vTv Therapeutics Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017; filed November 1, 2017. Unaudited consolidated financial statements include vTv Therapeutics Inc. and its operating subsidiary, vTv LLC. All amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
vTv is a clinical-stage biopharmaceutical company developing oral small-molecule drug candidates. Its lead program, azeliragon, is in a Phase 3 Alzheimer’s disease study (STEADFAST). Diabetes programs include TTP399 and TTP273; the company also has other preclinical and clinical programs. It has no approved products and has not generated product-sale revenue.
Financial performance and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $0.015 | $0.038 | $0.058 | $0.596 |
| Research and development expense | $8.989 | $11.165 | $29.572 | $34.649 |
| General and administrative expense | $2.567 | $2.401 | $8.396 | $7.654 |
| Operating loss | $(11.541) | $(13.528) | $(37.910) | $(41.707) |
| Consolidated net loss | $(12.355) | $(13.505) | $(40.055) | $(41.642) |
| Net loss attributable to vTv Therapeutics Inc. | $(3.650) | $(3.993) | $(11.833) | $(12.302) |
| Loss per Class A share | $(0.38) | $(0.41) | $(1.22) | $(1.30) |
- Revenue is immaterial and no meaningful revenue margin is available. The 2016 nine-month revenue was primarily from the Calithera license agreement.
- At September 30, cash and cash equivalents were $20.488 million, with $0.281 million of restricted cash. Current assets were $21.494 million and current liabilities $12.203 million; working capital was approximately $9.291 million.
- Gross notes payable were $20.0 million; carrying value was $19.311 million, including debt discount. Total liabilities were $29.716 million.
- For the first nine months, operating cash use was $38.510 million, investing cash use $0.007 million, and financing cash provided $7.500 million. Cash declined by $31.017 million from $51.505 million.
- Redeemable noncontrolling interest was $130.642 million; outside holders held a 70.5% economic interest in vTv LLC as of quarter-end.
Changes versus prior comparable periods
- Nine-month operating loss narrowed by $3.797 million, while consolidated net loss narrowed by $1.587 million. Parent-attributable net loss improved by $0.469 million.
- R&D expense fell 14.7% for the nine-month period, mainly because the TTP399 AGATA and TTP273 LOGRA studies had been completed. Azeliragon trial and extension-study costs partly offset these reductions.
- G&A expense rose 9.7% for the nine months, primarily due to compensation and share-based awards.
- Interest expense rose to $2.240 million for the nine months, largely reflecting the loan entered into in October 2016. Revenue declined by $0.538 million year over year.
Outlook, risks and unusual items
- Going concern: Management stated that cash was expected to fund operations through receipt of top-line results for Subpart A of STEADFAST in early 2018, but for less than twelve months from issuance of the statements. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern.
- The company expects continued losses and says substantial additional capital is needed. It is pursuing partnering opportunities and interim financing, but timing and availability are uncertain; no additional financing was committed. Failure to raise funds could force delays, reductions or termination of programs.
- Management planned to initiate an adaptive Phase 1b/2 TTP399 study in type 1 diabetes in Q4 2017. Under an August 2017 JDRF agreement, funding of up to $3.0 million is milestone-based and capped at approximately half the project cost; $0.3 million had been received by September 30.
- The $20.0 million loan bears floating interest of 10.5% plus any one-month LIBOR above 0.5%; the unused $5.0 million third tranche expired June 30, 2017. Principal repayments begin in 2018, and early repayment may incur penalties. The loan is secured by substantially all assets other than intellectual property, subject to specified conditions.
- Clinical, regulatory, enrollment, financing and intellectual-property uncertainties may increase costs or delay development. A 1% increase in the loan’s variable rate would add approximately $0.2 million in annual interest expense, based on amounts outstanding.
- The company reported no material legal proceedings, no income tax provision, and no off-balance-sheet arrangements.
Key facts for investors to verify
- Whether STEADFAST Subpart A results were received on the expected early-2018 timeline, and what the results showed.
- Whether the company secured financing or partnerships sufficient to address its disclosed going-concern uncertainty and fund planned trials.
- Progress and costs for azeliragon, including the FDA’s view of the trial data and any additional study requirements.
- Cash burn, debt service and covenants, including the effect of floating rates and the 2018 start of principal repayments.
- Terms and funding milestones of the JDRF-supported TTP399 study, and changes in the company’s remaining pipeline priorities.