Ovid Therapeutics Inc. — Q2 2022 Form 10-Q Summary
Business context and reporting period
Ovid is a biopharmaceutical company developing medicines for rare neurological disorders, epilepsies and seizure-related conditions. The filing covers the three and six months ended June 30, 2022; interim financial statements are unaudited. Ovid had no approved commercial products and generated no product-sales revenue.
Financial performance and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $0 | $1.4 million |
| Research and development expense | $6.0 million | $13.9 million |
| General and administrative expense | $8.3 million | $18.1 million |
| Loss from operations | $14.3 million | $30.6 million |
| Net loss | $14.6 million | $30.7 million |
| Net loss per diluted share | $0.21 | $0.44 |
| Operating cash flow | Not separately disclosed | $(33.4) million |
- Cash, cash equivalents and marketable securities totaled approximately $152.4 million at June 30, 2022, including $72.8 million of cash and cash equivalents and $79.6 million of marketable securities.
- Working capital was approximately $146.9 million, compared with $190.5 million of current assets at December 31, 2021.
- The company reported no long-term debt. It recognized a $16.0 million long-term operating lease liability for its new headquarters and had $1.9 million of restricted cash supporting a letter of credit.
- Accumulated deficit was $202.1 million at June 30, 2022.
- Operating and net margins are not meaningful because quarterly revenue was zero and substantially all revenue was licensing-related rather than recurring product revenue.
- Investing cash outflow was $81.8 million, primarily reflecting purchases of marketable securities; financing cash inflow was $0.1 million, primarily from stock-option exercises.
Material changes versus the prior comparable period
- Six-month revenue fell to $1.4 million from $208.4 million. The 2021 period included the $196.0 million Takeda upfront license payment and approximately $12.4 million of Angelini-related revenue.
- Six-month net results shifted from $160.2 million of net income in 2021 to a $30.7 million net loss in 2022, primarily because the prior-year Takeda transaction was non-recurring.
- Six-month research and development expense declined by $10.1 million to $13.9 million, primarily following discontinuation of OV101 studies in Angelman syndrome and Fragile X syndrome and termination of the Takeda collaboration for OV935.
- Six-month general and administrative expense declined by $4.1 million to $18.1 million, despite higher payroll and office costs, due principally to lower legal and professional fees and reduced administrative headcount.
- Quarterly research and development expense decreased by $1.6 million, while quarterly general and administrative expense increased by $1.6 million because of headquarters rent, strategic consulting and higher legal and accounting fees.
- Cash and marketable securities decreased by approximately $35.4 million from December 31, 2021, reflecting operating expenses, licensing-related payments and investment purchases.
Guidance, outlook, commentary and risks
- Management believes existing cash, cash equivalents and marketable securities will fund current operating plans for at least the 12 months following the filing date, but states that additional funding will ultimately be required.
- Management expects significant operating losses and negative operating cash flow for at least the next several years. Funding may come from equity or debt offerings, collaborations, licensing transactions or strategic alliances.
- Ovid had $250.0 million available under its shelf registration statement, including $75.0 million under its at-the-market program, as of June 30, 2022. No shares had been sold under the ATM agreement through that date.
- Takeda reiterated in July 2022 that regulatory filings for pivotal Phase 3 soticlestat trials in Lennox-Gastaut and Dravet syndromes were expected in Takeda’s fiscal year 2024. Ovid remains dependent on Takeda’s development decisions for potential milestone and royalty payments.
- The Takeda arrangement provides for up to $660.0 million of additional development, regulatory and sales milestones and tiered royalties ranging from the low double digits up to 20% if soticlestat is approved and commercialized; these amounts are contingent and not recognized as assets or revenue.
- Ovid’s current controlled drug candidates, including OV329 and OV350, were described as being in preclinical development. The company cautions that clinical, regulatory and commercial success is uncertain.
- Other unusual items included $0.5 million of Healx license-option revenue and approximately $0.9 million of revenue recognized through receipt of Marinus shares. The Marinus investment generated an unrealized loss of approximately $0.6 million in the second quarter.
- Potential contingent milestone obligations under in-license agreements totaled up to approximately $279.3 million, including obligations to AstraZeneca, Lundbeck and Northwestern; timing and probability were not considered reasonably estimable.
- Key risks include continued losses, the need for additional capital, preclinical and clinical failure, dependence on third-party manufacturers and research organizations, intellectual-property challenges, reliance on Takeda and other partners, market volatility, and potential effects of COVID-19 and broader economic conditions.
- Management reported effective disclosure controls as of June 30, 2022 and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Takeda advances soticlestat on the stated timeline and whether the program produces future milestones or royalties.
- The company’s quarterly cash-burn rate and whether the stated cash runway remains adequate as preclinical programs progress.
- Potential dilution from 13.5 million outstanding stock options and 1.25 million common shares issuable upon conversion of Series A preferred stock.
- The timing and financial impact of the $2.3 million annual headquarters rent and approximately $23.3 million of undiscounted future lease commitments.
- Whether Ovid can generate recurring revenue, since current revenue is licensing-based and no product sales have occurred.
- Progress of OV329, OV350 and other pipeline candidates toward IND filings and clinical development.
- Availability and terms of future financing, including possible use of the ATM program or other equity, debt or licensing transactions.
- Whether contingent milestone obligations, partner termination rights, intellectual-property risks or regulatory setbacks could materially affect liquidity or development plans.