Ovid Therapeutics Inc.

03/11/2025 | Press release | Distributed by Public on 03/11/2025 07:09

Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this Annual Report on Form 10-K. You should carefully read the "Risk Factors" section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled "Special Note Regarding Forward-Looking Statements."
Overview
We are a biopharmaceutical company dedicated to developing small molecule medicines for brain conditions with significant unmet need. Our approach to achieve this goal is scientifically driven, patient focused, and coupled with an integrated and disciplined approach to research, clinical development and business development. Our team has significant experience with and understanding of epilepsies and other neurological conditions, and we continue to gain insight into the ways the different molecular mechanisms and pathways underlying these disorders impact the symptoms patients experience. We have developed a differentiated pipeline of drug candidates containing three novel MoAs to target seizures and believe we are the only company that holds a portfolio of direct activators of KCC2. Two of our programs are in clinical trials in humans, and a third will begin a clinical trial in the second quarter of 2026. We are initially pursuing therapeutic drug candidates for epilepsy and psychosis in Parkinson's disease and Lewy body dementia. If successfully developed and marketed to treat these conditions, we intend to explore these drug candidates for broader neurologic indications. Our cohesive focus in brain conditions with significant unmet need reinforces our belief that we can develop and produce multiple novel medicines, scale our infrastructure, positively impact patients' lives and create long-term stockholder value.
Since our inception in April 2014, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team, acquiring assets and raising capital.
During the years ended December 31, 2024 and 2023, we generated $0.6 million and $0.4 million of royalty and licensing revenue, respectively. We have otherwise primarily funded our business through the sale of our capital stock and through the entry into the RLT Agreement with Takeda, which resulted in a one-time up-front payment of $196.0 million in 2021 and the entry into a Royalty Monetization Agreement (the "Ligand Agreement") with Ligand Pharmaceuticals Incorporated ("Ligand"), which resulted in a one-time up-front payment of $30.0 million in 2023. Through December 31, 2024, we have raised net proceeds of $275.4 million from the sale of our preferred and common stock. As of December 31, 2024, we had $53.1 million in cash, cash equivalents and marketable securities. We recorded net losses of $26.4 million and $52.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $304.3 million.
We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on our other research and development and commercial development activities. We expect our expenses will increase substantially over time as we:
•continue the ongoing and planned preclinical and clinical development of our drug candidates;
•build a portfolio of drug candidates through the development, acquisition or in-license of drugs, drug candidates or technologies;
•initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future;
•seek marketing approvals for our current and future drug candidates that successfully complete clinical trials;
•establish a sales, marketing and distribution infrastructure to commercialize any drug candidate for which we may obtain marketing approval;
•develop, maintain, expand and protect our intellectual property portfolio;
•implement operational, financial and management systems; and
•attract, hire and retain additional administrative, clinical, regulatory, manufacturing, commercial and scientific personnel.
Significant Risks and Uncertainties
The global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with public health crises and global geopolitical tensions, like tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, may have a material adverse effect on our business, financial condition, results of operations and growth prospects. The resulting fluctuations in inflation rates may materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. Relatively high interest rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Furthermore, economic conditions have produced downward pressure on share prices. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain relatively high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, global geopolitical tensions as a result of tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, worsening global macroeconomic conditions, as well as potential future conditions, which may be impacted by the implementation of tariffs by the United States and other countries, and employee availability and wage increases, which may result in additional stress on our working capital resources. Moreover, there is great uncertainty with respect to potential changes in trade regulations, tariffs, sanctions and export controls which also increase volatility in the global economy.
In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: identifying, acquiring or in-licensing products or product candidates; obtaining regulatory approval of product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; and complying with applicable regulatory requirements.
Financial Operations Overview
Revenue
We have generated revenue primarily under the RLT Agreement and the Ligand Agreement, as well as nominal amounts from other licensing and royalty agreements. We have not generated any revenue from commercial drug sales and we do not expect to generate any revenue from commercial drug sales unless or until we obtain regulatory approval and commercialize one or more of our current or future drug candidates, or if we become entitled to revenue from our licensing agreements. In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include, among other things:
•employee-related expenses, including salaries, benefits and stock-based compensation expense;
•fees paid to consultants for services directly related to our drug development and regulatory efforts;
•expenses incurred under agreements with contract research organizations, as well as contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials;
•costs associated with preclinical activities and development activities;
•costs associated with technology and intellectual property licenses; and
•milestone payments and other costs and payments under licensing agreements, research agreements and collaboration agreements.
Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of
specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct. The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will depend on a variety of factors that include, but are not limited to, the following:
•number of clinical trials required for approval and any requirement for extension trials;
•per patient trial costs;
•number of patients who participate in the clinical trials;
•number of sites included in the clinical trials;
•countries in which the clinical trial is conducted;
•length of time required to enroll eligible patients;
•number of doses that patients receive;
•drop-out or discontinuation rates of patients;
•potential additional safety monitoring or other studies requested by regulatory agencies;
•duration of patient follow-up; and
•efficacy and safety profile of the drug candidates.
In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate's commercial potential.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation expense, related to our executive, finance, business development and support functions. Other general and administrative expenses include costs associated with operating as a public company, generation and maintenance of intellectual property, travel expenses, conferences, professional fees for auditing, tax and legal services and facility-related costs.
Other Income (Expense), net
Other income (expense), net, consists primarily of interest income, accretion of discount on short-term investments, and unrealized gains/losses on long-term equity investments, changes in the values of long-term investments and the royalty monetization liability under the Ligand Agreement, and loss related to a fraudulent funds transfer.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes the results of our operations for the periods indicated:
(in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $
Revenue:
License and other revenue $ 566 $ 392 $ 175
Total revenue 566 392 175
Operating expenses:
Research and development 36,767 28,588 8,179
General and administrative 25,684 31,085 (5,401)
Total operating expenses 62,451 59,673 2,778
Loss from operations (61,885) (59,281) (2,604)
Other income (expense), net 35,452 6,943 28,509
Loss before provision for income taxes (26,433) (52,339) 25,905
Provision for income taxes - - -
Net loss $ (26,433) $ (52,339) $ 25,905
Revenue
Revenue of $0.6 million and $0.4 million was recognized for the years ended December 31, 2024 and 2023, respectively, related to a royalty agreement.
Research and Development Expenses
(in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $
Preclinical and clinical development expenses $ 23,965 $ 14,605 $ 9,360
Payroll and payroll-related expenses 9,889 10,541 (652)
Other expenses 2,913 3,442 (529)
Total research and development $ 36,767 $ 28,588 $ 8,179
Research and development expenses were $36.8 million for the year ended December 31, 2024 compared to $28.6 million for the year ended December 31, 2023. The increase of $9.4 million in preclinical and development expenses was due to additional activities related to our ongoing development programs, primarily relating to OV350, OV888 (GV101) and OV329. The decrease in payroll and payroll-related expenses was primarily due to the impact of an organizational restructuring in 2024, which resulted in approximately $1.7 million in severance costs during the period ended December 31, 2024 compared to approximately $0.2 million for the same period in 2023.
General and Administrative Expenses
(in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $
Payroll and payroll-related expenses $ 13,835 $ 17,131 $ (3,296)
Legal and professional fees 6,573 7,610 (1,037)
General office expenses 5,275 6,344 (1,069)
Total general and administrative $ 25,684 $ 31,085 $ (5,401)
General and administrative expenses were $25.7 million for the year ended December 31, 2024 compared to $31.1 million for the year ended December 31, 2023. The decrease of $5.4 million was primarily due to the impact of the organizational restructuring in 2024, which resulted in approximately $1.8 million in severance costs during the period compared to approximately $1.5 million for the same period in 2023. Additionally, resulting from the restructuring, non-severance payroll and related expenses were reduced by approximately $3.7 million between the years ended December 31, 2024 and 2023. Legal and professional fees and general office expenses were primarily reduced by cost-cutting efforts.
Other Income (Expense), net
Other income (expense), net was $35.5 million for the year ended December 31, 2024, comprised of a $30.0 million decrease in fair value of the royalty monetization liability resulting from Takeda's reported negative soticlestat Phase 3 study results and announcement of program discontinuation, $3.9 million in interest and accretion income on investments in U.S. treasuries, $1.8 million loss on a fraudulent funds transfer and a net $3.3 million unrealized gain on long-term equity investments. For the year ended December 31, 2023, other income (expense), net of $6.9 million was comprised of $4.9 million in interest and accretion income on investments in U.S. treasuries and $2.0 million of unrealized loss on long-term equity investments.
Liquidity and Capital Resources
Overview
As of December 31, 2024 and 2023, we had total cash, cash equivalents and marketable securities of $53.1 million and $105.8 million, respectively. We believe that our cash, cash equivalents and marketable securities as of December 31, 2024 are sufficient to fund our existing and planned operating expenses and capital expenditure requirements into the second half of 2026.
Similar to other development-stage biotechnology companies, we have generated limited revenue. We have incurred losses and experienced negative operating cash flows in most years since our inception and anticipate that we will continue to incur losses for at least the next several years. We incurred net losses of $26.4 million and $52.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $304.3 million and working capital of $45.4 million.
At-the-Market Offering Program
In November 2023, we filed a new shelf registration statement on Form S-3 (Registration No. 333-275307) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, convertible debt securities and/or warrants (the "S-3 Registration Statement"), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to our at-the-market ("ATM") program. During the years ended December 31, 2024 and 2023, we did not sell any shares under our ATM program. As of December 31, 2024, we had up to $250.0 million available under our S-3 Registration Statement, including up to $75.0 million available pursuant to our ATM program.
As of the date of this Form 10-K, our public float was less than $75.0 million. As a result, we are subject to the limitations of General Instruction I.B.6 to Form S-3 until such time as our public float exceeds $75 million, which means we only have the capacity to sell shares up to one-third of our public float under the S-3 Registration Statement, including the ATM program, in any twelve-month period. We will remain constrained by the limitations of General Instruction I.B.6 to Form S-3 until such time as our public float exceeds $75 million, at which time the number of securities we may sell under a Form S-3 registration statement will no longer be limited by limitations of General Instruction I.B.6 to Form S-3.
Future Funding Requirements
We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we conduct clinical trials of, and seek marketing approval for, our product candidates and advance our other programs. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs. We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain. We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability.
We have no products approved for commercial sale and have not generated any revenues from product sales to date. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through
a combination of equity offerings, debt financings and additional funding from license and collaboration arrangements. Except for any obligations of our collaborators to reimburse us for research and development expenses or to make milestone or royalty payments under our agreements with them, we will not have any committed external source of liquidity. To the extent that we raise additional capital through future equity offerings or debt financings, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. There can be no assurance that such financings will be obtained on terms acceptable to us, if at all.
Additionally, while the long-term economic impact of geopolitical tensions, including tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, is difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown. Furthermore, inflation rates have increased recently to levels not seen in decades, which may also be impacted by the implementation of tariffs by the United States and other countries. Moreover, there is great uncertainty with respect to potential changes in trade regulations, tariffs, sanctions and export controls which also increase volatility in the global economy. In addition, the U.S. Federal Reserve has raised interest rates in response to concerns about inflation. Relatively high interest rates and fluctuations in inflation, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks. If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could negatively affect our future ability to pursue our business strategy.
If we raise additional funds through collaborations, strategic alliances or licensing agreements with third parties for one or more of our current or future drug candidates, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy. We may be required to take additional actions beyond the cost preservation measures initiated to address our liquidity needs, including exploring other strategic options, continuing to further reduce operating expense or delaying, reducing the scope of, discontinuing or altering our research and development activities.
See "Item 1A. Risk Factors" for additional risks associated with our capital requirements.
Material Cash Requirements
As of December 31, 2024, we had no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. We cannot estimate whether we will receive or the timing of any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed certain intellectual property as contractual obligations or commitments, including agreements with AstraZeneca, Gensaic and Northwestern. Pursuant to these license agreements, we have agreed to make milestone payments up to an aggregate of $660.3 million upon the achievement of certain development, regulatory and sales milestones. We excluded these contingent payments from the consolidated financial statements given that the timing, probability, and amount, if any, of such payments cannot be reasonably estimated at this time.
In September 2021, we entered into a ten year lease agreement for our corporate headquarters with a term commencing in March 2022 for approximately 19,000 square feet of office space at Hudson Commons in New York, New York. The lease provides for monthly rental payments over the lease term. The base rent under the lease is currently $2.3 million per year. Rent payments commenced in January 2023, and will continue for ten years following the rent commencement date. We issued a letter of credit in the amount of $1.9 million in association with the execution of the lease agreement, which is reflected as restricted cash on the consolidated balance sheets. Payment obligations under the lease agreement include approximately $2.3 million in the 12 months subsequent to December 31, 2024 and approximately $19.3 million over the remainder of the agreement. For additional information see Note 5 to our consolidated financial statements under the heading 'Leases.'
Cash Flows
The following table summarizes our cash flows for the periods indicated:
(in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023
Net cash (used in) provided by:
Operating activities $ (55,956) $ (45,781)
Investing activities 54,594 (2,581)
Financing activities 622 30,535
Net decrease in cash, cash equivalents, and restricted cash $ (740) $ (17,827)
Net Cash Used in Operating Activities
Net cash used in operating activities was $56.0 million for the year ended December 31, 2024, which consisted of net loss of $26.4 million offset by $29.4 million, net, of various noncash charges, most significantly a $30.0 million in change in fair value of the royalty monetization liability with Ligand. Net cash used in operating activities was $45.8 million for the year ended December 31, 2023, which consisted of net loss of $52.3 million offset by a net of $4.2 million of various noncash charges, most significantly $7.3 million in stock-based compensation expense.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was $54.6 million for the year ended December 31, 2024, which was primarily related to our purchases and sales/maturities of investments in U.S. treasuries and the purchase of a long-term equity investment. For the year ended December 31, 2023, $2.6 million was used in investing activities, primarily comprised of purchases and sales/maturities of investments in U.S. treasuries.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0.6 million for the year ended December 31, 2024, which was comprised of proceeds from the exercise of options and purchases made under our employee stock purchase plan. For the same period in 2023, cash provided by financing activities was $30.5 million, primarily due to the $30.0 million received in connection with the Ligand Agreement in addition to proceeds from the exercise of options and purchases made under the employee stock purchase plan.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the revenue and expenses incurred during the reported periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known.
Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. Our critical accounting policies are described in greater detail in Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K.
We have listed below our critical accounting estimates that we believe to have the greatest potential impact on our consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.
Revenue Recognition
We recognize revenue under sublicense agreements in accordance with ASC 606, Revenue Recognition. The terms of the agreements within this scope may contain multiple performance obligations, including but not limited to licenses and research and development activities. ASC 606 requires that we evaluate these agreements to determine the distinct performance obligations. Non-refundable, upfront fees that are not contingent on any future performance and require no consequential continuing involvement by us, are recognized as revenue when the license term commences and the licensed data, technology or product is delivered. We defer recognition of non-refundable upfront fees if the performance obligations are not satisfied.
During the year ended December 31, 2024, we recognized revenue of approximately $0.6 million related to royalty agreements.
Research and Development Accrual
When preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and communicating with our personnel and consultants to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. Payments under certain contracts we have with third parties depend on factors, such as the successful enrollment of certain numbers of patients, site initiation and the completion of clinical trial milestones.
When accruing research and development expenses, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If possible, we obtain information regarding unbilled services directly from our service providers. However, we may be required to estimate the cost of these services based only on information available to us. If we underestimate or overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued research and development expenses have approximated actual expense incurred.
Smaller Reporting Company Status
We are a smaller reporting company as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our most recently completed second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our the value of voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our most recently completed second fiscal quarter.
As a smaller reporting company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.