Ovid Therapeutics Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
Ovid Therapeutics is a development-stage biopharmaceutical company focused on medicines for epilepsies, seizure-related disorders and rare neurological disorders. This unaudited Form 10-Q covers the three and six months ended June 30, 2023, compared primarily with the same periods in 2022. The company had 40 full-time employees and no products approved for commercial sale.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| License and other revenue | $0.1 million | $0 | $0.1 million | $1.4 million |
| Research and development | $6.0 million | $6.0 million | $12.6 million | $13.9 million |
| General and administrative | $8.2 million | $8.3 million | $16.6 million | $18.1 million |
| Loss from operations | $(14.2) million | $(14.3) million | $(29.1) million | $(30.6) million |
| Net loss | $(12.4) million | $(14.6) million | $(25.8) million | $(30.7) million |
| Net loss per share | $(0.18) | $(0.21) | $(0.37) | $(0.44) |
| Cash used in operating activities | Not separately presented | $(23.8) million | $(33.4) million |
- June 30, 2023 cash, cash equivalents and marketable securities totaled $96.5 million, versus $129.0 million at December 31, 2022. Working capital was approximately $92.0 million.
- Cash, cash equivalents and restricted cash increased by $26.8 million during the first six months, primarily because $85.0 million of marketable securities were sold or matured, partly offset by $24.6 million of purchases, a $10.0 million Graviton equity investment and operating cash use.
- The company had no long-term debt. Lease liabilities totaled $16.3 million, including $0.9 million current and $15.4 million long-term. Remaining corporate lease commitments were approximately $22.5 million.
- Accumulated deficit was $251.3 million. Other income was $1.8 million in Q2 and $3.3 million for the first six months, primarily reflecting interest and accretion on investments and investment-related gains.
Material changes versus the prior comparable period
- Six-month revenue declined $1.3 million, primarily because the comparable 2022 period included licensing revenue associated with Healx and the Marinus license transaction. Q2 2023 included $75,000 of license revenue.
- Six-month research and development expense decreased $1.3 million, mainly from lower payroll and severance costs following the 2022 restructuring, partially offset by higher preclinical and development costs for the OV329 Phase 1 trial.
- Six-month general and administrative expense decreased $1.5 million as legal and professional fees and general office costs declined, partly offset by higher payroll expense and $1.6 million of severance costs.
- Net loss improved $2.2 million in Q2 and $4.9 million for the first six months, despite minimal revenue, because operating expenses declined and investment income increased.
- In April 2023, Ovid entered a Graviton collaboration and license agreement for ROCK2 inhibitors, including GV101, and invested $10.0 million in Graviton preferred stock. In May 2023, Ovid provided Gensaic $3.5 million for an approved research plan.
- Common shares outstanding increased to 70.6 million at June 30, 2023 from 70.5 million at December 31, 2022. Options to purchase 15.4 million shares and preferred stock convertible into 1.25 million common shares were outstanding and potentially dilutive.
Guidance, outlook, commentary and risks
- Management believes existing cash, cash equivalents and marketable securities will fund current operating plans for at least the next 12 months from the filing date. The company nevertheless expects continuing losses and negative operating cash flow for at least several years.
- Ovid expects research and development spending to increase as it advances current and future candidates, pursues additional in-licensing opportunities and conducts clinical and preclinical work.
- Takeda reiterated that regulatory filings for the two pivotal Phase 3 soticlestat programs in Lennox-Gastaut and Dravet syndromes are expected in Takeda’s 2024 fiscal year. Ovid is dependent on Takeda’s development and commercialization decisions for potential milestone and royalty revenue.
- The FDA cleared Ovid’s OV329 investigational new drug application in late 2022, and Ovid subsequently initiated a Phase 1 trial in healthy volunteers.
- Ovid has no commercial product revenue and no committed external source of liquidity. It may need additional equity, debt, collaboration or licensing financing earlier than expected; the $75.0 million ATM program remained unused at June 30, 2023.
- Material risks include clinical and regulatory failure, adverse safety findings, delays in patient enrollment or manufacturing, dependence on third-party collaborators and contract organizations, intellectual-property challenges, inflation and interest-rate effects, cybersecurity incidents, and dilution from future financing or equity exercises.
- Potential contingent milestone obligations under in-license agreements totaled up to $279.3 million as disclosed in liquidity discussions, while the Gensaic agreement includes potential milestones of up to $452.0 million. These payments were not accrued because their timing and probability were not reasonably estimable.
- The company reported no material legal proceedings, and management concluded that disclosure controls and procedures were effective as of June 30, 2023.
Important facts for investors to verify
- Track Takeda’s progress toward the expected 2024 fiscal-year regulatory filings for soticlestat and assess the probability and timing of related milestones and royalties.
- Review OV329 Phase 1 safety and development updates and the status of the Graviton and Gensaic programs, including the company’s future funding obligations.
- Reconcile cash burn with the stated 12-month liquidity outlook, considering the absence of product revenue and the company’s expected continuing losses.
- Assess potential dilution from 15.4 million outstanding options, 1.25 million convertible preferred shares and any future use of the ATM or shelf registration.
- Evaluate the financial and strategic implications of the $10.0 million Graviton investment, the $3.5 million Gensaic research advance and the long-term headquarters lease.