Ovid Therapeutics Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. The filing is an annual Form 10-K, not a standalone fourth-quarter filing; quarterly results are not separately provided in the supplied text.
Business context
Ovid is a development-stage biopharmaceutical company focused on rare epilepsies and seizure-related neurological disorders. It has no products approved for commercial sale and has never generated revenue from drug sales. Its principal programs include OV329, a Phase 1 GABA-AT inhibitor; OV350 and related KCC2 transporter activators, in preclinical development; and early-stage genetic medicine programs. Takeda is independently advancing soticlestat in pivotal Phase 3 trials for Dravet syndrome and Lennox-Gastaut syndrome.
In 2022, Ovid conducted a strategic pipeline and organizational review, discontinued or out-licensed non-core programs, focused on rare epilepsies and seizure-related disorders, and reduced its workforce by approximately 20%. The Company had 44 full-time employees at year-end.
Key financial metrics
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total revenue | $1.5 million | $208.4 million | Down $206.9 million |
| Research and development expense | $24.6 million | $46.9 million | Down $22.3 million |
| General and administrative expense | $32.4 million | $37.2 million | Down $4.4 million |
| Operating loss | $55.5 million | Operating income of $124.2 million | Decrease of $180.1 million |
| Net loss | $54.2 million | Net income of $122.8 million | Decrease of $177.4 million |
| Net loss per diluted share | $0.77 | Net income per diluted share of $1.76 | Unfavorable change |
| Operating cash flow | $(55.2) million | $118.6 million | Decrease of $173.8 million |
| Cash, cash equivalents and marketable securities | $129.0 million | $187.8 million | Down $58.8 million |
| Accumulated deficit | $225.5 million | $171.4 million | Increase of $54.2 million |
FY2022 revenue primarily consisted of $0.5 million from the Healx license option and approximately $0.9 million of non-cash revenue related to the Marinus license. FY2021 revenue included the $196.0 million upfront payment from Takeda under the soticlestat royalty, license and termination agreement.
Investing cash outflow was $87.9 million, mainly reflecting purchases of U.S. Treasury investments and a long-term equity investment. Financing cash inflow was $0.2 million, primarily from option exercises and employee stock purchases. The Company reported no long-term debt and working capital of $124.4 million at December 31, 2022.
Material changes versus the prior comparable period
- Revenue fell sharply because FY2021 included the one-time $196.0 million Takeda upfront payment; no comparable payment was recorded in 2022.
- Research and development spending declined following termination of OV101 development, transfer of OV935 development to Takeda, and lower overall program activity. The 2021 period also included $12.3 million related to the AstraZeneca KCC2 license.
- General and administrative expenses decreased primarily due to lower legal and professional fees, partly offset by higher compensation and costs associated with the new headquarters lease.
- Cash resources declined from $187.8 million to $129.0 million, while the Company shifted a substantial portion of its liquidity into marketable securities.
- The Company entered into a 10-year headquarters lease. The lease has approximately $23.3 million of future minimum payments, including approximately $1.7 million due during 2023.
- Ovid invested $5.1 million in Gensaic preferred stock and entered into a collaboration covering up to three potential phage-derived genetic medicines.
- The Company ceased to be an emerging growth company effective December 31, 2022 and became subject to additional reporting requirements, including auditor attestation of internal control over financial reporting.
Guidance, outlook and management commentary
- Management stated that available cash, cash equivalents and marketable securities were expected to fund current operating plans into the first quarter of 2025; the filing also states funding for at least 12 months from filing.
- Management expects continuing operating losses and negative operating cash flows for at least the next several years and does not expect product-sale revenue in the near term.
- Ovid expected complete OV329 Phase 1 findings in the first half of 2024. The study evaluates pharmacokinetics, safety, tolerability and target engagement in healthy volunteers.
- Ovid expected to submit the first IND for the KCC2 program, including OV350, in 2024.
- Takeda stated that, if soticlestat Phase 3 trials are successful, it anticipated submitting NDAs in its fiscal year 2024, which runs from April 2024 through March 2025.
- Under the Takeda agreement, Ovid remains eligible for up to $660 million in regulatory and commercial milestones and tiered royalties of up to 20% of potential net sales. These payments are contingent on successful development, approval and commercialization.
- The Company has an effective shelf registration allowing up to $250.0 million of securities issuance, including up to $75.0 million under an ATM program. No shares had been sold under the ATM program as of December 31, 2022.
Principal risks and unusual items
- Ovid has no approved products, no drug-sales revenue and a history of significant losses. Its ability to continue operations will ultimately require successful development, regulatory approval, commercialization, licensing transactions or additional financing.
- Most controlled programs remain preclinical or early clinical, and preclinical or early-stage results may not predict later safety or efficacy.
- Failure or delay of Takeda’s soticlestat program would eliminate or defer potential milestones and royalties and could increase Ovid’s financing needs.
- Additional capital may be required on terms that could be unavailable or dilutive. The Company has no committed external source of liquidity.
- Ovid relies on third parties for manufacturing, clinical research, clinical sites and other development activities, creating execution, supply, quality and regulatory risks.
- Development and commercialization depend on patent protection, license compliance, market acceptance, reimbursement and competition from companies with greater resources.
- Contingent milestone obligations under license and collaboration agreements were disclosed at up to $279.3 million for certain in-licensed programs, excluding amounts whose timing or probability could not be reasonably estimated. The Gensaic agreement also includes potential milestones of up to $452.0 million.
- The Company had no material legal proceedings, and KPMG reported no critical audit matters. Management and KPMG concluded that internal control over financial reporting was effective at December 31, 2022.
Investor verification checklist
- Verify the timing, enrollment, safety and efficacy data for Takeda’s pivotal soticlestat trials and the likelihood of NDA submissions.
- Verify OV329 Phase 1 results, including target engagement, tolerability and any ocular-safety findings in humans.
- Verify the timing and funding requirements for the planned OV350 IND and other pipeline programs.
- Reconcile the reported $129.0 million liquidity balance with operating cash burn and assess whether the projected runway remains current.
- Review potential dilution from 12.96 million outstanding stock options, 1.25 million shares issuable upon conversion of Series A preferred stock, and future equity financing.
- Assess the probability and economic impact of contingent milestone, royalty and collaboration obligations.
- Monitor the Company’s ability to generate additional licensing revenue or secure financing before existing resources are exhausted.