vTv Therapeutics Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. vTv is a clinical-stage pharmaceutical company focused on metabolic and inflammatory diseases; it has no product sales. Its lead program is TTP399 for type 1 diabetes.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $3.0m | $2.0m | $4.0m |
| Research and development expense | $3.1m | $2.4m | $8.4m | $7.9m |
| General and administrative expense | $2.6m | $2.2m | $9.8m | $6.6m |
| Operating loss | $5.7m | $1.6m | $16.2m | $10.6m |
| Net loss attributable to vTv | $4.3m | $1.1m | $14.4m | $5.9m |
| Loss per Class A share | $0.05 | $0.02 | $0.20 | $0.10 |
| Cash used in operating activities | — | — | $9.1m | $12.9m |
- At September 30, cash and cash equivalents were $15.3m; current assets were $28.8m and current liabilities $7.5m. Current assets included a $12.1m G42 promissory note receivable. The company also reported $6.2m of long-term investments.
- Total liabilities were $27.9m, including $18.7m of long-term contract liabilities, $1.4m of related-party warrant liability, and $0.6m of current notes payable. The balance sheet lists no noncurrent notes payable.
- Cash increased by $1.9m during the first nine months, as $11.1m of financing cash flow more than offset operating cash use and $0.02m of investing cash use. Financing included stock-sale proceeds from G42 and CinRx.
- No meaningful product gross margin is reported. Results are driven by collaboration/license revenue, operating expenses, and investment and warrant fair-value changes.
Changes and notable items
- Q3 revenue fell to zero from $3.0m, which had included Reneo and Newsoara development milestones. Nine-month 2022 revenue included a $2.0m Huadong milestone; prior-year revenue included milestone and contract-accounting items.
- Nine-month G&A expense rose $3.2m, primarily from higher legal expenses, severance, and other costs, partly offset by lower payroll expense. R&D increased $0.5m as higher TTP399 spending was largely offset by reduced HPP737, azeliragon, and indirect costs.
- Nine-month other expense was $2.8m, versus $2.4m of other income in 2021, mainly reflecting a $3.0m unrealized loss on Reneo shares and changes in related-party warrant fair value.
- In May, G42 agreed to invest $25.0m for Class A shares: $12.5m cash at closing and a $12.5m note due by May 31, 2023. In July, CinPax agreed to invest $10.0m: $6.0m cash and a $4.0m note due November 22, 2022. CinRx also received warrants for up to 1.2m shares, exercisable upon specified triggers, including TTP399 FDA approval or certain exit events.
- Class A shares outstanding increased from 66.9m at December 31, 2021 to 81.5m at September 30, 2022, including shares issued to G42 and CinPax and to a collaboration partner.
Outlook, risks, and contingencies
- Management plans two pivotal, placebo-controlled TTP399 trials involving approximately 1,000 participants; at least one is expected to run for one year. The company expects site start-up and enrollment to begin in Q1 2023. The FDA agreed on a primary endpoint based on hypoglycemia events and granted TTP399 Breakthrough Therapy Designation in April 2021.
- Management cites prior study results suggesting improved glucose control and fewer hypoglycemic events, and a mechanistic study showing no increase in ketone levels during acute insulin withdrawal. These are investigational findings, not evidence of regulatory approval or commercial success.
- The filing states that available liquidity is expected to fund operations into the fourth quarter of 2023 in the going-concern note, but the MD&A says into the third quarter of 2023. This inconsistency is not reconciled in the filing text. The company states that substantial doubt exists about its ability to continue as a going concern and is evaluating equity financing and licensing or monetization of programs such as HPP737.
- Potential financing sources include up to $37.3m of remaining ATM capacity and approximately 9.4m shares available under the Lincoln Park agreement; actual availability depends on stock price, trading volume, and other conditions, and use could dilute shareholders. The $30.0m G42 approval-related payment may be payable in cash or shares, at G42’s option, if FDA approval is obtained.
- Potential Novo Nordisk obligations include development and regulatory milestones and sales-based milestones, as well as royalties, if specified events occur. The company reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Which cash runway estimate applies: Q3 or Q4 2023, and whether financing or note collections extend it.
- Collection and timing of the $4.0m CinPax and $12.5m G42 notes, and the conditions and economics of the G42 collaboration and deferred revenue.
- Whether TTP399 pivotal trials start on schedule, enroll as planned, and ultimately meet clinical and regulatory requirements.
- Potential dilution from future ATM/Lincoln Park sales, outstanding warrants, and the G42 approval-related consideration.
- How much of future spending is required for TTP399 trials and whether additional funding or program licensing can be secured on acceptable terms.