Minerva Neurosciences, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018; comparisons are with the corresponding 2017 periods. Minerva is a clinical-stage CNS biopharmaceutical company with no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $8.4 million | $9.0 million | $25.9 million | $23.7 million |
| General and administrative expense | $4.1 million | $2.5 million | $12.2 million | $7.9 million |
| Total operating expenses / operating loss | $12.4 million | $11.4 million | $38.1 million | $31.6 million |
| Net loss | $12.0 million | $11.3 million | $37.0 million | $31.7 million |
| Basic and diluted loss per share | $0.31 | $0.28 | $0.95 | $0.84 |
Margins: Not meaningful because the company reported no revenue. Nine-month investment income was $1.2 million versus $0.5 million; interest expense was $0.1 million versus $0.5 million.
Balance sheet at September 30, 2018: Cash and cash equivalents were $87.3 million, restricted cash $0.1 million, and marketable securities $10.3 million, or approximately $97.7 million combined. Total assets were $150.5 million; total liabilities $49.1 million; stockholders’ equity $101.4 million. No term-loan borrowings remained; the loan matured and was repaid in August 2018. Deferred revenue was $41.2 million.
Cash flows, nine months: Operating activities used $32.1 million, versus $12.0 million provided in 2017. Investing activities provided $96.9 million, primarily from maturities and redemptions of marketable securities; 2017 investing activities used $107.2 million, mainly for security purchases. Financing activities used $3.5 million, including loan repayments, versus $48.4 million provided in 2017, when the company completed a public offering and received warrant-exercise proceeds. Cash, cash equivalents and restricted cash increased $61.3 million to $87.4 million.
Management said existing cash, cash equivalents, restricted cash and marketable securities should fund cash commitments for at least 12 months after issuance of the interim financial statements. It also stated that additional capital will be needed to continue operations and fully fund later-stage development; financing may not be available on acceptable terms.
Material changes and notable items
- Nine-month R&D expense increased $2.2 million, principally with roluperidone Phase 3 and MIN-117 Phase 2b activity; reduced seltorexant costs after the Janssen agreement amendment partly offset the increase. Q3 R&D decreased year over year for the same seltorexant-related reason.
- Nine-month G&A expense increased $4.3 million, mainly due to higher stock-based compensation and staffing for pre-commercial activities. Stock-based compensation totaled $6.3 million for the nine months, up from $3.8 million.
- The company’s $30 million Janssen upfront payment and $11.2 million of forgiven collaborative expenses remain in deferred revenue. The filing says these amounts are to be recognized as services are performed during the specified development activities; no revenue was reported for the periods presented.
- At September 30, 2018, accumulated deficit was $201.3 million. The company reported 38.85 million common shares outstanding; potentially dilutive awards were excluded from loss per share because they were antidilutive.
Outlook, development updates and risks
- Roluperidone: The pivotal Phase 3 schizophrenia trial was enrolling approximately 500 patients. Management expected enrollment completion in the first half of 2019 and top-line results in mid-2019; manufacturing scale-up work was ongoing.
- MIN-117: A Phase 2b MDD trial began in April 2018, with approximately 324 patients planned. Top-line results were expected in the first half of 2019.
- Seltorexant: Phase 2b trials in MDD and insomnia were underway, with results expected in 2019. Enrollment in one MDD trial had been temporarily suspended for a packaging issue, which the company said was resolved; enrollment restarted in Q2 2018. The company expected completion of a Phase 2b development milestone in the second half of 2019. Under the Janssen amendment, the company assumed strategic control of insomnia development and had no further financial obligations until that milestone; future participation could require substantial trial funding.
- MIN-301: Preclinical work continued in preparation for an investigational filing and a potential Phase 1 study.
- The company expects losses and negative operating cash flows to continue, with R&D and G&A spending expected to rise as trials and infrastructure advance. Key risks include clinical failure or delay, regulatory approval uncertainty, competition, the need for additional financing, and potential dilution or unfavorable financing terms. If capital cannot be raised, operations may need to be scaled back or discontinued.
- No material litigation was identified. The company reported effective disclosure controls at September 30, 2018 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress against the stated enrollment and readout timelines for roluperidone, MIN-117 and seltorexant, and whether trial results support further development.
- Cash burn and available liquidity relative to the company’s 12-month runway statement, including the timing and terms of any additional financing.
- Janssen agreement milestones, future payment conditions, cost-sharing obligations and the timing and criteria for recognizing the $41.2 million deferred balance.
- Whether increased clinical and pre-commercial spending, including stock-based compensation, changes the projected funding requirement.
- Execution of roluperidone manufacturing scale-up and any regulatory, safety, enrollment or trial-design developments.