Ovid Therapeutics Inc. — Form 10-Q Summary
Reporting period: Quarterly and year-to-date periods ended June 30, 2020; filed August 10, 2020. Ovid is a clinical-stage biopharmaceutical company developing medicines for rare neurological disorders, including OV101 and OV935. The interim financial statements are unaudited.
Business Context and Reporting Period
- Ovid has not generated revenue from commercial drug sales since inception and remains dependent on equity financing, collaborations, licensing transactions and other capital sources.
- Key programs include OV101 for Angelman syndrome and Fragile X syndrome, and OV935, partnered with Takeda, for developmental and epileptic encephalopathies.
- COVID-19 caused delays in enrollment of the Phase 3 NEPTUNE trial. The trial size was expanded from approximately 60 to 90 patients, with topline data expected in the fourth quarter of 2020.
Financial Results and Metrics
| Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $16.0 million | $9.1 million | $30.7 million | $18.5 million |
| General and administrative expense | $7.1 million | $4.2 million | $12.8 million | $8.9 million |
| Total operating expenses | $23.1 million | $13.3 million | $43.4 million | $27.4 million |
| Net loss | $22.6 million | $13.1 million | $42.6 million | $26.9 million |
| Net loss per share | $0.41 | $0.34 | $0.77 | $0.78 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $35.6 million | $24.7 million |
- Margins: No meaningful revenue or gross margin was reported because the company has no commercial product revenue. Operating margin and net margin were negative.
- Cash and liquidity: Cash and cash equivalents were $41.3 million at June 30, 2020, compared with $41.9 million at December 31, 2019. Including short-term investments, liquidity declined from $76.7 million at year-end 2019 to $41.3 million at June 30, 2020.
- Working capital: Approximately $29.5 million at June 30, 2020.
- Debt: The company reported no long-term debt, capital leases or material non-cancelable purchase commitments.
- Balance sheet: Total assets were $45.4 million, total liabilities were $14.9 million and stockholders’ equity was $30.5 million at June 30, 2020. Accumulated deficit was $255.7 million.
- Stock-based compensation: $2.9 million was recorded for the six months ended June 30, 2020. Outstanding options totaled 8.2 million shares at a weighted-average exercise price of $5.68.
Material Changes Versus the Prior Comparable Period
- Second-quarter research and development expense increased $6.9 million, or approximately 76%, primarily because of higher clinical development and preclinical costs for OV101 and OV935.
- Six-month research and development expense increased $12.2 million, or approximately 66%.
- Second-quarter general and administrative expense increased $2.9 million, primarily due to higher legal, compliance, professional and pre-commercialization expenses.
- Six-month total operating expenses increased $16.1 million, and the six-month net loss increased $15.7 million.
- Operating cash burn increased to $35.6 million from $24.7 million in the prior-year period.
- Investing cash flow was $34.8 million in the first six months of 2020, primarily reflecting maturities of short-term investments rather than operating improvement.
- Financing cash flow was only $0.2 million in the first six months of 2020, compared with $30.6 million in the prior-year period from the February 2019 offering.
- In May 2020, holders converted 2,256 Series A preferred shares into 2.256 million common shares. Common shares outstanding increased to 57.1 million at June 30, 2020 from 54.7 million at December 31, 2019.
Guidance, Outlook, Risks and Unusual Items
- Management expects continuing operating losses and significant expenses for at least the next several years, with research and development spending expected to increase as programs advance.
- Management stated that existing cash and cash equivalents were expected to fund current and planned operations for the 12 months following the filing date; however, the filing identifies conditions that could raise substantial doubt about the company’s ability to continue as a going concern.
- Potential mitigations include cost reductions, capital expenditure management and additional collaboration or licensing proceeds. These actions may not be successful, and additional financing will be required.
- On July 9, 2020, after quarter-end, Ovid entered into an Angelini license agreement granting exclusive rights to OV101 in specified European territories. Angelini paid Ovid a $20.0 million upfront payment and may pay up to $50.0 million in regulatory and technology-transfer milestones, up to $162.5 million in sales milestones and tiered royalties. The upfront payment was not included in the June 30, 2020 balance sheet.
- Ovid also entered into a University of Connecticut license agreement on July 22, 2020 for shRNA-based therapeutic technology related to Angelman syndrome.
- Contingent milestone obligations under the Lundbeck, Northwestern and Takeda arrangements could total up to approximately $279.3 million, excluding royalties. None of the potential payments was considered probable at June 30, 2020.
- Material risks include clinical trial failure or delay, COVID-19 disruption, regulatory non-approval, dependence on Takeda, Angelini, Lundbeck and third-party manufacturers and CROs, intellectual-property challenges, limited access to capital, dilution from future financings or milestone-related equity issuances, and possible adverse safety or efficacy results.
- No material legal proceedings were reported, and management concluded that disclosure controls and procedures were effective as of June 30, 2020.
Most Important Facts for Investors to Verify
- Whether the $20.0 million Angelini upfront payment was received and how it is recognized in subsequent financial statements.
- NEPTUNE Phase 3 enrollment completion, fourth-quarter 2020 topline results and any COVID-19-related timeline changes.
- Cash burn, remaining liquidity and the timing and terms of any required equity, debt, collaboration or licensing financing.
- Progress and data from OV935 trials, including ELEKTRA, ARCADE and ENDYMION, and the continuing economics of the Takeda collaboration.
- Potential dilution from 8.2 million outstanding options, 5.506 million common shares issuable upon conversion of Series A preferred stock and possible future Takeda milestone payments.
- Regulatory status, safety, efficacy and manufacturing readiness for OV101 and OV935, including reliance on third-party suppliers and collaborators.