Ovid Therapeutics Inc. — Form 10-Q Summary
Business Context and Reporting Period
Ovid Therapeutics is a clinical-stage biopharmaceutical company focused on medicines for rare neurological disorders. The filing covers the quarter and nine months ended September 30, 2018, and was filed November 8, 2018. The company has no commercial products and has generated no revenue since inception.
The principal development programs were OV101 for Angelman syndrome and Fragile X syndrome and OV935, developed with Takeda, for developmental and epileptic encephalopathies and related indications.
Financial Position and Results
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $8.5 million | $25.2 million |
| General and administrative expense | $4.6 million | $14.6 million |
| Total operating expenses | $13.2 million | $39.8 million |
| Net loss | $13.0 million | $39.1 million |
| Net loss per share | $0.53 | $1.59 |
| Operating cash flow | Not provided for the quarter | $(34.6) million |
Because the company had no revenue, gross margin and operating margin are not meaningful. The company reported an accumulated deficit of $139.8 million at September 30, 2018.
Cash and cash equivalents were $30.5 million, and short-term investments were $22.0 million, for total cash, cash equivalents and short-term investments of $52.5 million. Working capital was approximately $44.8 million. Current liabilities were $10.4 million, consisting primarily of accounts payable and accrued expenses. No debt balance was reported on the condensed balance sheet.
Total assets were $60.4 million and stockholders’ equity was $50.0 million at September 30, 2018. The company had 24.65 million common shares outstanding as of November 1, 2018.
Material Changes Versus the Prior Comparable Period
- Third-quarter operating expenses increased $3.8 million, or approximately 40%, to $13.2 million from $9.4 million. R&D increased $2.6 million, while G&A increased $1.1 million.
- Third-quarter net loss increased to $13.0 million from $9.4 million, despite higher interest income of $0.2 million versus $0.1 million.
- For the first nine months, operating expenses declined $14.2 million to $39.8 million, primarily because the prior-year period included a $25.9 million noncash R&D charge related to shares issued to Takeda for OV935 collaboration rights.
- Nine-month net loss improved to $39.1 million from $53.8 million, but operating cash use increased to $34.6 million from $22.5 million due to higher development costs, upfront payments and payroll expenses.
- Investing cash outflows increased to $22.3 million from $0.1 million, principally due to $50.0 million of purchases of short-term investments, partly offset by $28.0 million of maturities.
- Cash and cash equivalents declined from $87.1 million at December 31, 2017 to $30.5 million at September 30, 2018, while $22.0 million was held in short-term investments.
Guidance, Outlook, Commentary and Risks
- Management expects continuing significant expenses and operating losses for at least the next several years and does not expect revenue until regulatory approval and commercialization of a drug candidate, if ever.
- Management stated that existing cash, cash equivalents and short-term investments should fund current operating plans through at least the next 12 months from the filing date. Additional capital will eventually be required, but no financing was committed.
- The company filed a shelf registration statement permitting up to $200 million of common-stock sales, including a $50 million at-the-market program. No shares had been sold under the ATM program as of September 30, 2018.
- The Phase 2 STARS trial of OV101 in Angelman syndrome met its safety and tolerability endpoint and showed statistically significant improvement on the prespecified physician-rated CGI-I endpoint for once-daily and combined dosing groups. Prespecified subsets covering behavior, sleep and gait did not show statistically significant differences from placebo. The company planned to discuss the regulatory pathway with the FDA and initiate the ELARA open-label extension.
- The Phase 2 ROCKET trial of OV101 in Fragile X syndrome was enrolling, with data anticipated in 2019. Data from the fully enrolled Phase 1b/2a OV935 trial were expected in the fourth quarter of 2018. The company and Takeda were also advancing ELEKTRA, ARCADE and ENDYMION trials.
- Potential milestone obligations include up to $181.0 million to Lundbeck for OV101, approximately $35.0 million of remaining potential global commercial and regulatory milestones to Takeda, and a potential Takeda equity issuance equal to the lesser of 8% of outstanding capital stock or $50.0 million upon specified Phase 3 enrollment. None were considered probable at the balance-sheet date.
- Catalyst Pharmaceuticals asserted claims involving the Northwestern license and confidential disclosure agreement, including breach of contract, fraud and tortious interference. Ovid denied liability and stated that it could not estimate a potential loss. Ovid also reported an October 2018 settlement with Ovid Technologies regarding trademark opposition and cancellation proceedings.
- Key risks include clinical-trial failure or delay, uncertain FDA acceptance of efficacy endpoints, adverse events, reliance on Takeda and third-party manufacturers and clinical research organizations, intellectual-property disputes, need for additional financing and potential dilution.
Most Important Facts for Investors to Verify
- Whether the $52.5 million liquidity position remains sufficient as clinical spending accelerates and whether additional financing is required sooner than management expects.
- Regulatory feedback from the FDA regarding OV101’s CGI-I results and the registrational pathway for Angelman syndrome.
- Results from the OV935 Phase 1b/2a trial and progress of the ELEKTRA, ARCADE, ROCKET, ELARA and other clinical programs.
- The financial and dilution implications of future Lundbeck and Takeda milestone obligations, including possible equity settlement.
- The status and potential exposure from the Catalyst-related Northwestern license dispute and any continuing trademark matters.
- Future cash-burn trends, clinical-trial accruals, stock-based compensation and the company’s ability to access its $50 million ATM program or other capital sources.