Ovid Therapeutics Inc. — Fiscal 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018; filed March 7, 2019. The filing is an annual Form 10-K rather than a standalone quarterly filing, although it includes unaudited quarterly data. Ovid is a clinical-stage biopharmaceutical company developing medicines for rare neurological disorders and has not generated commercial product revenue.
Business Context and Pipeline
- OV101: In development for Angelman syndrome and Fragile X syndrome. The Phase 2 STARS trial in 88 adolescents and adults with Angelman syndrome met its safety and tolerability endpoint and showed statistically significant improvement on the prespecified CGI-I endpoint for pooled dosing and the once-daily group. Development remained subject to confirmation in later-stage trials.
- NEPTUNE: Planned pivotal Phase 3 trial in approximately 50 to 60 pediatric Angelman syndrome patients ages 4 to 12, pending FDA concurrence on the protocol and supporting framework. Initial enrollment was expected in the second half of 2019.
- ROCKET and SKY ROCKET: Phase 2 drug trial and observational endpoint study for Fragile X syndrome; data were expected in the second half of 2019.
- OV935: Developed with Takeda for developmental and epileptic encephalopathies, including Dravet syndrome, Lennox-Gastaut syndrome, CDKL5 Deficiency Disorder and Dup15q syndrome. The adult Phase 1b/2a trial met its safety and tolerability endpoint and produced exploratory seizure-reduction and biomarker signals.
- ELEKTRA, ARCADE and ENDYMION: Pediatric Phase 2 and open-label extension studies of OV935 were enrolling.
Financial Performance and Position
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No commercial product revenue |
| Research and development expense | $33.8 million | $50.0 million | Down $16.2 million |
| General and administrative expense | $19.1 million | $15.0 million | Up $4.1 million |
| Total operating expenses | $52.9 million | $65.0 million | Down $12.1 million |
| Interest income | $1.0 million | $0.2 million | Up $0.8 million |
| Net loss | $52.0 million | $64.8 million | Loss narrowed by $12.8 million |
| Basic and diluted loss per share | $2.11 | $3.35 | Improved |
| Operating cash flow | $(45.6) million | $(31.5) million | Higher cash use |
| Cash, cash equivalents and short-term investments | $41.5 million | $87.1 million | Down $45.6 million |
| Working capital | $35.4 million | $82.6 million | Down $47.1 million |
| Total liabilities | $8.8 million | $6.0 million | Up $2.8 million |
| Accumulated deficit | $152.7 million | $100.7 million | Increased $52.0 million |
Operating and net loss margins are not meaningful because the company had no revenue. There was no long-term debt or capital lease, and the filing states that the company had no contractual obligations or commitments as of December 31, 2018, excluding contingent license milestones and royalties.
Material Changes Versus 2017
- Net loss decreased primarily because 2017 included a non-cash $25.9 million research and development charge related to the Takeda collaboration. The 2018 loss still reflected substantial ongoing clinical-development spending.
- Research and development expense declined 32%, while general and administrative expense increased 27% as headcount and public-company costs increased.
- Operating cash use increased to $45.6 million from $31.5 million, despite the lower reported net loss, reflecting development spending, upfront program costs, payroll growth and working-capital changes.
- Cash and short-term investments declined substantially from year-end 2017, while the company remained dependent on future equity financings, collaborations or debt financing.
- The company substantially completed implementation of a new enterprise resource planning system and reported effective disclosure controls and internal control over financial reporting as of December 31, 2018. The auditor was not required to provide an internal-control attestation because Ovid remained an emerging growth company.
Liquidity, Outlook, Risks and Unusual Items
- Management stated that year-end cash, cash equivalents and short-term investments, together with the February 2019 financing, were expected to fund current operating plans for at least 12 months from the filing date.
- In February 2019, Ovid raised approximately $31.0 million of estimated net proceeds through common stock and convertible preferred stock offerings, including approximately $2.8 million of net proceeds from a partial underwriter option exercise.
- Management expects continuing substantial operating losses and negative operating cash flow for at least several years and does not expect product-sale revenue unless and until a candidate receives regulatory approval and is commercialized.
- Potential contingent payments under license and collaboration agreements totaled up to approximately $271.3 million, including up to $181.0 million to Lundbeck, up to $5.3 million to Northwestern and approximately $35.0 million of remaining potential Takeda commercial and regulatory milestones, plus the potential Takeda equity or cash payment tied to first Phase 3 enrollment. None were considered probable at year-end.
- Key development risks include FDA acceptance of the NEPTUNE protocol and CGI-I framework, the small and difficult-to-enroll patient populations, limited clinical precedent for the targeted disorders, potential adverse events, drug-drug interaction concerns involving OV935 and perampanel, reliance on Takeda and third-party manufacturers, and the possibility that early efficacy signals will not be confirmed.
- Ovid disclosed a dispute initiated by Catalyst Pharmaceuticals concerning Northwestern patent rights and related disclosure obligations; Ovid denied liability and stated that the claims were without merit. A separate trademark dispute with Ovid Technologies was settled in October 2018 subject to amendments to certain registrations and applications.
Most Important Facts for Investors to Verify
- Whether FDA concurrence was obtained for the NEPTUNE protocol and whether the trial enrolled on the anticipated timeline.
- Whether later-stage OV101 trials confirmed the STARS CGI-I efficacy signal and established a regulatory basis for an NDA.
- Whether OV935’s exploratory seizure-reduction results were replicated in ELEKTRA, ARCADE or subsequent studies, including the impact of excluding perampanel-treated patients.
- Actual cash runway after the February 2019 financing, subsequent operating cash burn and the timing and terms of any additional capital raises.
- Potential dilution and cash obligations arising from the Takeda milestone provisions and the Lundbeck, Northwestern and other license agreements.
- Status and potential financial or intellectual-property impact of the Catalyst dispute and the Ovid Technologies trademark settlement.
- Whether the company can advance its pipeline without material delays, clinical holds, manufacturing interruptions or adverse safety findings.