Business context and reporting period
Entity mismatch: The supplied filing is Ventrus Biosciences, Inc.’s Form 10-Q, not Assembly Biosciences, Inc.’s. It covers the quarter ended September 30, 2013 and was signed November 12, 2013. Ventrus was a development-stage specialty pharmaceutical company focused on gastrointestinal treatments; it reported no product revenue because no product had received regulatory approval.
Financial results and liquidity
All amounts are U.S. dollars. The company had no revenue, so gross margin and operating margin are not meaningful.
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Research and development expense | $3.75 million | $4.19 million | $9.87 million | $16.77 million |
| General and administrative expense | $1.18 million | $1.18 million | $3.64 million | $4.27 million |
| Operating loss | $4.93 million | $5.37 million | $13.51 million | $21.04 million |
| Net loss | $4.88 million | $5.36 million | $13.36 million | $21.00 million |
| Basic and diluted loss per share | $0.25 | $0.41 | $0.71 | $1.66 |
| Net cash used in operations | Not stated for quarter | Not stated for quarter | $12.40 million | $18.31 million |
At September 30, 2013, cash and cash equivalents were $32.22 million, versus $20.49 million at December 31, 2012. Total assets were $32.37 million; current liabilities were $2.32 million, comprising accounts payable of $2.28 million and accrued expenses of $37,415. Stockholders’ equity was $30.05 million. No debt was reported on the balance sheet. Nine-month investing cash use was $5,166, while financing provided $24.14 million, primarily from stock sales.
Changes versus prior comparable periods
- Nine-month R&D expense fell 41.1%, mainly because development of VEN 309 was halted; spending on lead candidate VEN 307 increased. Q3 R&D declined 10.4% year over year.
- Nine-month G&A expense declined 14.7%, primarily due to lower stock-based compensation; Q3 G&A was essentially unchanged.
- Nine-month net loss narrowed to $13.36 million from $21.00 million, while operating cash use declined to $12.40 million from $18.31 million.
- Cash increased following approximately $20.8 million of net proceeds from a February 2013 offering and approximately $3.4 million raised through an at-the-market program in September. The nine-month cash-flow statement reports $24.14 million of net equity proceeds.
Outlook, commentary, risks and unusual items
- Management expected substantial losses for at least the next 18–24 months and estimated approximately $10 million to complete VEN 307 development and the clinical-trial process. It said existing cash should fund operations through FDA approval and initial launch and commercialization, but cautioned that estimates depend on assumptions and additional capital may be needed.
- Ventrus expected no product revenue for at least 18–24 months, pending FDA approval and a successful launch of VEN 307, topical diltiazem for anal fissures. Timing, trial outcomes, regulatory approval, commercialization, financing availability and market acceptance were identified as risks.
- VEN 309 development had stopped after a Phase III trial failed to meet its endpoints. A vendor credit of $418,202 related to that terminated program reduced reported VEN 309 R&D expense in 2013.
- On November 8, 2013, after the reporting date, Ventrus entered an exclusive worldwide license and collaboration agreement with Therabiome for an intestinal-targeted oral-delivery platform. It paid a $300,000 upfront fee and may owe development and regulatory milestones and low-to-mid-single-digit royalties; no specific clinical candidates had been identified.
- Two securities class actions concerning statements about VEN 309 were consolidated; plaintiffs filed an amended complaint in September 2013. The company intended to defend itself but said the outcome and potential loss could not be estimated.
- The Series A preferred stock is convertible at the holder’s option into 10 common shares per preferred share. The company reported disclosure controls as effective and no material third-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: this filing names Ventrus Biosciences, Inc., not Assembly Biosciences, Inc.
- Check subsequent VEN 307 trial, regulatory and commercialization developments, and whether management’s cash-runway assumptions were achieved.
- Review subsequent financing, dilution and potential conversion of the preferred shares; the filing reported 20,663,301 common shares outstanding at September 30, 2013.
- Assess the financial and development obligations under the Therabiome agreement and the status of any resulting product candidates.
- Track the securities litigation and any later estimate, settlement or resolution of potential losses.