Minerva Neurosciences, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Minerva is a clinical-stage CNS biopharmaceutical company with no approved products and no product revenue. Its portfolio includes MIN-101, MIN-117, MIN-202 and MIN-301.
Financial performance and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $3.8 million | $24.7 million | $12.3 million | $39.9 million |
| General and administrative expense | $1.9 million | $2.4 million | $5.6 million | $7.5 million |
| Net loss | $5.9 million | $27.2 million | $18.6 million | $49.5 million |
| Loss per share, basic and diluted | $0.24 | $1.53 | $0.81 | $4.58 |
Margins are not meaningful because the company had no revenue. Nine-month operating cash use was $17.7 million, versus $30.9 million in 2014. Investing activities used $22.4 million, mainly for marketable securities; financing provided $38.3 million. Cash and cash equivalents were $16.8 million at September 30, with $22.1 million of marketable securities and $80,000 restricted cash. Management reported total cash, cash equivalents and marketable securities of approximately $38.9 million.
Total assets were $89.3 million, total liabilities $26.3 million and stockholders’ equity $63.1 million. The balance sheet included $10.0 million of term-loan principal, net of discount and current portion. Current assets were $38.8 million and current liabilities $3.2 million. The company reported an accumulated deficit of $93.4 million.
Changes versus the prior comparable period
- Q3 and nine-month R&D expense fell substantially, primarily because 2014 included a one-time $22.0 million MIN-202 license fee paid to Janssen. Excluding that fee and stock compensation, R&D spending on development programs increased to $3.6 million for Q3 2015 from $2.6 million, and to $11.9 million for the first nine months from $4.9 million.
- Lower reported net losses also reflected sharply lower stock-based compensation, particularly in the nine-month comparison, and lower interest expense for the first nine months following repayment/conversion of prior debt in 2014.
- In March 2015, Minerva raised approximately $28.5 million net through a private placement of common shares and warrants. It also borrowed $10.0 million under a term-loan facility.
- Cash and cash equivalents declined by $1.7 million from year-end 2014, while marketable securities increased to $22.1 million. Total liabilities rose from $17.0 million to $26.3 million, mainly reflecting the new borrowing.
Outlook, programs and risks
- Management expected available cash, securities and financing proceeds to fund operations into the fourth quarter of 2016, but stated that additional capital would be needed to continue operations and fully fund clinical development. Financing may be unavailable or dilutive; without it, programs could be scaled back or discontinued.
- MIN-101: Phase IIb enrollment was ongoing in Europe; enrollment was expected through year-end 2015 and topline results in Q2 2016.
- MIN-117: Phase IIa enrollment was ongoing in Europe; the first patient had been dosed, with topline results expected in the first half of 2016.
- MIN-202: Phase Ib and Phase IIa studies were ongoing, with data expected in the first half of 2016. Minerva reported paying Janssen $3.8 million during the first nine months and having no further 2015 funding requirement under the agreement.
- MIN-301 remained preclinical; the company described future IND or European filing and Phase I testing as planned steps, subject to regulatory acceptance.
- The $10.0 million Term A loans bear fixed interest of 7.05%, mature August 2018 and are secured by substantially all assets except intellectual property. Interest-only payments extend through August 1, 2016, followed by 24 months of principal and interest payments. Up to $5.0 million of additional borrowing is conditional, including on specified clinical milestones. The filing says the company achieved the amended interest-only milestones and elected the extension.
- Key risks include clinical failure, enrollment and regulatory delays, dependence on licensors and CROs, limited capital, possible dilution, patent protection and commercialization uncertainty. The company had no commercially approved products. It reported no material litigation and said disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether actual cash burn and trial costs remain consistent with the stated runway into Q4 2016, and the timing and terms of any additional financing.
- Clinical enrollment, safety and efficacy data, and the timing of expected MIN-101, MIN-117 and MIN-202 readouts.
- Compliance with loan covenants and conditions, repayment schedule, collateral terms and eligibility for the conditional Term B tranche.
- Potential dilution: 24,721,143 common shares were outstanding at October 30, 2015; the filing also reports 6,281,661 private-placement warrants, 3,098,036 options outstanding and lender warrants.
- Whether the Janssen and MTPC license and collaboration obligations, milestone terms and territory rights change, and whether acquired IPR&D or goodwill requires impairment.