Ovid Therapeutics Inc. — Q3 2022 Form 10-Q Summary
Business context and reporting period
Ovid is a development-stage biopharmaceutical company focused on medicines for rare neurological disorders, epilepsies and seizure-related conditions. The filing covers the three and nine months ended September 30, 2022, with comparisons to the corresponding 2021 periods. Ovid has no approved commercial products and has not generated product-sale revenue.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Total revenue | $0.01 million | $0 | $1.46 million | $208.38 million |
| Research and development expense | $5.18 million | $4.92 million | $19.06 million | $28.85 million |
| General and administrative expense | $7.63 million | $6.76 million | $25.77 million | $28.97 million |
| Net income (loss) | $(11.97) million | $(11.38) million | $(42.66) million | $148.83 million |
| Net loss per diluted share | $(0.17) | $(0.17) | $(0.61) | $2.14 |
| Cash used in operating activities | Not separately provided | Not separately provided | $(46.05) million | $130.61 million provided |
Operating loss was $12.80 million in Q3 2022 and $43.38 million for the first nine months. The filing does not provide a meaningful gross margin because Ovid has no product sales and reported only license-related revenue. The company reported an accumulated deficit of $214.0 million at September 30, 2022.
At September 30, 2022, cash and cash equivalents were $58.26 million, marketable securities were $79.60 million, and total cash, cash equivalents and marketable securities were approximately $137.9 million. Working capital was $133.8 million. Ovid had no long-term debt, but reported a $16.25 million long-term operating lease liability and $1.93 million of restricted cash supporting a letter of credit.
Material changes versus the prior comparable period
- Nine-month revenue fell by $206.93 million, primarily because 2021 included the $196.0 million Takeda upfront license payment and $12.4 million of Angelini-related revenue; 2022 revenue consisted primarily of the Healx and Marinus arrangements.
- Nine-month net income of $148.8 million in 2021 changed to a $42.7 million net loss in 2022, reflecting the absence of the Takeda upfront payment.
- Nine-month research and development expense declined $9.8 million to $19.1 million, primarily following discontinuation of OV101 studies and termination of the Takeda collaboration relating to OV935.
- Nine-month general and administrative expense declined $3.2 million to $25.8 million, principally because of lower legal and professional fees, partly offset by higher payroll, stock compensation, rent and office costs.
- Cash and marketable securities declined approximately $49.9 million from December 31, 2021. Operating use of cash was $46.1 million, while investing activities used $83.7 million, primarily for purchases of marketable securities.
- The company entered a 10-year headquarters lease. The lease created a $15.2 million right-of-use asset and a $16.2 million lease liability; rent payments begin in January 2023.
- Ovid issued no shares under its $75.0 million ATM program during the period. It had approximately $250.0 million available under its shelf registration statement, including the ATM capacity.
Guidance, outlook, commentary and risks
- Management believes existing cash, cash equivalents and marketable securities will fund current operating plans through at least the next 12 months from the filing date, but expects significant losses and negative operating cash flow for at least several years.
- Ovid expects expenses to increase as it advances preclinical and clinical programs, adds or licenses drug candidates, protects intellectual property and builds operational infrastructure. No formal revenue or earnings guidance was provided.
- In October 2022, the FDA cleared the IND for OV329; management intended to begin a Phase 1 study in healthy volunteers during the fourth quarter of 2022.
- Takeda reiterated that regulatory filings for pivotal Phase 3 soticlestat trials in Lennox-Gastaut and Dravet syndromes were expected in Takeda’s fiscal 2024. Ovid remains dependent on Takeda’s development decisions for potential milestone and royalty payments, including up to $660 million in milestones and tiered royalties of up to 20% if approved and commercialized.
- Potential milestone obligations under in-license agreements with AstraZeneca, Lundbeck and Northwestern totaled up to approximately $279.3 million; these amounts were contingent and were not accrued.
- Additional risks include clinical and regulatory failure, reliance on third-party manufacturers and CROs, intellectual-property challenges, limited access to future financing, dilution from future equity issuance, inflation, rising interest rates, COVID-19 effects and geopolitical or supply-chain disruption.
- The company reported no material legal proceedings. Management concluded that disclosure controls and procedures were effective as of September 30, 2022.
Most important facts for investors to verify
- Whether the $137.9 million liquidity balance and stated 12-month runway remain adequate after the start of OV329 development and January 2023 lease payments.
- Progress, clinical results and filing timing for Takeda’s soticlestat program, which drives Ovid’s potential milestone and royalty economics.
- FDA and clinical execution milestones for OV329 and other pipeline programs, including whether the planned Phase 1 study began on schedule.
- The pace of quarterly cash burn and whether Ovid will need equity, debt, collaboration or licensing financing before reaching revenue-generating milestones.
- The probability and timing of contingent milestone obligations, particularly the potential $279.3 million of in-licensing payments.
- Future dilution from 13.0 million outstanding stock options and 1.25 million common shares issuable upon conversion of Series A preferred stock.