vTv Therapeutics Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The company is a clinical-stage biopharmaceutical developer with no product-sales revenue. Financial amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $1.828 | $2.473 | $2.749 | $4.537 |
| Research and development expense | $4.228 | $8.594 | $7.050 | $17.537 |
| General and administrative expense | $2.392 | $2.737 | $4.778 | $4.992 |
| Operating loss | $(4.792) | $(8.858) | $(9.079) | $(17.992) |
| Net loss attributable to vTv Therapeutics Inc. | $(2.882) | $(3.072) | $(5.037) | $(6.024) |
| Net loss per Class A share | $(0.10) | $(0.31) | $(0.34) | $(0.61) |
- Revenue fell 26% in Q2 and 39% for the six-month period, mainly because Huadong license-related revenue recognized in 2018 had ended. A $1.0 million Newsoara milestone recognized in 2019 partly offset the decline.
- R&D expense declined 51% in Q2 and 60% year to date, chiefly following the 2018 termination of azeliragon’s STEADFAST and open-label extension studies, and workforce reductions. Spending on the new azeliragon study and TTP399 increased in some periods.
- Six-month net loss attributable to common shareholders was $8.765 million, including a $3.728 million deemed distribution to a related party; the reported loss attributable to the company was $5.037 million.
- Cash used in operations was $10.947 million for the first six months, versus $14.727 million a year earlier. Financing provided $10.726 million, including $10.5 million from related-party share sales and $5.443 million from a registered direct offering, partly offset by $5.217 million of debt repayments. Cash, cash equivalents and restricted cash ended the period at $3.962 million.
- At June 30, cash and cash equivalents were $1.462 million; an additional $2.5 million was restricted as loan collateral. Total assets were $9.072 million. Notes payable were $10.831 million, of which $8.646 million was current. The loan carries a floating rate of 10.5% plus any one-month LIBOR amount above 0.5% and is secured by substantially all assets, including intellectual property.
- Stockholders’ deficit was $49.902 million. Redeemable noncontrolling interest was $37.060 million; non-voting holders owned a 43.6% economic interest in vTv LLC.
Business developments, outlook and risks
- In June 2019, vTv began screening for a sequential Phase 2/Phase 3 azeliragon study in mild Alzheimer’s disease patients with type 2 diabetes. The planned Phase 2 enrollment is approximately 100; the company expected top-line results by the end of Q4 2020. The Phase 3 design may change based on Phase 2 results.
- The company reported positive primary-analysis results from Part 1 of the Phase 2 Simplici-T1 study of TTP399: mean HbA1c decreased 0.6% in the TTP399 group (n=8) and increased 0.1% with placebo (n=11), a 0.7 percentage-point difference (p=0.03). Responders were 75% versus 9% (p=0.006). The small study reported no serious adverse events, diabetic ketoacidosis or severe hypoglycemia. Part 2 enrollment had begun, with topline results expected in Q1 2020.
- Management said available cash, remaining Letter Agreement capacity and expected collaboration receipts were expected to fund operations only into Q3 2019. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. Additional financing is required; potential sources include further equity investment or public offerings, but timing and availability were unknown.
- At June 30, $7.0 million remained available under the MacAndrews Letter Agreements, including a company option to sell shares at $1.65 per share. MacAndrews also held rights to require certain share sales. On July 9, after quarter-end, it purchased 1,212,121 shares for $2.0 million. Equity financing may dilute shareholders. MacAndrews affiliates controlled approximately 79.6% of combined voting power at June 30.
- R&D spending could rise as clinical trials proceed, subject to funding. Key risks include trial outcomes and enrollment, regulatory requirements, financing access, collaboration and licensing economics, and the pledged intellectual property and debt covenants. A 1 percentage-point loan-rate increase was estimated to add about $0.1 million of annual interest expense.
- The company completed its workforce restructuring in Q2 2019, shifting development toward external resources; related remaining severance accrual was de minimis. No material legal proceedings or defaults on senior securities were reported. Disclosure controls were assessed as effective.
Most important facts for investors to verify
- Whether the company obtained sufficient financing after the stated Q3 2019 liquidity runway, and the terms and dilution of any subsequent funding.
- Actual cash burn, collaboration receipts, debt maturities and compliance with the $2.5 million minimum-cash requirement.
- Subsequent enrollment, safety and efficacy results for azeliragon and TTP399, including whether reported early TTP399 findings are reproduced in the larger study.
- Revenue concentration and milestone timing: three customers accounted for 100% of revenue in the periods presented, and reported revenue includes licensing and milestone items rather than product sales.
- Related-party financing, voting control, share issuance and potential exchanges of LLC units, including resulting effects on common shareholders.