NanoViricides, Inc. — Form 10-Q Summary
Reporting period: Quarter ended December 31, 2017, with six-month comparisons to December 31, 2016. Because the company’s fiscal year ends June 30, this is fiscal Q2 2018. The company is a pre-revenue biopharmaceutical developer; all programs remained preclinical or advanced preclinical.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2017 | Three months ended Dec. 31, 2016 | Six months ended Dec. 31, 2017 | Six months ended Dec. 31, 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $1.386 million | $1.261 million | $2.541 million | $2.713 million |
| General and administrative expense | $1.008 million | $1.037 million | $2.083 million | $2.025 million |
| Net loss | $2.797 million | $1.546 million | $4.802 million | $4.608 million |
| Basic and diluted loss per share | $0.04 | $0.03 | $0.08 | $0.08 |
| Cash used in operating activities | Not separately stated | Not separately stated | $2.961 million | $4.836 million |
At December 31, cash and cash equivalents were $12.046 million, down from $15.099 million at June 30, 2017. Current assets were $12.286 million and current liabilities were $6.740 million, implying working capital of approximately $5.546 million. Total assets were $23.726 million; total liabilities were $7.808 million; stockholders’ equity was $15.918 million. The company reported no product revenue and no meaningful operating margin.
The company had no Series C debenture outstanding at quarter-end: it redeemed the $5 million debenture in November 2017 for common and preferred shares. The balance sheet instead includes a $5.163 million current obligation to issue registered shares; issuance was pending NYSE authorization. The company also reported a $1.068 million derivative liability related to warrants. It says the share-based redemption preserved approximately $5.5 million of cash that otherwise would have been paid to the debenture holder.
Changes versus the prior comparable period
- Quarterly net loss increased by approximately $1.251 million year over year, despite slightly lower general and administrative expense. The six-month net loss increased by approximately $195,000.
- Quarterly R&D expense rose by $125,000; management attributed the increase primarily to collaborator laboratory fees, supplies, and materials. Six-month R&D expense declined by $172,000.
- Six-month operating cash use improved by approximately $1.876 million year over year. Cash nevertheless declined by $3.053 million during the first half of fiscal 2018.
- Interest and debt-discount expense decreased following repayment of the Series B debenture and redemption of the Series C debenture. The 2017 six-month results also included a $1.348 million noncash loss on extinguishment of the Series C debt, partly offset by noncash gains from changes in derivative fair values.
- Accounts payable to related party TheraCour Pharma rose to $1.475 million from $341,000 at June 30, 2017.
Outlook, management commentary, and risks
- Management estimated existing cash would support operations at the current spending rate through February 2019, but said funds were insufficient for its projected work beyond normal preclinical operations toward an IND filing. It expects to seek additional financing and cautioned that funding may not be timely or available on favorable terms.
- Development priorities centered on HerpeCide candidates, particularly a topical shingles treatment. The company reported beginning a preliminary rat safety and toxicology study; after quarter-end, it said the animal portion was complete and reported preliminary verbal observations of no toxicity, while awaiting the CRO’s final report. This was not an IND-enabling GLP toxicology package or evidence of clinical efficacy.
- Management described potential IND and clinical-development paths as dependent on study results, funding, regulatory requirements, manufacturing readiness, and external collaborators. It acknowledged limited scientific staffing, lack of dedicated QA/QC personnel, and the need for additional resources to progress toward clinical trials.
- All drug candidates remained in development, and the company had no assurance of successful development, regulatory approval, commercialization, or profitability. It depends on TheraCour for licensed technology and development services; loss of relevant rights could cause substantial delay and cost. The VZV/shingles license was still being pursued, and the filing says it had not yet been licensed.
- On January 27, 2018, CEO and director Eugene Seymour resigned. President Anil Diwan became interim CEO while the board searched for a permanent successor. A severance agreement had not been finalized as of the filing.
- The company reported no pending or threatened legal proceedings known to it and no off-balance-sheet arrangements for the six-month period. Management concluded disclosure controls were effective; it adopted temporary Audit Committee review of TheraCour invoices after the CEO’s departure.
Key facts investors should verify
- Whether NYSE authorization was obtained and the 5.5 million common shares and 150,000 preferred shares related to the Series C redemption were issued, and the resulting dilution.
- Actual cash burn, financing plans and terms, and whether cash supports the development timetable beyond the stated current-spending runway.
- The final CRO toxicology report, subsequent IND-enabling study results, regulatory milestones, and any clinical-trial plans.
- Status and terms of the proposed VZV license from TheraCour, the related-party payable, and the company’s ongoing dependence on TheraCour.
- Appointment of a permanent CEO and the terms of any severance agreement with the former CEO.
- Whether management’s preclinical efficacy, market-size, manufacturing-capacity, and revenue projections are supported by independently validated data; these are forward-looking claims, not reported results.