Minerva Neurosciences, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018; unaudited. Minerva is a clinical-stage CNS biopharmaceutical company with no approved products and no product-sales revenue. Its candidates include roluperidone for schizophrenia, seltorexant for insomnia and MDD, MIN-117 for MDD, and MIN-301 for Parkinson’s disease.
Financial performance and position
- Revenue: No product-sales revenue. The filing reports no revenue in the statements of operations for the periods presented.
- Q2 expenses and loss: R&D was $9.1 million, G&A was $3.9 million, and total expenses were $12.9 million. Net loss was $12.5 million, or $0.32 per share, compared with a $9.8 million loss, or $0.27 per share, in Q2 2017.
- First-half expenses and loss: R&D was $17.5 million and G&A was $8.2 million; total expenses were $25.7 million. Net loss was $24.9 million, or $0.64 per share, versus a $20.4 million loss, or $0.57 per share, in first-half 2017. Margins are not meaningful because the company had no product-sales revenue.
- Cash flow: First-half operating cash use was $22.2 million, up from $12.9 million in 2017. Investing activities provided $67.4 million, mainly from marketable-security maturities, while financing activities used $2.6 million for loan repayments. Cash, cash equivalents and restricted cash rose by $42.7 million to $68.8 million.
- Liquidity and balance sheet: Cash, cash equivalents, restricted cash and marketable securities totaled approximately $108.6 million at June 30, 2018. Total assets were $160.9 million; total liabilities were $50.3 million; stockholders’ equity was $110.7 million. Accumulated deficit was $189.3 million.
- Debt: Current notes payable were $1.4 million at June 30, down from $4.0 million at year-end. The Term A loan matured August 1, 2018; the company expected to repay approximately $0.9 million of remaining principal during 2018. It reported compliance with loan covenants at June 30.
- Other balance-sheet item: Deferred revenue was $41.2 million, associated with the Janssen collaboration arrangement and amounts to be recognized as development services are performed.
Changes versus the prior comparable period
- Q2 net loss increased by $2.7 million year over year; first-half net loss increased by $4.5 million.
- R&D and G&A increased in both the quarter and first half. Management attributed higher R&D principally to roluperidone Phase 3 and MIN-117 Phase 2b development; lower seltorexant spending partly offset the increase. Higher G&A reflected stock-based compensation and staffing for pre-commercial activities.
- Operating cash use increased year over year. The prior-year period included a $4.0 million increase in accrued collaborative expenses; no such increase was reported in the 2018 period.
- Investment income rose and interest expense fell, the latter reflecting lower Term A loan balances.
Outlook, developments and risks
- Management said existing liquid resources should cover cash commitments for at least 12 months after issuance of the interim statements. It also expects ongoing losses and negative operating cash flow, and says additional capital will be needed to continue operations and fully fund later-stage development. Financing may be unavailable or dilutive; absent funding, programs could be scaled back or discontinued.
- Roluperidone’s pivotal Phase 3 study was underway, with top-line results from its 12-week double-blind phase expected in the first half of 2019. The trial was designed to enroll about 500 patients.
- MIN-117 Phase 2b enrollment began in April 2018; top-line results were expected in the first half of 2019, with approximately 324 patients planned.
- Seltorexant Phase 2b MDD and insomnia studies were underway. Enrollment in one MDD study was temporarily suspended over a packaging issue and restarted in Q2 after the issue was resolved. Completion of the Phase 2b development milestone was expected in the second half of 2019. Under the Janssen amendment, the company may opt out after that milestone; continuing into Phase 3 would entail substantial funding obligations, partly offset by Janssen milestone payments.
- MIN-301 remained in preclinical development, with a Phase 1 study expected after preparatory studies and regulatory filings.
- Key risks include clinical-trial outcomes and timing, regulatory approval, commercialization prospects, competition, intellectual-property protection, and the need to raise additional capital. The filing disclosed no material legal claim known to the company and no material change to contractual obligations. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether clinical timelines and enrollment progress support the stated 2019 readouts and the seltorexant Phase 2b milestone.
- Whether the reported liquidity remains adequate as trial spending rises, and what financing may be needed after the stated 12-month coverage period.
- The loan’s August 2018 maturity and repayment, including the final payment obligation.
- How and when Janssen-related deferred revenue and any future milestone payments will be recognized, and the company’s potential funding obligations if it continues seltorexant development.
- Future dilution and stock-based compensation: the filing reported 6.7 million outstanding options and 186,000 unvested restricted stock units at June 30, 2018.