NanoViricides, Inc. — Form 10-Q Summary
Business context and reporting period. The filing covers the three months ended September 30, 2019, the company’s fiscal first quarter. NanoViricides is a pre-revenue antiviral drug developer. Its lead program is NV-HHV-101, a topical shingles treatment; the company reported no commercialized products and no revenue.
Key financial metrics
| Metric | Quarter ended September 30, 2019 | Comparable 2018 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.482 million | $1.411 million |
| General and administrative expense | $505,472 | $627,615 |
| Total operating expenses / operating loss | $1.988 million | $2.039 million |
| Net loss | $1.561 million; $0.41 per share | $1.841 million; $0.53 per share |
| Cash used in operating activities | $1.434 million | $962,152 |
- Cash and cash equivalents were $874,953 at September 30, down from $2.555 million at June 30, 2019. Prepaid expenses were $220,795.
- Total assets were $11.786 million; stockholders’ equity was $9.130 million. Current liabilities were $2.657 million, including a $1.224 million warrant derivative liability. The filing reports no long-term debt.
- Accumulated deficit was $93.678 million. No income tax provision was recorded.
- The $421,527 gain from the change in fair value of the warrant derivative was a major contributor to the lower reported net loss; it is a noncash valuation item, not operating revenue.
Material changes and operating developments
- Compared with the 2018 quarter, R&D expense rose $70,922, mainly due to outside laboratory fees, while G&A fell $122,143, primarily due to lower officer compensation and travel costs. Operating expenses declined by $51,221 overall.
- Despite the lower net loss, operating cash use increased by about $472,000 year over year. Management said spending had been reduced to approximately $1.6 million per quarter through workforce and consultant reductions and prioritization of the lead program.
- Management reported that NV-HHV-101’s 28-day minipig dermal safety and tolerability study had completed its in-life stage with favorable clinical observations; final reports and additional IND-enabling work remained pending. The company expected to submit an IND after receiving required reports, but gave no firm filing date.
- The company reported manufacturing the drug substance and formulated cream at its own facilities and said approximately 10 kg of drug product had been produced. These are company-reported development milestones, not evidence of clinical efficacy or regulatory approval.
- A 1-for-20 reverse stock split took effect September 24, 2019. The filing reports 3,853,675 common shares outstanding at quarter-end and approximately 3,854,000 as of November 14, 2019.
Outlook, liquidity, risks, and unusual items
- Going concern: The filing states that substantial doubt exists about the company’s ability to continue as a going concern, citing its accumulated deficit, ongoing losses, lack of revenue, and approximately $0.9 million of cash. Losses and cash needs are expected to continue, with no assurance of profitability.
- Financing dependence: The company needs additional capital for operations and clinical development. It reported a related-party commitment for a bridge loan of up to $1 million, potential financing secured by its Shelton facility, and efforts to raise equity or debt. None of these prospective sources is assured. A September 2019 S-1 offering was withdrawn November 5; the company engaged Aegis Capital on November 7 to continue the offering.
- Development risk: The lead candidate remained preclinical, dependent on external collaborators and contract organizations. IND-enabling studies, clinical development, costs, and timelines could be delayed or exceed estimates. The company has no direct experience taking a drug through human clinical trials.
- Related-party dependence and obligations: TheraCour, an entity controlled by a significant stockholder, supplies licensed technology and development services. Payables to TheraCour were $714,417 at September 30. A November 1, 2019 VZV license agreement provided for 75,000 Series A preferred shares upon IND approval and cash milestones of $1.5 million, $2.5 million, and $5 million upon completion of Phases I, II, and III, respectively, plus 15% royalties on net sales upon commercialization.
- Controls: Management concluded disclosure controls were not effective at September 30 because material weaknesses in internal control over financial reporting remained unremediated. The company described enhanced reviews, outside specialists, and a financial reporting controls committee as remediation measures.
- The company reported no pending or threatened legal proceedings known to it and no off-balance-sheet arrangements for the quarter.
Important facts for investors to verify
- Whether the company secures financing, on what terms, and whether the bridge-loan commitment is funded; assess the resulting cash runway and dilution risk.
- Completion and results of the remaining IND-enabling studies, timing and acceptance of an IND submission, and any FDA feedback.
- Whether the S-1 offering proceeds and how much capital is actually raised after fees and discounts.
- Progress and costs of clinical-trial preparation, including manufacturing readiness and dependence on TheraCour and outside collaborators.
- Remediation of the disclosed material weaknesses and the status and terms of the TheraCour license milestones and royalties.