NanoViricides, Inc. — Form 10-Q Summary
Period: The filing covers the quarter and nine months ended March 31, 2018, corresponding to fiscal Q3 2018. This differs from the request metadata’s “2017 Q3.” Financial statements are unaudited.
Business context
NanoViricides is a pre-revenue biopharmaceutical company developing antiviral drug candidates based on its nanomedicine platform. Its lead efforts were focused on topical herpesvirus treatments, particularly shingles (VZV), with other programs including HSV-1, HSV-2, ocular herpes, influenza, dengue and HIV. All programs remained preclinical or advanced preclinical; the company had no commercialized products.
Financial results and position
| Metric | Three months ended Mar. 31, 2018 | Nine months ended Mar. 31, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| R&D expense | $1.03 million | $3.57 million | $1.56 million / $4.27 million |
| G&A expense | $1.39 million | $3.47 million | $1.06 million / $3.08 million |
| Net loss | $2.11 million | $6.91 million | $3.14 million / $7.75 million |
| Basic and diluted loss per share | $0.03 | $0.11 | $0.05 / $0.13 |
Gross margin and operating margin are not meaningful because the company reported no revenue. Nine-month operating expenses were $7.04 million, versus $7.35 million in 2017. The lower nine-month net loss reflected lower operating costs and reduced interest and debt-discount expense, partly offset by a $1.35 million noncash loss on extinguishing Series C debt. A $1.95 million gain from changes in derivative fair value also benefited nine-month results.
At March 31, 2018, cash and equivalents were $10.62 million, current assets $10.95 million, total assets $22.34 million, total liabilities $3.19 million and stockholders’ equity $19.15 million. Current liabilities included $1.69 million payable to related party TheraCour and a $902,426 warrant derivative liability. No debentures or long-term liabilities remained on the balance sheet. Accumulated deficit was approximately $82.04 million in the balance sheet and MD&A; a note gives a different figure of $82.10 million.
Cash used in operating activities was $4.26 million for the nine months, compared with $6.89 million in 2017. Capital spending was $225,205. Cash declined by $4.48 million from June 30, 2017 to $10.62 million at March 31, 2018.
Material changes and unusual items
- R&D expense declined year over year, chiefly because of lower noncash share-based compensation and other operating costs; collaborator laboratory fees increased.
- G&A expense increased, primarily due to approximately $364,000 of former-CEO separation-related costs.
- In November 2017, the company agreed to redeem its $5 million Series C debenture with 5.5 million common shares and 150,000 Series A preferred shares. The shares were issued March 21, 2018. The transaction produced a $1.35 million noncash extinguishment loss.
- Common shares outstanding increased to 68,985,375 from 63,306,774 at June 30, 2017. The company also had 6.96 million outstanding warrants and 4.52 million Series A preferred shares; preferred shares are convertible only upon a defined change of control.
Outlook, management commentary and risks
Management estimated existing cash would fund operations at the then-current spending rate through May 2019, but said funds were insufficient for its projected IND-enabling work through that date. It expected to seek additional financing and stated it could adjust development priorities if funding were unavailable. There is no assurance of timely financing or favorable terms, and clinical-development costs and timelines could exceed estimates.
The company said it was nearing selection of a shingles clinical candidate and reported that an initial, non-GLP rat safety/toxicology study had been completed. The company’s April 9, 2018 announcement of favorable preliminary safety findings was subsequent to the reporting period; these results are not evidence of human safety or efficacy. IND-enabling studies, manufacturing scale-up, regulatory work and clinical trials remained to be completed. Progress was constrained by limited staffing and funding.
CEO Eugene Seymour resigned in January 2018. Anil Diwan, President and Chairman, became interim CEO while the board searched for a permanent CEO. A separation agreement was finalized April 30, 2018; it provided continued salary through December 2018, accelerated vesting of 50,000 preferred shares and warrants for 250,000 common shares. VZV and other unlicensed herpesvirus rights were not yet secured from TheraCour; the company said it intended to negotiate after appointing a permanent CEO. Dependence on TheraCour’s licensed technology and related-party services is a material risk.
The company reported no pending or threatened legal proceedings to its knowledge. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the reporting-period discrepancy: the filing is for the quarter ended March 31, 2018, not 2017 Q3.
- Assess whether the stated May 2019 cash runway remains realistic, particularly for planned IND-enabling work and clinical development, and review subsequent financing.
- Verify the status, terms and timing of the VZV license negotiations with TheraCour and the company’s related-party balances and charges.
- Track candidate selection, reproducibility of preclinical findings, required GLP toxicology, CMC/manufacturing readiness and any IND submission; preliminary animal results do not establish clinical benefit.
- Review dilution exposure from the increased common share count, outstanding warrants, preferred stock and former-CEO severance awards.