VistaGen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2018 (fiscal 2019 third quarter); comparative periods ended December 31, 2017. The company is a clinical-stage biopharmaceutical developer with no commercial products or recurring revenue.
Financial performance and position
| Metric | Three months ended Dec. 31 | Nine months ended Dec. 31 |
|---|---|---|
| Revenue | None in 2018 or 2017 | None in 2018 or 2017 |
| Research and development expense | $5.34 million vs. $1.60 million | $13.34 million vs. $5.12 million |
| General and administrative expense | $1.86 million vs. $1.27 million | $5.49 million vs. $5.00 million |
| Net loss | $7.22 million vs. $3.00 million | $18.87 million vs. $10.27 million |
| Net loss attributable to common stockholders | $7.51 million vs. $3.47 million | $19.71 million vs. $11.23 million |
| Loss per common share, basic and diluted | $0.24 vs. $0.25 | $0.75 vs. $1.03 |
Gross margin and operating margin are not meaningful because the company reported no revenue. The lower quarterly per-share loss reflects, in part, a larger weighted-average share count.
- Cash and liquidity: Cash and cash equivalents were $6.29 million at December 31, 2018, down from $10.38 million at March 31, 2018. Current assets were $7.14 million and current liabilities $1.97 million.
- Cash flow, nine months: Operating activities used $10.97 million (prior year: $6.45 million); investing activities used $0.17 million; financing activities provided $7.05 million. Cash decreased by $4.09 million.
- Debt and other liabilities: Notes payable were $49,100 and capital lease obligations totaled $10,000. The balance sheet also included $3.46 million of accrued Series B preferred dividends, up from $2.61 million at March 31. Total liabilities were $5.83 million; stockholders’ equity was $1.69 million.
- Accumulated deficit: $175.4 million at December 31, 2018.
Material changes and unusual items
- R&D expense rose sharply, primarily due to the $4.25 million noncash cost of licensing PH94B and PH10 and their option/license consideration, plus ELEVATE trial activity and AV-101 manufacturing and development. The quarter included $2.0 million of noncash PH10 license expense.
- G&A increased year over year for the quarter, including higher stock compensation and investor/public-relations spending. Nine-month G&A rose more modestly; stock-based compensation increased while professional-service and warrant-modification costs declined.
- During June–October 2018, private placements generated $6.57 million in cash proceeds; warrant exercises generated a further $0.61 million. Common shares issued and outstanding increased to 31.20 million at December 31 from 23.07 million at March 31. The cover reports 31.12 million shares outstanding as of February 11, 2019.
- The PH94B and PH10 licenses carry potential future milestone and royalty payments; PH94B terms also include monthly support payments. The company recorded a $22,700 loss on extinguishing an accounts payable balance through stock and warrant issuance.
Outlook, risks and contingencies
- Funding and going concern: Management stated that $6.3 million of cash was not expected to fund planned operations for the 12 months after issuance of the financial statements and that this raised substantial doubt about the company’s ability to continue as a going concern. Additional financing or collaborations may be needed; neither is assured. Failure to raise funds could force research and development reductions, delays or discontinuation.
- Development plans: The company planned to complete the AV-101 ELEVATE Phase 2 study, prepare PH94B for pivotal Phase 3 development, advance AV-101 studies, and prepare a Phase 2 study of PH10. AV-101 studies for neuropathic pain and Parkinson’s disease dyskinesia were contingent on sufficient capital. No quantified financial guidance was provided.
- Pipeline status: AV-101 was in Phase 2 development for major depressive disorder and had FDA Fast Track designation for adjunctive MDD and neuropathic pain. PH94B had completed Phase 2 and a pilot Phase 3 study and was being prepared for pivotal Phase 3. PH10 had completed an exploratory Phase 2 study and was being prepared for further Phase 2 work. These are investigational products; approval and commercial success are uncertain.
- Other principal risks: Clinical efficacy, safety, enrollment and timing; FDA and other regulatory requirements; reliance on contract research and manufacturing organizations; financing and dilution; competition; and protection or enforceability of intellectual property. Certain nasal-spray candidates may be regulated as drug-device combination products.
- Controls and legal matters: Management assessed disclosure controls as effective, but previously identified material weaknesses in financial reporting controls related to segregation of duties and accounting software remained unremediated. The filing reports no legal proceedings.
Investor facts to verify
- Whether subsequent financing or partnering was secured, and whether it adequately funded the stated clinical plans.
- Updates and results for ELEVATE and the timing, design and funding of planned PH94B and PH10 trials.
- Cash burn and cash runway after December 31, 2018, including any changes to planned spending.
- Share count, potential dilution from preferred stock, options and warrants, and the terms of any subsequent securities issuance.
- Progress in remediating the two disclosed material weaknesses in internal control over financial reporting.