VistaGen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2020, the second quarter of fiscal 2021; comparative results cover the three and six months ended September 30, 2019. Financial statements are unaudited. VistaGen is a clinical-stage biopharmaceutical company with no approved products or product sales.
Key financial results
| Metric | Three months ended Sept. 30, 2020 | Six months ended Sept. 30, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | $334,000 | $334,000 | $0 |
| Research and development expense | $2.358 million | $4.089 million | $4.205 million and $8.519 million, respectively |
| General and administrative expense | $1.270 million | $2.660 million | $1.146 million and $3.056 million, respectively |
| Net loss | $3.298 million | $6.425 million | $5.336 million and $11.546 million, respectively |
| Net loss per common share | $0.05 | $0.12 | $0.13 and $0.29, respectively |
- The $334,000 revenue is partial recognition of EverInsight’s $5.0 million upfront PH94B license payment. The remaining $4.666 million was deferred at September 30, 2020 and is expected to be recognized over approximately four years.
- Six-month operating loss was $6.416 million versus $11.575 million in 2019. No meaningful operating margin comparison is available given minimal collaboration revenue and continuing development costs.
- Cash and cash equivalents were $15.400 million at September 30, 2020, compared with $1.355 million at March 31, 2020. Current assets were $15.972 million and current liabilities $3.302 million.
- For the six months, operating cash use was $1.803 million, investing cash use $98,800, and financing cash provided $15.946 million; cash increased $14.044 million. Operating cash use was reduced by the EverInsight payment and the related deferred revenue.
- Notes payable, including accrued interest, totaled approximately $439,900, including a $224,400 Paycheck Protection Program (PPP) loan. The company had applied for PPP forgiveness; forgiveness was not assured. Operating lease liabilities were $3.879 million. Accrued Series B preferred dividends were $5.695 million.
- Stockholders’ equity was $4.223 million, versus a $5.729 million deficit at March 31, 2020. Common shares outstanding increased from 49.349 million to 74.134 million during the period, principally reflecting equity financing.
Material changes and developments
- Revenue began under the EverInsight agreement, which licenses PH94B in Greater China, South Korea and Southeast Asia. VistaGen received $5.0 million upfront and may receive up to $172 million in development and commercial milestones plus royalties, all contingent on future success.
- VistaGen raised approximately $12.9 million net from its August 2020 public offering, received cash from sales under its Lincoln Park equity purchase agreement and warrant exercises, and received the EverInsight payment. The company reported approximately $20.0 million in net cash proceeds from these and related transactions between April 1, 2020 and the report date.
- Common shares outstanding rose about 50% from March 31 to September 30. Potentially dilutive securities excluded from diluted loss per share included 12.1 million options and 25.8 million warrants, as well as convertible preferred stock.
- Six-month R&D expense declined by $4.430 million year over year, primarily because the AV-101 Elevate Phase 2 study had been completed. PH94B and PH10 manufacturing and development spending increased; G&A declined modestly.
Outlook, risks and unusual items
- Going concern: Management stated that September 30 cash was probably insufficient to fund planned operations for the 12 months following issuance of the financial statements, raising substantial doubt about the company’s ability to continue as a going concern. Additional financing is necessary; failure to obtain it could require curtailing or discontinuing development programs.
- Subject to financing, planned work included preparing and launching a pivotal Phase 3 PH94B trial for social anxiety disorder (SAD), exploratory PH94B studies, evaluating a Phase 1 AV-101/probenecid study, and nonclinical studies. No quantified financial guidance was provided.
- Management reported FDA alignment on key elements of the initial PH94B Phase 3 SAD study, including a randomized, placebo-controlled public-speaking challenge and an approximate target enrollment of 182. Manufacturing and supply readiness remained critical path items.
- AV-101 did not separate from placebo on the primary endpoint in the 199-patient Elevate study. The company is assessing AV-101 with probenecid based on preclinical findings; further clinical benefit is unproven. PH10 was being prepared for Phase 2B development, including required toxicology work.
- COVID-19 had caused remote operations and intermittent delays in active pharmaceutical ingredient and drug-product supply, manufacturing and analytical processes. Further disruption could delay development programs.
- EverInsight announced a planned merger with AffaMed Therapeutics in October 2020. The filing does not establish the effect, if any, on the agreement’s execution or expected payments.
- Nasdaq granted a second compliance period through April 12, 2021 to regain the $1.00 minimum bid-price requirement. Failure could result in delisting.
- Management said disclosure controls were effective, but two previously identified material weaknesses in internal control over financial reporting remained: inadequate segregation of duties and accounting software limitations. No material change in internal control was reported during the quarter.
- The filing reported no legal proceedings and no off-balance-sheet arrangements. The lease renewal option and commitments are described in the notes.
Important facts for investors to verify
- Whether VistaGen secures sufficient financing to address the stated going-concern risk, and the resulting cost and dilution to shareholders.
- Whether PH94B manufacturing is ready and the planned Phase 3 trial starts on schedule, with required FDA and regulatory alignment maintained.
- Whether the EverInsight collaboration remains on track following the announced merger, and whether any milestone or royalty assumptions are supported by actual development progress.
- The status of AV-101/probenecid clinical plans, PH10 toxicology and development, and the implications of AV-101’s unsuccessful Elevate primary endpoint.
- Whether VistaGen regains Nasdaq’s minimum bid-price compliance by April 12, 2021, and what further share issuance, warrant exercise or preferred-stock conversion could mean for dilution.
- Whether the PPP loan is forgiven and how management plans to remediate the disclosed internal-control weaknesses.