Ovid Therapeutics Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2020; filed May 7, 2020. Ovid is a late-stage clinical biopharmaceutical company developing medicines for rare neurological disorders. The company has no approved products and has generated no commercial revenue since inception.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No commercial revenue |
| Research and development expense | $14.6 million | $9.3 million | +$5.3 million |
| General and administrative expense | $5.7 million | $4.7 million | +$1.0 million |
| Total operating expenses | $20.3 million | $14.1 million | +$6.2 million |
| Net loss | $20.0 million | $13.8 million | Loss increased $6.2 million |
| Basic and diluted loss per share | $0.37 | $0.46 | Improved due primarily to higher share count |
| Net cash used in operating activities | $18.4 million | $12.9 million | Cash use increased $5.5 million |
Interest income was $264,000 in Q1 2020 versus $253,000 in Q1 2019. There was no meaningful operating margin because the company had no revenue and all operating costs were devoted primarily to research and development and corporate activities.
Cash, cash equivalents and short-term investments totaled $58.3 million at March 31, 2020, down from $76.7 million at December 31, 2019. Cash and cash equivalents were $27.3 million, and short-term investments were $31.0 million, principally U.S. Treasury notes. Working capital was approximately $50.7 million. Total liabilities were $10.3 million, and the company reported no long-term debt or capital leases.
Investing activities provided $3.8 million, primarily reflecting $14.0 million of investment maturities partially offset by $10.0 million of purchases. Financing activities provided approximately $16,000, primarily from the employee stock purchase plan, net of ATM offering costs. The company ended the quarter with a $233.2 million accumulated deficit.
Material changes versus the prior comparable period
- Research and development expense increased 57%, primarily from higher preclinical and development costs and payroll-related expenses for OV101 and the Takeda collaboration program for OV935.
- General and administrative expense increased 20%, driven mainly by higher legal and professional fees and general office costs, partly offset by lower payroll expense.
- Net loss increased 45%, while operating cash use increased 43%.
- Weighted-average common shares increased to 54.7 million from 30.3 million, reflecting prior equity financings; this reduced reported loss per share despite the higher total net loss.
- The company did not sell shares under its ATM program during the quarter. Approximately $107.0 million remained available under its shelf registration statement, including $27.0 million under the ATM program.
Pipeline, outlook and management commentary
- OV101: The pivotal Phase 3 NEPTUNE trial in Angelman syndrome was expanded from approximately 60 to 90 participants to support a European responder analysis. COVID-19-related clinical-site closures delayed enrollment, but management expected topline data in the fourth quarter of 2020. The company also continued the ELARA open-label extension and development in Fragile X syndrome.
- OV935/soticlestat: The company and Takeda continued Phase 2 ELEKTRA and ARCADE trials. Management expected ELEKTRA and related ENDYMION data in the third quarter of 2020 and full ARCADE results in early 2021. All patients completing ARCADE and ELEKTRA had rolled into ENDYMION as of March 31, 2020.
- COVID-19: Employees were working remotely and business continuity plans were implemented. The principal reported clinical impact was delayed enrollment in NEPTUNE; management reported limited impact on the fully enrolled ELEKTRA trial and no expected material impact on clinical supply at the time of filing.
- Management expects continued significant expenses and increasing operating losses for at least several years as clinical development, regulatory, intellectual-property and potential commercialization activities advance. No profitability or revenue guidance was provided.
Liquidity, contingencies and principal risks
Management stated that existing cash, cash equivalents and short-term investments were not sufficient to fund anticipated operations for the 12 months following the filing date. The filing therefore disclosed substantial doubt about the company’s ability to continue as a going concern. Management plans to seek additional funding through equity or debt financings, collaborations, strategic alliances or licensing transactions, but no committed external funding source exists.
- Additional financing may be unavailable or may dilute existing stockholders, impose restrictive covenants or require the company to relinquish valuable rights.
- License agreements contain contingent milestone obligations of up to an aggregate of approximately $279.3 million, excluding royalties. These payments were not considered probable and were excluded from contractual obligations because timing and probability could not be reasonably estimated.
- Under the Takeda collaboration, a future Phase 3 enrollment milestone could require issuance of securities equal to up to 8% of outstanding capital stock, subject to specified limits. Additional global commercial and regulatory milestones of approximately $35.0 million may be payable in cash or shares, subject to agreement terms.
- Clinical development and regulatory approval remain uncertain. Trials may be delayed or fail because of COVID-19, enrollment challenges, safety or efficacy results, regulatory requirements, manufacturing or supply issues, or reliance on CROs and collaborators.
- The company depends on third parties for manufacturing and clinical-trial execution and relies heavily on Takeda for OV935 development and commercialization.
- As of March 31, 2020, 7.9 million stock options were outstanding, and 7.8 million common shares were issuable upon conversion of Series A preferred stock, creating potential dilution.
- The company reported no material legal proceedings, no material off-balance-sheet arrangements and no material contractual obligations other than contingent license-related payments. Disclosure controls and procedures were assessed as effective.
Investor verification items
- Verify the company’s subsequent financing activity, cash runway and any later updates to the going-concern assessment.
- Verify actual NEPTUNE, ELEKTRA, ARCADE and ENDYMION clinical results and the effect of COVID-19-related delays on development timelines.
- Review subsequent regulatory decisions, including any filings or approvals for OV101 or OV935.
- Monitor milestone-triggering events, potential Takeda equity issuances and the company’s aggregate contingent license obligations.
- Reconcile subsequent share issuances, option exercises, preferred-stock conversions and dilution against the Q1 capital structure.