NanoViricides, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2020 (the company’s fiscal 2021 first quarter), compared with the three months ended September 30, 2019. The filing is dated November 16, 2020. NanoViricides is a pre-revenue antiviral drug developer; it reports no commercial products or revenue.
Key financial metrics
| Metric | Quarter ended Sep. 30, 2020 | Comparable 2019 period / prior balance date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.573 million | $1.482 million |
| General and administrative expense | $697,312 | $505,472 |
| Operating loss | $2.270 million | $1.988 million |
| Net loss | $2.311 million | $1.561 million |
| Net loss per share, basic and diluted | $0.22 | $0.41 |
| Net cash used in operating activities | $2.236 million | $1.434 million |
| Cash and cash equivalents | $21.792 million | $13.709 million at June 30, 2020 |
| Total assets | $31.848 million | $23.914 million at June 30, 2020 |
| Stockholders’ equity | $29.982 million | $21.758 million at June 30, 2020 |
| Current liabilities | $1.866 million | $2.156 million at June 30, 2020 |
Cash flow from financing was $10.354 million, mainly reflecting approximately $10.442 million in net proceeds from a July public stock offering; investing cash use was $34,985. The company’s accumulated deficit was $107.874 million. Net property and equipment was $9.404 million.
Current liabilities included a net $1.092 million mortgage note payable to CEO and Chairman Anil Diwan, secured by the company’s headquarters, and $437,818 of accounts payable to related party TheraCour. The related-party mortgage bears 12% interest; the company said it intended to repay it in December 2020, though maturity could be extended to May 15, 2021. The company had drawn $1.1 million of a facility of up to $2.0 million, with $0.9 million remaining available.
Changes versus the prior comparable period
- Net loss increased by about $750,000. Operating expenses rose approximately $283,000: R&D increased $90,666, attributed to laboratory supplies, materials, repairs and maintenance; G&A increased $191,840, primarily from professional fees and general operating costs.
- The prior-year quarter included $421,527 of income from a change in fair value of derivative liabilities; there was no such income in 2020 after the liabilities were eliminated when warrants were exercised in January 2020. This, together with higher operating expenses and interest expense, drove the increase in net loss.
- Cash increased by approximately $8.083 million from June 30, 2020, chiefly due to the public offering. The offering sold 1,575,342 shares at $7.30 per share, with gross proceeds of approximately $11.5 million and net proceeds of approximately $10.4 million. Common shares outstanding rose from 9.083 million to 10.666 million during the quarter.
- Operating cash use increased by approximately $802,000 year over year. Despite the higher loss per share improving from $0.41 to $0.22, weighted-average shares increased substantially, from 3.845 million to 10.488 million.
Outlook, risks and notable items
- Funding: Management said existing resources were expected to fund planned operations through November 2021, and elsewhere said they were sufficient for at least 12 months from issuance of the financial statements. The company expects ongoing losses and says additional capital will be needed for longer-term operations and clinical development. A $50 million at-the-market equity sales agreement was available, but the company was not obligated to sell shares and gave no assurance it would do so.
- Development plans: The company reported nominating a COVID-19 clinical candidate in September 2020. After quarter-end, it announced that core safety pharmacology studies had begun, with an IND filing and initial clinical trials planned if development and regulatory steps permit. It also described the shingles candidate NV-HHV-101 as advanced preclinical and said it was preparing an IND. These candidates had not entered human clinical trials as of the filing.
- Evidence and execution risk: COVID-19 claims were based on cell-culture work and animal studies using HCoV-NL63 as a surrogate, not clinical evidence in COVID-19 patients. Management acknowledged that FDA could require additional studies; timelines and costs may exceed estimates. The company relies on external collaborators and has limited experience conducting clinical trials.
- Licensing and related-party exposure: TheraCour, which is controlled by Dr. Diwan, supplies licensed technology and development services. The company reported $648,324 of R&D costs paid to TheraCour in the quarter and $437,818 net related-party payables at period-end. The coronavirus arrangement was then a limited license under an MOU, with a full license still being developed. The VZV license includes milestone payments and a 15% royalty on net sales.
- Contingencies and other risks: The company reported no known pending or threatened legal proceedings. It warned that COVID-19-related economic disruption could impair future fundraising, although it had not experienced a direct financial impact. The filing states that the company has no revenues and may never achieve profitability.
- Controls: Management concluded disclosure controls were not effective at September 30, 2020 because of an unremediated material weakness previously identified in the fiscal 2020 Form 10-K. A financial-reporting controls committee and remediation efforts were underway.
- Management emphasis: The filing describes COVID-19 as the highest-priority emergency program in its development strategy, but also says the quarter’s R&D focus was primarily HerpeCide candidates. Investors may wish to clarify the relative resource allocation.
Most important facts for investors to verify
- Whether safety studies were completed, an IND was filed and accepted, and any human trials actually began; the filing’s near-term plans were forward-looking.
- Cash burn and runway against management’s November 2021 estimate, particularly as clinical-trial costs rise; distinguish cash on hand from potential ATM proceeds that had not necessarily been raised.
- Terms and completion status of the full coronavirus license, related-party payments and balances, and the mortgage repayment or extension.
- Progress in remediating the disclosed material weakness in financial reporting controls.
- Whether preclinical efficacy and manufacturing claims translate into reproducible clinical safety and effectiveness; no product revenue or human efficacy data were reported.