NanoViricides, Inc. — Form 10-Q Summary
Period clarification: The filing covers the three months ended September 30, 2012, the company’s fiscal first quarter of fiscal 2013—not calendar-year 2012 Q1. The financial statements are unaudited. NanoViricides is a development-stage biotechnology company with no commercialized products.
Financial performance and position
| Metric | Quarter ended Sep. 30, 2012 | Comparable 2011 quarter |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $1.210 million | $0.692 million |
| General and administrative expense | $0.381 million | $0.449 million |
| Total operating expenses | $1.591 million | $1.140 million |
| Net loss | $1.804 million | $1.140 million |
| Basic and diluted loss per share | $0.01 | $0.01 |
| Cash used in operating activities | $1.345 million | $0.676 million |
- R&D expense increased about 75% year over year; G&A decreased about 15%. Net loss increased about 58%, reflecting higher operating costs and a $246,273 noncash loss from the change in fair value of derivatives, compared with an $8,452 loss in the prior-year quarter. Interest income was $33,303.
- Cash and cash equivalents were $12.930 million at September 30, down from $14.275 million at June 30. Current assets were $13.368 million and current liabilities $1.557 million, implying working capital of about $11.811 million and a current ratio of about 8.6.
- Total liabilities were current liabilities; the company reported no long-term debt. The balance sheet included a $633,430 derivative liability.
- Stockholders’ equity was $12.797 million and accumulated development-stage deficit was $31.228 million. Common shares outstanding rose from 155.612 million at June 30 to 158.392 million at September 30.
Material changes and operating developments
- The company reported progress in its preclinical antiviral pipeline. It highlighted oral FluCide animal-study results against H1N1 and H3N2 influenza, and stated that it held an FDA pre-IND meeting for candidate NV-INF-1 in March 2012. These are company-reported preclinical results, not human clinical evidence or regulatory approval.
- Development costs charged by related-party licensor TheraCour were $948,026 for the quarter, versus $416,679 a year earlier. Animal-study fees charged by KARD Scientific, whose principal owner is a company consulting regulatory officer, were $561,618 versus none in the prior-year quarter.
- In August 2012, the Scientific Advisory Board received warrants for 60,000 shares at $0.68 per share, valued at $40,800. The company also recorded $18,000 of expense for 30,931 common shares issued for consulting services.
- During the quarter, Series C preferred conversions and associated dividends resulted in common-share issuances to Seaside 88, LP. The filing’s equity schedule also records shares issued for consulting and legal services.
Outlook, risks, and contingencies
- Management said existing cash, together with an expected $2.5 million follow-on Series C preferred-stock purchase, would fund operations through at least September 30, 2014 at the current expenditure rate. The follow-on amount was not included in September 30 cash. The company also said substantial additional financing will be required over time.
- Management estimated that advancing a candidate through certain clinical-trial phases could require an additional $10 million to $15 million. Its forward-looking 24-month estimates included $5 million for R&D, $1.25 million for corporate overhead, $1.5 million for capital costs, and $1.5 million for staffing, plus an estimated $5 million for facility infrastructure. These are estimates, not committed spending or formal earnings guidance.
- The company described plans for a cGMP facility in a building owned by Inno-Haven, an entity controlled by company founder and chairman Anil Diwan. A lease had not been finalized, construction depended on financing, and the company said it might instead use outside manufacturers. Development timelines, budgets, and funding availability are uncertain.
- TheraCour is a related party: Diwan is its president and director, owns approximately 70% of it, and TheraCour owns about 21% of NanoViricides’ common stock. The license agreement provides for development fees, monthly lab-supply charges, administrative charges, and 15% royalties on net sales; no royalties had accrued through September 30, 2012.
- A shareholder lawsuit seeks inspection of company records and alleges fiduciary-duty breaches, among other relief. Management said it considers the claims without merit and intends to defend the case; no specific monetary damages were claimed and no accrual was recorded. A motion to dismiss was pending.
- Management reported that disclosure controls and internal control over financial reporting were not effective as of June 30, 2012, citing a material weakness associated with the absence of a functioning audit committee and outside directors during the evaluation period. An independent director and audit committee chair were appointed in June 2012 as remediation; the filing does not establish that the weakness was fully remediated.
- Subsequent events included an October 26, 2012 filing for a new $40 million shelf registration and a November 13 announcement of an agreement with Bioanalytical Systems, Inc. for drug-development studies supporting prospective IND submissions.
Important facts for investors to verify
- Whether and when Seaside completes the anticipated $2.5 million Series C follow-on purchase, and the terms and dilution of any future financing.
- Cash burn versus management’s stated runway, and the actual funding and schedule required for IND-enabling studies, clinical trials, and cGMP manufacturing.
- Independent support for the reported animal-study results and the steps still required before any candidate can enter human trials.
- Related-party payments, licensing terms, governance safeguards, and the status of the shareholder litigation and internal-control remediation.
- The filing reports 158,391,799 common shares outstanding on the September 30 balance sheet, but states 158,391,699 shares outstanding as of November 19. Verify the correct share count; the filing text does not explain the 100-share difference.