Ovid Therapeutics Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2018; filed May 8, 2018. The unaudited interim financial statements are presented under U.S. GAAP. Ovid is a clinical-stage biopharmaceutical company developing medicines for rare neurological disorders, including OV101 and OV935. The company has generated no revenue from commercial drug sales.
Financial position and operating results
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $8.5 million | $31.3 million | Down $22.8 million |
| General and administrative expense | $5.0 million | $3.0 million | Up $2.0 million |
| Total operating expenses | $13.4 million | $34.3 million | Down $20.8 million |
| Operating loss | $13.4 million | $34.3 million | Improved by $20.8 million |
| Interest income | $247 thousand | $23 thousand | Up $224 thousand |
| Net loss | $13.2 million | $34.2 million | Improved by $21.1 million |
| Basic and diluted loss per share | $0.54 | $3.48 | Improved |
| Net cash used in operating activities | $12.9 million | $7.2 million | Use increased by $5.7 million |
There was no meaningful operating margin because the company had no revenue and incurred operating losses. The accumulated deficit was $113.9 million at March 31, 2018.
- Cash and cash equivalents were $29.2 million, compared with $87.1 million at December 31, 2017.
- Short-term investments were $45.0 million at March 31, 2018, versus none at year-end 2017.
- Total cash, cash equivalents and short-term investments were $74.2 million, compared with $87.1 million at December 31, 2017.
- Working capital was approximately $69.1 million.
- Current liabilities were $6.6 million; the filing reports no debt balances.
- Stockholders’ equity was $72.1 million, compared with $83.4 million at December 31, 2017.
- Net cash used in investing activities was $45.1 million, principally from purchases of short-term investments.
- Net cash provided by financing activities was $75 thousand, primarily from employee stock purchases and option exercises.
Material changes versus the prior comparable period
- Research and development expense declined primarily because Q1 2017 included a $25.9 million noncash charge for Series B-1 preferred stock issued to Takeda in connection with the OV935 collaboration. Q1 2018 included approximately $432.7 thousand of reimbursable research and development costs under the collaboration.
- General and administrative expense increased due to higher headcount, stock-based compensation and professional fees associated with operating as a public company.
- Interest income increased because IPO proceeds were invested in money market funds, U.S. Treasury notes and corporate bonds.
- Cash used in operations increased despite the lower net loss, reflecting higher development, payroll and operating costs.
- The company shifted $45.0 million of cash into short-term investments; total liquid resources declined by $12.9 million during the quarter.
- Stock-based compensation expense was $1.8 million, compared with $1.4 million in Q1 2017. Options outstanding increased to 5.3 million at March 31, 2018.
Guidance, outlook, risks and unusual items
- Management expects continued net losses and significant expense increases for at least the next several years. It believes existing cash, cash equivalents and short-term investments will fund current operating plans for at least 12 months from the filing date.
- Ovid completed enrollment in the Phase 2 STARS trial of OV101 in Angelman syndrome and expected topline data in the third quarter of 2018.
- Ovid planned a Phase 2 trial of OV101 in adolescents and young adults with Fragile X syndrome during 2018.
- Enrollment continued in the Phase 1b/2a OV935 trial for developmental and epileptic encephalopathies, with data expected in the second half of 2018. Additional Phase 2 studies were planned with Takeda.
- OV101 had received FDA fast-track designation for Angelman syndrome and Fragile X syndrome. OV935 had received orphan-drug designations for Dravet syndrome and Lennox-Gastaut syndrome.
- Potential future obligations include up to $181 million of development, regulatory and sales milestones and royalties under the Lundbeck license for OV101; Takeda obligations include a potential equity issuance equal to the lesser of 8% of outstanding capital stock or $50 million upon specified Phase 3 enrollment, plus approximately $35 million of additional potential global commercial and regulatory milestones.
- The company has no commercial products, no approved drugs and no committed external source of funding. Additional equity, debt or collaboration financing may be required and could dilute shareholders or require the company to relinquish rights.
- Key risks include clinical-trial failure or delay, uncertain efficacy and safety, regulatory non-approval, limited patient populations, dependence on Takeda and third-party manufacturers and CROs, intellectual-property challenges, reimbursement uncertainty, competition and future capital requirements.
- The filing discloses a trademark opposition and cancellation proceeding involving Ovid Technologies, Inc.; the parties were negotiating a settlement. The company reported no other current legal matters arising in the ordinary course.
- Management concluded that disclosure controls and procedures were effective as of March 31, 2018, with no significant changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether OV101 and OV935 clinical milestones and data releases occurred on the timelines described in the filing.
- The company’s quarterly cash burn, investment balances and runway relative to evolving clinical-development plans.
- Potential dilution and cash requirements associated with Takeda milestone obligations and other license payments.
- Clinical efficacy, safety, enrollment and regulatory status for OV101 and OV935, particularly because the cited OV101 STARS trial was primarily designed for safety with exploratory efficacy measures.
- Whether additional financing, partnering or licensing transactions become necessary before the company generates product revenue.
- The status and potential resolution of the Ovid Technologies trademark dispute and any intellectual-property claims involving licensed compounds.