Ovid Therapeutics Inc. — Q1 2019 Form 10-Q Summary
Business context and reporting period
Ovid Therapeutics is a clinical-stage biopharmaceutical company focused on medicines for rare neurological disorders. The filing covers the three months ended March 31, 2019, with comparative results for the three months ended March 31, 2018. The company has no approved products and has generated no revenue since inception.
Key programs included OV101 for Angelman syndrome and Fragile X syndrome, and OV935, developed with Takeda, for developmental and epileptic encephalopathies and related epilepsy syndromes.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $9.3 million | $8.5 million | +$0.9 million |
| General and administrative expense | $4.7 million | $5.0 million | -$0.2 million |
| Total operating expenses | $14.1 million | $13.4 million | +$0.6 million |
| Interest income | $0.3 million | $0.2 million | +$0.01 million |
| Net loss | $13.8 million | $13.2 million | +$0.6 million loss |
| Basic and diluted loss per share | $0.46 | $0.54 | Lower loss per share due primarily to higher share count |
| Net cash used in operating activities | $12.9 million | $12.9 million | Approximately unchanged |
Operating expenses exceeded revenue, resulting in an operating loss of $14.1 million. R&D represented approximately 66% of operating expenses. R&D costs increased primarily because of clinical-development activity, payroll and related costs, partially offset by a $1.3 million reimbursement credit related to the Takeda collaboration. G&A declined despite higher payroll costs because of lower professional fees and office expenses; the filing also identifies approximately $0.5 million of severance costs.
At March 31, 2019, cash and cash equivalents were $54.6 million, short-term investments were $5.0 million, and total cash, cash equivalents and short-term investments were $59.6 million, compared with $41.5 million at December 31, 2018. Working capital was approximately $54.8 million. The company had no long-term debt or capital leases.
The February 2019 public offering generated gross proceeds of $33.0 million and estimated net proceeds of approximately $30.5 million through the sale of common stock and Series A convertible preferred stock. Financing cash inflows were $31.0 million in Q1 2019, compared with $0.1 million in Q1 2018.
Material changes versus the prior comparable period
- Net loss increased by approximately $0.6 million, or about 5%, mainly because total operating expenses rose.
- R&D expense increased by approximately 10%, reflecting ongoing and planned clinical programs, higher payroll costs and other development expenses.
- G&A expense decreased by approximately 5%, primarily because of lower professional and office expenses, despite increased headcount and severance.
- Cash used in investing activities fell to approximately $0.01 million from $45.1 million, as the prior-year period included substantial purchases of short-term investments.
- Cash and investments increased by approximately $18.1 million from year-end 2018, primarily because of the February Offering.
- Weighted-average shares outstanding increased to 30.3 million from 24.6 million, while period-end common shares outstanding increased to 38.7 million from 24.7 million.
Guidance, outlook, risks and unusual items
Management expects significant expenses and operating losses to continue for at least the next several years. It believes existing cash, cash equivalents and short-term investments will fund current operating plans through at least the 12 months following the filing date, but additional financing will ultimately be required. Potential funding sources include equity or debt financings, collaborations and licensing arrangements.
- NEPTUNE, a planned pivotal Phase 3 trial of OV101 in pediatric Angelman syndrome patients, was expected to begin enrollment in the second half of 2019, pending FDA concurrence on the protocol and supporting materials. The planned study contemplated approximately 60 patients aged 4 to 12.
- ELARA, an open-label extension study for OV101 in Angelman syndrome, enrolled its first patient in February 2019.
- The ROCKET Phase 2 trial of OV101 in Fragile X syndrome was enrolling, with data anticipated in the second half of 2019.
- OV935 studies with Takeda included trials in developmental and epileptic encephalopathies, Dravet syndrome, Lennox-Gastaut syndrome, CDKL5 deficiency disorder and Duplication 15q syndrome.
- Potential milestone obligations under license and collaboration agreements totaled up to approximately $271.3 million, excluding royalties. These payments were contingent on development, regulatory and commercial milestones and were not considered probable at March 31, 2019.
- Under the Takeda agreement, the company may be required to issue securities equal to the lesser of 8% of outstanding capital stock or $50.0 million divided by the applicable share price upon a specified Phase 3 enrollment milestone. Additional global commercial and regulatory milestones totaled approximately $35.0 million and could be payable in cash or shares, subject to the agreement.
- The company disclosed claims asserted by Catalyst Pharmaceuticals concerning the Northwestern license and a confidential disclosure agreement. Ovid stated that it believes the claims are without merit and denied liability.
- Principal risks include clinical-trial failure or delay, regulatory nonapproval, adverse events, limited patient populations, dependence on third-party manufacturers and CROs, intellectual-property disputes, dependence on Takeda, future dilution and the need to raise additional capital.
Most important facts for investors to verify
- Whether cash and investments remained sufficient to support operations through the company’s stated planning horizon and the timing and terms of subsequent financing.
- FDA concurrence, enrollment and results for the NEPTUNE Phase 3 trial and other key OV101 studies.
- Clinical progress, safety and efficacy data for OV935 and the company’s continuing dependence on Takeda.
- The status and potential financial impact of the Catalyst-related intellectual-property dispute.
- The probability, timing and settlement method of contingent milestone obligations, including potential equity issuance to Takeda.
- Whether the company can obtain regulatory approval and ultimately generate commercial revenue; the filing provides no current revenue or profitability guidance.