Ovid Therapeutics Inc. — Form 10-Q Summary
Business context and reporting period
Ovid is an early-stage biopharmaceutical company developing medicines for rare neurological disorders. This unaudited Form 10-Q covers the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. Ovid had no approved commercial products and no revenue from drug sales; substantially all candidates under its control were in preclinical development.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $0 | $0 | $208.4 million | $0 |
| Research and development expense | $7.7 million | $16.0 million | $23.9 million | $30.7 million |
| General and administrative expense | $6.6 million | $7.1 million | $22.2 million | $12.8 million |
| Net income (loss) | $(15.8) million | $(22.6) million | $160.2 million | $(42.6) million |
| Net income (loss) per diluted share | $(0.23) | $(0.41) | $2.30 | $(0.77) |
| Net cash provided by operating activities | Not separately provided | Not separately provided | $141.5 million | $(35.6) million |
- The six-month revenue consisted primarily of a $196.0 million upfront payment from Takeda and $12.4 million recognized under the Angelini license arrangement.
- Q2 operating loss was $14.3 million, and the company recorded a $1.5 million income tax provision despite the pretax loss, largely due to limitations on using research credits and net operating losses.
- Cash and cash equivalents were $212.2 million at June 30, 2021, versus $72.0 million at December 31, 2020. Working capital was $204.6 million and accumulated deficit was $134.0 million.
- The company reported no long-term debt, capital leases, material non-cancelable purchase commitments, or off-balance-sheet arrangements.
- Cash used in investing activities was $1.6 million, primarily for a long-term equity investment. Financing activities provided $0.2 million.
Material changes versus the prior comparable period
- Revenue and earnings increased sharply because of the one-time Takeda transaction; the company had no revenue in the first six months of 2020.
- Research and development expense declined by $6.7 million for the six-month period, reflecting discontinuation of OV101 development and termination of the prior Takeda collaboration for OV935.
- General and administrative expense increased by $9.4 million, including $8.2 million of one-time legal and professional fees related to the Takeda License and Termination Agreement.
- In April 2021, Ovid announced that it would discontinue OV101 development in Angelman syndrome and would not initiate further OV101 studies in Fragile X syndrome. Resources were redirected toward earlier-stage programs, including OV882.
- In March 2021, 2,000 shares of Series A preferred stock converted into 2.0 million common shares. Common shares outstanding increased to 67.8 million at June 30, 2021.
Guidance, outlook, risks and unusual items
- Management expects significant expenses and operating losses for at least the next several years and does not expect commercial drug-sale revenue for the next several years, if at all.
- Management stated that existing cash and cash equivalents should fund current operating plans for at least 12 months from the filing date, but additional capital will ultimately be required. The company had $250.0 million available under its shelf registration statement, including $75.0 million under its ATM program, with no shares sold under the ATM as of June 30, 2021.
- Under the Takeda agreement, Takeda assumed development and commercialization responsibility for soticlestat. Ovid may receive up to $660.0 million in development, regulatory and sales milestones and tiered royalties from the low double-digits up to 20% if development and approval succeed. These amounts are contingent and not assured.
- The Angelini license terminated effective March 31, 2021. Ovid recognized $12.4 million of related revenue during the six months and will not receive future milestone payments under that agreement.
- Key risks include the preclinical stage of Ovid’s remaining pipeline, clinical and regulatory failure, dependence on third-party manufacturers and CROs, intellectual-property challenges, the need for future financing, reliance on Takeda for soticlestat milestones and royalties, and potential COVID-19 disruption.
- The company reported no material legal proceedings, and management concluded that disclosure controls and procedures were effective as of June 30, 2021.
Important facts for investors to verify
- Whether the reported cash balance and management’s 12-month liquidity assessment remain adequate after the filing date.
- The sustainability of the cash position and operating outlook once the $196.0 million Takeda upfront payment is excluded.
- Progress, timing and financing requirements for OV882, OV815 and other earlier-stage programs.
- Takeda’s development decisions for soticlestat and the probability and timing of contingent milestones and royalties.
- The effect of the OV101 discontinuation and Angelini termination on the company’s pipeline and future revenue prospects.
- Potential dilution from 10.96 million outstanding stock options and 1.25 million common shares issuable upon conversion of Series A preferred stock.