vTv Therapeutics Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020; unaudited consolidated results. vTv is a clinical-stage pharmaceutical company focused on metabolic diseases. It has no product sales and relies on licensing, collaboration, debt and equity financing. Unless noted otherwise, financial figures below are in millions of dollars.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0.007 | $0.008 | $0.015 | $2.757 |
| Research and development | $1.768 | $3.663 | $8.481 | $10.713 |
| General and administrative | $1.071 | $1.770 | $5.216 | $6.548 |
| Operating loss | $(2.832) | $(5.425) | $(13.682) | $(14.504) |
| Net loss attributable to vTv | $(1.533) | $(3.608) | $(9.625) | $(8.645) |
| Loss per Class A share | $(0.03) | $(0.13) | $(0.21) | $(0.46) |
| Operating cash used | — | — | $(15.788) | $(17.142) |
Revenue was negligible in 2020; the prior-year nine-month revenue included license-related recognition and a Newsoara milestone. Margins are not meaningful given the near-zero revenue base. Q3 operating expenses declined 48% year over year; nine-month expenses declined 21%. Lower trial spending, personnel costs and reversals of performance-based compensation accruals contributed to the reductions. Nine-month net loss attributable to vTv nevertheless increased from 2019, partly reflecting non-operating and noncontrolling-interest effects.
- Balance sheet at September 30: Cash and cash equivalents were $1.827 million; total assets $7.046 million; current liabilities $8.296 million; total liabilities $12.827 million. Stockholders’ deficit was $51.372 million, and redeemable noncontrolling interest was $45.591 million.
- Debt: Notes payable were $2.369 million, all classified current. The loan bears floating interest of 10.5% plus any one-month LIBOR above 0.5%; debt is secured by substantially all assets, including intellectual property. As of November 5, $0.9 million of principal and a $0.8 million final payment remained due January 1, 2021.
- Cash flows and financing: Nine-month financing provided $13.338 million, including $9.731 million net ATM proceeds and $7.0 million from a related-party share issuance, offset in part by debt repayments. Cash, cash equivalents and restricted cash declined $2.450 million to $1.827 million. The $2.480 million Reneo investment is carried at cost and is not described as readily marketable.
Material changes, outlook and risks
- Management said available cash, remaining Letter Agreement funding and ATM proceeds would fund operations only through December 2020, raising substantial doubt about the company’s ability to continue as a going concern. The ATM’s remaining $2.8 million capacity was fully used after quarter-end through issuance of 1,633,536 Class A shares. At September 30, $3.0 million remained available under the Letter Agreements; additional financing was not assured.
- The company is evaluating financing and partnership options. Equity financing could materially dilute shareholders; debt or partnership arrangements could restrict operations or require surrender of valuable rights. The filing does not provide a longer-term cash runway or a committed financing plan.
- Pipeline: Following positive Phase 2 results for TTP399 in type 1 diabetes, the company planned two placebo-controlled six-month trials of approximately 400 subjects each, with the second planned to start 9–12 months after the first. Estimated development cost, including pivotal trials and related work, was $75–$90 million, subject to funding and evolving plans. A mechanistic study was expected to start in Q1 2021, with results expected in Q2 2021.
- Enrollment in the azeliragon Elevage Phase 2 study ended in September: 43 patients were enrolled, and top-line results for approximately 38 patients were expected in December 2020. COVID-19-related site disruptions delayed screening and enrollment. A Phase 1 HPP737 study was planned to start in Q1 2021, with results expected in Q2 2021.
- Management reported no significant financial impact from COVID-19 through the period, but said future effects on trials, partners, suppliers, financing and operations remained uncertain. The company reported no material legal proceedings. Potential obligations include up to $3.0 million toward a Huadong Phase 2 trial if required, and substantial development, sales-milestone and royalty payments under its Novo Nordisk license if applicable milestones are achieved.
- MacAndrews affiliates controlled approximately 80% of combined voting power. Its related-party Letter Agreements and warrants, and the redeemable 32% noncontrolling interest in vTv LLC, are important capital-structure considerations. A $0.814 million related-party other-income line in Q3 contrasts with $(0.114) million for the nine-month period; warrant fair-value movements are noncash and may be volatile.
Most important facts for investors to verify
- Whether vTv secured financing after the disclosed December 2020 runway estimate, and the resulting dilution, terms and updated going-concern assessment.
- Actual debt repayment and final-payment status at the January 1, 2021 maturity, including compliance with loan terms.
- Subsequent clinical results and regulatory plans for TTP399 and azeliragon, and whether COVID-19 or funding changed study timing, design or costs.
- Whether forecast development spending—especially the $75–$90 million TTP399 estimate—can be funded, and what funding or partnering milestones are required.
- Related-party financing terms, MacAndrews’ remaining rights, warrant valuation and potential effects of the redeemable noncontrolling interest on future shareholder dilution and reported results.