vTv Therapeutics Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; filed May 3, 2017. Unaudited consolidated results include vTv Therapeutics LLC. vTv is a clinical-stage biopharmaceutical company with no approved products and no drug-sale revenue.
Business and pipeline
Lead program azeliragon is in the Phase 3 STEADFAST study for Alzheimer’s disease; enrollment in sub-study A was complete. Diabetes candidates TTP399 and TTP273 completed Phase 2b and Phase 2 studies, respectively, in 2016. The company also has earlier-stage programs.
Financial results and liquidity
| Metric (USD millions, except per-share data) | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | 0.03 | 0.376 |
| Research and development expense | 10.960 | 11.335 |
| General and administrative expense | 2.824 | 2.581 |
| Operating loss | (13.754) | (13.540) |
| Interest expense | 0.559 | 0.002 |
| Consolidated net loss | (14.286) | (13.520) |
| Net loss attributable to vTv Therapeutics Inc. | (4.220) | (3.852) |
| Loss per Class A share | (0.44) | (0.42) |
| Cash used in operating activities | 13.816 | 12.502 |
At March 31, cash and cash equivalents were $45.150 million, down $6.355 million from year-end. Current assets were $45.932 million and current liabilities $11.109 million. Total liabilities were $30.139 million, including notes payable with a $20.0 million face amount and $18.761 million carrying value after debt discount. The company reported a stockholders’ deficit of $123.469 million and redeemable noncontrolling interest of $141.659 million.
Changes and notable items
- Revenue fell by $0.346 million year over year, primarily because Q1 2016 included collaboration revenue related to Calithera.
- R&D expense declined by $0.375 million overall. Higher azeliragon trial spending was offset by lower costs following completion of the TTP399 and TTP273 studies and a largely completed drug-interaction study.
- G&A expense increased $0.243 million, attributed mainly to public-company staffing and share-based compensation.
- Interest expense rose substantially following the 2016 loan financing. The company borrowed a second $7.5 million tranche in March 2017, bringing gross borrowings to $20.0 million.
- The $29.210 million increase in redeemable noncontrolling interest was a noncash change in redemption value; the company’s economic interest in vTv LLC was 29.5% at quarter-end.
Outlook, risks, and commitments
Management expected continued significant operating losses and rising expenses. It believed existing cash and loan availability could fund operations through receipt of Part A STEADFAST results, but stated those resources would not fund completion of STEADFAST or the development, regulatory submission, and commercialization of azeliragon. The company anticipated needing substantial additional capital and was pursuing partnering opportunities; neither future financing nor partnerships were assured.
A further $5.0 million loan tranche was available subject to customary conditions and receipt, by June 30, 2017, of a qualifying executed term sheet for licensing or purchase of a main drug candidate. The loan bears floating interest at 10.5% plus any one-month LIBOR above 0.5%, includes final payments and prepayment penalties, and is secured by substantially all assets other than intellectual property, subject to stated conditions. There are no financial maintenance covenants. A 1% interest-rate increase would add approximately $0.2 million in annual interest expense at the reported borrowing level.
Key risks include clinical and regulatory uncertainty, trial enrollment and cost overruns, dependence on additional funding, potential dilution or unfavorable financing terms, and the possibility of delaying or curtailing programs if funding is unavailable. The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2017.
Important facts for investors to verify
- Timing and results of Part A of STEADFAST, and whether the FDA will accept the trial and supporting work as a basis for review.
- Cash runway assumptions and the amount and terms of any financing or partnership needed to complete STEADFAST and advance azeliragon.
- Whether the qualifying term sheet and other conditions for the additional $5.0 million loan tranche were met by the deadline.
- Loan interest, repayment, security, final-payment, and warrant dilution terms, as well as any impact of changing rates.
- Clinical progress and funding plans for TTP399, TTP273, and other pipeline programs; the filing does not provide a clear revenue outlook or product commercialization timetable.