Ovid Therapeutics Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
Ovid is a development-stage biopharmaceutical company focused on medicines for rare epilepsies, seizure-related disorders and other neurological diseases. The filing covers the unaudited three and nine months ended September 30, 2023, compared with the corresponding 2022 periods. Ovid has no approved products and has generated no commercial product-sales revenue.
At September 30, 2023, Ovid had 39 full-time employees, 70,680,551 common shares outstanding and an accumulated deficit of $262.5 million.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $0.1 million | $0.01 million | $0.3 million | $1.5 million |
| Research and development | $5.3 million | $5.2 million | $17.9 million | $19.1 million |
| General and administrative | $6.8 million | $7.6 million | $23.4 million | $25.8 million |
| Operating loss | $12.0 million | $12.8 million | $41.1 million | $43.4 million |
| Net loss | $11.3 million | $12.0 million | $37.0 million | $42.7 million |
| Net loss per share | $0.16 | $0.17 | $0.52 | $0.61 |
Q3 revenue consisted primarily of $109,000 of royalty revenue. Nine-month revenue was $250,000, compared with $1.5 million in 2022, when revenue included licensing-related amounts. Revenue was insufficient to produce a meaningful positive margin; the company remains loss-making.
Cash, cash equivalents and marketable securities totaled $87.1 million at September 30, 2023, consisting of $57.4 million of cash and cash equivalents and $29.6 million of current marketable securities. Restricted cash was $1.9 million. Working capital was approximately $83.0 million.
Net cash used in operating activities was $33.9 million for the nine months ended September 30, 2023, compared with $46.1 million in the prior-year period. Investing activities provided $45.9 million, primarily from sales and maturities of marketable securities, while financing activities provided $0.5 million from option exercises and employee stock purchases. The filing’s cash-flow table reports an ending cash, cash equivalents and restricted cash balance of $59.4 million.
Ovid had no long-term debt. Lease liabilities totaled $16.3 million, including $1.2 million current and $15.1 million long-term. The company believes its existing cash, cash equivalents and marketable securities will fund current operating plans for at least 12 months from the filing date, but expects continuing losses and negative operating cash flow.
Material changes versus the prior comparable period
- Q3 revenue increased by $98,000, but nine-month revenue declined by $1.2 million because the prior-year period included licensing revenue.
- Q3 research and development expense increased by $149,000, primarily reflecting payroll and other expense increases, while nine-month R&D expense decreased by $1.1 million after organizational restructuring, partly offset by higher development spending for OV329.
- General and administrative expense declined by $0.8 million in Q3 and $2.4 million for the nine-month period, driven by workforce reductions, cost controls and lower legal and professional fees. Nine-month 2023 results included $1.6 million of severance expense.
- Other income increased to $4.1 million for the nine-month period from $0.7 million, mainly due to interest income and accretion on marketable securities.
- Long-term equity investments increased to $16.1 million from $5.6 million at year-end 2022, primarily reflecting the $10.0 million preferred-stock investment in Graviton.
- Common shares outstanding increased modestly from 70.5 million at December 31, 2022 to 70.7 million at September 30, 2023. Outstanding options increased to 15.2 million, with a weighted-average exercise price of $3.86.
Pipeline, outlook and unusual items
- OV329 is in a Phase 1 study; management expects the current study to be completed in the second half of 2024 and expects to submit an IND for an intravenous formulation in the second half of 2024.
- OV888, formerly GV101, is being developed with Graviton. A Phase 1 multiple-ascending-dose study was ongoing, with completion expected in the first half of 2024 and a planned signal-finding study in cerebral cavernous malformations in the second half of 2024.
- Ovid is advancing OV350, a KCC2 activator, toward an anticipated IND for an anticonvulsant indication in the second half of 2024.
- Takeda is conducting pivotal Phase 3 trials of soticlestat in Lennox-Gastaut and Dravet syndromes and reiterated that regulatory filings are expected in its 2024 fiscal year. Ovid remains eligible for up to $660 million of potential milestones and tiered royalties of up to 20% if the program succeeds.
- On October 17, 2023, after the reporting date, Ovid received $30.0 million, less $0.1 million of reimbursable expenses, from Ligand for selling a 13% interest in potential soticlestat royalties and milestones. Ovid retained 87% of those potential payments. The filing states that the transaction is expected to be accounted for under ASC 470.
- Potential contingent milestone obligations under licensing agreements totaled up to $279.3 million, excluding other agreement-specific obligations; none were considered probable or recorded because timing, probability and amount could not be reasonably estimated.
Key risks and contingencies
- Ovid expects substantial operating losses and negative operating cash flow for at least the next several years and will likely require additional financing or collaboration proceeds.
- All internally controlled drug candidates remain in Phase 1 or preclinical development, creating substantial clinical, regulatory, manufacturing and commercialization risk.
- Future cash resources depend partly on Takeda’s continued development and potential commercialization of soticlestat; failure or delay could eliminate expected milestone and royalty payments.
- Clinical trials may be delayed or fail because of safety, efficacy, enrollment, manufacturing, regulatory or third-party execution issues.
- The company relies on third parties for manufacturing, clinical research, intellectual property licenses and development activities.
- Additional equity or debt financing could be unavailable or dilutive. The company had up to $250.0 million available under its shelf registration statement, including up to $75.0 million under its ATM program, but had not sold shares under the ATM as of September 30, 2023.
- Macroeconomic conditions, inflation, higher interest rates, geopolitical conflict, supply-chain disruption, cybersecurity events and intellectual-property challenges could adversely affect operations and financing access.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter. No material legal proceedings were reported.
Investor verification checklist
- Verify the accounting and cash impact of the post-quarter-end Ligand transaction, including the $29.9 million net proceeds and the retained 87% economic interest.
- Monitor Takeda’s soticlestat Phase 3 results, regulatory filings and any resulting milestones or royalties.
- Track OV329, OV888 and OV350 clinical, IND and development milestones against the stated 2024 timelines.
- Assess operating cash burn relative to the stated 12-month liquidity runway and the potential need for additional capital.
- Review dilution exposure from 15.2 million outstanding options, 1.25 million shares issuable upon conversion of Series A preferred stock and any future financing.
- Evaluate the probability, timing and economics of contingent milestone and royalty obligations under the company’s licensing and collaboration agreements.