Vistagen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2020, the first quarter of fiscal 2021. The filing was dated August 13, 2020. Vistagen is a clinical-stage biopharmaceutical company with no approved products or product-sales revenue.
Financial results
| Metric | Quarter ended June 30, 2020 | Prior-year quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.731 million | $4.314 million |
| General and administrative expense | $1.391 million | $1.910 million |
| Total operating expenses / operating loss | $3.122 million | $6.224 million |
| Net loss | $3.127 million | $6.210 million |
| Net loss attributable to common stockholders | $3.463 million; $0.07 per share | $6.512 million; $0.15 per share |
| Cash used in operating activities | $2.807 million | $4.761 million |
Revenue and operating margins are not meaningful measures for this pre-commercial company; the filing reports no revenue in either period. The smaller year-over-year loss and operating cash use primarily reflect completion of the AV-101 Elevate Study in late 2019 and lower related expenses.
At June 30, 2020, cash and cash equivalents were $1.546 million, total current assets $2.179 million, current liabilities $2.673 million, total liabilities $11.779 million, and stockholders’ deficit $5.612 million. Current assets less current liabilities imply a working-capital deficit of approximately $494,000. Notes payable, including accrued interest, totaled about $554,000; operating lease liabilities were $3.957 million. Accrued Series B preferred dividends were $5.348 million.
Financing activities provided $2.998 million during the quarter, principally from sales under the Lincoln Park equity line. The company had 55.94 million common shares outstanding at quarter-end, compared with 49.35 million at March 31, 2020; it reported 73.998 million shares outstanding as of August 13, 2020.
Business, pipeline and material developments
- PH94B: The company is preparing a pivotal Phase 3 trial for acute anxiety treatment in adults with social anxiety disorder (SAD). It reported FDA alignment on key elements of an initial study: a randomized, placebo-controlled public-speaking challenge, approximately 182 completed patients and 12–15 North American sites. A small exploratory Phase 2A study for adjustment disorder with anxiety was also planned, subject to further FDA discussions.
- EverInsight agreement: In June 2020, Vistagen granted EverInsight exclusive PH94B development and commercialization rights in Greater China, South Korea and Southeast Asia. The agreement provides a $5.0 million non-refundable upfront payment, up to $172 million in potential milestones, and royalties. No related revenue had been recognized by June 30; the upfront payment was received in August, with approximately $4.655 million in net cash proceeds after related payments. The upfront amount was expected to be recognized over approximately four years as services are performed.
- PH10: The company was preparing for Phase 2B development for major depressive disorder, including additional FDA-required toxicology work. Manufacturing and supply-chain delays affected advancement plans.
- AV-101: The Phase 2 Elevate Study in MDD did not differentiate the 1,440 mg treatment arm from placebo on its primary endpoint. Vistagen was assessing preclinical results for AV-101 combined with probenecid and possible further clinical development.
- Additional post-quarter financing: In August, the company completed a public offering and partial overallotment, generating approximately $12.9 million in net proceeds. It also received the EverInsight payment; July warrant exercises and equity-line sales brought additional cash. The filing describes approximately $20 million of net cash proceeds from transactions between April 1 and the report date.
Outlook, liquidity and principal risks
Management stated that quarter-end cash, together with the subsequent financing and collaboration proceeds, might not fund planned operations for the 12 months following issuance of the financial statements. The filing therefore identifies substantial doubt about the company’s ability to continue as a going concern. Vistagen expected continued losses and negative operating cash flows and anticipated seeking additional equity, debt, collaboration or grant funding. It warned that financing might not be available in adequate amounts, on acceptable terms or on time, and that failure to obtain it could force reductions, delays or discontinuation of development programs.
- COVID-19 had curtailed headquarters operations and delayed supplies of active pharmaceutical ingredient and finished product for PH94B and PH10. Further disruption could delay development and trials.
- Development remains dependent on successful clinical and regulatory outcomes, third-party CROs and manufacturers, and adequate funding. Early-stage results do not assure later-stage success.
- Equity financing and outstanding options, warrants and convertible preferred stock create potential dilution. The company reported approximately 26.6 million common-stock warrants outstanding at quarter-end.
- The $224,400 Paycheck Protection Program loan bears 1% interest and may be forgivable, but forgiveness was not assured.
- Nasdaq had notified the company of a minimum-bid-price deficiency; the disclosed compliance deadline was October 12, 2020.
- Management said disclosure controls were effective, but the company continued to report material weaknesses in internal control over financial reporting relating to segregation of duties and accounting software functionality.
The company reported no legal proceedings and no off-balance-sheet arrangements. It did not provide quantified financial guidance.
Important facts for investors to verify
- Whether post-quarter cash proceeds and subsequent spending resolve the disclosed 12-month funding shortfall and going-concern uncertainty.
- Whether PH94B manufacturing and COVID-related supply issues are resolved, and whether the planned Phase 3 and exploratory Phase 2A studies begin on schedule.
- Whether PH10 completes required toxicology and manufacturing work to support Phase 2B, and whether AV-101 plus probenecid advances beyond preclinical evaluation.
- Actual recognition and collection of the EverInsight upfront payment, and the conditions, timing and likelihood of future milestone and royalty payments.
- The status of PPP loan forgiveness, Nasdaq bid-price compliance, and remediation of the reported internal-control weaknesses.
- Potential dilution from further equity issuance, conversions and exercises, including the effect of the August offering on the share count.