Ovid Therapeutics Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Ovid Therapeutics is a clinical-stage biopharmaceutical company developing medicines for epilepsies and other neurological conditions involving seizures. The filing covers the unaudited three months ended March 31, 2024, compared with the three months ended March 31, 2023. Ovid has no products approved for commercial sale and has not generated product-sale revenue.
Active development programs include OV329, OV888 and the KCC2 program, including OV350. The company also remains economically exposed to soticlestat, which is being developed by Takeda.
Financial performance and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $0.1 million | $0.1 million | +$0.1 million |
| Research and development expense | $10.4 million | $6.6 million | +$3.8 million |
| General and administrative expense | $7.2 million | $8.3 million | -$1.2 million |
| Loss from operations | $17.4 million | $14.9 million | Loss increased $2.5 million |
| Other income, net | $5.7 million | $1.5 million | +$4.2 million |
| Net loss | $11.7 million | $13.4 million | Loss decreased $1.7 million |
| Net loss per share | $0.17 | $0.19 | Improved |
| Cash used in operating activities | $16.7 million | $12.1 million | Use increased $4.6 million |
Revenue was primarily royalty revenue under licensing arrangements. The company reported no gross profit or gross margin because it has no product sales and only nominal licensing revenue. Operating and net margins are not meaningful for assessing the underlying business because revenue is minimal and net income benefited from non-cash investment gains.
- Cash, cash equivalents and marketable securities totaled $90.3 million at March 31, 2024, compared with $105.8 million at December 31, 2023. Including restricted cash, cash, cash equivalents and restricted cash were $32.7 million at quarter-end.
- Working capital was $84.3 million, and accumulated deficit was $289.6 million.
- Marketable securities were $59.5 million; long-term equity investments were $22.0 million.
- Other income included a $4.4 million unrealized gain on the Graviton investment and interest income and accretion on marketable securities.
- The company reported no long-term debt and no material non-cancelable purchase commitments with service providers. It had a $30.0 million royalty monetization liability related to the sale of a 13% interest in potential soticlestat royalties and milestones to Ligand.
- Lease liabilities totaled $15.7 million, including current and long-term portions. Remaining lease payments under the headquarters lease totaled $21.0 million.
- Stock-based compensation expense was $2.0 million, with approximately $16.4 million of unrecognized expense remaining.
Material changes versus the prior comparable period
- Research and development expense increased 57%, primarily because of accelerated clinical development of OV329 and OV888.
- General and administrative expense declined 14%, reflecting 2023 headcount reductions and cost-reduction initiatives.
- Operating loss increased despite the lower net loss, because the increase in development spending exceeded the modest revenue increase.
- Net loss improved primarily because other income increased by $4.2 million, driven largely by unrealized gains on long-term equity investments.
- Operating cash use increased to $16.7 million from $12.1 million, while investing cash inflow declined as fewer marketable securities matured.
- Graviton investment carrying value increased to $15.8 million from $11.2 million at December 31, 2023, including a $4.5 million measurement adjustment during the quarter.
- Common shares outstanding increased modestly to 70.8 million at March 31, 2024 from 70.7 million at year-end. Options to purchase 17.4 million shares and preferred stock convertible into 1.25 million common shares remained potentially dilutive.
Guidance, outlook, management commentary and risks
Management believes existing cash, cash equivalents and marketable securities will fund current operating plans for at least 12 months from the filing date. The company expects significant operating losses and negative operating cash flows for at least the next several years and anticipates that research and development expenses will increase as programs advance.
- OV888: Phase 1 multiple-ascending-dose study was expected to complete in the first half of 2024, with a signal-finding study in cerebral cavernous malformations planned for the second half of 2024.
- OV329: Phase 1 study was expected to complete in the second half of 2024. The company also expected to submit an IND or equivalent for an intravenous formulation in the second half of 2024.
- OV350 and the KCC2 portfolio: an intravenous formulation was progressing toward an anticipated IND in the second half of 2024.
- Soticlestat: Takeda’s regulatory filings related to pivotal Phase 3 trials in Lennox-Gastaut syndrome and Dravet syndrome were expected during Takeda’s 2024 fiscal year. Ovid could receive up to $660.0 million in additional milestones and tiered royalties of up to 20%, subject to successful development, approval and commercialization. Ligand is entitled to 13% of those potential payments.
- Ovid had $250.0 million available under its shelf registration statement, including $75.0 million available under its at-the-market program, as of March 31, 2024. No offering under that program was reported in the filing.
Key risks include continued losses and the need for additional financing; failure or delay in clinical development or regulatory approval; uncertain clinical and safety outcomes; reliance on Takeda, Graviton, contract research organizations and third-party manufacturers; limited patient populations; intellectual-property challenges; potential loss or delay of soticlestat milestones and royalties; dilution from future financing, options and preferred-stock conversion; and inflation, interest-rate, geopolitical, supply-chain and cybersecurity risks.
The company disclosed that it is defending a post-grant review initiated by Marinus concerning an Ovid patent and has initiated an inter partes review concerning a Marinus patent; management states that both proceedings are not material. No other material legal proceedings were reported. Disclosure controls and procedures were considered effective as of March 31, 2024, with no material changes in internal control over financial reporting.
Important facts investors should verify
- Whether Takeda submits the anticipated soticlestat regulatory filings and whether the program remains on schedule toward potential approval, milestones and royalties.
- The actual cash runway as clinical spending increases, including the timing and terms of any equity, debt or strategic financing.
- Progress, safety findings, biomarker results and regulatory milestones for OV329, OV888 and OV350.
- The sustainability and valuation sensitivity of the $22.0 million long-term equity investment balance, particularly the Graviton investment.
- The distinction between the company’s stated lack of long-term debt and the $30.0 million royalty monetization liability.
- Potential dilution from 17.4 million outstanding options, 1.25 million convertible preferred shares and future use of the shelf or ATM program.
- The outcome and potential intellectual-property impact of the Marinus PGR and IPR proceedings.