Oncothyreon Inc. (ONTY)

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Oncothyreon Inc (ONTY)

Q3 2012 Earnings Call

November 07, 2012 4:30 pm ET

Executives

Julie Rathbun

Julie M. Eastland - Chief Financial Officer, Principal Accounting Officer, Secretary and Member of New Employee Option Committee

Robert L. Kirkman - Chief Executive Officer, President, Director and Member of New Employee Option Committee

Analysts

Simos Simeonidis - Cowen and Company, LLC, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Oncothyreon's Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] I would like to introduce your host for today's conference, Julie Rathbun with Investor Relations. Ms. Rathbun, you may begin.

Julie Rathbun

Thank you. Good afternoon, and welcome to Oncothyreon's financial results conference call for the third quarter of 2012.

With us this afternoon are Dr. Robert Kirkman, Oncothyreon's President and CEO; and Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development.

In the first part of the call, Ms. Eastland will review Oncothyreon's financial results for the third quarter of 2012. After that, Dr. Kirkman will provide a brief corporate and pipeline review and discuss upcoming milestones. We will then open the call to questions.

Before I turn the call over to Ms. Eastland, let me first remind you that during this call, we will be making a number of forward-looking statements. These forward-looking statements include Oncothyreon's expectations regarding the use and adequacy of cash resources, future expenses, the clinical development and commercial outlook for Stimuvax, the expected timing of the release of data related to Stimuvax, and the clinical development activities and expected data related to PX-866 and ONT-10. Forward-looking statements involve risks and uncertainties related to Oncothyreon's business and the general economic environment, many beyond the company's control. These risks, uncertainties and other factors could cause Oncothyreon's actual results to differ materially from those projected in forward-looking statements.

For a detailed description of these risks and uncertainties, you are encouraged to review our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and other corporate documents filed with the securities regulators in the United States and EDGAR and in Canada on SEDAR.

I would now like to introduce Julie Eastland, Oncothyreon's Chief Financial Officer and Vice President, Corporate Development. Julie?

Julie M. Eastland

Thank you, Julie. As reported in our press release this afternoon, our loss from operations increased in the third quarter of 2012 to $7.7 million from $6.4 million in the third quarter of 2011, and to $21.5 million in the 9 months ended September 30, 2012, compared to $18.1 million for the comparable period in 2011. This increase in loss from operations for the 3 and 9 months ended September 30, 2012, compared to prior year periods was primarily the result of increased research and development expenses due to the increased development activity for Oncothyreon's product candidates, and an increased general and administrative expenses. Net loss for the 3 months ended September 30, 2012, was $8.6 million or $0.15 per basic and diluted share compared with net income of $9.9 million or $0.24 per basic share, and $0.15 loss per diluted share for the comparable period in 2011.

Oncothyreon reported a net loss of $7.7 million or $0.15 per basic, and $0.41 loss per diluted share for the 9 months ended September 30, 2012, compared with a net loss of $31.2 million or $0.85 per basic and diluted share for the comparable period in 2011. The net loss for the 3 months ended September 30, 2012, compared to the prior year period's net income was primarily attributable to noncash income of $16.6 million as a result of the change in the fair value of warrant liability in the prior year and increases in research and development expenses and general and administrative expenses. The decrease in net loss for the 9 months ended September 30, 2012, compared to the prior year period, was primarily attributable to noncash income of $14.3 million as a result of the change in the fair value of the warrant liability in 2012, compared to the non-cash expense of $12.8 million in 2011, offset by increases in our research and development expenses and G&A expenses.

As we have discussed in previous calls, our net income or loss is subject to significant variability as a result of these changes in warrant liability. This arises because some of our outstanding warrants have provisions that, under certain circumstances, could potentially require us to settle the warrants with cash. These settlement provisions require us to carry these warrants as a liability on our balance sheet. Changes in the value of this liability arising primarily from changes in the price of our common stock flow through the income statement, causing these fluctuations. Because this change is all noncash, we think it makes more sense for investors to focus on our operating results, which I discussed at the start of my talk.

Turning to our cash position. As of September 30, 2012, Oncothyreon's cash, cash equivalents and investments were $91.2 million compared to $66.4 million at December 31, 2011. The $24.8 million increase was attributable to the closing of an underwritten public offering in April of 2012 of 13,512,500 shares of Oncothyreon common stock, which generated net proceeds of approximately $50.3 million. This increase was offset in part by $19.8 million in cash used in operations, $4.1 million cash used in repayment in full for a term loan with General Electric Capital Corp. and $0.9 million used for principal payments on notes and lastly, $0.7 million used in capital expenditures during the 9 months ending September 30, 2012.

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