NanoViricides, Inc. — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2019, the company’s fiscal third quarter of 2019. This differs from the request metadata’s “2018 Q3.” NanoViricides is a pre-revenue antiviral drug development company.
Financial performance and position
| Metric | Three months ended March 31, 2019 | Nine months ended March 31, 2019 | Prior comparable period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $1.31 million | $4.34 million | $1.29 million and $4.38 million, respectively |
| General and administrative expense | $0.77 million | $2.16 million | $1.13 million and $2.66 million, respectively |
| Net loss | $2.14 million | $6.21 million | $2.11 million and $6.91 million, respectively |
| Loss per common share, basic and diluted | $0.03 | $0.09 | $0.03 and $0.11, respectively |
- No gross margin is applicable because the company reported no revenue or commercialized products.
- Nine-month operating expenses were $6.49 million, down from $7.04 million. Nine-month operating cash use was $5.13 million, compared with $4.26 million in the prior period.
- Cash and cash equivalents were $4.24 million at March 31, 2019, down from $7.08 million at June 30, 2018. Current assets were $4.63 million and current liabilities $1.08 million.
- Total liabilities were $2.68 million, including a $1.59 million long-term derivative liability for warrants. The company reported no long-term debt. Stockholders’ equity was $12.72 million, down from $17.66 million at June 30, 2018.
- Accumulated deficit was $89.90 million. Net property and equipment was $10.39 million, largely the company’s Shelton facility.
- On February 27, 2019, the company raised $2.50 million gross, or $2.35 million net after offering costs, through a registered direct offering of 6.94 million common shares. Investors also received warrants for up to 6.94 million shares at $0.61 per share. Common shares outstanding increased from 69.17 million at June 30, 2018 to 76.74 million at March 31, 2019.
Changes versus the prior period
- For the nine months, net loss narrowed by about $0.70 million, primarily reflecting lower operating expenses and the absence of prior-year debenture-related costs. The prior-year period also included a $1.35 million debt extinguishment loss and larger derivative fair-value gains.
- Quarterly net loss increased slightly despite lower operating expenses, as derivative fair-value results and lower interest income offset the expense reduction.
- General and administrative expense declined year over year; management attributed the reduction mainly to lower officer compensation, travel, and other operating costs. Nine-month R&D expense was slightly lower, although quarterly R&D expense rose modestly.
- Cash declined by $2.84 million from fiscal year-end despite the February financing. Related-party accounts payable to TheraCour rose to $730,063 from $107,468.
Outlook, milestones, and risks
- Management said existing resources were expected to support work toward filing the company’s first Investigational New Drug application (IND), but additional financing would be needed for clinical trials and continuing operations. The company stated that there is substantial doubt about its ability to continue as a going concern; additional financing is not assured.
- The lead candidate, NV-HHV-101, is being developed as a topical shingles treatment. Non-GLP safety/tolerability studies reported as completed in early 2019 were company-reported preclinical results, not evidence of clinical efficacy or FDA approval. The company requested an FDA pre-IND meeting and submitted briefing documents in April 2019. It reported in May 2019, after quarter-end, that it had produced material for planned GLP toxicology studies.
- The filing describes additional preclinical programs for HSV-1, HSV-2, ocular herpes, influenza, HIV, dengue, and other viruses, but says work is prioritized toward the HerpeCide program because of limited resources. Timelines, costs, and clinical outcomes remain uncertain.
- The company had not completed a VZV license agreement with TheraCour, an entity owned and controlled by a significant stockholder. The filing describes a memorandum of understanding and draft agreement process. TheraCour also provides development services; its payable balance and related-party transactions warrant attention.
- CEO Irach Taraporewala resigned effective February 1, 2019 and became a consultant through January 2021; Anil Diwan, a significant stockholder and TheraCour owner, served as President and Executive Chairman. The filing reports a $400,000 annual base salary and preferred-stock award for Dr. Diwan.
- Disclosure controls and procedures were deemed ineffective at March 31, 2019 because previously identified material weaknesses remained unremediated. Management described enhanced transaction review and training as remediation efforts.
- Warrants issued with the February financing were classified as a derivative liability using Level 3 valuation inputs. The warrants and other outstanding securities may create dilution; the filing excludes anti-dilutive instruments from diluted loss per share.
- The company reported no pending or threatened legal proceedings to its knowledge and no off-balance-sheet arrangements for the reported periods.
Important facts for investors to verify
- Cash runway, projected spending, and the timing, amount, and terms of additional financing needed for GLP studies and clinical trials.
- Progress and results of GLP toxicology work, FDA feedback, and the actual prerequisites and timing for an IND submission.
- Completion and terms of the VZV and other herpesvirus licenses with TheraCour, including the related-party service costs and outstanding payable.
- Potential dilution from the February offering warrants, other warrants and options, and any future equity financing.
- Whether management’s internal-control remediation resolves the disclosed material weaknesses, and whether the company can maintain operations as a going concern.