Minerva Neurosciences, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2017. The filing was signed November 6, 2017. Minerva is a clinical-stage CNS biopharmaceutical company with no commercially approved products.
Financial performance and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Product sales revenue | None | None | None | None |
| Research and development expense | $9.0 million | $5.9 million | $23.7 million | $13.9 million |
| General and administrative expense | $2.5 million | $2.4 million | $7.9 million | $7.0 million |
| Operating loss | $(11.4) million | $(8.2) million | $(31.6) million | $(21.0) million |
| Net loss | $(11.3) million | $(8.4) million | $(31.7) million | $(21.6) million |
| Basic and diluted loss per share | $(0.28) | $(0.24) | $(0.84) | $(0.71) |
No operating margins are meaningful because the company had no product sales. Janssen’s $30 million upfront payment and $11.2 million of forgiven accrued collaboration expenses were recorded as deferred revenue, not recognized as earned revenue at September 30.
- Cash and liquidity: Cash and cash equivalents were $36.3 million; marketable securities were $107.0 million, for total cash, cash equivalents and marketable securities of approximately $143.3 million. Management believed these resources would cover cash commitments for at least 12 months after issuance of the statements.
- Cash flows, nine months: Operating activities provided $12.0 million, versus $16.8 million used in 2016; investing activities used $107.2 million, mainly from purchases of marketable securities; financing activities provided $48.4 million. Cash declined $46.7 million to $36.3 million. The operating cash inflow was driven principally by the $41.2 million deferred-revenue balance, and should not be read as operating profitability.
- Debt: Notes payable were reported as $5.2 million current and none noncurrent at September 30. The secured Oxford Finance/Silicon Valley Bank term loan carried a 7.05% fixed rate and matures August 1, 2018. Expected principal repayments were approximately $1.3 million in 2017 and $3.5 million in 2018. The company reported compliance with loan covenants.
- Balance sheet: Total assets were $193.5 million, total liabilities $63.3 million, and stockholders’ equity $130.2 million. Accumulated deficit was $164.5 million.
Material changes versus the prior comparable period
- Nine-month R&D expense rose $9.8 million, primarily from increased seltorexant Phase 2 and MIN-101 development costs, higher personnel and stock-based compensation, partly offset by completion of the MIN-117 Phase 2a trial.
- Nine-month net loss increased $10.0 million year over year. Loss per share increased from $0.71 to $0.84, while weighted-average shares rose from 30.4 million to 37.7 million.
- Minerva completed a July 2017 public offering of 5.75 million shares, yielding approximately $41.6 million net proceeds, and received proceeds from warrant and option exercises. Shares outstanding were 38.7 million at September 30, versus 35.0 million at year-end 2016.
- Marketable securities increased from none at year-end 2016 to $107.0 million at September 30, reflecting investment of available cash.
Outlook, programs, risks and unusual items
- MIN-101: Management expected to initiate a pivotal Phase 3 schizophrenia trial in Q4 2017, enrolling approximately 500 patients at about 60 sites; top-line results from the 12-week double-blind phase were expected in the first half of 2019. The FDA denied Breakthrough Therapy designation, while confirming negative symptoms of schizophrenia meet the serious-disease criterion. The selected gastro-resistant formulation showed comparable exposure and lower peak exposure of a metabolite associated with transient QTc increases at the higher dose in Phase 2b.
- Seltorexant (MIN-202): The Janssen amendment became effective August 29, 2017. Janssen paid $30 million upfront and committed to two further $20 million payments tied to the start of, and 50% enrollment in, a Phase 3 insomnia trial. Minerva assumed strategic control of insomnia development and has no further financial obligations until completion of the Phase 2b development milestone, expected in the second half of 2019. If it continues to Phase 3, Minerva would fund insomnia trials, receive the $40 million milestone payments, and bear 40% of Janssen’s Phase 3 MDD development costs. Alternatively, at the milestone it may opt out and receive a single-digit royalty on worldwide sales without further obligations. Minerva had begun enrolling a Phase 2b adjunctive-MDD trial and planned additional Phase 2b MDD and insomnia trials before year-end 2017.
- Other candidates: A MIN-117 Phase 2b MDD trial was planned for early 2018; MIN-301 remained in preclinical development, with a Phase 1 study expected after preparation of an investigational filing.
- Funding and development risk: Management expects continuing losses and negative operating cash flows and says additional capital will be needed to fully fund later-stage development. Financing may not be available on acceptable terms; absent financing, operations may need to be reduced or discontinued. Clinical timelines, trial outcomes, regulatory review and spending needs are uncertain.
- Unusual items and commitments: Minerva repurchased 3,892,256 shares previously held by Johnson & Johnson Innovation-JJDC for approximately $389 in connection with the Janssen amendment. An October 2017 office sublease, commencing November 1, runs through July 2021, with rent starting at about $14,808 per month and two months free.
- The filing reports no material litigation known to the company, no off-balance-sheet arrangements, and effective disclosure controls. It highlights clinical, regulatory, financing, collaboration, intellectual-property, manufacturing, and product-safety risks.
Important facts for investors to verify
- Whether MIN-101 Phase 3 actually began on schedule, and whether enrollment, safety monitoring, and the projected 2019 data timing remain achievable.
- The terms and timing of Janssen’s two contingent $20 million payments, the recognition schedule for the $41.2 million deferred balance, and Minerva’s future funding obligations under each seltorexant development path.
- Underlying cash burn excluding the one-time deferred-revenue-related operating cash-flow benefit, and whether the stated 12-month liquidity outlook remains adequate as trials advance.
- The loan balance and repayment schedule: the filing presents current notes payable of $5.2 million while separately detailing loan principal and an accrued final payment; reconcile the reported amounts and upcoming maturities.
- Clinical results and risks across the pipeline, including QTc-related monitoring for MIN-101 and the efficacy evidence needed from later-stage MIN-117 and seltorexant trials.