Business context and reporting period
vTv Therapeutics Inc. is a clinical-stage pharmaceutical company developing small-molecule treatments for metabolic diseases and related complications. This Form 10-K covers the fiscal year ended December 31, 2019; it was filed February 20, 2020. The company had no approved products and generated no product-sales revenue. Reported revenue came primarily from license and collaboration arrangements.
Lead programs were TTP399, an oral glucokinase activator being developed as an adjunct to insulin for type 1 diabetes, and azeliragon, a RAGE antagonist being studied for mild Alzheimer’s disease in people with type 2 diabetes. TTP273 was in planning for a cystic-fibrosis-related diabetes trial; Nrf2/Bach1 compounds remained in preclinical development or research. Partners were advancing licensed GLP-1, PDE4 and PPAR-delta programs.
Financial performance and position
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $2.764 million | $12.434 million |
| Research and development expense | $15.119 million | $23.035 million |
| General and administrative expense | $8.537 million | $9.223 million |
| Operating loss | $20.892 million | $19.824 million |
| Net loss attributable to vTv Therapeutics Inc. | $13.044 million | $7.911 million |
| Net loss attributable to common shareholders | $17.913 million | $8.650 million |
| Basic and diluted loss per share | $0.59 | $0.69 |
| Net cash used in operating activities | $23.018 million | $26.856 million |
| Cash and cash equivalents at year-end | $1.777 million | $1.683 million |
Revenue fell 77.8%, largely because technology-transfer performance obligations for the Huadong and Newsoara licenses had been completed and the Reneo transfer period ended during 2019. The year included $1.0 million of Newsoara milestone revenue. R&D expense declined 34.4%, mainly as spending on the discontinued STEADFAST study fell, partly offset by increased TTP399 trial spending and the start of the Elevage study. Operating loss nevertheless widened about 5.4% as lower revenue more than offset reduced expenses.
The common-shareholder loss includes a $4.869 million deemed distribution to a related party; the corresponding 2018 amount was $0.739 million. The filing reports $13.044 million of net loss attributable to the company and $17.913 million attributable to common shareholders for 2019. No operating margin is meaningful given the company’s development-stage operations and absence of product sales.
At December 31, 2019, total assets were $9.266 million, current liabilities $13.381 million and working capital was negative $10.543 million. Cash, cash equivalents and restricted cash together totaled $4.277 million, including $2.5 million pledged under the loan agreement. Long-term investments of $2.480 million represented the Reneo investment and were not cash equivalents. Notes payable were $6.172 million on the balance sheet, all current; this includes $4.896 million of loan principal, short-term financing and accrued final payments. Loan principal payments of approximately $5.041 million were scheduled for 2020. The loan’s stated rate was 10.5% plus any one-month LIBOR above 0.5%; its reported effective annual rate, including fees and final payments, was 17.7%.
Financing activities provided $22.870 million in 2019, including $27.5 million from related-party stock sales and $5.443 million from a registered direct offering, offset in part by $10.573 million of debt repayments. The company had 40.919 million Class A shares and 23.094 million Class B shares outstanding at year-end; Class A shares outstanding had been 20.347 million a year earlier. The company reported 26 employees at year-end.
Material changes, outlook and risks
- Clinical update after year-end: In February 2020, vTv reported positive topline Part 2 results from the adaptive Phase 2 Simplici-T1 study of TTP399. In a prespecified estimand analysis, the placebo-subtracted HbA1c reduction was 0.32 percentage points (p=0.001); time in range improved by about two hours daily versus placebo (p=0.03), and mealtime bolus insulin fell 11% from baseline (p=0.02). The 85-patient, 12-week study reported no DKA in either arm and no severe hypoglycemia in the treated arm. These are post-period results, not 2019 financial results. Management planned FDA discussions on the design of the next trial, expected to last six months, but funding and trial plans remained subject to uncertainty.
- Azeliragon: The Elevage study was enrolling at the filing date. Its Phase 2 portion was designed for about 100 patients and six months of treatment; topline results were expected in the first half of 2021. A subsequent Phase 3 portion was contemplated, with design subject to Phase 2 results. The rationale relied in part on a post-hoc subgroup from a prior Phase 3 study that failed its primary endpoints overall; the second study was stopped early.
- Going concern and funding: The company had an accumulated deficit of $233.5 million and recurring operating cash outflows. Management said year-end cash and available letter-agreement funding were expected to support operations only into March 2020 and identified substantial doubt about the company’s ability to continue as a going concern. As of February 20, 2020, $4.0 million of a December 2019 commitment had been drawn and $6.0 million remained available. Additional financing, partnerships or grants were not assured; failure to obtain funding could delay, reduce or end development programs.
- Debt and dilution: The loan requires a minimum $2.5 million cash balance in a pledged account, restricts certain actions and is secured by substantially all assets, including intellectual property subject to limited exceptions. MacAndrews and its affiliates held about 83.5% of combined voting power. Related-party equity commitments, warrants and possible future offerings could further dilute shareholders. The company does not expect to pay dividends.
- Other material risks and contingencies: Drug-candidate efficacy, safety, trial execution and regulatory approval remain uncertain; vTv relies on third parties for clinical work and manufacturing and disclosed no multiple sources for candidate components. The company may owe up to $3.0 million toward a Huadong-requested Phase 2 multi-region TTP273 trial, whose timing was indeterminate. Novo Nordisk agreements provide for potential development/regulatory milestones up to $115 million, sales milestones up to $75 million and royalties; these are contingent obligations, not current debt. The filing reported no material legal proceedings. The independent auditor’s report highlighted the going-concern uncertainty; management reported effective disclosure controls and internal control over financial reporting, while the auditor did not provide an opinion on internal controls.
Important facts for investors to verify
- Current cash runway, subsequent financing, and whether the remaining $6.0 million under the December 2019 related-party agreement was drawn; also assess its share-price terms, warrants and dilution.
- Whether TTP399’s February 2020 results are confirmed in full study data and what FDA feedback, trial design, cost, funding and timing follow.
- Elevage enrollment, Phase 2 results and any resulting change to the planned Phase 3 design or schedule.
- Debt repayment status and compliance with the pledged-cash covenant, alongside any liens or other financing restrictions.
- How collaboration milestones, royalties and the possible Huadong trial contribution affect future cash needs; distinguish potential payments from recognized revenue or committed funding.