NanoViricides, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2016. The filing was signed February 14, 2017. NanoViricides is a pre-revenue antiviral drug developer; all disclosed programs remained preclinical or advanced preclinical.
Financial performance and position
| Metric | Three months ended Dec. 31, 2016 | Six months ended Dec. 31, 2016 | Prior-year comparison |
|---|---|---|---|
| Revenue | $0 | $0 | $0 in both comparable periods |
| Research and development | $1.261 million | $2.713 million | Up 9% and 15%, respectively |
| General and administrative | $1.037 million | $2.025 million | Up 11% and 4%, respectively |
| Total operating expenses / operating loss | $2.298 million | $4.738 million | Prior-year expenses were $2.090 million and $4.315 million |
| Net loss | $1.546 million | $4.608 million | Prior-year losses were $2.775 million and $4.082 million |
| Loss per share, basic and diluted | $0.03 | $0.08 | Prior year: $0.05 and $0.07 |
| Cash used in operating activities | Not separately provided | $4.836 million | Prior-year six-month use: $2.867 million |
The quarter’s net loss was lower than the prior-year quarter, chiefly alongside a $1.408 million noncash gain from changes in derivative fair value. For the six-month period, net loss increased year over year. No meaningful operating margin is available because the company had no revenue.
At December 31, 2016, cash and cash equivalents were $19.302 million; current assets were $19.441 million; total assets were $31.364 million; total liabilities were $12.218 million; and stockholders’ equity was $19.146 million. Cash declined $4.861 million from June 30, 2016. The company reported accounts payable and accrued liabilities of approximately $210,000 in MD&A.
Convertible debentures had carrying values, net of discounts, of $5.911 million for Series B (current) and $3.524 million for Series C (long term). Their stated principal amounts were $6 million and $5 million, respectively; the Series C debenture bears 10% interest and matures in June 2018. Total liabilities also included derivative liabilities, whose aggregate fair value was $2.323 million. The company reported no off-balance-sheet arrangements.
Changes versus comparable periods and balance-sheet date
- Six-month operating cash use rose to $4.836 million from $2.867 million. R&D spending increased, primarily due to payroll, laboratory supplies, and materials; G&A also increased.
- Cash fell from $24.162 million at June 30 to $19.302 million at December 31, 2016. Net property and equipment declined to $11.459 million from $11.761 million.
- Derivative fair-value gains were $1.421 million for the six months, versus $1.403 million in the prior year; the filing describes this item as noncash and based on valuation assumptions.
- Common shares outstanding were 58.459 million at December 31, versus 58.180 million at June 30. The filing reports approximately 62.819 million common shares outstanding as of February 14, 2017.
Outlook, development, and risks
- Management said available funds were sufficient for more than one year at the then-current spending rate and expected to fund toxicology and efficacy work, an IND or equivalent filing, and Phase I/IIa trials for at least one candidate. These are management estimates, not assured outcomes; the filing gives no formal revenue or earnings guidance.
- Management prioritized topical HerpeCide programs, particularly shingles, with injectable FluCide also in IND-enabling development. Other programs, including DengueCide and HIVCide, received lower priority because of resource constraints. Management said clinical timing depends on study results, manufacturing readiness, regulatory requirements, outside collaborators, and costs; delays or higher-than-estimated costs could require reprioritization or additional financing.
- The company had an accumulated deficit of $69.432 million, had never generated revenue, expected losses to continue, and had no assurance of future profitability. It relied on securities financing and stated that inability to obtain further financing could significantly delay its plans.
- Management described encouraging preclinical findings, including reported animal-model survival results for certain HSV candidates and safety observations for FluCide. These are company-reported, early-stage findings and do not establish human safety or efficacy. The company had not begun clinical trials.
- Manufacturing and intellectual property are material dependencies: TheraCour Pharma, an entity controlled by a significant stockholder, holds licensed technology and is a development-cost provider. The filing describes exclusive licenses but warns that loss of licensed rights could cause substantial delay and expense. Much biological testing and all animal studies were conducted externally.
- Related-party exposure is notable: director Milton Boniuk or controlled entities held $4 million of Series B and $5 million of Series C debentures. TheraCour-related R&D costs were $1.840 million for the six months. The filing also describes stock-based compensation and interest payments to related parties.
- After quarter-end, holders agreed to convert $5 million of Series B principal plus accrued interest into restricted common shares; the remaining $1 million principal and accrued interest was repaid in cash. The filing says the transaction retained about $5.02 million of cash and reduced current liabilities by about $6.03 million. Separately, the company issued 200,000 Series A preferred shares to Chairman and President Anil Diwan as a performance bonus.
- The company reported no known pending or threatened legal proceedings. Management assessed disclosure controls as effective at the reasonable-assurance level and reported no material quarter-period changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the Series B post-quarter conversion, cash repayment, and resulting common-share dilution. The filing gives slightly different share counts in its subsequent-event discussion: 4,359,656 in one passage and 4,359,652 in another.
- Check the precise Series B maturity and payment dates: the filing references both January 31 and February 1, 2017, and describes the debenture as maturing February 1 elsewhere.
- Assess cash runway using actual subsequent spending and clinical/manufacturing costs; the more-than-one-year estimate depends on management’s projected expenditure and development assumptions.
- Track progress toward candidate selection, IND-enabling studies, validated manufacturing, and human trials; all candidates were preclinical at period-end, and timelines were expressly subject to delay.
- Review related-party debenture terms, TheraCour license and development arrangements, and the potential dilution from outstanding warrants, convertible debentures, and preferred stock. The filing excluded potential shares from diluted loss per share because they were anti-dilutive or contingently convertible.