NanoViricides, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2018, the first quarter of the company’s fiscal year. The filing was signed November 14, 2018. Financial statements are unaudited.
Business context
NanoViricides is a pre-revenue antiviral drug developer. Its programs remain in preclinical development, with management prioritizing topical herpesvirus treatments, particularly a shingles (VZV) candidate. The company has not begun product commercialization or human clinical trials. It relies on licensed technology and development work from related party TheraCour Pharma.
Financial performance and position
| Metric | Quarter ended September 30, 2018 | Comparable 2017 period or balance-sheet comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.411 million | $1.452 million; down $40,423 |
| General and administrative expense | $628 thousand | $779 thousand; down $150,925 |
| Total operating expenses | $2.039 million | $2.230 million |
| Net loss | $1.841 million, or $0.03 per share | $2.006 million, or $0.03 per share |
| Net cash used in operating activities | $962 thousand | $1.557 million |
| Cash and cash equivalents | $6.082 million at September 30 | $7.082 million at June 30, 2018; $13.512 million at September 30, 2017 |
| Current liabilities | $1.392 million | $882 thousand at June 30, 2018 |
| Stockholders’ equity | $15.978 million | $17.664 million at June 30, 2018 |
Gross margin is not applicable because the company reported no revenue. The company reported no long-term debt at quarter-end. Its $5 million Series C debenture had been redeemed for common stock in November 2017. Cash declined by about $999 thousand from June 30, 2018; operating cash use was partly offset by noncash items and changes in payables. The reported net loss included a $176 thousand noncash gain from the change in fair value of warrant derivatives.
Material changes and unusual items
- Net loss improved by approximately $164 thousand year over year. Lower operating expenses and the absence of debenture interest and debt-discount amortization contributed; these benefits were partly offset by a smaller derivative fair-value gain than in 2017.
- Accounts payable to related party TheraCour rose to $718 thousand from $107 thousand at June 30. The company reported $847 thousand of R&D costs charged by and paid to TheraCour during the quarter.
- Cash-based compensation and services were supplemented by equity awards. During the quarter, the company issued 532,716 Series A preferred shares, 210,820 common shares for consulting and director services, and granted 300,000 CEO options.
- The company’s 2017 comparative expenses were reclassified, moving $297 thousand of laboratory-facility costs from general and administrative to R&D; the reclassification did not affect total expenses or net loss.
Outlook, risks and contingencies
- Liquidity and going concern: The company disclosed substantial doubt about its ability to continue as a going concern, citing an accumulated deficit of $85.5 million, continuing losses, no revenue, and $962 thousand of operating cash use for the quarter. Management estimated existing resources and capital-market access could fund planned operations through November 2019, but gave no assurance. Funding may be needed for clinical trials and licensing.
- Management said it reduced staffing and consultant costs and concentrated resources on the shingles program. It was considering additional financing, grants or licensing arrangements, and a mortgage on its laboratory facility. The company cautioned that costs or timelines could exceed estimates and financing may not be available on favorable terms.
- The shingles candidate remained in IND-enabling preclinical work, including planned safety and toxicology studies and manufacturing scale-up. The company was still negotiating with TheraCour for a VZV license; it reported that the license was not yet executed. Management’s expectation of advancing toward clinical trials is forward-looking, not evidence that trials or an IND filing had begun.
- Management reported favorable preliminary animal and human-skin-model findings for herpes candidates, but emphasized that further studies and regulatory steps are required. The filing describes the pipeline as preclinical and offers no assurance of efficacy, safety, regulatory approval, or commercialization.
- Disclosure controls were deemed ineffective as of September 30, 2018 because previously identified material weaknesses remained unremediated. Management described enhanced transaction review and training as remediation efforts.
- The filing reported no pending or threatened legal proceedings known to the company and no off-balance-sheet arrangements for the quarter. The company depends on TheraCour licenses and external collaborators; loss or delay of rights or services could impede development.
Most important facts for investors to verify
- Whether cash burn, financing activity, and the company’s stated runway remain consistent with its November 2019 funding estimate.
- Whether the VZV license with TheraCour has been completed, on what terms, and whether the related-party payable continues to grow or is deferred.
- Actual progress and funding for IND-enabling studies, manufacturing readiness, an IND submission, and any clinical-trial start; distinguish milestones achieved from management forecasts.
- Whether internal-control material weaknesses have been remediated and independently assessed.
- Potential dilution from outstanding warrants, options, preferred shares, and future equity financing. At September 30, 5.064 million Series A preferred shares could convert into approximately 17.724 million common shares upon a change of control; they were excluded from diluted loss per share.