Minerva Neurosciences, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Minerva is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue. Its lead candidate, roluperidone, is under FDA review for negative symptoms of schizophrenia; the company also holds rights to MIN-301 for Parkinson’s disease.
Key financial metrics
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior balance |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $3.44 million for Q3; $7.98 million for nine months | $2.37 million and $11.46 million, respectively, in 2022 |
| General and administrative expense | $2.64 million for Q3; $7.96 million for nine months | $2.84 million and $8.70 million, respectively, in 2022 |
| Net loss | $7.82 million for Q3; $20.98 million for nine months | $6.90 million and $25.38 million, respectively, in 2022 |
| Basic and diluted loss per share | $1.03 for Q3; $3.41 for nine months | $1.29 and $4.75, respectively, in 2022 |
| Cash, cash equivalents and restricted cash | $47.00 million | $36.19 million at December 31, 2022 |
| Operating cash flow | $8.79 million used in the first nine months | $20.54 million used in the first nine months of 2022 |
| Total liabilities | $83.18 million, including a $79.83 million liability from the sale of future royalties | $75.11 million at December 31, 2022 |
| Stockholders’ equity | Deficit of $20.05 million | Deficit of $20.02 million at December 31, 2022 |
Gross margin is not applicable because the company reported no revenue. The royalty-sale liability is not presented as conventional interest-bearing debt; it is accounted for as a liability and accretes through non-cash interest expense.
Changes versus prior comparable periods
- Q3 net loss increased by about $0.92 million year over year, while nine-month net loss decreased by about $4.40 million. Q3 R&D expense rose about $1.08 million, primarily from costs related to FDA review of the roluperidone NDA. Nine-month R&D expense fell about $3.47 million, mainly because NDA-preparation costs were lower than in 2022.
- Q3 G&A expense decreased about $0.20 million; nine-month G&A expense decreased about $0.74 million. The company attributed both declines primarily to lower stock-based compensation.
- Nine-month investment income increased to $1.08 million from $0.26 million, primarily reflecting higher interest rates. Nine-month non-cash royalty-obligation interest expense increased to $6.09 million from $5.48 million.
- Cash used in operations declined to $8.79 million from $20.54 million. The company cited lower net loss, the $3.12 million FDA fee refund received in January 2023, and non-cash items and working-capital changes. The 2023 financing inflow chiefly reflects the June private placement.
Outlook, risks and unusual items
- The FDA filed the roluperidone NDA on April 27, 2023, after Minerva appealed a 2022 refusal-to-file decision. FDA assigned standard review and a February 26, 2024 PDUFA goal date, but flagged potential review issues concerning antipsychotic interactions, applicability of non-U.S. trial data to U.S. patients, efficacy evidence and identification of patients likely to benefit. Filing does not ensure approval.
- Management said the approximately $47.0 million of cash, cash equivalents and restricted cash should fund operating commitments for at least 12 months from the financial statements’ issuance. The company expects continuing losses and negative operating cash flow, and says additional capital will be needed to continue operations and fully fund later-stage development. Financing may be unavailable or dilutive; failure to obtain it could require scaling back or discontinuing operations.
- In June, Minerva raised $20.0 million gross through a private placement of 1.425 million common shares and pre-funded warrants for 575,575 shares; net proceeds were approximately $19.6 million after offering costs. The common shares outstanding rose from 5.34 million at year-end to 6.99 million at September 30. The pre-funded warrants have a $0.01 exercise price and do not expire.
- The $79.83 million royalty obligation reflects the original $60 million payment from Royalty Pharma plus $19.83 million of accumulated non-cash interest. The estimated effective annual interest rate was approximately 10.7% at September 30 and depends on significant assumptions about future seltorexant royalties and milestones. Janssen was conducting two Phase 3 studies; a third was discontinued in 2022.
- Other material risks include clinical and regulatory uncertainty, the need for further financing, possible Nasdaq continued-listing noncompliance, and potential delays or additional evidence requirements in the FDA review. Management reported no legal proceeding expected to have a material adverse effect and concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Subsequent FDA communications, any changes to the February 26, 2024 review goal date, and the status or resolution of the identified NDA review issues.
- Cash runway assumptions, operating cash burn and the timing, amount and terms of any additional financing.
- Potential dilution from pre-funded warrants, equity awards and use of the $22.6 million available under the at-the-market program as of September 30, 2023.
- Progress of Janssen’s remaining seltorexant Phase 3 studies and the assumptions underlying the royalty obligation’s interest accretion and any potential milestone payments.