On August 7, 2018 Tocagen Inc. (Nasdaq: TOCA), a clinical-stage, cancer-selective gene therapy company, reported financial results and business highlights for the second quarter ended June 30, 2018 (Press release, Tocagen, AUG 7, 2018, View Source [SID1234528487]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"We conclude the mid-point of 2018 on a high note, with robust site activation and enrollment in our Phase 3 Toca 5 clinical trial, a license agreement with ApolloBio for development and commercialization of Toca 511 & Toca FC in the greater China region, and continued progress in our pipeline-expanding R&D efforts," said Marty Duvall, chief executive officer of Tocagen. "We expect to continue to achieve a number of milestones during the second half of the year, including the completion of enrollment for the Toca 5 clinical trial in patients with recurrent brain cancer and conducting the first of two pre-planned interim analyses of the trial. During the second half of 2018, we also plan to advance our R&D programs to build our gene therapy pipeline."

Tocagen finished 2017 with $88.7 million in cash and cash equivalents. The cash guidance for 2018, provided early this year, implied a year-end projected cash balance of approximately $40 million. Recent progress has substantially strengthened Tocagen’s cash position to execute, expand and explore the company’s highly differentiated cancer-selective gene therapy platform. Tocagen now expects to conclude 2018 with approximately $70 million in cash and cash equivalents.

Second Quarter 2018 and Recent Highlights

Closed license agreement with ApolloBio: In July 2018, Tocagen and ApolloBio closed a license agreement to develop and commercialize Toca 511 & Toca FC within the greater China region. Under the terms of the agreement, Tocagen received an initial upfront payment of $16 million, before taxes. Tocagen is eligible to receive additional potential payments of $4 million in near-term development milestones, including completion of enrollment in the ongoing Phase 3 Toca 5 study, and an additional $107 million in development and commercial milestones, plus additional double-digit tiered sales royalties.
Restructured 2015 venture debt to strengthen cash position: In May 2018, Tocagen entered into an amended and restated loan and security agreement with Oxford Finance and Silicon Valley Bank. Under the agreement, approximately $18 million was added to Tocagen’s cash reserve and may be used to satisfy the company’s future working capital needs and to fund its general business requirements. Additionally, further principal amortization on this debt was deferred until January 2020.
Presentation and publication of Toca 511 & Toca FC data: At the 2018 American Academy of Neurology (AAN) Annual Meeting and the 2018 American Association of Neurological Surgeons (AANS) Annual Scientific Meeting, research collaborators presented updated durable response data from the Phase 1 study involving patients with recurrent high-grade glioma (rHGG) who received Toca 511 & Toca FC at the time of surgical resection. In May 2018, data were published online in Neuro-Oncology demonstrating the multiyear durable responses observed in rHGG patients treated in the Toca 511 & Toca FC Phase 1 trial. These data will be included in the Neuro-Oncology October print edition to be distributed at the 23rd Annual Scientific Meeting and Education Day of the Society for Neuro-Oncology.
Advanced Toca 521 as part of pipeline-building strategy: At the 2018 Annual Meeting of The American Society of Gene & Cell Therapy (ASGCT) (Free ASGCT Whitepaper), research collaborators introduced Toca 521, a retroviral replicating vector expressing a single-chain variable fragment targeting PD-L1. The preclinical data demonstrate Toca 521 has robust, durable and highly selective anti-tumor activity superior to systemically administered anti-PD-1 or anti-PD-L1 monoclonal antibodies. These data inform Tocagen’s plans to advance Toca 521 into investigational new drug application (IND) enabling studies this year.
Second Quarter 2018 Financial Results

Research and Development (R&D) Expenses: R&D expenses were $12.8 million for the quarter ended June 30, 2018, compared to $6.6 million for the quarter ended June 30, 2017. The increase in R&D expenses in 2018 was primarily driven by higher costs to support the expanded Toca 5 trial, manufacturing activities related to Toca 511 & Toca FC, and personnel and related costs due to increased headcount.

General and Administrative (G&A) Expenses: G&A expenses were $2.6 million for the quarter ended June 30, 2018, compared to $2.0 million for the quarter ended June 30, 2017. The increase in G&A expenses was primarily due to increased stock-based compensation expense.

Net Loss: Net loss was $16.1 million, or $0.81 per common share (basic and diluted), for the quarter ended June 30, 2018, compared to a net loss of $9.1 million, or $0.56 per common share (basic and diluted), for the quarter ended June 30, 2017. The 2018 calculation is based on 19.9 million average common shares outstanding for the second quarter of 2018, compared to 16.3 million average common shares outstanding for the second quarter of 2017. The average common shares outstanding for the second quarter of 2017 includes the issuance of 9.8 million common shares, as well as the conversion of convertible preferred stock and convertible promissory notes into 7.8 million common shares, upon Tocagen’s initial public offering in April 2017.

2018 Six-Month Results

R&D Expenses: R&D expenses were $23.2 million for the six months ended June 30, 2018 compared to $13.3 million for the six months ended June 30, 2017. Similar to the second quarter results, the R&D expenses primarily reflect increased costs to support the expanded Toca 5 Phase 3 clinical trial, manufacturing activities related to Toca 511 & Toca FC, and personnel and related costs due to increased headcount.

G&A Expenses: G&A expenses were $5.0 million for the six months ended June 30, 2018 compared to $4.0 million for the first six months ended June 30, 2017, with the increase primarily driven by higher stock-based compensation expense.

Net Loss: Net loss for the first six months ended June 30, 2018 was $29.0 million, or $1.45 per common share (basic and diluted), compared to a net loss of $18.1 million, or $1.95 per common share (basic and diluted), for the six months ended June 30, 2017. This calculation is based on 19.9 million average common shares outstanding for the six months ended June 30, 2018, compared to 9.3 million average shares outstanding for the same period in 2017.

Cash Position and Guidance

Cash, cash equivalents and marketable securities were $79.5 million at June 30, 2018 compared to $88.7 million at December 31, 2017. The decrease of approximately $10 million reflects the use of $29 million of cash during the six months ended June 30, 2018, partially offset by the net proceeds of approximately $18 million from the restructured debt and a $1 million installment payment from ApolloBio. Subsequent to the end of the second quarter, Tocagen closed its license agreement with ApolloBio and received a total upfront payment of $16 million before applicable China taxes. Tocagen reiterates its annual cash burn guidance and continues to estimate the total cash used in 2018 to fund operations, capital expenditures and debt amortization will not exceed $50 million, resulting in a year-end cash balance of approximately $70 million.

About Toca 511 & Toca FC

Tocagen’s lead product candidate is a two-part cancer-selective immunotherapy comprised of an investigational biologic, Toca 511 and an investigational small molecule, Toca FC. Toca 511 (vocimagene amiretrorepvec) is a retroviral replicating vector (RRV) that selectively infects cancer cells and delivers a gene for the enzyme, cytosine deaminase (CD). Through this targeted delivery, infected cancer cells carry the CD gene and produce CD. Toca FC is an orally administered, extended-release formulation of the prodrug, 5-fluorocytosine (5-FC), which is converted into an anti-cancer drug, 5-fluorouracil (5-FU), when it encounters CD. 5-FU kills cancer cells and immune-suppressive myeloid cells in the tumor microenvironment resulting in anti-cancer immune activation and subsequent tumor killing.