Business context and reporting period
This is Ventrus BioSciences, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2013. The request metadata names Assembly Biosciences, Inc.; that does not match the company identified in this filing. Ventrus describes itself as a development-stage specialty pharmaceutical company developing gastrointestinal treatments. It reported no product revenue.
Financial performance and position
| Metric | Q2 2013 / June 30, 2013 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None to date |
| Research and development expense | $3.51 million for Q2; $6.12 million for six months | $6.16 million and $12.58 million, respectively, in 2012 |
| General and administrative expense | $1.30 million for Q2; $2.46 million for six months | $1.32 million and $3.08 million, respectively, in 2012 |
| Net loss | $4.75 million for Q2; $8.47 million for six months | $7.47 million and $15.64 million, respectively, in 2012 |
| Basic and diluted loss per share | $0.24 for Q2; $0.46 for six months | $0.59 and $1.25, respectively, in 2012 |
| Cash and cash equivalents | $33.49 million | $20.49 million at December 31, 2012 |
| Total assets / current liabilities | $33.68 million / $2.59 million | $20.56 million / $2.75 million at December 31, 2012 |
| Cash flow, six months | Operating use: $7.75 million; investing use: $5,166; financing inflow: $20.75 million | Operating use: $13.03 million; investing use: $3,240; financing inflow: $4.90 million in 2012 |
Margins are not meaningful because the company had no revenue. The balance sheet lists current liabilities but no debt balance; the filing states prior convertible notes and accrued interest were converted to equity or repaid. Accumulated development-stage deficit was $100.79 million. No separate profitability guidance was provided.
Material changes and financing
- Q2 R&D expense fell 43% year over year and six-month R&D expense fell 51%, primarily because development of VEN 309 was halted, partly offset by increased spending on VEN 307.
- Six-month G&A expense decreased 20%, mainly due to lower stock-based compensation. Net loss narrowed year over year for both the quarter and six-month period.
- In February 2013, Ventrus raised approximately $20.8 million net by selling 6.67 million common shares and 220,000 Series A non-voting convertible preferred shares. The preferred shares are convertible at the holder’s option into 10 common shares each. Common shares outstanding were 19,604,350 at June 30.
- The company reported no availability under its shelf registration statement as of June 30, 2013.
Outlook, risks, and unusual items
- Management estimated approximately $15 million would be needed to complete VEN 307 clinical development and seek approval. It believed existing cash would fund operations through FDA approval and initial launch and commercialization, but cautioned that estimates depend on assumptions and cash could be exhausted sooner than expected.
- Ventrus expected losses for at least two more years, no product revenue for at least two years, and increasing R&D and commercialization-related G&A spending. It had no commitments for future external funding; additional financing might be unavailable or dilutive, and could require delaying programs or relinquishing product rights.
- VEN 307 (topical diltiazem) was the lead candidate for anal fissure pain; VEN 308 (topical phenylephrine) was intended for fecal incontinence, with further development plans not yet determined. VEN 309 development ceased after its Phase III trial failed to meet endpoints in 2012.
- Two purported securities class actions concerning statements about VEN 309 were consolidated in July 2013. The company intended to defend the claims but could not predict the outcome or estimate a possible loss.
- Ventrus reported effective disclosure controls and no material changes in internal control over financial reporting. Cash balances at times exceeded federally insured limits.
Important facts for investors to verify
- Confirm the filing entity: the supplied filing is for Ventrus BioSciences, not Assembly Biosciences.
- Track VEN 307 clinical and regulatory progress, timing, total costs, and whether the stated cash runway remains achievable.
- Review financing needs, potential dilution from future equity issuance and preferred-share conversion, and the limited shelf-registration capacity.
- Monitor the consolidated securities litigation and any change in the company’s ability to assess potential losses.
- Verify the status and funding priorities for VEN 308 and whether any product receives regulatory approval or generates revenue.