vTv Therapeutics Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; filed March 4, 2016. The company is a clinical-stage biopharmaceutical developer with no approved products and no product-sale revenue. It completed its IPO in August 2015 and reorganized its predecessor businesses; comparisons therefore reflect a material change in corporate structure and ownership.
Financial performance and position
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | $0.519 million | $1.549 million |
| Research and development | $29.584 million | $18.729 million |
| General and administrative | $9.077 million | $11.717 million |
| Operating loss | $(38.142) million | $(28.897) million |
| Consolidated net loss before noncontrolling interest | $(41.107) million | $(36.101) million |
| Net loss attributable to vTv Therapeutics Inc. | $(27.498) million | $(36.101) million |
| Cash and cash equivalents, year-end | $88.003 million | $1.384 million |
| Working capital, year-end | $81.460 million | $(5.253) million |
- FY2015 basic and diluted loss per share was $(3.32); the filing does not present comparable 2014 or 2013 EPS because the public company had no economic interest in the predecessor businesses before the IPO reorganization.
- Operating cash use was $36.946 million, versus $30.779 million in 2014. Financing provided $123.644 million, primarily from the IPO and related-party borrowing activity. Investing used $0.079 million.
- At year-end, current liabilities were $7.726 million and reported debt was zero. Redeemable noncontrolling interest was $161.531 million; this is not reported as debt. Total assets were $91.532 million.
- Revenue fell by $1.030 million year over year and consisted of collaboration/license and other revenue, not product sales. Two customers accounted for all FY2015 revenue.
Fourth-quarter detail
For Q4 2015, revenue was $226,000, operating loss was $11.091 million, net loss attributable to vTv Therapeutics Inc. was $3.170 million, and basic and diluted loss per share was $(0.35). Quarterly results reflect the post-IPO ownership allocation.
Material changes and business developments
- R&D expense rose 58% to $29.584 million, primarily as the company initiated the Phase 3 STEADFAST Alzheimer’s trial and advanced Phase 2 diabetes studies. Azeliragon program expense increased to $14.079 million; TTP399 and TTP273 spending also increased.
- G&A expense declined 22.5%, mainly because 2014 included costs related to a former officer’s departure; public-company professional and insurance expenses partly offset the decrease.
- Other expense declined to $2.965 million from $7.204 million, largely reflecting lower interest expense and changes associated with predecessor financing arrangements. Certain debt and liabilities were not assumed in the IPO reorganization.
- The company raised substantial capital in its IPO. The filing presents net IPO proceeds differently across disclosures: approximately $104.4 million in the equity statement and $105.8 million in the cash-flow statement after separately presented offering costs.
Outlook, risks and unusual items
- Management estimated that existing cash and IPO proceeds could fund operations through at least mid-2017, subject to assumptions and trial costs. It also stated that funding should cover at least the next 12 months. Additional capital may be needed sooner than expected; no committed external financing was in place.
- As of the filing, STEADFAST was enrolling 800 patients under an FDA-agreed Special Protocol Assessment (SPA), with topline results forecast for late 2017/early 2018 for sub-study A and the second half of 2018 for sub-study B. Azeliragon had FDA Fast Track designation; neither designation assures approval.
- The 180-patient TTP399 AGATA Phase 2b study had completed enrollment, with topline data expected in mid-2016. The TTP273 Phase 2 trial began in early 2016, with data expected in late 2016. These are management forecasts stated in the 2015 filing, not current guidance.
- Azeliragon’s prior Phase 2b results included a statistically significant benefit at 5 mg/day, but the study was discontinued after a prespecified futility analysis; the company said subsequent analyses could not replicate that futility result. The 20 mg/day arm was stopped after increased confusion, falls, and apparent cognitive decline. The Phase 3 outcome remains uncertain.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, continuing cash burn and potential dilution, dependence on third-party manufacturers and CROs, competition, and lack of commercialization infrastructure. The company had no material legal proceedings and disclosed no off-balance-sheet arrangements.
- MacAndrews & Forbes affiliates held approximately 76.1% of combined voting power at year-end. The company also agreed to pay M&F 85% of certain realized or deemed tax savings under a Tax Receivable Agreement; no liability was recorded at year-end because no triggering exchange had occurred.
- Calithera received worldwide rights to the company’s hexokinase II inhibitors; potential payments include up to $30.5 million in development and regulatory milestones, $77.0 million in sales milestones, and tiered royalties. Novo Nordisk license obligations for the GKA program include potential milestones up to $115 million plus royalties.
Most important facts for investors to verify
- Cash runway assumptions, trial spending, and the timing, terms, and dilution impact of any additional financing.
- STEADFAST enrollment, protocol execution, safety monitoring, and eventual results against both co-primary endpoints; distinguish historical Phase 2 findings from confirmatory evidence.
- Whether TTP399 and TTP273 meet clinical endpoints and whether their development can be funded or partnered.
- The economic and governance implications of the noncontrolling interests, exchange rights, M&F voting control, and Tax Receivable Agreement.
- Potential milestone and royalty receipts, manufacturing readiness, and the extent to which collaboration revenue remains concentrated among a small number of customers.