Vistagen Therapeutics, Inc. — Form 10-Q Summary
Reporting period: The filing covers the quarter ended December 31, 2021, which Vistagen identifies as the third quarter of fiscal 2022, and the nine months ended on that date. The comparison periods are the quarter and nine months ended December 31, 2020. Amounts below are in U.S. dollars.
Business context
Vistagen is a clinical-stage biopharmaceutical company with no approved products or product-sales revenue. Its CNS pipeline comprises PH94B nasal spray for anxiety disorders, PH10 nasal spray for depression, and AV-101, including its development with probenecid. The company’s lead effort is PH94B’s Phase 3 PALISADE program for social anxiety disorder (SAD).
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Nine months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Sublicense revenue | $357,900 | $313,600 | $1,070,000 | $647,600 |
| Research and development expense | $7,966,800 | $3,496,100 | $23,637,100 | $7,585,500 |
| General and administrative expense | $2,931,300 | $2,116,800 | $8,518,800 | $4,776,900 |
| Net loss | $10,535,100 | $5,298,700 | $31,074,000 | $11,723,300 |
| Net loss attributable to common stockholders | $10,743,200 | $5,652,300 | $32,019,100 | $12,759,900 |
| Basic and diluted loss per share | $0.05 | $0.07 | $0.16 | $0.19 |
Revenue was sublicense revenue, principally recognized over time from the AffaMed PH94B agreement; it was not recurring product-sales revenue. Operating expenses substantially exceeded revenue, so operating and profit margins were negative; the filing does not present a positive operating margin.
- Cash and cash equivalents: $83.7 million at December 31, 2021, down from $103.1 million at March 31, 2021.
- Cash flow, nine months: $29.7 million used in operations, $0.2 million used in investing, and $10.5 million provided by financing; cash declined by $19.4 million.
- Balance sheet: Total assets were $90.5 million and total liabilities $10.6 million. Stockholders’ equity was $80.0 million; accumulated deficit was $250.9 million.
- Debt and lease obligations: The filing reports no material borrowing balance; operating lease liabilities totaled $3.1 million. Current liabilities were $6.4 million. Deferred revenue was $2.8 million.
- Funding and dilution: Warrant exercises brought in $6.2 million during the nine months, and ATM sales generated approximately $4.45 million gross. Common shares issued increased from 180.8 million at March 31 to 206.6 million at December 31. All preferred shares had converted by December 31.
Material changes versus the prior comparable period
- Nine-month net loss increased to $31.1 million from $11.7 million, as R&D expense rose by $16.1 million, mainly due to PH94B Phase 3 trial activity, other PH94B/PH10 development and manufacturing, and increased staffing.
- Nine-month G&A expense rose by $3.7 million, including $1.4 million for pre-commercialization studies and analyses and a $232,000 noncash write-off of deferred offering costs after termination of the Lincoln Park equity-line arrangement.
- Operating cash use increased to $29.7 million from $6.8 million. Financing cash provided fell sharply versus the prior period, which included large public offering proceeds.
- Revenue increased but remained modest and derived from recognition of the prior AffaMed upfront payment. The company recognized $1.07 million in the current nine-month period and had $2.84 million of deferred revenue remaining.
Outlook, risks and notable matters
- Management planned to continue the PH94B PALISADE Phase 3 program and long-term safety study, advance exploratory PH94B studies, initiate PH10 Phase 2B development in MDD, and complete an exploratory AV-101/probenecid Phase 1B study. PALISADE-1 results were anticipated in mid-2022 and PALISADE-2 results later in 2022; a PH94B NDA in 2023 was a conditional objective, dependent on successful development and regulatory progress.
- Going concern: Despite $83.7 million of cash, management stated that the balance was probably insufficient to fund planned operations, including commercialization preparations, for the 12 months after issuance of the financial statements. The filing says this raises substantial doubt about the company’s ability to continue as a going concern without additional capital. Future financing or collaborations are not assured and could dilute shareholders or require reduced or delayed development spending.
- Key risks include clinical-trial efficacy and safety outcomes, regulatory approval, dependence on third-party manufacturers and CROs, and COVID-19-related supply, enrollment and operational delays. The filing notes prior delays in delivery of PH94B/PH10 supplies and potential disruption from pandemic variants.
- In October 2021, the company extended its South San Francisco headquarters lease through July 2027. It reported no legal proceedings and no off-balance-sheet arrangements.
- Management concluded disclosure controls were effective. Previously identified material weaknesses in segregation of duties and accounting software remained under remediation through additional accounting staff and new software.
Important facts for investors to verify
- Whether the PALISADE trials meet their endpoints and deliver results on the stated timelines, and what additional studies or regulatory requirements may follow.
- Cash runway and the timing, amount, and terms of any needed financing; monitor ATM usage, warrant exercises, share count and resulting dilution.
- Whether PH10 Phase 2B and AV-101/probenecid development proceed as planned and whether AffaMed generates milestone, royalty or other cash receipts.
- Clinical and manufacturing progress amid COVID-19-related supply and trial risks, and the status of the company’s internal-control remediation.