enVVeno Medical Corporation — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The company is a pre-revenue medical-device developer focused on deep venous chronic venous insufficiency (CVI). Its lead product, the porcine-tissue VenoValve, was being evaluated in the U.S. SAVVE pivotal trial. In September 2021, the company changed its name from Hancock Jaffe Laboratories and narrowed its focus to venous disease; it stopped further development of CoreoGraft and began early development of a second venous-disease device, enVVe.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Operating revenue | No revenue from operations | No clear value stated |
| Research and development expense | $5.7 million | $4.3 million |
| Selling, general and administrative expense | $11.2 million | $4.9 million |
| Loss from operations | $16.9 million | $9.1 million |
| Net loss | $16.5 million | $9.1 million |
| Cash used in operating activities | $11.8 million | $7.7 million |
- Expense drivers: SG&A rose 129%, principally because share-based compensation increased to $6.0 million from $0.7 million. R&D rose 35%, mainly with added staff, lab costs and trial-related quality testing.
- Cash and liquidity: Year-end cash and cash equivalents were $54.7 million, versus $9.3 million in 2020; working capital was $53.5 million. Current assets were $55.0 million and current liabilities $1.6 million. Management estimated quarterly cash burn at about $4 million and expected funds to support operations through the end of 2024 and into 2025; it also stated cash was sufficient to meet obligations for at least one year after the report date.
- Financing: The company raised $57.4 million net in 2021 through public and registered-direct offerings and an at-the-market program. Common shares outstanding increased from 2.54 million to 9.47 million during 2021.
- Debt and obligations: The $312,700 Paycheck Protection Program loan was forgiven in 2021, producing a one-time gain; no note payable remained at year-end. Operating lease liabilities totaled approximately $2.0 million, including $291,000 current and $1.7 million long-term.
- Profitability and margins: The company reported no operating revenue, so operating margins are not meaningful. It had an accumulated deficit of $81.9 million and expects continued losses. The filing does not provide a meaningful product gross margin.
- Cash concentration: $54.5 million of cash was uninsured by the FDIC at year-end, compared with $9.1 million in 2020.
Material changes and developments
- Net loss increased $7.4 million, or 81%, year over year; operating expenses increased $7.8 million. The 2021 net loss included a $312,700 gain from PPP loan forgiveness.
- The February 2021 public offering and September 2021 registered-direct offering were major sources of capital. Financing cash inflow was $57.6 million, compared with $15.1 million in 2020.
- The Irvine manufacturing-facility lease was extended to September 30, 2027. The company said the facility could manufacture approximately 24,000 venous valves annually.
- Management said it remediated a previously disclosed material weakness involving reporting of complex financial transactions. Management concluded internal control over financial reporting was effective at year-end; the auditor did not attest to that assessment.
Clinical outlook, risks and contingencies
- VenoValve evidence: In an 11-patient first-in-human study, one-year average improvements versus pre-surgery levels were 54% in reflux, 56% in VCSS and 76% in pain scores. The company reported no device-related safety incidents during that study. In follow-up of eight patients at an average of two years, it reported improvements of 63%, 60% and 93%, respectively, with no reported recurrence of severe CVI or ulcers in that cohort. These are small, non-pivotal results and do not establish U.S. approval or commercial effectiveness.
- SAVVE trial: The U.S. pivotal study is prospective, open-label, single-arm, planned for 75 patients at up to 20 sites. Its primary endpoints are a material adverse safety-event rate no greater than 26% at one month and at least 30% reflux improvement at six months. Ten sites were active at December 31, 2021. As a subsequent update, by March 24, 2022, 16 sites were active and nine surgeries had been completed. Management targeted full enrollment by the end of 2022 or early 2023, but COVID-related hospital staffing constraints, suspended elective procedures and patient screening delays had slowed enrollment and site activation.
- Regulatory path: VenoValve is a Class III device expected to require FDA premarket approval. The FDA approved the study’s IDE in April 2021 and previously granted Breakthrough Device Designation; neither is marketing approval. Review timing, trial outcomes and any approval remain uncertain.
- Funding and execution risks: The company remains dependent on financing and successful, timely trial completion and regulatory approval. Other major risks include dilution, lack of commercialization infrastructure, market adoption and reimbursement, manufacturing scale-up, reliance on a single domestic porcine-tissue supplier, and continuing COVID-related disruption.
- Legal contingency: Two consolidated claims by a former employee seek, among other relief, wages, damages and attorney fees. The company denied the claims and filed a counterclaim. It said the potential loss could not be reasonably estimated and accrued no amount at December 31, 2021. Trial was scheduled for June 27, 2022.
- Other items: No off-balance-sheet arrangements were reported. The company has no current sales infrastructure and expects no significant revenue in the near future. Its options, restricted stock units and warrants create potential dilution; as of the report, it disclosed 6.3 million warrants outstanding.
Important facts for investors to verify
- Current SAVVE enrollment, site activity, safety events and progress toward the stated enrollment and endpoint-data timeline.
- Whether the small first-in-human results are reproduced in the 75-patient pivotal study and meet the stated safety and effectiveness thresholds.
- Actual quarterly cash burn, remaining runway and financing needs relative to management’s end-2024/2025 estimate.
- Potential dilution from outstanding warrants, options and equity awards, and any future capital raises.
- Updates on the former employee litigation, including any outcome or financial exposure.
- Cash-management arrangements for the substantial uninsured bank balance and progress in qualifying alternative tissue suppliers.