aug 05, 2010
ONCOGENEX PHARMACEUTICALS INC. - COMMON SHARES (OGXI, Financial) filed Quarterly Report for the period ended 2010-06-30.

Oncogenex Pharmaceuticals Inc. - Common Shares has a market cap of $96.1 million; its shares were traded at around $15.06 with and P/S ratio of 3.8. OGXI is in the portfolios of Bruce Kovner of Caxton Associates.

Highlight of Business Operations:

Under the Collaboration Agreement with Teva, we are required to spend $30 million towards development of OGX-011 which will include personnel costs for certain development activities. Teva is required to fund all other expenses under the Clinical Development Plan. A total of $5.9 million of costs incurred by the Company have been applied against the Companys $30 million funding commitment, resulting in a remaining funding commitment of $24.1 million at June 30, 2010. We expect compensation for our full time equivalent employee costs of between $1.5 and $2.5 million per year from 2010 to 2012, which will be applied against our funding commitment, or reimbursed to us from Teva on a cash basis. We expect to incur all remaining costs associated with the Clinical Development Plan by the fourth quarter of 2012.

In June 2009, the Company revised its sublease income assumptions used to estimate the fair value of the excess lease facility liability. These assumptions were subsequently revised again in December 2009. These changes in estimate resulted in increases in the fair value of the excess lease liability and $494,000 and $3,457,000 in charges to research and development expense recorded in June 2009 and December 2009, respectively, to reflect these changes in estimate. The estimated fair value of the liability remaining at December 31, 2009 with respect to excess facilities was $4,645,000. In the six months ended June 30, 2010, with respect to excess facilities, $665,000 was amortized into income recorded within research and development expense, resulting in a remaining liability of $3,980,000 at June 30, 2010.

Research and development expenses for the three months ended June 30, 2010 were $3.1 million, compared to $3.6 million in the corresponding period of 2009. The costs incurred in the three months ended June 30, 2010 were primarily due to manufacturing costs, clinical trial costs associated with the OGX-011 phase 3 clinical trials, and employee expenses. The costs incurred in the three months ended June 30, 2009 were due mainly to the purchase of OGX-011 drug compound from Isis, costs associated with the development of OGX-427, employee expenses and facility costs resulting from the reverse takeover of Sonus. The decrease in research and development expenses in the three months ended June 30, 2010 as compared with the three months ended June 30, 2009 was due to a change in estimate relating to the sublease assumptions associated with the Companys Bothell facility, which resulted in a $494 thousand expense in the second quarter of 2009. Clinical trial costs incurred in 2010 for the OGX-011 phase 3 clinical trials are applied against the non-refundable up-front payments received from Teva in December 2009, while manufacturing costs are reimbursable from Teva on a cash basis. See note 3 in the Notes to Financial Statements for further details on our collaboration with Teva.

An income tax recovery of $3.0 million was booked in the second quarter of 2010, as the Company received approval from the Israel Tax Authority (ITA) for a withholdings tax exemption on amounts received from Teva in relation to the collaboration. Under the Collaboration Agreement, Teva paid the Company upfront payments in the aggregate amount of $50 million of which $20 million was for an upfront milestone payment and subject to possible withholding taxes by the ITA. Prior to the receipt of the approval, Teva was granted a temporary exemption for a transfer of $17 million of the $20 million upfront milestone payment. Such temporary exemption was conditioned upon Tevas depositing $3 million, which represented 15% of the consideration paid according to the Collaboration Agreement, in a trust account in favor of the ITA, until a final decision would be made by the ITA regarding the request. Accordingly, prior to the receipt of the approval, the Company had recorded a $3 million liability recognizing this amount as an uncertain tax position. Following this approval from the ITA, this liability has been released, and the Company has recorded a $3 million income tax recovery. See note 3 in the Notes to Financial Statements for further details on our collaboration with Teva.

An income tax recovery of $3.0 million was booked in the second quarter of 2010, as the Company received approval from the ITA for its request for a withholdings tax exemption on amounts received from Teva in relation to the collaboration. Under the Collaboration Agreement, Teva paid the Company upfront payments in the aggregate amount of $50 million of which $20 million was for an upfront milestone payment and subject to possible withholding taxes by the ITA. Prior to the receipt of the approval, Teva was granted a temporary exemption for a transfer of $17 million of the $20 million upfront milestone payment. Such temporary exemption was conditioned upon Tevas depositing $3 million, which represented 15% of the consideration paid according to the Agreement, in a trust account in favor of the ITA, until a final decision would be made by the ITA regarding the request. Accordingly, prior to the receipt of the approval, the Company had recorded a $3 million liability recognizing this amount as an uncertain tax position. Following this approval from the ITA, this liability has been released, and the Company has recorded a $3 million income tax recovery. See note 3 in the Notes to Financial Statements for further details on our collaboration with Teva.

All of our operations to date have been funded through the sale of our debt and equity securities, and upfront payments received from Teva. As at June 30, 2010, OncoGenex had cash, cash equivalents, and short-term investments of $47.3 million in the aggregate as compared to cash, cash equivalents and short-term investments of $64.6 million as at December 31, 2009. As at June 30, 2010, OncoGenex does not have any borrowing or credit facilities available to it. In 2010, we anticipate that we will incur operating expenses of between $30 million and $32 million, and we anticipate ending the year with cash, cash equivalents, short-term investments and amounts receivable of between $32 million and $34 million. Based upon our current expectations, we believe our capital resources at June 30, 2010 will be sufficient to fund our currently planned operations into mid-2012 and expect that both planned phase 3 prostate cancer trials will be fully accrued by this time. Our currently planned operations are set forth below under the heading Operating Capital and Capital Expenditure Requirements.

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