Ovid Therapeutics Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; filed March 15, 2022. The filing reports full-year results, not a standalone fourth quarter. Ovid is a development-stage biopharmaceutical company focused on epilepsies, seizure-related disorders and rare neurological diseases. It had 57 full-time employees and no approved products or commercial drug sales.
Financial Performance and Position
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $208.4 million | $12.6 million | +$195.8 million |
| License and other revenue | $12.4 million | $12.6 million | -$0.2 million |
| Related-party license revenue | $196.0 million | — | +$196.0 million |
| Research and development expense | $46.9 million | $63.4 million | -$16.5 million |
| General and administrative expense | $37.2 million | $30.6 million | +$6.6 million |
| Net income (loss) | $122.8 million | $(81.0) million | +$203.9 million |
| Basic earnings (loss) per share | $1.78 | $(1.39) | Improved |
| Operating cash flow | $118.6 million | $(51.6) million | +$170.2 million |
| Cash and cash equivalents | $187.8 million | $72.0 million | +$115.8 million |
Operating income was $124.2 million versus an operating loss of $81.4 million in 2020. The 2021 result was primarily driven by the one-time $196.0 million upfront payment from Takeda for soticlestat rights. The reported net income and operating margin therefore do not represent recurring operating performance. Revenue less operating expenses produced an operating margin of approximately 59.6% in 2021, compared with a negative margin in 2020.
Ovid reported working capital of $175.7 million, an accumulated deficit of $171.4 million and no long-term debt as of December 31, 2021. Total liabilities were $14.8 million. Restricted cash was $1.9 million, primarily related to a letter of credit for new office space. The company stated that existing cash and cash equivalents should fund current operating plans for at least 12 months from the filing date.
Material Changes Versus 2020
- Takeda obtained Ovid’s 50% global share and relevant rights to soticlestat in March 2021. Ovid received $196.0 million upfront and became eligible for up to $660.0 million in development, regulatory and sales milestones, plus tiered royalties from the low double-digits up to 20% if approved.
- Ovid’s research and development expense declined 26% to $46.9 million, primarily due to termination of the OV101 Angelman syndrome program and transfer of OV935 development to Takeda.
- General and administrative expense increased 22%, reflecting Takeda transaction costs, compliance, pre-commercialization activities and professional fees.
- The Angelini license agreement terminated effective March 31, 2021. Ovid recognized $12.4 million of related revenue and will not receive future milestone payments under that agreement.
- On December 30, 2021, Ovid licensed AstraZeneca’s KCC2 transporter compound library, including OV350, for $5.0 million in cash and $7.3 million in Ovid shares. The transaction generated $12.3 million of 2021 research and development expense.
- Ovid issued 2.3 million common shares in connection with the AstraZeneca transaction and ended the year with 70.4 million common shares outstanding. It also had 10.8 million outstanding stock options and preferred stock convertible into 1.25 million common shares.
Pipeline, Outlook and Management Commentary
- OV329: Preclinical GABA aminotransferase inhibitor for seizures associated with tuberous sclerosis complex and infantile spasms. Ovid expected to file an IND in 2022.
- OV350: Early-stage KCC2 transporter activator obtained from AstraZeneca. Ovid planned formulation optimization and animal studies.
- OV882: Early-stage shRNA gene therapy program for Angelman syndrome, being developed with the University of Connecticut.
- OV815/OV825: Columbia University research programs targeting rare genetic neurological conditions, including KIF1A-associated neurological disorder.
- Takeda initiated Phase 3 SKYWAY and SKYLINE studies of soticlestat in Lennox-Gastaut syndrome and Dravet syndrome. Takeda anticipated data in the first half of 2023 and potential regulatory decisions by March 2024, but these outcomes remain uncertain.
- Management expects substantial operating losses for at least the next several years because all internally controlled drug candidates were in preclinical development and no product had been approved for commercial sale.
- Subsequent to year-end, Ovid granted Healx an option relating to gaboxadol, granted Marinus rights to certain ganaxolone patents, and announced a workforce reduction of approximately 20% on March 15, 2022.
Risks, Contingencies and Unusual Items
- The 2021 profit and cash generation were dominated by a nonrecurring Takeda upfront payment; future liquidity depends on cash management, potential financings and successful partner milestone or royalty payments.
- Ovid may receive up to $660.0 million in additional soticlestat milestones, but payments depend on Takeda’s development, regulatory and commercial success. Takeda has sole discretion over the program.
- Ovid had contingent milestone obligations of up to approximately $279.3 million under licensing agreements, including agreements with AstraZeneca, Lundbeck and Northwestern. The filing states that the timing and probability of these payments could not be reasonably estimated.
- The company relies on third parties for manufacturing, preclinical work, clinical trials and commercialization, creating supply, quality, timing and execution risks.
- Clinical and regulatory risks are substantial: all company-controlled candidates were preclinical, and preclinical results may not predict clinical safety or efficacy.
- COVID-19, geopolitical disruption, clinical-trial enrollment, intellectual-property challenges, competition, reimbursement policy and future access to capital could materially affect operations.
- Ovid reported no material legal proceedings. Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021; the external auditor did not provide an internal-control attestation because Ovid qualified as an emerging growth company.
Important Facts for Investors to Verify
- Whether Takeda’s Phase 3 soticlestat trials meet their endpoints and whether regulatory approvals and milestone payments are achieved.
- The portion of 2021 revenue, income and operating cash flow attributable to the one-time Takeda payment versus recurring or potentially recurring sources.
- Ovid’s projected cash burn and runway after the March 2022 workforce reduction and as OV329, OV350 and OV882 advance.
- The terms, probability and potential timing of contingent milestone and royalty obligations under the company’s licensing agreements.
- Progress toward the expected OV329 IND filing and the development timelines for the other preclinical programs.
- Potential dilution from 10.8 million stock options, 1.25 million shares issuable on preferred-stock conversion, future equity financings and partner-related share issuances.
- Whether subsequent Healx and Marinus arrangements produce meaningful upfront, milestone or royalty revenue, and the related obligations to Lundbeck where applicable.