Vital Therapies, Inc. — Form 10-Q Summary
Entity note: The request metadata names IMMUNIC, INC., but the filing is for Vital Therapies, Inc. The summary below reflects the filing. Reporting period ended September 30, 2015; filed November 5, 2015. Financial statements are unaudited.
Business context and reporting period
Vital Therapies was a clinical-stage biotherapeutics company developing ELAD, an extracorporeal cell-based therapy for liver failure. It reported no revenue from its planned principal operations. In August 2015, its VTI-208 Phase 3 trial in alcohol-induced liver decompensation (AILD) failed to meet its primary and secondary endpoints. The company planned a new AILD Phase 3 trial, VTL-308, subject to FDA review.
Financial performance and position
| Metric | Three months ended September 30, 2015 | Nine months ended September 30, 2015 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $9.646 million | $32.945 million |
| General and administrative expense | $2.689 million | $9.286 million |
| Total operating expenses | $12.335 million | $42.231 million |
| Net loss | $12.300 million | $42.164 million |
| Net loss per share, basic and diluted | $0.51 | $1.76 |
| Cash used in operating activities | Not presented by quarter | $40.661 million |
Compared with the prior-year periods, third-quarter operating expenses fell 4% and net loss narrowed slightly from $12.798 million. For the first nine months, operating expenses rose 16% and net loss increased from $33.712 million. Prior-year nine-month loss attributable to common stockholders was higher ($42.866 million) because of preferred-stock accretion and deemed dividends; those items did not recur in 2015.
At September 30, cash and cash equivalents were $59.754 million, restricted cash was $1.069 million, and current assets totaled $62.609 million. Total current liabilities were $8.119 million; total liabilities were $8.265 million. The filing reports no borrowings or material interest-bearing debt. Stockholders’ equity was $58.678 million. Cash and cash equivalents declined $42.484 million from year-end 2014. No meaningful operating margin comparison is available because the company had no revenue.
For the nine months, investing activities used $1.769 million, principally reflecting $2.292 million of property and equipment purchases, partly offset by a decrease in restricted cash. Financing activities used $47,000. Stock-based compensation was $2.943 million.
Material changes and unusual items
- Third-quarter R&D expense decreased 6% year over year, mainly due to lower clinical-trial costs after VTI-208 enrollment was completed and VTI-210 and VTI-212 were discontinued. G&A expense increased 5%.
- Nine-month R&D expense rose $4.356 million, while G&A rose $1.550 million, reflecting clinical, research, BLA-preparation, staffing, stock-compensation and public-company costs, partly offset by reduced trial costs.
- After obtaining subject-specific trial information, the company reduced its clinical-trial accrual and R&D expense by $750,000 in the quarter and nine-month period.
- A September workforce-reduction plan targeted approximately 30% of staff. The company recognized about $910,000 in severance-related costs, including approximately $303,000 of non-cash stock compensation; the plan was expected to finish by year-end.
- Construction in progress increased to $2.308 million from $922,000 at year-end 2014; total net property and equipment was $4.163 million.
Outlook, risks and contingencies
Management expected fourth-quarter operating expenses to decline following trial discontinuations, the workforce reduction and postponement of most BLA-preparation work. Assuming focus principally on VTL-308, management projected average quarterly operating expenses and operating cash use would decrease by more than one-third; spending would depend substantially on trial timing and enrollment. The company anticipated enrolling the first VTL-308 subject in the first half of 2016, subject to FDA review, and expected FDA feedback on its proposed protocol by year-end 2015.
In October 2015, the company completed a follow-on offering of 6,272,727 shares at $5.50 per share. Gross proceeds were approximately $34.5 million and estimated net proceeds were approximately $32.0 million. Including those proceeds, management believed available resources would fund operations to mid-2018, potentially but not necessarily including VTL-308 topline data. This is a forward-looking estimate and depends on trial enrollment, expenditures and other funding needs.
Key risks include the failed VTI-208 trial and uncertainty about FDA acceptance, VTL-308 design, enrollment and efficacy; possible need for additional pivotal trials; dependence on a single product candidate; continued losses and potential need for more capital; manufacturing and single-source supplier risks; and regulatory, reimbursement and commercialization uncertainty. The company reported no material pending or threatened litigation. It disclosed that disclosure controls and procedures were ineffective as of September 30 because sufficient testing had not been completed, and described prior material weaknesses in internal control over financial reporting that were being remediated and tested.
Important facts for investors to verify
- Whether the FDA accepts the proposed VTL-308 protocol and whether enrollment begins as planned.
- Whether the new trial can demonstrate statistically significant efficacy, and whether regulators may require another confirmatory trial.
- Actual cash burn, trial costs and runway compared with management’s mid-2018 estimate, including the impact of the October offering.
- Completion and cash cost of the workforce reduction, and whether expected expense reductions are achieved.
- Progress in remediating internal-control weaknesses and the status of disclosure-control testing.
- The discrepancy between the request’s company name and the registrant named in this filing.