Ovid Therapeutics Inc. annual report, FY2023

Ovid Therapeutics Inc. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. The filing is an annual Form 10-K, not a standalone fourth-quarter filing. Ovid is a development-stage biopharmaceutical company focused on epilepsies and neurological disorders with seizure symptoms. It has no products approved for commercial sale and has generated no product-sales revenue.

Financial Performance and Position

Metric	FY2023	FY2022	Change
Total revenue	$0.4 million	$1.5 million	Down $1.1 million
Research and development expense	$28.6 million	$24.6 million	Up $4.0 million
General and administrative expense	$31.1 million	$32.4 million	Down $1.3 million
Total operating expenses	$59.7 million	$57.1 million	Up $2.6 million
Loss from operations	$59.3 million	$55.5 million	Loss increased $3.7 million
Other income, net	$6.9 million	$1.4 million	Up $5.6 million
Net loss	$52.3 million	$54.2 million	Loss narrowed $1.8 million
Basic and diluted loss per share	$0.74	$0.77	Improved
Cash used in operating activities	$45.8 million	$55.2 million	Improved $9.4 million

Revenue consisted primarily of royalties. Ovid has no commercial drug-sales revenue.
R&D spending increased primarily because of additional development activity for OV888 (GV101) and OV329.
Other income included $4.9 million of interest and accretion income on U.S. Treasury investments and a $2.0 million unrealized gain on long-term equity investments.
Stock-based compensation was $7.3 million, compared with $6.6 million in 2022.
At December 31, 2023, cash, cash equivalents and marketable securities totaled $105.8 million, compared with $129.0 million at year-end 2022. Working capital was $98.1 million and accumulated deficit was $277.9 million.
Total assets were $144.0 million and total liabilities were $56.2 million. The filing identifies no traditional borrowings, but liabilities included a $30.0 million royalty monetization liability to Ligand and $16.0 million of lease liabilities.
The company reported no income tax provision. It maintains a full valuation allowance against deferred tax assets and disclosed approximately $150.2 million of federal NOL carryforwards, subject to potential Section 382 limitations.

Cash Flow, Liquidity and Capital Resources

Operating cash use was $45.8 million. Investing cash use was $2.6 million, primarily involving investment purchases and maturities and a long-term equity investment.
Financing cash inflow was $30.5 million, primarily the $30.0 million received from Ligand for a 13% interest in future soticlestat royalties and milestones.
Cash, cash equivalents and restricted cash decreased by $17.8 million during 2023 to $29.0 million, while cash, cash equivalents and marketable securities totaled $105.8 million at year-end.
Management stated that available cash, cash equivalents and marketable securities are expected to fund current and planned operations into the first half of 2026. The formal liquidity disclosure also states funding for at least 12 months from filing.
Ovid has no committed external source of liquidity and expects to require additional capital to advance development programs and potentially commercialize products. Its November 2023 shelf registration permits issuance of up to $250.0 million of securities, including up to $75.0 million under an ATM program; no ATM shares were sold in 2023.
The company has a 10-year headquarters lease with approximately $21.6 million of remaining undiscounted minimum commitments, including approximately $2.3 million due in 2024.

Material Changes and Business Developments

Ovid streamlined its organization and paused certain non-core genetic medicine programs, including OV815, OV825 and OV882, to prioritize small-molecule development. It intends to pursue out-licensing or collaboration opportunities for those programs.
In April 2023, Ovid invested $10.0 million in Graviton Bioscience and obtained rights to OV888 (GV101) and related ROCK2 inhibitors. Graviton is responsible for development through Phase 2, while Ovid will fund later development and commercialization; potential royalties to Graviton are in the mid- to high-teens.
In October 2023, Ovid monetized 13% of its soticlestat royalty and milestone interest to Ligand for $30.0 million and retained 87%. The proceeds are accounted for as a royalty monetization liability rather than conventional revenue.
Ovid recorded a $2.0 million unrealized gain on long-term equity investments in 2023, compared with a $0.5 million unrealized loss in 2022. This included a $1.2 million gain on the Graviton investment and approximately $0.8 million on Marinus shares.
At December 31, 2023, 70.7 million common shares were outstanding. Outstanding options covered 15.1 million shares at a weighted-average exercise price of $3.87, and Series A preferred stock was convertible into 1.25 million common shares.

Pipeline, Outlook and Management Commentary

Soticlestat: Takeda was conducting two pivotal Phase 3 trials in Dravet syndrome and Lennox-Gastaut syndrome. Takeda stated that enrollment was complete, with topline data expected by September 2024 and a potential regulatory filing during its fiscal 2024. Ovid remains eligible for up to $660.0 million of regulatory and commercial milestones and tiered royalties from the low double digits up to 20%, subject to the Ligand participation.
OV888 (GV101): A selective ROCK2 inhibitor in a Phase 1 multiple-ascending-dose study for cerebral cavernous malformations. Ovid expected to initiate Phase 2 in the second half of 2024; no serious adverse events had been reported in the disclosed study status.
OV329: An oral next-generation GABA-AT inhibitor in Phase 1, with the study expected to complete in the second half of 2024. An intravenous formulation for acute seizures was undergoing IND-enabling work, with human safety studies anticipated in 2025 and a regulatory submission expected in late 2024.
OV350 and KCC2 portfolio: Preclinical development continued, including work on oral and intravenous formulations. Ovid expected to submit the first IND from the KCC2 portfolio by the end of 2024.
Management expects expenses and operating losses to continue for at least the next several years. Future funding may come from equity or debt financings, collaborations, licensing transactions or strategic alliances, potentially causing dilution or requiring Ovid to surrender valuable rights.

Principal Risks and Unusual Items

All current drug candidates remain in early clinical or preclinical development, and none has received marketing approval. Clinical, regulatory, manufacturing and commercial success is uncertain.
Ovid’s future liquidity depends in part on Takeda’s continued development and potential commercialization of soticlestat. Failure or delay of the Phase 3 program would eliminate or defer expected milestones and royalties.
Preclinical findings for OV329, including the potential for reduced ocular toxicity relative to vigabatrin, have not been established in humans.
The company relies on third parties for clinical trials, manufacturing, supply, and significant development activities, creating risks related to delays, quality, capacity and regulatory compliance.
Ovid faces patent validity, enforceability, infringement and licensing risks, as well as potential milestone and royalty obligations. The filing discloses aggregate contingent milestone obligations of up to approximately $660.3 million under certain license agreements, although timing and probability could not be reasonably estimated.
Inflation, higher interest rates, geopolitical tensions, supply-chain disruption and capital-market volatility could increase costs or impair access to financing.
The company is a smaller reporting company and non-accelerated filer. Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, but the independent auditor was not required to provide an internal-control attestation.
No material legal proceedings were reported.

Investor Verification Priorities

Verify the timing and results of Takeda’s soticlestat Phase 3 readout, regulatory filing and any resulting milestone or royalty payments.
Assess whether the disclosed cash runway remains adequate after actual 2024 spending, clinical-trial timing and business-development transactions.
Track Phase 1 safety, pharmacokinetic and biomarker data for OV888 and OV329 and the timing of planned Phase 2 or IND activities.
Review potential dilution from the $250.0 million shelf registration, $75.0 million ATM capacity, outstanding options and convertible preferred stock.
Reconcile future milestone, royalty and lease commitments with available liquidity and expected operating cash burn.
Evaluate the carrying values and subsequent financing or impairment risk of the private-company equity investments in Graviton and Gensaic.