NanoViricides, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended June 30, 2016, not calendar-year 2015 or a standalone 2015 fourth quarter. The company is a development-stage antiviral drug developer with no approved products and no revenue. Financial statements are audited; EisnerAmper LLP issued an unqualified opinion.
Financial performance and position
| Metric | FY2016 / June 30, 2016 | FY2015 / June 30, 2015 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.03 million | $3.66 million |
| General and administrative expense | $3.83 million | $3.40 million |
| Total operating expenses / operating loss | $8.86 million | $7.06 million |
| Net loss | $10.72 million; $0.19 per basic and diluted share | $2.20 million; $0.04 basic and $0.09 diluted per share |
| Cash used in operating activities | $6.83 million | $6.21 million |
| Cash and cash equivalents | $24.16 million | $31.47 million |
| Working capital | $17.64 million | $31.08 million |
| Total assets | $36.63 million | $44.19 million |
| Total liabilities | $13.59 million | $12.40 million |
| Stockholders’ equity | $23.05 million | $31.79 million |
There is no meaningful gross margin because the company has no product revenue. Cash used in investing activities was $0.48 million, mainly capital spending, versus $5.76 million in FY2015. No financing cash was raised in FY2016. Cash declined by $7.31 million during the year. The accumulated deficit reached $64.82 million.
Debt includes $6 million principal of Series B convertible debentures, due February 1, 2017, and $5 million of Series C debentures, due June 30, 2018. The balance sheet reports debentures net of discounts and derivative liabilities; total liabilities also include these derivative balances. Most debentures are held by entities controlled by director Milton Boniuk. The filing says $6.74 million of current liabilities were outstanding at year-end.
Changes versus FY2015
- Net loss increased by $8.53 million, despite the smaller operating loss-adjustment items; the main comparison factor was the much smaller noncash gain from remeasuring derivative liabilities ($0.54 million gain in FY2016 versus $8.53 million in FY2015).
- Operating expenses rose $1.80 million. R&D increased $1.37 million and G&A increased $0.43 million, which management attributed principally to increased staffing, salaries, supplies, and stock compensation.
- Cash fell $7.31 million, while working capital declined $13.44 million. Current liabilities rose from $0.60 million to $6.74 million, including the Series B debenture reclassified as current ahead of its 2017 maturity.
- Capital investment was substantially lower than in FY2015 as the Shelton campus build-out progressed. Property and equipment, net, was $11.76 million at year-end.
Outlook, management commentary, and risks
- Funding and plans: Management estimates existing cash can fund budgeted operations through June 30, 2018, and expects to pursue an approximately $8 million cash budget for the next 12 months. It says funds may support one or possibly two candidates into initial human trials, but are insufficient to complete development and commercialization; further funding, partnering, or reduced activity will be needed. No assurance is given that additional capital or favorable partnerships will be available.
- Pipeline: HerpeCide topical candidates for shingles and herpes labialis are the highest priority; the company also has ocular herpes, genital herpes, influenza, dengue, HIV, and other programs. All candidates remain preclinical, and the filing states that detailed IND-enabling safety packages have not yet been completed for any candidate. Management’s efficacy descriptions rely on preliminary cell and animal studies, not human clinical evidence.
- Timing: The filing says an IND filing in late calendar 2017 was the best-case plan, while elsewhere describing work plans and dependencies that could delay progress. Management provides no reliable timeline for approval or revenue and cautions that timelines and cost estimates are uncertain.
- Manufacturing and execution: The Shelton facility is described as cGMP-capable, not yet registered as a cGMP facility. Further process validation, reproducible batches, and facility work are needed. Clinical trials, animal studies, and much regulatory work rely on external collaborators and contractors.
- Related-party and governance matters: TheraCour owns the licensed core technology, supplies materials, and is controlled by President and Chairman Anil Diwan. NanoViricides paid TheraCour $3.73 million for development and other costs in FY2016 and owed it $0.77 million at year-end. The filing also discloses director-affiliated debenture holdings and identifies potential conflicts of interest.
- Other risks and unusual items: The company has no revenue history and expects continuing losses; it may need dilutive equity financing. Series B and C interest has in part been paid in shares or warrants. Outstanding warrants and preferred shares may add dilution, subject to their terms. The company reported no material legal proceedings and no off-balance-sheet arrangements. Management said the prior-year material weakness in financial-reporting controls was remediated and concluded controls were effective at June 30, 2016; the auditor did not audit internal control effectiveness.
Investor verification priorities
- Confirm liquidity, burn rate, and the cash runway against the $6 million Series B maturity in February 2017 and other debt and interest obligations.
- Review the terms, conversion rights, and potential dilution from debentures, warrants, Series A preferred stock, and any future fundraising.
- Verify progress toward IND-enabling studies, validated manufacturing batches, facility registration, and actual regulatory submissions; distinguish preclinical claims from clinical evidence.
- Assess the scope and independence of TheraCour-related charges, outstanding payables, and governance safeguards for related-party transactions.
- Reconcile management’s funding and development timelines with the stated external dependencies, budget estimates, and risk of delays or additional financing needs.