MediciNova, Inc. 10-Q Summary
Business Context and Reporting Period
MediciNova is a clinical-stage biopharmaceutical company developing therapies for serious diseases with unmet medical needs. Key programs include the BC-PIV COVID-19 vaccine, MN-166 (ibudilast), MN-001 (tipelukast), MN-221 (bedoradrine), and MN-029 (denibulin). This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2020, filed October 26, 2020.
Financial Performance and Position
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | No revenue recognized in 2020 or 2019 | No revenue recognized in 2020 or 2019 |
| Research, development and patents expense | $2.2 million, versus $1.2 million | $5.7 million, versus $4.3 million |
| General and administrative expense | $1.5 million, unchanged | $5.5 million, versus $7.6 million |
| Total operating expenses | $3.7 million, versus $2.6 million | $11.2 million, versus $11.8 million |
| Net loss | $3.7 million, versus $2.4 million | $10.9 million, versus $11.0 million |
| Basic and diluted loss per share | $0.08 loss, versus $0.05 loss | $0.25 loss, versus $0.26 loss |
| Net cash used in operating activities | Not separately provided | $8.9 million, versus $6.7 million |
| Cash and cash equivalents | $61.7 million at September 30, 2020, versus $63.8 million at December 31, 2019 |
The company had no product sales revenue. Its Kissei collaboration includes $1.7 million of long-term deferred revenue, but no revenue was recognized during the periods presented because the remaining study obligation has not been scheduled.
At September 30, 2020, total assets were $77.3 million, total liabilities were $3.7 million, and stockholders’ equity was $73.6 million. The filing does not disclose conventional debt; liabilities primarily consisted of accounts payable, accrued liabilities, deferred revenue, deferred tax liabilities and other non-current liabilities. Working capital was approximately $60.8 million.
Material Changes Versus the Prior Comparable Period
- Third-quarter research and development expense increased by approximately $1.0 million, primarily because of higher clinical trial costs for MN-166 in ALS.
- Nine-month research and development expense increased by approximately $1.4 million, reflecting higher clinical trial costs, partially offset by lower performance-based stock compensation.
- Nine-month general and administrative expense decreased by approximately $2.1 million, primarily because of lower performance-based stock compensation and lower legal expenses.
- Third-quarter net loss increased to $3.7 million from $2.4 million, while the nine-month net loss was modestly lower than in 2019.
- Operating cash burn increased to $8.9 million from $6.7 million for the nine-month period.
- Financing provided $6.7 million of cash in the first nine months, mainly from selling 811,798 shares under the 2019 at-the-market facility for $6.1 million of net proceeds and from option exercises.
- Shares outstanding increased to 44.9 million at September 30, 2020 from 43.9 million at December 31, 2019, reflecting equity issuances and option exercises.
Guidance, Outlook, Risks and Unusual Items
Management expects to incur substantial net losses for the next several years as it advances its development programs. The company expects research and development costs to increase as programs progress and intends to seek strategic partnerships and non-dilutive funding.
Management stated that available cash and working capital were sufficient to fund operations at least through the end of 2021, but cautioned that resources may not be sufficient to conduct all planned research and development programs. Continued financing may therefore be required, creating potential dilution risk.
COVID-19 temporarily reduced patient visits at certain trial sites, but management reported improving visits, continued enrollment, and ongoing trial and regulatory activities. The FDA accepted the IND for MN-166 for prevention of COVID-19-related ARDS and informed the company that the proposed clinical investigation could proceed. Management did not expect a material negative impact on development plans, timelines or liquidity based on its assessment at the filing date, while acknowledging uncertainty regarding the pandemic, supply chains, workforce and clinical operations.
Principal risks include failure or delay in clinical trials, inadequate efficacy or safety, inability to obtain regulatory approval, dependence on MN-166 and MN-001, reliance on third-party clinical and manufacturing providers, inability to raise capital or generate product revenue, intellectual property disputes, competition, loss of key personnel, and COVID-19-related disruption. No material legal proceedings were reported, and the company reported no material changes to internal control over financial reporting.
Important Facts for Investors to Verify
- Verify the clinical status, enrollment, data and funding sources for MN-166, including ALS, progressive MS and COVID-19-related ARDS programs.
- Assess whether the stated cash runway through the end of 2021 remains adequate under higher clinical spending and possible delays.
- Review the remaining availability and potential dilution under the $75.0 million 2019 ATM facility.
- Monitor the timing and probability of recognizing the $1.7 million of deferred Kissei collaboration revenue.
- Evaluate regulatory, safety and efficacy risks for the BC-PIV vaccine and other principal candidates.
- Reconcile current cash burn, stock-based compensation and equity issuance trends with the company’s financing requirements.