vTv Therapeutics Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; filed May 15, 2018. vTv is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 or prior period |
|---|---|---|
| Revenue | $2.064 million | $0.030 million |
| Research and development expense | $8.943 million | $10.960 million |
| General and administrative expense | $2.255 million | $2.824 million |
| Operating loss | $9.134 million | $13.754 million |
| Net loss before noncontrolling interest | $9.960 million | $14.286 million |
| Net loss attributable to vTv Therapeutics Inc. | $2.952 million; $0.30 per Class A share | $4.220 million; $0.44 per Class A share |
| Operating cash used | $5.397 million | $13.816 million |
Q1 2018 revenue primarily reflected recognition over time of consideration under the Huadong and Reneo license agreements. The filing reports no product-sales revenue. Gross margin is not presented and is not a meaningful measure for the company’s development-stage operations.
At March 31, 2018, cash and cash equivalents were $6.535 million, with $2.500 million in long-term restricted cash pledged under the loan agreement. Total assets were $14.729 million; total liabilities were $43.120 million. Notes payable had $20.0 million principal outstanding and a $19.862 million net carrying value, including debt discount. Accumulated deficit was $277.9 million. Current liabilities totaled $26.821 million, including $6.771 million current notes payable and $11.296 million of accounts payable and accrued expenses.
Changes versus the prior comparable period
- Revenue rose by $2.034 million, primarily reflecting the December 2017 Huadong and Reneo license agreements.
- Operating expenses declined $2.586 million. R&D expense fell $2.017 million, mainly as STEADFAST Part A neared completion; G&A expense fell $0.569 million, largely due to lower expected incentive compensation.
- Operating loss narrowed by $4.620 million and net loss attributable to vTv narrowed by $1.268 million. Interest expense increased $0.296 million to $0.855 million.
- Operating cash use decreased by $8.419 million, reflecting lower expenses, receipt of Huadong upfront consideration and working-capital changes. Financing provided no cash in Q1 2018, compared with $7.5 million of debt proceeds in Q1 2017.
- Cash, cash equivalents and restricted cash totaled $9.035 million at quarter-end, down from $14.420 million at December 31, 2017.
Outlook, developments and risks
- Going concern and funding: Management stated that available cash and cash equivalents at quarter-end and funds available under the MacAndrews letter agreement were expected to support operations for less than twelve months from financial-statement issuance; the current operating plan indicated cash coverage through June 2018. The filing states that substantial doubt exists about the company’s ability to continue as a going concern. Additional financing is required, its timing and availability are uncertain, and the STEADFAST result may make financing more difficult.
- Azeliragon: In April 2018, the company reported that STEADFAST Part A failed both co-primary endpoints and discontinued Part B and the open-label extension. On May 9, it disclosed a post hoc subgroup result: participants with peak drug concentration below 7.5 ng/mL showed a 1.9-point ADAS-cog benefit versus placebo at 12 months (n≈48 versus 200; p=0.02), unadjusted for multiple comparisons. The company planned to submit a revised analysis plan and expected to report Part B topline results based on 12-month data in June 2018. The filing cautions that further clinical work and regulatory approval may be needed and are not assured.
- Other development programs: Management expected to continue advancing diabetes candidates TTP399 and TTP273, subject to funding, and anticipated substantially lower R&D expense as STEADFAST was wound down. TTP399 was in an adaptive Phase 1/2 type 1 diabetes study; a Phase 2 multi-region type 2 diabetes study for TTP273 was planned, with vTv responsible for contributing up to $3.0 million.
- Financing and debt: The MacAndrews agreement permits up to $10.0 million of Class A stock sales at $4.38 per share through December 5, 2018, subject to its terms; it is not equivalent to cash already received. The $20.0 million loan bears floating interest at 10.5% plus any one-month LIBOR amount above 0.5%; principal payments on the first tranche were scheduled to begin May 1, 2018. The loan is secured by substantially all assets, including intellectual property following the STEADFAST termination, and requires at least $2.5 million in a pledged deposit account.
- Other risks: NASDAQ notified the company on May 2, 2018 that it did not meet the minimum market value of listed securities requirement, with until October 29, 2018 to regain compliance. The company also disclosed the Chief Medical Officer’s planned departure after the Part A announcement. Management reported effective disclosure controls as of March 31, 2018 and no material legal proceedings.
Most important facts for investors to verify
- Whether the company secured funding beyond its stated June 2018 cash runway, and the conditions and actual availability of the MacAndrews facility.
- The eventual Part B azeliragon analysis, including whether the post hoc subgroup finding is supported under a prespecified analysis and whether further trials are required.
- Cash burn, vendor and trial wind-down costs, debt service commencement, and compliance with the loan’s minimum-cash covenant.
- Progress and financing for TTP399 and TTP273, including vTv’s obligations for the planned TTP273 study.
- Whether vTv regained NASDAQ market-value compliance by the stated deadline and how any financing affects dilution and control.