NanoViricides, Inc. — Form 10-Q Summary
Business context and reporting period. This fiscal second-quarter 2019 report covers the three and six months ended December 31, 2019; it was filed February 14, 2020. NanoViricides is a pre-revenue antiviral drug developer. Its lead program is NV-HHV-101, a topical shingles candidate, with other early-stage programs targeting herpes and additional viruses. The company relies on licensed technology and development work from related party TheraCour Pharma.
Financial performance and position
| Metric | Three months ended Dec. 31, 2019 | Six months ended Dec. 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $1.01 million | $2.49 million | $1.66 million and $3.02 million, respectively |
| General and administrative expense | $622,347 | $1.13 million | $711,360 and $1.38 million, respectively |
| Total operating expense | $1.63 million | $3.62 million | $2.37 million and $4.41 million, respectively |
| Net loss | $1.93 million | $3.49 million | $2.23 million and $4.07 million, respectively |
| Basic and diluted loss per share | $0.50 | $0.91 | $0.64 and $1.18, respectively |
| Net cash used in operating activities | Not separately stated | $2.56 million | $3.12 million for six months |
- At December 31, 2019, cash and cash equivalents were $707,648; current assets were $1.35 million and current liabilities were $3.90 million. Total assets were $11.62 million, total liabilities $3.90 million, and stockholders’ equity $7.72 million.
- Cash fell from $2.56 million at June 30, 2019. Operating cash use was partly offset by $1.1 million drawn on a related-party loan; financing cash flow was $716,825 after $383,175 of deferred issuance costs.
- The related-party mortgage note had $1.1 million drawn, bears 12% annual interest, is secured by the company’s headquarters, and was due December 15, 2020. The lender could provide up to an additional $900,000. The maturity was subsequently extended, at the company’s option, to March 15, 2021.
- Accounts payable and accrued expenses were approximately $1.46 million, including $737,370 owed to TheraCour. The company also reported a $1.37 million warrant derivative liability, measured using Level 3 inputs.
- Margins are not meaningful because the company had no revenue. No income tax provision was recorded. No off-balance-sheet arrangements were reported.
Changes versus the prior comparable period
- Six-month operating expenses declined $786,000 year over year, chiefly as R&D fell $530,000 and G&A fell $256,000. Management attributed lower R&D costs to reduced collaborator fees, laboratory staffing, and supplies; lower G&A reflected reduced officer compensation and travel, partly offset by higher professional, consulting, insurance, and other costs.
- Six-month net loss narrowed by about $584,000. The quarter’s loss also declined, primarily due to lower operating expenses, partly offset by a $142,669 loss on exchanging deferred related-party fees for preferred stock and a quarterly derivative fair-value expense.
- Cash used in operations improved by about $560,000 year over year, though cash on hand declined substantially from June 30, 2019.
Outlook, commentary, risks, and unusual items
- Management said the IND-enabling studies for NV-HHV-101 were complete, but final external study reports, clinical protocol and site work, and conversion of the submission to eCTD format remained. The company could not provide a firm IND filing date because of external dependencies. The filing describes IND timing estimates as uncertain.
- Management reported positive preclinical and human-skin-model findings, including negative genotoxicity tests disclosed after quarter-end. These findings are not evidence of safety or efficacy in human clinical trials; FDA review and clinical testing remain necessary.
- The company had focused resources mainly on the shingles program and reduced staffing and consultant spending. Management expected the January 2020 financing to fund planned operations, including initial clinical trials, for at least 12 months from issuance of the financial statements; it also said further capital would be required for longer-term operations and development.
- After quarter-end, the company completed a public offering of 2.875 million common shares at $3.00 per share, including the fully exercised over-allotment option. Gross proceeds were $8.625 million and net proceeds were approximately $7.8 million before company legal and accounting expenses.
- After quarter-end, existing investors exchanged warrants and restrictive-covenant rights under a settlement: the company issued 677,224 common shares and new warrants for 347,222 shares at $3.00. The filing states that no authorized common shares were available for immediate warrant exercise at that time. The cover reports approximately 7.423 million common shares outstanding as of February 14, 2020.
- A January 2020 coronavirus research effort was described as exploratory. The company said it had no coronavirus license from TheraCour and no active government or international-agency collaboration; additional support would be needed for further testing and any clinical use. Its stated priority remained NV-HHV-101.
- Important operating risks include ongoing losses, no product revenue, dependence on future financing, dependence on TheraCour and external research collaborators, uncertain clinical and regulatory outcomes, and limited internal staffing. The company also disclosed that disclosure controls were ineffective at December 31, 2019 because previously reported material weaknesses in internal control over financial reporting remained unremediated.
- Under the VZV license, milestone obligations include 75,000 Series A preferred shares upon IND grant and cash payments of $1.5 million, $2.5 million, and $5 million upon completion of Phase I, II, and III, respectively; a 15% royalty on net sales is payable upon commercialization.
Most important facts for investors to verify
- Whether the company completes and submits the NV-HHV-101 IND, and whether the FDA permits the proposed clinical program without requiring additional studies.
- Actual cash burn and runway after the January 2020 offering, including offering expenses, trial costs, and any further draws on the related-party loan.
- The terms, authorized-share availability, and potential dilution associated with the warrant exchange and outstanding equity-linked securities.
- Progress in remediating the disclosed material weaknesses in internal controls and whether disclosure controls become effective.
- Related-party balances, fees, loan terms, and TheraCour license milestones, royalties, and continuing development charges.
- Whether reported preclinical results are reproducible and translate into acceptable safety and efficacy in human trials; the filing provides no clinical efficacy results.