Vistagen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2017 (the company’s fiscal second quarter) and six months ended September 30, 2017. Unless noted, financial amounts are U.S. dollars. The interim statements are unaudited.
Business context
Vistagen is a clinical-stage biopharmaceutical company with no marketed products or recurring revenue. Its lead candidate, oral AV-101, is in Phase 2 development for major depressive disorder (MDD); the company is also exploring other central nervous system indications and stem-cell-based drug discovery and regenerative medicine. The National Institute of Mental Health (NIMH) is funding and conducting a separate Phase 2 AV-101 monotherapy study under a cooperative agreement.
Financial performance and liquidity
| Metric | Three months ended September 30, 2017 | Six months ended September 30, 2017 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.427 million, versus $1.606 million | $3.523 million, versus $2.432 million |
| General and administrative expense | $2.567 million, versus $1.494 million | $3.731 million, versus $2.631 million |
| Net loss | $4.997 million, versus $3.101 million | $7.262 million, versus $5.068 million |
| Net loss attributable to common stockholders | $5.253 million, versus $3.342 million | $7.766 million, versus $5.960 million |
| Basic and diluted loss per share | $0.53, versus $0.42 | $0.82, versus $0.91 |
For the six months, operating cash outflow was $4.010 million, investing cash outflow was $0.002 million, and financing cash inflow was $2.855 million. Cash declined by $1.157 million, from $2.921 million at March 31 to $1.764 million at September 30, 2017. The comparable 2016 six-month period had operating cash outflow of $3.873 million and financing inflow of $9.709 million.
At September 30, 2017, current assets were $2.328 million and current liabilities were $1.884 million; total assets were $2.618 million and total liabilities were $4.289 million, leaving a stockholders’ deficit of $1.672 million. Current notes payable were $105,200; capital lease obligations totaled $13,200. Accrued Series B preferred dividends were $2.081 million. The company reported an accumulated deficit of $149.3 million.
Management estimated cash expenditures of approximately $12 million for the 12 months following issuance of the statements and said available cash could not fund planned operations. The filing states that, without additional financing, the company may be unable to meet obligations within one year and substantial doubt exists about its ability to continue as a going concern.
Changes, outlook, and significant items
- Year-over-year increases in R&D reflected AV-101 manufacturing, clinical-material production, and preparation for the planned MDD trial. G&A growth included professional and investor-relations services, share-based compensation, and warrant modification expense.
- In October 2017, after addressing manufacturing impurities and completing a bridging toxicology study, the FDA authorized the planned 180-patient Phase 2 adjunctive-treatment study. The company said it intended to start in the first quarter of 2018, subject to sufficient financing, and expected completion by year-end 2018, with top-line results in the first quarter of 2019. These are management expectations, not assured outcomes.
- The NIMH-funded AV-101 monotherapy study was expected by the company to finish in the first half of 2018; Vistagen does not direct or control that study.
- In September 2017, Vistagen received approximately $2.0 million net proceeds from a public offering of common stock and warrants (approximately $2.4 million gross). It also raised funds through private placements. In October, it filed an S-1 registration statement for a proposed offering intended to fund the planned trial and at least 12 months of operations; completion and proceeds were not assured.
- The September offering issued 1,371,430 common shares and warrants for up to 1,892,572 shares at $1.82 per share. Stockholders increased authorized common shares from 30 million to 100 million. At September 30, 6,965,151 warrants were outstanding; potentially dilutive securities totaling 14,473,274 shares were excluded from diluted loss per share as anti-dilutive.
- The company recorded $279,700 of noncash warrant-modification expense after repricing and increasing warrants from a spring private placement. It also issued substantial common stock for services; shares granted for services in the September quarter had aggregate fair value of approximately $1.504 million, of which all but $161,300 was recognized as expense by quarter-end.
- There were no legal proceedings, defaults upon senior securities, or off-balance-sheet arrangements reported. Disclosure controls were considered effective, but two previously identified material weaknesses in financial-reporting controls—segregation of duties and accounting-software functionality—remained unremediated.
Key investor verification points
- Whether the proposed equity offering was completed, how much net funding it produced, and the resulting dilution and cash runway.
- Whether Vistagen funded and initiated the adjunctive Phase 2 trial on the stated timetable, and whether manufacturing quality and supply remain adequate.
- Progress and results from both the company-sponsored adjunctive trial and the NIMH monotherapy study; neither study’s efficacy is established by this filing.
- The potential dilution and economic terms of outstanding warrants, preferred stock, options, and future equity issuance.
- Whether the company remediated its material weaknesses in internal controls and improved its ability to produce reliable financial reporting.