Vivani Medical, Inc. — Q3 2023 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2023. Vivani is a preclinical-stage biopharmaceutical company developing long-acting subdermal drug implants using its NanoPortal technology. It reports no product revenue and expects none until product candidates are developed and receive marketing approval. Amounts below are in millions of dollars unless otherwise noted.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $4.4 | $3.9 | $12.3 | $9.7 |
| General and administrative expense | $2.7 | $1.6 | $8.5 | $3.7 |
| Total operating expenses / operating loss | $7.1 | $5.4 | $20.7 | $13.5 |
| Other income, net | $0.4 | $6.9 | $1.1 | $6.8 |
| Net income (loss) | ($6.8) | $1.4 | ($19.6) | ($6.6) |
| Operating cash used | Not presented quarterly | Not presented quarterly | $20.2 | $13.6 |
Margins: Not meaningful because the company reported no revenue. Liquidity: Cash and cash equivalents were $24.8 million at September 30, 2023, down from $45.1 million at December 31, 2022; restricted cash was $1.4 million. Management estimated available cash would fund planned obligations into early 2025. Working capital was $23.2 million, versus $40.7 million at year-end 2022. Debt and leases: The filing does not report conventional borrowings outstanding. Operating lease liabilities totaled $21.1 million, including $19.7 million long-term; future undiscounted lease payments were $31.6 million. Total assets were $53.3 million and stockholders’ equity was $26.2 million.
Material changes versus the prior comparable period
- Q3 2023 net loss of $6.8 million compared with net income of $1.4 million in Q3 2022. The prior-year quarter included a $6.9 million nonrecurring bargain-purchase gain from the Second Sight merger; Q3 2023 other income was primarily interest income.
- Nine-month net loss increased to $19.6 million from $6.6 million. The prior-year period also included the $6.9 million bargain-purchase gain.
- Nine-month R&D and G&A expenses rose by $2.6 million and $4.8 million, respectively. Management attributed increases to the fuller inclusion of Second Sight after the August 2022 merger, drug-implant development, payroll, and higher public-company costs.
- Operating cash use increased to $20.2 million from $13.6 million in the first nine months of 2022. Cash, cash equivalents and restricted cash declined by $20.2 million during the first nine months of 2023.
- Lease assets and liabilities increased substantially following commencement of the Alameda facility lease and other leases; the principal Alameda lease runs through September 2033.
Outlook, management commentary, risks and unusual items
- Clinical program: The FDA placed the NPM-119 LIBERATE-1 first-in-human study on full clinical hold on August 18, 2023, citing insufficient chemistry, manufacturing and controls information to assess human-subject risk. Vivani was discussing steps to lift the hold and planned to seek ethics approval for an alternative first-in-human trial in Australia. Delays or additional studies could increase costs.
- Pipeline: Vivani intends to emphasize NPM-115, a high-dose exenatide implant for weight management, and advance it toward human testing, subject to regulatory clearance. The company cited preclinical rat data, not human efficacy evidence. NPM-139 is being developed with an undisclosed partner as a potential once-yearly implant. NPM-159 is being removed from the portfolio after the partner discontinued its parent compound.
- Funding and going concern: The company has recurring losses, negative operating cash flows and no revenue. It expects expenses to rise with development and clinical work and says it will need additional capital; financing may be unavailable or dilutive. Its cash-runway estimate into early 2025 is management’s estimate, not a guarantee.
- Cortigent: Vivani continues to support its neuromodulation subsidiary while Cortigent pursues a proposed IPO. Under an amended funding agreement, Cortigent is to repay $1.5 million at the end of the funding-support term and issue Vivani a five-year, 5% promissory note for $2.0 million; remaining amounts due under the agreement are to be forgiven. The support term ends earlier of December 31, 2024 or Cortigent’s IPO. In October 2023, Cortigent furloughed certain employees, potentially affecting operations and its IPO plans and creating possible additional benefit or termination costs.
- Contingencies: Vivani has recorded a $1.675 million accrual for the Pixium dispute. A Paris court judgment ordered payment of approximately €1.55 million net of credit for a prior payment; Vivani appealed in May 2023. Three European patent oppositions are also pending.
- Other items: The company recorded $1.4 million of stock-based compensation in the first nine months. It reported effective disclosure controls and no material change in internal control over financial reporting. There were no off-balance-sheet arrangements reported.
Important facts for investors to verify
- Whether and when Vivani resolves the FDA’s CMC concerns, lifts the NPM-119 clinical hold, or obtains approval to begin an Australian study.
- Whether actual cash use, development spending and financing needs remain consistent with management’s projected runway into early 2025.
- Progress and costs for NPM-115, and the status, partner arrangements and development plans for NPM-139.
- Cortigent’s funding requirements, repayment and promissory-note terms, employee furlough impacts, and prospects for completing its IPO.
- The outcome and potential financial impact of the Pixium appeal and pending patent oppositions.
- Potential dilution: as of September 30, 2023, the company reported 10.311 million warrants and 6.043 million options outstanding; 51.025 million common shares were outstanding. The cover page reports 51,025,060 shares and 7,680,938 warrants outstanding as of November 10, 2023.