Ovid Therapeutics Inc. — FY2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017; filed March 29, 2018. The filing is an annual report, not a standalone Q4 filing, although quarterly data are provided. Ovid is a clinical-stage biopharmaceutical company developing medicines for rare neurological disorders. Its lead programs were OV101 for Angelman and Fragile X syndromes and OV935, partnered with Takeda, for rare epileptic encephalopathies.
Financial Performance and Position
| Metric | FY2017 | FY2016 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No commercial product revenue |
| Research and development expense | $50.0 million | $9.6 million | +$40.4 million |
| General and administrative expense | $15.0 million | $12.9 million | +$2.1 million |
| Total operating expenses | $65.0 million | $22.5 million | +$42.5 million |
| Operating loss | $65.0 million | $22.5 million | +$42.5 million loss |
| Net loss | $64.8 million | $22.4 million | +$42.4 million loss |
| Net loss per share | $3.35 | $2.28 | Higher loss per share |
| Cash used in operating activities | $31.5 million | $17.8 million | +$13.7 million use |
| Cash and cash equivalents | $87.1 million | $51.9 million | +$35.2 million |
| Working capital | $82.6 million | $48.7 million | +$33.9 million |
| Total liabilities | $6.0 million | $3.7 million | +$2.3 million |
| Accumulated deficit | $100.7 million | $35.9 million | Higher deficit |
There was no meaningful revenue or operating margin because Ovid had no approved commercial products. The company reported a net loss margin that is not meaningful given zero revenue. FY2017 research and development expense included a $25.9 million non-cash charge related to shares issued to Takeda for OV935 collaboration rights and approximately $4.3 million of amounts reimbursed to Takeda. Stock-based compensation was $6.4 million, compared with $3.6 million in 2016.
Ovid had no long-term debt, capital leases or material non-cancelable purchase commitments reported at year-end. The company stated that existing cash and cash equivalents were expected to fund current operating plans through at least the next 12 months from the filing date, but additional capital will be required for expanded development and commercialization activities.
Material Changes Versus the Prior Comparable Period
- R&D spending increased more than fivefold, primarily because of OV101 and OV935 clinical development, the Takeda collaboration accounting charge, Takeda cost reimbursements and increased staffing.
- Net loss increased from $22.4 million to $64.8 million, substantially reflecting the higher development activity and the $25.9 million non-cash Takeda charge.
- Operating cash use increased to $31.5 million from $17.8 million.
- The May 2017 IPO raised $75.0 million gross and $66.7 million net. Approximately $18.3 million of net IPO proceeds had been used by December 31, 2017, primarily for OV101 and OV935 clinical programs, working capital and general corporate purposes.
- All outstanding preferred stock converted into common stock upon the IPO. Common shares outstanding were 24.6 million at December 31, 2017 and 24.6 million as of March 22, 2018.
- Ovid entered into its OV935 collaboration with Takeda in January 2017. The parties generally share development and commercialization costs and revenues equally in the applicable territories.
- Fourth-quarter 2017 operating expenses were $11.0 million and net loss was $11.0 million, compared with fourth-quarter 2016 operating expenses of $7.6 million and net loss of $7.6 million.
Pipeline, Outlook, Risks and Unusual Items
- OV101: The Phase 2 STARS trial in adults and adolescents with Angelman syndrome was fully enrolled after randomization was completed. It was primarily designed to evaluate safety and tolerability, with exploratory efficacy measures. Topline data were expected in the second half of 2018. Ovid also planned a Phase 2 Fragile X syndrome trial in 2018.
- OV935: Ovid and Takeda initiated a Phase 1b/2a proof-of-concept trial in June 2017 in adults with Dravet syndrome, Lennox-Gastaut syndrome and Tuberous Sclerosis Complex. Data were expected in the second half of 2018.
- The FDA granted orphan drug designations for OV101 in Angelman syndrome and Fragile X syndrome and for OV935 in Dravet syndrome and Lennox-Gastaut syndrome. These designations do not establish safety or efficacy and do not guarantee approval or exclusivity.
- Neither OV101 nor OV935 had FDA approval. Ovid had not generated revenue from drug sales and expected continued substantial operating losses for the foreseeable future.
- Key risks include clinical-trial failure or delay, uncertain efficacy endpoints in rare neurological disorders, adverse events, regulatory rejection, patient enrollment constraints, dependence on Takeda, reliance on third-party manufacturers and CROs, intellectual-property challenges, reimbursement uncertainty and the need for additional financing.
- Potential contingent payments under licensing arrangements totaled up to approximately $271.3 million, including up to $181.0 million to Lundbeck, up to approximately $35.0 million in remaining potential global commercial and regulatory milestones to Takeda, and up to $5.3 million to Northwestern. These amounts were excluded from contractual obligations because timing and payment were contingent and not reasonably estimable.
- Upon specified OV935 development milestones, Ovid may be required to issue Takeda securities equal to the lesser of 8% of outstanding capital stock or $50.0 million divided by the applicable share price, subject to conditions; cash payment may be required in certain circumstances.
- The filing disclosed a trademark opposition and cancellation proceeding brought by Ovid Technologies, Inc. The proceeding concerns trademark registration and does not provide for monetary or injunctive relief.
Most Important Facts for Investors to Verify
- Whether OV101 and OV935 clinical results met safety, efficacy and regulatory objectives, and whether development timelines changed after the filing.
- Current cash runway, quarterly cash burn and the timing, size and terms of any required equity, debt or partnering financing.
- Potential dilution and cash obligations associated with Takeda milestones, including the possible 8% equity issuance and approximately $35.0 million of additional milestone payments.
- Status of Lundbeck, Takeda and Northwestern license obligations, royalties, supply arrangements and termination provisions.
- Whether the company has advanced toward pediatric formulations, Phase 3 trials, regulatory submissions or commercial infrastructure.
- Current patent scope and expiry dates, including OV101 patents generally expiring from 2025 to 2035 and OV935 patents and applications generally expiring in 2032, excluding possible extensions.
- Actual operating cash burn relative to management’s stated cash runway and whether additional capital is needed sooner than projected.