Vivani Medical, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited. Vivani is a clinical-stage company developing subdermal drug implants, including NPM-119 for Type 2 diabetes, and the Orion visual cortical prosthesis. The August 30, 2022 reverse merger with Second Sight brought the neuromodulation business into the company; Second Sight was the accounting acquiree. Amounts below are in U.S. dollars.
Key financial metrics
| Metric | Q3 2022 | Nine months 2022 | Comparable 2021 |
|---|---|---|---|
| Net sales | $0 | $0 | $0 |
| Operating expenses | $5.44 million | $13.45 million | $3.49 million / $9.78 million |
| Loss from operations | $5.44 million | $13.45 million | $3.49 million / $9.78 million |
| Net income (loss) | $1.42 million | $(6.61) million | $(3.49) million / $(9.15) million |
| Operating cash flow | Not separately presented | $(13.58) million | $(7.99) million |
- Revenue, cost of sales, and gross profit were zero; gross margin is not meaningful.
- Q3 net income largely reflected a $6.88 million non-cash bargain-purchase gain from the merger, recorded in other income. Q3 other income was $6.87 million.
- Cash and cash equivalents were $51.68 million at September 30, 2022, including $50.43 million in money market funds, versus $2.18 million at December 31, 2021. Working capital was $48.8 million, versus $0.4 million.
- Total liabilities were $5.66 million, primarily operating lease liabilities and operating accruals. The balance sheet reports no interest-bearing debt; the $8 million SAFE advance was eliminated upon merger completion.
- There was no meaningful operating margin because the company had no revenue. Nine-month operating cash use increased from $7.99 million to $13.58 million year over year.
Changes versus prior comparable periods
- Q3 R&D expense rose 34% to $3.86 million, partly from $0.3 million of Second Sight costs after the merger and otherwise from subdermal implant development. Nine-month R&D rose 21% to $9.74 million.
- Q3 G&A increased 156% to $1.59 million; nine-month G&A increased 112% to $3.71 million, primarily reflecting merger-related costs. The company reported $0.7 million of acquisition-related costs for the nine-month period.
- Cash increased substantially following the merger, which brought approximately $55.4 million of cash. The merger issued 13.14 million shares; common shares outstanding were 50.74 million at quarter-end, compared with 36.80 million at year-end 2021.
Outlook, risks, and unusual items
- Management expects no product revenue until development and marketing approval; it expects operating losses and negative operating cash flows to continue. It estimates current cash will fund planned obligations for at least 24 months, while also stating additional capital may be needed and cannot be assured.
- Management planned to file an IND for NPM-119 and initiate the LIBERATE-1 Phase 2 study in early 2023, with top-line results anticipated in late 2023. These are forward-looking targets, not guarantees. The company also reported six-month preclinical proof-of-concept for NPM-119 and was advancing the feline OKV-119 program into preclinical development.
- The company said it was exploring strategic options to advance Orion. It cited clinical-trial cost and execution uncertainty, regulatory approval risk, potential financing needs and dilution, and possible inflation, supply-chain, interest-rate, and COVID-related disruptions.
- Pixium Vision patent oppositions remain pending. Pixium also seeks approximately €5.1 million (reported as about $5.1 million) in a dispute over termination of a proposed business combination; Vivani believes its prior $1 million payment satisfied its obligations and recorded no additional loss accrual. A placement agent invoice exceeding $1.86 million is also disputed by the company.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material change in internal control during the quarter. It noted that the control environment is being updated following changes in operations and staffing.
Important facts for investors to verify
- Whether the planned NPM-119 IND, study start, and results timelines were achieved, and the clinical and regulatory evidence supporting the program.
- Cash burn, spending plans, and the assumptions underlying management’s estimate of at least 24 months of liquidity, including any need for additional financing.
- The merger’s purchase accounting and non-recurring $6.88 million bargain-purchase gain, which materially affected Q3 reported earnings.
- Potential dilution from shares, warrants, and options; quarter-end common shares were 50.74 million, with 10.31 million warrants and 5.03 million options outstanding.
- Developments and potential financial exposure in the Pixium disputes and patent challenges, and progress on Orion strategic alternatives.