vTv Therapeutics Inc 10-Q for FY2021 Q3
vTv Therapeutics Inc. (VTVT)
About this 10-Q
vTv Therapeutics Inc filed this 10-Q on November 9, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3M
- up 42757.1% from $7000 a year earlier
- Net loss
- $1.09M
- compared with a net loss of $1.53M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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Class of Stock |
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Shares Outstanding as of November 9, 2021 |
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Class A common stock, par value $0.01 per share |
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Class B common stock, par value $0.01 per share |
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vTv THERAPEUTICS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED September 30, 2021
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Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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32 |
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Item 1. |
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32 |
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Item 1A. |
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33 |
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Item 2. |
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33 |
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Item 3. |
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33 |
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Item 4. |
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Item 5. |
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Item 6. |
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34 |
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35 |
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2
PART I – FINANCIAL INFORMATION
The financial statements and other disclosures contained in this report include those of vTv Therapeutics Inc. (“we”, the “Company” or the “Registrant”), which is the registrant, and those of vTv Therapeutics LLC (“vTv LLC”), which is the principal operating subsidiary of the Registrant. Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “we”, “us” and “our” refer to vTv Therapeutics Inc. and its consolidated subsidiaries.
3
vTv Therapeutics Inc.
Condensed Consolidated Balance Sheets
(in thousands, except number of shares and per share data)
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September 30, |
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December 31, |
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2021 |
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2020 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Current deposits |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Long-term investments |
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Total assets |
$ |
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$ |
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Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Deficit |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ |
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$ |
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Current portion of operating lease liabilities |
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Current portion of contract liabilities |
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Current portion of notes payable |
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Total current liabilities |
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Contract liabilities, net of current portion |
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Operating lease liabilities, net of current portion |
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Warrant liability, related party |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Redeemable noncontrolling interest |
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Stockholders’ deficit: |
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Class A Common Stock, $ outstanding as of September 30, 2021 and shares outstanding as of December 31, 2020 |
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Class B Common Stock, $ outstanding as of September 30, 2021 and |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ deficit attributable to vTv Therapeutics Inc. |
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Total liabilities, redeemable noncontrolling interest and stockholders’ deficit |
$ |
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$ |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
vTv Therapeutics Inc.
Condensed Consolidated Statements of Operations - Unaudited
(in thousands, except number of shares and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Operating loss |
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( |
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( |
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Other (expense) income |
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( |
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— |
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— |
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Other (expense) income – related party |
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( |
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Interest income |
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— |
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— |
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Interest expense |
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( |
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( |
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( |
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( |
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Loss before income taxes and noncontrolling interest |
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( |
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Income tax provision |
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— |
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— |
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Net loss before noncontrolling interest |
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( |
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( |
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( |
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Less: net loss attributable to noncontrolling interest |
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( |
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( |
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( |
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( |
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Net loss attributable to vTv Therapeutics Inc. |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss attributable to vTv Therapeutics Inc. common shareholders |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share of vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average number of vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
vTv Therapeutics Inc.
Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit - Unaudited
(in thousands, except number of shares)
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For the three months ended September 30, 2021 |
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Class A Common Stock |
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Class B Common Stock |
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Redeemable Noncontrolling Interest |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Stockholders' Deficit |
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Balance at June 30, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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( |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Class A Common Stock under ATM offering |
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— |
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— |
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— |
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— |
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Change in redemption value of noncontrolling interest |
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( |
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— |
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— |
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— |
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— |
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— |
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Balances at September 30, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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For the three months ended September 30, 2020 |
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Class A Common Stock |
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Class B Common Stock |
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Redeemable Noncontrolling Interest |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Stockholders' Deficit |
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Balances at June 30, 2020 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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( |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Class A Common Stock under ATM offering |
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— |
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— |
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— |
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— |
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Change in redemption value of noncontrolling interest |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Balances at September 30, 2020 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
vTv Therapeutics Inc.
Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit - Unaudited
(in thousands, except number of shares)
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For the nine months ended September 30, 2021 |
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Class A Common Stock |
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Class B Common Stock |
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Redeemable Noncontrolling Interest |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Stockholders' Deficit |
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Balances at December 31, 2020 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Net loss |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Class A Common Stock under ATM offering |
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— |
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— |
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— |
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— |
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Exchange of Class B Common Stock for Class A Common Stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of Class A Common Stock under LPC Agreement |
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— |
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— |
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— |
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— |
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Change in redemption value of noncontrolling interest |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Balances at September 30, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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For the nine months ended September 30, 2020 |
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Class A Common Stock |
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Class B Common Stock |
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Redeemable Noncontrolling Interest |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Stockholders' Deficit |
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Balances at December 31, 2019 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Net loss |
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( |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Share-based compensation |
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— |
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— |
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— |
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|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of Class A Common Stock under ATM offering |
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of Class A Common Stock to a related party under the Letter Agreements |
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Vesting of restricted stock units |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Change in redemption value of noncontrolling interest |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balances at September 30, 2020 |
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
vTv Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows - Unaudited
(in thousands)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss before noncontrolling interest |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss before noncontrolling interest to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Change in fair value of investments |
|
|
( |
) |
|
|
— |
|
|
Change in fair value of warrants, related party |
|
|
( |
) |
|
|
|
|
|
Amortization of debt discount |
|
|
— |
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
|
Long-term deposits |
|
|
— |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
( |
) |
|
|
( |
) |
|
Accreted interest on debt |
|
|
— |
|
|
|
( |
) |
|
Contract liabilities |
|
|
( |
) |
|
|
( |
) |
|
Other liabilities |
|
|
— |
|
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Class A Common Stock to a related party under the Letter Agreements |
|
|
— |
|
|
|
|
|
|
Proceeds from issuance of Class A Common Stock, net of offering costs |
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
— |
|
|
Proceeds from debt issuance |
|
|
|
|
|
|
|
|
|
Repayment of notes payable |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents |
|
|
|
|
|
|
( |
) |
|
Total cash, cash equivalents and restricted cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities: |
|
|
|
|
|
|
|
|
|
Change in redemption value of noncontrolling interest |
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8
vTv Therapeutics Inc.
Notes to Condensed Consolidated Financial Statements – Unaudited
(dollar amounts are in thousands, unless otherwise noted)
|
Note 1: |
Description of Business, Basis of Presentation and Going Concern |
Description of Business
vTv Therapeutics Inc. (the “Company,” the “Registrant,” “we” or “us”) was incorporated in the state of Delaware in April 2015. The Company is a clinical-stage pharmaceutical company focused on treating metabolic and inflammatory disorders to minimize their long-term complications through end-organ protection.
Principles of Consolidation
vTv Therapeutics Inc. is a holding company and its principal asset is a controlling equity interest in vTv Therapeutics LLC (“vTv LLC”), the Company’s principal operating subsidiary, which is a clinical-stage pharmaceutical company focused on treating metabolic diseases to minimize their long-term complications through end-organ protection.
The Company has determined that vTv LLC is a variable-interest entity (“VIE”) for accounting purposes and that vTv Therapeutics Inc. is the primary beneficiary of vTv LLC because (through its managing member interest in vTv LLC and the fact that the senior management of vTv Therapeutics Inc. is also the senior management of vTv LLC) it has the power and benefits to direct all of the activities of vTv LLC, which include those that most significantly impact vTv LLC’s economic performance. vTv Therapeutics Inc. has therefore consolidated vTv LLC’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation” in its Condensed Consolidated Financial Statements. As of September 30, 2021, various holders own non-voting interests in vTv LLC, representing a
Going Concern and Liquidity
To date, the Company has not generated any product revenue and has not achieved profitable operations. The continuing development of our drug candidates will require additional financing. From its inception through September 30, 2021, the Company has funded its operations primarily through a combination of private placements of common and preferred equity, research collaboration agreements, upfront and milestone payments for license agreements, debt and equity financings and the completion of its IPO in August 2015. As of September 30, 2021, the Company had an accumulated deficit of $
As of September 30, 2021, the Company had cash and cash equivalents of $
9
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. If we are unable to raise additional capital as and when needed, or upon acceptable terms, such failure would have a significant negative impact on our financial condition.
The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Condensed Consolidated Financial Statements do not include adjustments to reflect the possible future effects on the recoverability and classification of recorded assets or the amounts of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
Note 2: |
Summary of Significant Accounting Policies |
Unaudited Interim Financial Information
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying Condensed Consolidated Balance Sheet as of September 30, 2021, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit for the three and nine months ended September 30, 2021 and 2020 and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2021, the results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. The December 31, 2020 Condensed Consolidated Balance Sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.
The financial data and other information disclosed in these notes to the financial statements related to the three and nine months ended September 30, 2021 and 2020 are unaudited. Interim results are not necessarily indicative of results for an entire year.
The Company does not have any components of other comprehensive income recorded within its Condensed Consolidated Financial Statements, and, therefore, does not separately present a statement of comprehensive income in its Condensed Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
On an ongoing basis, the Company evaluates its estimates, including those related to the grant date fair value of equity awards, the fair value of warrants to purchase shares of its Class A Common Stock, the fair value of the Class B Common Stock, the useful lives of property and equipment, the fair value of derivative liabilities, and the fair value of the Company’s debt, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit with multiple financial institutions. The balances of these cash accounts frequently exceed insured limits.
Cash and Cash Equivalents
The Company considers any highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.
10
Investments
Investments in entities in which the Company has no control or significant influence, is not the primary beneficiary, and have a readily determinable fair value are classified as equity investments with readily determinable fair value. The investments are measured at fair value based on a quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs (Level 1). Gains and losses are recorded in other income (expense), net on the Condensed Consolidated Statements of Operations.
Equity investments without readily determinable fair value include ownership rights that do not provide the Company with control or significant influence and these investments do not have readily determinable fair values. The Company has elected to measure its equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment.
Revenue Recognition
The Company uses the revenue recognition guidance established by ASC Topic 606, “Revenue From Contracts With Customers” (“ASC Topic 606”).
The majority of the Company’s revenue results from its license and collaboration agreements associated with the development of investigational drug products. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For each contract meeting these criteria, the Company identifies the performance obligations included within the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company then recognizes revenue under each contract as the related performance obligations are satisfied.
The transaction price under the contract is determined based on the value of the consideration expected to be received in exchange for the transferred assets or services. Development, regulatory and sales milestones included in the Company’s collaboration agreements are considered to be variable consideration. The amount of variable consideration expected to be received is included in the transaction price when it becomes probable that the milestone will be met. For contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using the Company’s best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus margin approach. Revenue is recognized over the related period over which the Company expects the services to be provided using a proportional performance model or a straight-line method of recognition if there is no discernable pattern over which the services will be provided.
Research and Development
Major components of research and development costs include cash and share-based compensation, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, regulatory and compliance costs, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf, facilities costs, and overhead costs. Research and development costs are expensed as incurred.
The Company records accruals based on estimates of the services received, efforts expended, and amounts owed pursuant to contracts with numerous contract research organizations. In the normal course of business, the Company contracts with third parties to perform various clinical study activities in the ongoing development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events and the completion of portions of the clinical study or similar conditions. The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical studies are recognized based on the Company’s estimate of the degree of completion of the event or events specified in the specific clinical study.
The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses. Prepaid expenses are recognized as expense in the Condensed Consolidated Statements of Operations as the Company receives the related goods or services.
Research and development costs that are reimbursed under a cost-sharing arrangement are reflected as a reduction of research and development expense.
Recently Issued Accounting Pronouncements
There have been no recently accounting pronouncements which are expected to have a material impact on the Company’s financial statements.
11
|
Note 3: |
Collaboration Agreements |
Reneo License Agreement
The Company is party to a license agreement with Reneo Pharmaceuticals, Inc. (“Reneo”) (the “Reneo License Agreement”), under which Reneo obtained an exclusive, worldwide, sublicensable license to develop and commercialize the Company’s peroxisome proliferation activated receptor delta (PPAR-δ) agonist program, including the compound HPP593, for therapeutic, prophylactic or diagnostic application in humans.
The Company has fully allocated the transaction price to the license and the technology transfer services, which represents a single combined performance obligation because they were not capable of being distinct on their own. The revenue related to this performance obligation was recognized on a straight-line basis over the technology transfer service period.
In the third quarter of 2021, the transaction price for this performance obligation was increased by $
Huadong License Agreement
The Company is party to a License Agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”) (the “Huadong License Agreement”), under which Huadong obtained an exclusive and sublicensable license to develop and commercialize the Company’s glucagon-like peptide-1 receptor agonist (“GLP-1r”) program, including the compound TTP273, for therapeutic uses in humans or animals, in China and certain other pacific rim countries, including Australia and South Korea (collectively, the “Huadong License Territory”). Additionally, under the Huadong License Agreement, the Company obtained a non-exclusive, sublicensable, royalty-free license to develop and commercialize certain Huadong patent rights and know-how related to the Company’s GLP-1r program for therapeutic uses in humans or animals outside of the Huadong License Territory.
On January 14, 2021, the Company entered into the First Huadong Amendment which eliminated the Company’s obligation to sponsor a multi-region clinical trial (the “Phase 2 MRCT”), and corresponding obligation to contribute up to $
Prior to the First Amendment, the Company had allocated a portion of the transaction price to the obligation to sponsor and conduct a portion of the Phase 2 MRCT. Upon the removal of this performance obligation, the Company evaluated the impact of the modification under the provisions of ASC Topic 606 and performed a reallocation of the transaction price among the remaining performance obligations. This resulted in the recognition of approximately $
The significant performance obligations under this license agreement, as amended, were determined to be (i) the exclusive license to develop and commercialize the Company’s GLP-1r program, (ii) technology transfer services related to the chemistry and manufacturing know-how for a defined period after the effective date, (iii) the Company’s obligation to participate on a joint development committee (the “JDC”), and (iv) other obligations considered to be de minimis in nature.
The Company has determined that the license and technology transfer services related to the chemistry and manufacturing know-how represent a combined performance obligation because they were not capable of being distinct on their own. The Company also determined that there was no discernable pattern in which the technology transfer services would be provided during the transfer service period. As such, the Company recognized the revenue related to this combined performance obligation using the straight-line method over the transfer service period. The revenue related to this combined performance obligation has been fully recognized as of September 30, 2021. In connection with the First Huadong Amendment, the Company recognized approximately $
The portion of the transaction price allocated to the obligation to participate in the joint development committee (the “JDC”) to oversee the development of products and the Phase 2 MRCT in accordance with the development plan remained deferred as of September 30, 2021 and revenue will be recognized using the proportional performance model over the period of the Company’s participation on the JDC. The unrecognized amount of the transaction price allocated to this performance obligation as of
12
September 30, 2021 was an insignificant amount. An immaterial amount of revenue for this performance obligation has been recognized during the nine months ended September 30, 2021.
There have been
Newsoara License Agreement
The Company is party to a license agreement with Newsoara Biopharma Co., Ltd., (“Newsoara”) (the “Newsoara License Agreement”) under which Newsoara obtained an exclusive and sublicensable license to develop and commercialize the Company’s phosphodiesterase type 4 inhibitors (“PDE4”) program, including the compound HPP737, in China, Hong Kong, Macau, Taiwan and other pacific rim countries (collectively, the “Newsoara License Territory”). Additionally, under the Newsoara License Agreement, the Company obtained a non-exclusive, sublicensable, royalty-free license to develop and commercialize certain Newsoara patent rights and know-how related to the Company’s PDE4 program for therapeutic uses in humans outside of the Newsoara License Territory.
The Company has fully allocated the transaction price to the license and the technology transfer services which represents a single performance obligation because they were not capable of being distinct on their own. The Company recognized revenue for this performance obligation using the straight-line method over the transfer service period. The revenue for this performance obligation has been fully recognized as of September 30, 2021. In the third quarter of 2021, the transaction price for this performance obligation was increased by $
Anteris License Agreement
On December 11, 2020, we entered into a license agreement with Anteris Bio, Inc. (“Anteris”) (the “Anteris License Agreement”), under which Anteris obtained a worldwide, exclusive and sublicensable license to develop and commercialize the Company’s Nrf2 activator, HPP971.
Under the terms of the Anteris License Agreement, Anteris paid the Company an initial license fee of $
Pursuant to the terms of the Anteris License Agreement, the Company was required to provide technology transfer services for a 30 day period after the effective date. In accordance with ASC Topic 606, the Company identified all of the performance obligations at the inception of the Anteris License Agreement. The significant obligations were determined to be the license and the technology transfer services. The Company has determined that the license and technology transfer services represent a single performance obligation because they were not capable of being distinct on their own. The transaction price has been fully allocated to this combined performance obligation. As of December 31, 2020, the transaction price consisted of the $
JDRF Agreement
In August 2017, the Company entered into a research and collaboration agreement with JDRF International (the “JDRF Agreement”) to support the funding of the Simplici-T1 Study, a Phase 2 study to explore the effects of TTP399 in patients with type 1 diabetes. The JDRF Agreement was amended in June 2021 to provide additional funding for the Company’s mechanistic study exploring the effects of TTP399 on ketone body formation during a period of insulin withdrawal in people with type 1 diabetes. According to the terms of the JDRF Agreement, as amended, JDRF will provide research funding of up to $
13
Payments that the Company receives from JDRF under this agreement will be recorded as restricted cash and current liabilities and recognized as an offset to research and development expense, based on the progress of the project, and only to the extent that the restricted cash is utilized to fund such development activities. As of September 30, 2021, the Company had received funding under this agreement of $
Contract Liabilities
Contract liabilities related to the Company’s collaboration agreements consisted of the following (in thousands):
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Current portion of contract liabilities |
$ |
|
|
|
$ |
|
|
|
Contract liabilities, net of current portion |
|
|
|
|
|
|
|
|
Total contract liabilities |
$ |
|
|
|
$ |
|
|
The change in the Company’s contract liabilities for the nine months ended September 30, 2021 was due to the recognition of amounts included in the contract liability at the beginning of the period caused by the reallocation of the transaction price in connection with the First Huadong Amendment discussed above.
|
Note 4: |
Share-Based Compensation |
The Company has issued non-qualified stock option awards to certain employees of the Company. These option awards vest ratably over a period and the option awards expire after a term of
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options granted. The fair value of stock options granted was estimated using the following assumptions:
|
|
For the Nine Months Ended September 30, |
|
||||
|
|
2021 |
|
|
2020 |
|
|
|
Expected volatility |
121.12% - 122.17% |
|
|
|
|
|
|
Expected life of option, in years |
5.8 - 6.0 |
|
|
|
|
|
|
Risk-free interest rate |
1.00% - 1.01% |
|
|
|
|
|
|
Expected dividend yield |
|
|
|
|
|
|
The following table summarizes the activity related to the stock option awards for the nine months ended September 30, 2021:
|
|
Number of Shares |
|
|
Weighted- Average Exercise Price |
|
||
|
Awards outstanding at December 31, 2020 |
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
( |
) |
|
|
|
|
|
Forfeited |
|
( |
) |
|
|
|
|
|
Awards outstanding at September 30, 2021 |
|
|
|
|
$ |
|
|
|
Options exercisable at September 30, 2021 |
|
|
|
|
$ |
|
|
|
Weighted average remaining contractual term |
|
|
|
|
|
|
|
|
Options vested and expected to vest at September 30, 2021 |
|
|
|
|
$ |
|
|
|
Weighted average remaining contractual term |
|
|
|
|
|
|
|
14
Compensation expense related to the grants of stock options is included in research and development and general and administrative expense as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Research and development |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Note 5: |
Investments |
In connection with the Reneo and Anteris License Agreements, the Company has received equity ownership interests of less than
Reneo completed its initial public offering in April 2021. Prior to Reneo becoming a publicly-traded company, the Company’s investment in Reneo did not have a readily determinable fair value and was measured at cost less impairment under the measurement alternative. Subsequent to Reneo’s initial public offering, the Company’s investment in Reneo is considered to have a readily determinable fair value and, as such, is adjusted to its fair value each period with changes in fair value recognized as a component of net loss.
The Company’s investment in Anteris does not have a readily determinable fair value and is measured at cost less impairment, adjusted for any changes in observable prices.
The Company’s investments consist of the following:
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Equity investment with readily determinable fair value: |
|
||||||
|
Reneo common stock |
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Equity investment without readily determinable fair values assessed under the measurement alternative: |
|
||||||
|
Reneo common stock |
|
— |
|
|
|
|
|
|
Anteris preferred stock |
|
|
|
|
|
|
|
|
Total |
$ |
|
|
|
$ |
|
|
No adjustments have been made to the value of the Company’s investment in Anteris since its initial measurement either due to impairment or based on observable price changes. The Company recognized an unrealized loss on its investment in Reneo of $
|
Note 6: |
Notes Payable |
In October 2016, the Company entered into the Loan Agreement with Horizon Technology Finance Corporation and Silicon Valley Bank, under which the Company and vTv LLC borrowed $
15
The Second and Third Amendments were considered modifications to the existing agreement for accounting purposes. As such, the Company determined a new effective interest rate of
|
Note 7: |
Commitments and Contingencies |
Legal Matters
From time to time, the Company is involved in various legal proceedings arising in the normal course of business. If a specific contingent liability is determined to be probable and can be reasonably estimated, the Company accrues and discloses the amount. The Company is not currently a party to any material legal proceedings.
Novo Nordisk
In February 2007, the Company entered into an Agreement Concerning Glucokinase Activator Project with Novo Nordisk A/S (the “Novo License Agreement”) whereby we obtained an exclusive, worldwide, sublicensable license under certain Novo Nordisk intellectual property rights to discover, develop, manufacture, have manufactured, use and commercialize products for the prevention, treatment, control, mitigation or palliation of human or animal diseases or conditions. As part of this license grant, the Company obtained certain worldwide rights to Novo Nordisk’s GKA program, including rights to preclinical and clinical compounds such as TTP399. This agreement was amended in May 2019 to create milestone payments applicable to certain specific and non-specific areas of therapeutic use. Under the terms of the Novo License Agreement, the Company has additional potential developmental and regulatory milestone payments totaling up to $
Huadong License Agreement
Under the terms of the Huadong License Agreement, prior to its amendment in January 2021, vTv LLC was obligated to act as the sponsor of the Phase 2 MRCT should Huadong require it to do so. The Phase 2 MRCT was to include sites in both US and the Huadong License Territory for the purpose of assessing the safety and efficacy of TTP273 in patients with type 2 diabetes and was to be designed to satisfy the requirements of the China Food and Drug Administration necessary in order for Huadong to begin a Phase 3 clinical trial in China. vTv LLC was responsible for contributing up to $
|
Note 8: |
Leases |
The Company leases office space for its headquarters location under an operating lease. This lease commenced in November 2019 after the completion of certain tenant improvements made by the lessor. The lease includes an option to renew for a five-year term as well as an option to terminate after three years. Neither of these options have been recognized as part of its related right of use assets or lease liabilities as their election is not considered reasonably certain. Further, this lease does not include any material residual value guarantee or restrictive covenants.
At each of September 30, 2021 and December 31, 2020, the weighted average incremental borrowing rate for the operating leases held by the Company was
16
Maturities of lease liabilities for the Company’s operating leases as of September 30, 2021 were as follows (in thousands):
|
2021 (remaining three months) |
$ |
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
— |
|
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
( |
) |
|
Present value of lease liabilities |
$ |
|
|
Operating lease cost and the related operating cash flows for the nine months ended September 30, 2021 and 2020 were immaterial amounts.
|
Note 9: |
Redeemable Noncontrolling Interest |
The Company is subject to the Exchange Agreement with respect to the vTv Units representing the
The redeemable noncontrolling interest is recognized at the higher of (1) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (2) the redemption value as of the balance sheet date. At September 30, 2021 and December 31, 2020, the redeemable noncontrolling interest was recorded based on the redemption value as of the balance sheet date of $
Changes in the Company’s ownership interest in vTv LLC while the Company retains its controlling interest in vTv LLC are accounted for as equity transactions, and the Company is required to adjust noncontrolling interest and equity for such changes.
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net loss attributable to vTv Therapeutics Inc. common shareholders |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Increase in vTv Therapeutics Inc. accumulated deficit for purchase of LLC Units as a result of common stock issuances |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Change from net loss attributable to vTv Therapeutics Inc. common shareholders and transfers to noncontrolling interest |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
17
|
Note 10: |
Stockholders’ Equity |
Amendment to Certificate of Incorporation
On May 4, 2021, the Company filed an amendment to its Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to increase the number of shares of Class A Common Stock that the Company is authorized to issue from
ATM Offering
In April 2020, the Company entered into the Sales Agreement with Cantor as the sales agent, pursuant to which the Company may offer and sell, from time to time, through Cantor, shares of its Class A Common Stock, par value $
On January 14, 2021 and June 25, 2021, the Company filed a prospectus supplement in connection with the ATM Offering to increase the size of the at-the-market offering pursuant to which the Company may offer and sell, from time to time, through or to Cantor, as sales agent or principal, shares of the Company’s Class A Common Stock, by an aggregate offering price of $
Lincoln Park Capital Transaction
On November 24, 2020, the Company entered into the LPC Purchase Agreement and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s Class A Common Stock having an aggregate value of up to $
|
Note 11: |
Related-Party Transactions |
MacAndrews & Forbes Incorporated
As of September 30, 2021, subsidiaries and affiliates of MacAndrews & Forbes Incorporated (collectively “MacAndrews”) indirectly controlled
The Company has entered into several agreements with MacAndrews or its affiliates as further detailed below:
Letter Agreements
The Company previously entered into the Letter Agreements with MacAndrews. Under the terms of the Letter Agreements, the Company had the right to sell to MacAndrews shares of its Class A Common Stock at a specified price per share. In connection with and as a commitment fee for the entrance into certain of these Letter Agreements, the Company also issued MacAndrews warrants (the “Letter Agreement Warrants”) to purchase additional shares of the Company’s Class A Common Stock.
Certain terms of the December 23, 2019 Letter Agreement are set forth in the table below:
|
|
|
December 23, 2019 Letter Agreement |
|
|
|
Aggregate dollar value to be sold under agreement |
|
$ |
|
|
|
Specified purchase price per share |
|
$ |
|
|
|
Expiration date of letter agreement |
|
|
|
|
|
Shares available to be issued under related warrants |
|
|
|
|
|
Exercise price of related warrants |
|
$ |
|
|
|
Expiration date of related warrants |
|
|
|
|
|
Total shares issued as of September 30, 2021 |
|
|
|
|
|
Remaining shares to be issued as of September 30, 2021 |
|
|
— |
|
18
The Letter Agreement Warrants have been recorded as warrant liability, related party within the Company’s Condensed Consolidated Balance Sheets based on their fair value. The issuance of the Letter Agreement Warrants was considered to be a cost of equity recorded as a reduction to additional paid-in capital.
Exchange Agreement
The Company and MacAndrews are party to an exchange agreement (the “Exchange Agreement”) pursuant to which the vTv Units (along with a corresponding number of shares of the Class B Common Stock) are exchangeable for (i) shares of the Company’s Class A Common Stock on a
Tax Receivable Agreement
As no shares have been exchanged by MacAndrews pursuant to the Exchange Agreement (discussed above), the Company has not recognized any liability nor has it made any payments pursuant to the Tax Receivable Agreement as of September 30, 2021.
Investor Rights Agreement
The Company is party to an investor rights agreement with M&F, as successor in interest to vTv Therapeutics Holdings (the “Investor Rights Agreement”). The Investor Rights Agreement provides M&F with certain demand, shelf and piggyback registration rights with respect to its shares of Class A Common Stock and also provides M&F with certain governance rights, depending on the size of its holdings of Class A Common Stock. Under the Investor Rights Agreement, M&F was initially entitled to nominate a majority of the members of the Board of Directors and designate the members of the committees of the Board of Directors.
|
Note 12: |
Income Taxes |
The Company is subject to U.S. federal income taxes as well as state taxes. The Company’s income tax provision for the three and nine months ended September 30, 2021 was $
Management has evaluated the positive and negative evidence surrounding the realization of its deferred tax assets, including the Company’s history of losses, and under the applicable accounting standards determined that it is more-likely-than-not that the deferred tax assets will not be realized. The difference between the effective tax rate of the Company and the U.S. statutory tax rate of
As discussed in Note 10, the Company is party to a tax receivable agreement with a related party which provides for the payment by the Company to M&F (or certain of its transferees or other assignees) of
|
Note 13: |
Net Loss per Share |
Basic loss per share is computed by dividing net loss attributable to vTv Therapeutics Inc. by the weighted-average number of shares of Class A Common Stock outstanding during the period. Diluted loss per share is computed giving effect to all potentially dilutive shares. Diluted loss per share for all periods presented is the same as basic loss per share as the inclusion of potentially issuable shares would be antidilutive.
19
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of Class A Common Stock is as follows (in thousands, except share and per share amounts):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Less: Net loss attributable to noncontrolling interests |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to common shareholders of vTv Therapeutics Inc., basic and diluted |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share of vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Potentially dilutive securities not included in the calculation of diluted net loss per share are as follows:
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||
|
Class B Common Stock (1) |
|
|
|
|
|
|
|
|
Common stock options granted under the Plan |
|
|
|
|
|
|
|
|
Common stock options granted under Letter Agreements |
|
— |
|
|
|
|
|
|
Common stock warrants |
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
(1) |
|
|
Note 14: |
Fair Value of Financial Instruments |
The carrying amount of certain of the Company’s financial instruments, including cash and cash equivalents, net accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short-term nature.
The Company measures the value of its equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment. During the three and nine months ended September 30, 2021 and 2020, there were no observable price changes in identical or similar investments, nor were there any indications of impairment. As such, the value of the Company’s equity investments without readily determinable fair value was not remeasured.
20
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments.
|
|
Balance at September 30, 2021 |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities with readily determinable fair value |
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Total |
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability, related party (1) |
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Total |
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
|
Balance at December 31, 2020 |
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
|
Warrant liability, related party (1) |
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Total |
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
(1) |
Fair value determined using the Black-Scholes option pricing model. Expected volatility is based on historical volatility of its own stock. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the valuation. |
|
|
Changes in Level 3 instruments for the nine months ended September 30, |
|
|||||||||||||||||
|
|
Balance at January 1 |
|
|
Net Change in fair value included in earnings |
|
|
Purchases / Issuance |
|
|
Sales / Repurchases |
|
|
Balance at September 30, |
|
|||||
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability, related party |
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Total |
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability, related party |
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Total |
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
During the nine months ended September 30, 2021, Reneo completed its initial public offering. As a result, the fair value of the Company’s investment in Reneo’s common stock now has a readily determinable market value and is no longer eligible for the practical expedient for investments without readily determinable fair market values. As such, the Company’s investment in Reneo is adjusted each reporting period to its fair value based on its most recent closing price, which is considered a Level 1 fair value measurement under the fair value hierarchy.
The change in fair value of the Letter Agreement Warrants are recognized as a component of other (expense) income – related party in the Condensed Consolidated Statements of Operations.
21
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
|
|
Range |
Weighted Average |
|
|
Range |
Weighted Average |
|
|
Expected volatility |
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
|
|
|
|
|
The weighted average expected volatility and risk-free interest rate was based on the relative fair values of the warrants.
Changes in the unobservable inputs noted above would impact the amount of the liability for the Letter Agreement Warrants. Increases (decreases) in the estimates of the Company’s annual volatility would increase (decrease) the liability and an increase (decrease) in the annual risk-free rate would increase (decrease) the liability.
|
Note 15: |
Subsequent Events |
October 19, 2021, the Company entered into an employment agreement with Deepa Prasad, who was appointed President and Chief Executive Officer and a member of the Board (the “Prasad Employment Agreement”). In addition to outlining the terms of Ms. Prasad’s compensation, it also provides for the grant of stock options (the “Options”) to purchase
22
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As used in this Quarterly Report on Form 10-Q, the “Company”, the “Registrant”, “we” or “us” refer to vTv Therapeutics Inc. and “vTv LLC” refers to vTv Therapeutics LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes that appear elsewhere in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report under “Part II, Other Information—Item 1A, Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities, potential results of our drug development efforts or trials, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Overview
We are a clinical-stage pharmaceutical company focused on treating metabolic and inflammatory diseases to minimize their long-term complications and improve the lives of patients. We have an innovative pipeline of first-in-class small molecule clinical and pre-clinical drug candidates. Our lead program is TTP399, an orally administered, small molecule, liver-selective glucokinase activator (“GKA”) for the treatment of type 1 diabetes.
Recent Developments
In October 2021, we appointed Deepa Prasad to the role of President and CEO and as a director. Ms. Prasad is a recognized healthcare leader with more than 20 years of experience across startup funding, operations, investment banking, and healthcare policy. In conjunction with her appointment, we plan to implement a strategy to focus our efforts on the continued development of TTP399 as a potential treatment for patients with type 1 diabetes (“T1D”) and TTP273 as a potential treatment for patients with cystic fibrosis related diabetes, as well as continuing to support our currently partnered programs. Given the strategic focus on these programs, we plan to pause our development activities in the United States on HPP737 while we evaluate strategic options for it. As part of this planned strategic focus we are also evaluating cost reductions which may include reductions in our workforce.
In addition to our internal development programs, we are continuing to further the development of five partnered programs: a small molecule GLP-1r agonist (in certain Asian territories excluding Japan), the PDE4 inhibitor, HPP737 (in certain Asian territories excluding Japan), a PPAR-δ agonist, an Nrf2 activator, and the RAGE antagonist, azeliragon, through collaborations with pharmaceutical partners via licensing arrangements
23
The following table summarizes our drug candidates, their partnership status and their respective stages of development:
Our Type 1 Diabetes Program –TTP399
In October 2021, we announced positive results of a mechanistic study of TTP399 in patients with T1D. The study demonstrated that patients with T1D taking TTP399 experienced no increase in ketone levels relative to placebo during a period of acute insulin withdrawal, indicating no increased risk of ketoacidosis. Consistent with previous clinical studies, improved fasting plasma glucose levels and fewer hypoglycemic events were observed in the TTP399 treated group during the week of treatment prior to the insulin withdrawal test. The U.S. Food and Drug Administration (“FDA”) has declined to approve SGLT2 inhibitors as an adjunctive therapy in T1D, with concerns over the potential risks of diabetic ketoacidosis (“DKA”) in focus. DKA can lead to hospitalization and, if untreated, death. In order to address these concerns, vTv, following the FDA’s recommendation, conducted this mechanistic study to demonstrate that treatment with TTP399, a liver-selective glucokinase activator, will not result in increased production of ketones, a precursor to ketoacidosis.
In April 2021, we announced that the FDA granted Breakthrough Therapy Designation (“BTD”) for TTP399 as an adjunctive therapy to insulin for the treatment of type 1 diabetes. This designation provides a sponsor with added support and the potential to expedite development and review timelines for a promising new investigational medicine. With the receipt of this designation, we are in continuing discussions with the FDA regarding the optimal design for the registrational studies and plan to initiate those in the first half of 2022.
Our Psoriasis Program - HPP737
In September 2021, we announced the results of a multiple ascending dose Phase 1 study of HPP737, an orally administered phosphodiesterase type 4 (“PDE4”) inhibitor, to assess the pharmacokinetics, pharmacodynamics, safety and tolerability of HPP737 in healthy volunteers as part of our psoriasis development program. The trial enrolled 12 subjects in each of two dose cohorts, 15mg and 20mg, randomized to receive HPP737 or placebo (3:1) orally once daily for 14 days. Dose escalation up to 20mg once per day demonstrated dose proportional increases in exposure, while maintaining a favorable safety and tolerability profile with no dose limiting safety or tolerability findings observed. There were no serious adverse events and no discontinuations due to treatment emergent adverse events.
With the planned implementation of our strategic focus on TTP399, discussed further above, we plan to halt our current development activities in the United States for HPP737.
Holding Company Structure
vTv Therapeutics Inc. is a holding company, and its principal asset is a controlling equity interest in vTv Therapeutics LLC (“vTv LLC”), the principal operating subsidiary. We have determined that vTv LLC is a variable-interest entity (“VIE”) for accounting purposes and that vTv Therapeutics Inc. is the primary beneficiary of vTv LLC because (through its managing member interest in vTv LLC and the fact that the senior management of vTv Therapeutics Inc. is also the senior management of vTv LLC) it has the power to direct all of the activities of vTv LLC, which include those that most significantly impact vTv LLC’s economic performance. vTv Therapeutics Inc. has therefore consolidated vTv LLC’s results under the VIE accounting model in its consolidated financial statements.
24
Financial Overview
Revenue
To date, we have not generated any revenue from drug sales. Our revenue has been primarily derived from up-front proceeds and research fees under collaboration and license agreements.
In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of products developed under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of our drug candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue and our results of operations and financial position will be materially adversely affected.
Research and Development Expenses
Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for our drug candidates. We recognize research and development expenses as they are incurred. Our direct research and development expenses consist primarily of external costs such as fees paid to investigators, consultants, central laboratories and clinical research organizations (“CRO(s)”) in connection with our clinical trials, and costs related to acquiring and manufacturing clinical trial materials. Our indirect research and development costs consist primarily of cash and share-based compensation costs, the cost of employee benefits and related overhead expenses for personnel in research and development functions. Since we typically use our employee and infrastructure resources across multiple research and development programs such costs are not allocated to the individual projects.
From our inception, including our predecessor companies, through September 30, 2021, we have incurred approximately $599.0 million in research and development expenses.
Our research and development expenses by project for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Direct research and development expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Azeliragon |
$ |
— |
|
|
$ |
1,027 |
|
|
$ |
887 |
|
|
$ |
5,008 |
|
|
TTP399 |
|
729 |
|
|
|
449 |
|
|
|
1,365 |
|
|
|
776 |
|
|
HPP737 |
|
482 |
|
|
|
— |
|
|
|
2,249 |
|
|
|
102 |
|
|
Other projects |
|
97 |
|
|
|
59 |
|
|
|
329 |
|
|
|
545 |
|
|
Indirect research and development expense |
|
1,074 |
|
|
|
233 |
|
|
|
3,092 |
|
|
|
2,050 |
|
|
Total research and development expense |
$ |
2,382 |
|
|
$ |
1,768 |
|
|
$ |
7,922 |
|
|
$ |
8,481 |
|
We plan to continue to incur significant research and development expenses for the foreseeable future as we continue the development of TTP399 and further advance the development of our other drug candidates, subject to the availability of additional funding.
The successful development of our clinical and preclinical drug candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or preclinical drug candidates or the period, if any, in which material net cash inflows from these drug candidates may commence. This is due to the numerous risks and uncertainties associated with the development of our drug candidates, including:
|
|
• |
the uncertainty of the scope, rate of progress and expense of our ongoing, as well as any additional, clinical trials and other research and development activities; |
|
|
• |
the potential benefits of our candidates over other therapies; |
|
|
• |
our ability to market, commercialize and achieve market acceptance for any of our drug candidates that we are developing or may develop in the future; |
|
|
• |
future clinical trial results; |
|
|
• |
our ability to enroll patients in our clinical trials; |
|
|
• |
the timing and receipt of regulatory approvals, if any; and |
25
|
|
• |
the filing, prosecuting, defending and enforcing of patent claims and other intellectual property rights, and the expense of doing so. |
A change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a drug candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time with respect to the development of that drug candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and related costs for employees in executive, finance, corporate development, human resources and administrative support functions. Other significant general and administrative expenses include accounting and legal services, expenses associated with obtaining and maintaining patents, cost of various consultants, occupancy costs and information systems.
Interest Expense
For periods prior to December 31, 2020, interest expense primarily consists of cash and non-cash interest expense related to our Venture Loan and Security Agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation and Silicon Valley Bank. Cash interest on the Loan Agreement is recognized at a floating interest rate equal to 10.5% plus the amount by which the one-month London Interbank Offer Rate (“LIBOR”) exceeds 0.5%. Non-cash interest expense represents the amortization of the costs incurred in connection with the Loan Agreement, the allocated fair value of the warrants to purchase shares of our Class A Common Stock issued in connection with the Loan Agreement (the “Warrants”) and the accretion of the final interest payments (which are required to be paid in cash upon maturity), all of which are recognized in our Condensed Consolidated Statement of Operations using the effective interest method.
Other Income/(Expense)
Other income/expense primarily consists of unrealized gains or losses attributable to the changes in fair value of the equity investments held in our licensees as well the recognition of changes in fair value of the warrants to purchase shares of our Class A common stock held by a related party.
Results of Operations
Comparison of the three months ended September 30, 2021 and 2020
The following table sets forth certain information concerning our results of operations for the periods shown:
|
(dollars in thousands) |
Three Months Ended September 30, |
|
|||||||||
|
Statement of operations data: |
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
Revenue |
$ |
3,000 |
|
|
$ |
7 |
|
|
$ |
2,993 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
2,382 |
|
|
|
1,768 |
|
|
|
614 |
|
|
General and administrative |
|
2,221 |
|
|
|
1,071 |
|
|
|
1,150 |
|
|
Total operating expenses |
|
4,603 |
|
|
|
2,839 |
|
|
|
1,764 |
|
|
Operating loss |
|
(1,603 |
) |
|
|
(2,832 |
) |
|
|
1,229 |
|
|
Interest expense |
|
(6 |
) |
|
|
(235 |
) |
|
|
229 |
|
|
Other income, net |
|
244 |
|
|
|
814 |
|
|
|
(570 |
) |
|
Loss before income taxes |
|
(1,365 |
) |
|
|
(2,253 |
) |
|
|
888 |
|
|
Income tax provision |
|
100 |
|
|
|
— |
|
|
|
100 |
|
|
Net loss before noncontrolling interest |
|
(1,465 |
) |
|
|
(2,253 |
) |
|
|
788 |
|
|
Less: net loss attributable to noncontrolling interest |
|
(378 |
) |
|
|
(720 |
) |
|
|
342 |
|
|
Net loss attributable to vTv Therapeutics Inc. |
$ |
(1,087 |
) |
|
$ |
(1,533 |
) |
|
$ |
446 |
|
Revenue
Revenue for the three months ended September 30, 2021 included increases to the transaction prices for the license performance obligations under the license agreement with Newsoara Biopharma Co., Ltd., (“Newsoara”) (the “Newsoara License Agreement”) and Reneo Pharmaceuticals, Inc. (“Reneo”) (the “Reneo License Agreement”) due to the satisfaction of development milestones. Revenue for the three months ended September 30, 2020 was insignificant.
26
Research and Development Expenses
Research and development expenses were $2.4 million and $1.8 million for the three months ended September 30, 2021 and 2020, respectively. The increase in research and development expenses during the period of $0.6 million, or 34.7%, was primarily driven by higher spending on TTP399 and HPP737 in the 2021 periods due to the ongoing conduct of the DKA mechanistic and multiple-ascending dose studies for those candidates, respectively. These increases were offset by a decrease in clinical trial costs of $1.0 million for azeliragon which was mainly driven by discontinuance of its development as a potential treatment of Alzheimer’s disease in patients with type 2 diabetes. Additionally, compensation costs in the 2020 period were $0.7 million lower due to the reversal of certain performance-based compensation accruals in that period.
General and Administrative Expenses
General and administrative expenses were $2.2 million and $1.1 million for the three months ended September 30, 2021 and 2020, respectively. The increase of $1.2 million has been primarily driven by the impact of a reversal of certain performance-based compensation accruals in the 2020 period due to the expectation that they would not be paid coupled with higher professional fees incurred in the 2021 period.
Other Income / (Expense)
Other income was $0.2 million for the three months ended September 30, 2021 and is related to the unrealized gain recognized related to the change in fair value of the outstanding warrants in our own stock held by a related party of approximately $1.3 million which was offset by a loss of approximately $1.1 million related to the change in fair value of the Company’s investment in Reneo. During the three months ended September 30, 2020, we recognized a $0.8 million gain due to the change in fair value of the outstanding warrants in our own stock held by a related party.
Interest Expense
Interest expense was $0.2 million for the three months ended September 30, 2020 and was related to the cash and non-cash interest for our previous Loan Agreement. Since the Loan Agreement was fully repaid in December 2020, the Company’s interest expense incurred during the three months ended September 30, 2021 was insignificant.
Comparison of the nine months ended September 30, 2021 and 2020
The following table sets forth certain information concerning our results of operations for the periods shown:
|
(dollars in thousands) |
Nine Months Ended September 30, |
|
|||||||||
|
Statement of operations data: |
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
Revenue |
$ |
3,996 |
|
|
$ |
15 |
|
|
$ |
3,981 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
7,922 |
|
|
|
8,481 |
|
|
|
(559 |
) |
|
General and administrative |
|
6,627 |
|
|
|
5,216 |
|
|
|
1,411 |
|
|
Total operating expenses |
|
14,549 |
|
|
|
13,697 |
|
|
|
852 |
|
|
Operating loss |
|
(10,553 |
) |
|
|
(13,682 |
) |
|
|
3,129 |
|
|
Interest income |
|
1 |
|
|
|
12 |
|
|
|
(11 |
) |
|
Interest expense |
|
(6 |
) |
|
|
(625 |
) |
|
|
619 |
|
|
Other income (expense), net |
|
2,425 |
|
|
|
(114 |
) |
|
|
2,539 |
|
|
Loss before income taxes |
|
(8,133 |
) |
|
|
(14,409 |
) |
|
|
6,276 |
|
|
Income tax provision |
|
115 |
|
|
|
— |
|
|
|
115 |
|
|
Net loss before noncontrolling interest |
|
(8,248 |
) |
|
|
(14,409 |
) |
|
|
6,161 |
|
|
Less: net loss attributable to noncontrolling interest |
|
(2,312 |
) |
|
|
(4,784 |
) |
|
|
2,472 |
|
|
Net loss attributable to vTv Therapeutics Inc. |
$ |
(5,936 |
) |
|
$ |
(9,625 |
) |
|
$ |
3,689 |
|
Revenue
Revenue for the nine months ended September 30, 2021 relates to the reallocation of revenue to the license and technology transfer performance obligation made in connection with the First Huadong Amendment as well as increases to the transaction prices for the license performance obligations under the Newsoara and Reneo License Agreements due to the satisfaction of development milestones. Revenue for the nine months ended September 30, 2020 was insignificant.
27
Research and Development Expenses
Research and development expenses were $7.9 million and $8.5 million for the nine months ended September 30, 2021 and 2020, respectively. The decrease in research and development expenses during the period of $0.6 million, or 6.6%, was primarily due to a decrease in clinical trial costs of $4.1 million for azeliragon which was mainly driven by discontinuance of its development as a potential treatment of Alzheimer’s disease in patients with type 2 diabetes. This decrease was offset primarily by the following:
|
|
• |
increased spending of $2.2 million for the development of HPP737 as we were conducting a Phase 1 multiple-ascending dose study for this drug candidate during the nine months ended September 30, 2021; |
|
|
• |
increases of $0.6 million related to the development of TTP399 due to the spending on the mechanistic study and compound manufacturing during the nine months ended September 30, 2021; and |
|
|
• |
increases in compensation expense of $0.9 million which was primarily driven by the impact of a reversal of certain performance-based compensation accruals in the 2020 period due to the expectation that they would not be paid and increases in share-based compensation expense in the 2021 period. |
General and Administrative Expenses
General and administrative expenses were $6.6 million and $5.2 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of $1.4 million has been primarily driven by the impact of a reversal of certain performance-based compensation accruals and asset retirement obligations during the nine months ended September 30, 2020 due to the expectation that they would not be paid.
Other Income / (Expense)
Other income was $2.4 million for the nine months ended September 30, 2021 and is driven by an unrealized gain recognized related to the Company’s investment in Reneo as well as the change in fair value of the outstanding warrants in our own stock. During the nine months ended September 30, 2020, we recognized a $0.1 million loss due to the change in fair value of the outstanding warrants in our own stock.
Interest Expense
Interest expense was $0.6 million for the nine months ended September 30, 2020 and was related to the cash and non-cash interest for our previous Loan Agreement. Interest expense during the nine months ended September 30, 2021 was insignificant.
Liquidity and Capital Resources
Liquidity and Going Concern
As of September 30, 2021, we have an accumulated deficit of $259.0 million as well as a history of negative cash flows from operating activities. We anticipate that we will continue to incur losses for the foreseeable future as we continue our clinical trials. Further, we expect that we will need additional capital to continue to fund our operations. As of September 30, 2021, we had cash and cash equivalents of $19.6 million. To meet our future funding requirements into the fourth quarter of 2022, based on our current operating plans, we plan to rely on the remaining availability of $37.9 million under our Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) pursuant to which we could offer and sell, from time to time shares of our Class A Common Stock (the “ATM Offering”) and our ability to sell approximately 9.4 million shares of Class A Common Stock to Lincoln Park Capital Fund, LLC (“Lincoln Park”) pursuant and subject to the limitations of the purchase agreement (the “LPC Purchase Agreement”). However, the ability to use these sources of capital is dependent on a number of factors, including the prevailing market price of and the volume of trading in our Class A Common Stock. These factors raise substantial doubt about our ability to continue as a going concern.
ATM Offering
We have entered into the Sales Agreement with Cantor Fitzgerald pursuant to which we may offer and sell, from time to time, through or to Cantor Fitzgerald, as sales agent or principal, shares of our Class A Common Stock having an aggregate offering price of up to $68.5 million. We are not obligated to sell any shares under the Sales Agreement. Under the terms of the Sales Agreement, we will pay Cantor Fitzgerald a commission of up to 3% of the aggregate proceeds from the sale of shares and reimburse certain legal fees or other disbursements. As of September 30, 2021, we have sold $30.6 million worth of Class A Common Stock under the ATM Offering for net proceeds of $29.6 million, leaving $37.9 million available to be sold.
28
Lincoln Park Purchase Agreement
We have entered into the LPC Purchase Agreement, pursuant to which we have the right to sell to Lincoln Park shares of the Company’s Class A Common Stock having an aggregate value of up to $47.0 million. As of September 30, 2021, we have issued 5,331,306 of these shares for gross proceeds of approximately $11.1 million.
Over the 36-month term of the LPC Purchase Agreement, we have the right, but not the obligation, from time to time, in our sole discretion, to direct Lincoln Park to purchase up to 250,000 shares per day (the “Regular Purchase Share Limit”) of the Class A Common Stock (each such purchase, a “Regular Purchase”). The Regular Purchase Share Limit will increase to 275,000 shares per day if the closing price of the Class A Common Stock on the applicable purchase date is not below $4.00 per share and will further increase to 300,000 shares per day if the closing price of the Class A Common Stock on the applicable purchase date is not below $5.00 per share. In any case, Lincoln Park’s maximum obligation under any single Regular Purchase will not exceed $2,000,000. The purchase price for shares of Class A Common Stock to be purchased by Lincoln Park under a Regular Purchase will be equal to the lower of (in each case, subject to the adjustments described in the LPC Purchase Agreement): (i) the lowest sale price for the Class A Common Stock on the applicable purchase date and (ii) the arithmetic average of the three lowest closing sales prices for the Class A Common Stock during the 10 consecutive trading days prior to the purchase date.
If we direct Lincoln Park to purchase the maximum number of shares of Class A Common Stock that we may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the LPC Purchase Agreement, we may direct Lincoln Park to make an “accelerated purchase” and an “additional accelerated purchase”, each of an additional number of shares of Class A Common Stock which may not exceed the lesser of: (i) 300% of the number of shares purchased pursuant to the corresponding Regular Purchase and (ii) 30% of the total number of shares of the Common Stock traded during a specified period on the applicable purchase date as set forth in the LPC Purchase Agreement. The purchase price for such shares will be the lesser of (i) 97% of the volume weighted average price of the Class A Common Stock over a certain portion of the date of sale as set forth in the LPC Purchase Agreement and (ii) the closing sale price of the Class A Common Stock on the date of sale (an “Accelerated Purchase”). Under certain circumstances and in accordance with the LPC Purchase Agreement, we may direct Lincoln Park to purchase shares in multiple Accelerated Purchases on the same trading day.
The LPC Purchase Agreement also prohibits us from directing Lincoln Park to purchase any shares of its Class A Common Stock if those shares, when aggregated with all other shares of Class A Common Stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of Class A Common Stock as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.
Cash Flows
|
|
|
Nine Months Ended |
|
|||||
|
|
|
September 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
$ |
(12,891 |
) |
|
$ |
(15,788 |
) |
|
Net cash provided by financing activities |
|
|
26,710 |
|
|
|
13,338 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
13,819 |
|
|
$ |
(2,450 |
) |
Operating Activities
For the nine months ended September 30, 2021, our net cash used in operating activities decreased $2.9 million from the nine months ended September 30, 2020 due lower net loss and working capital changes.
Investing Activities
There were no cash flows from investing activities for the nine months ended September 30, 2021 or 2020.
Financing Activities
For the nine months ended September 30, 2021, net cash provided by financing activities increased by $13.4 million from the nine months ended September 30, 2020, driven by decreases in payments on loans due to the full repayment of the Loan Agreement in December 2020 and higher sales of shares of our Class A Common Stock during the nine months ended September 30, 2021.
29
Future Funding Requirements
To date, we have not generated any revenue from drug product sales. We do not know when, or if, we will generate any revenue from drug product sales. We do not expect to generate revenue from drug sales unless and until we obtain regulatory approval of and commercialize any of our drug candidates. At the same time, we expect our expenses to continue or to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our drug candidates. In addition, subject to obtaining regulatory approval of any of our drug candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations.
We plan to finance our operations into the fourth quarter of 2022 through the use of our cash and cash equivalents and the ability to sell shares of our Class A Common Stock pursuant to the ATM Offering and LPC Purchase Agreement. However, the ability to use these sources of capital is dependent on a number of factors, including the prevailing market price of and the volume of trading in the Company’s Class A Common Stock. We are also evaluating additional financing strategies to fund the clinical trials of TTP399 and HPP737, including direct equity investments and future public offerings of our common stock. The timing and availability of such financing are not yet known and we cannot be certain that additional financing will be available on acceptable terms, or at all. Even if we are able to obtain additional debt or equity financing, it may contain restrictions on our operations or cause substantial dilution to our stockholders. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our drug candidates.
Our future capital requirements will depend on many factors, including:
|
|
• |
The progress, costs, results and timing of our planned trials to evaluate TTP399 as a potential treatment of type 1 diabetes; |
|
|
• |
the willingness of the FDA to rely upon our completed and planned clinical and preclinical studies and other work, as the basis for review and approval of our drug candidates; |
|
|
• |
the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; |
|
|
• |
the number and characteristics of drug candidates that we pursue, including our drug candidates in preclinical development; |
|
|
• |
the ability of our drug candidates to progress through clinical development successfully; |
|
|
• |
our need to expand our research and development activities; |
|
|
• |
the costs associated with securing, establishing and maintaining commercialization capabilities; |
|
|
• |
the costs of acquiring, licensing or investing in businesses, products, drug candidates and technologies; |
|
|
• |
our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; |
|
|
• |
our need and ability to hire additional management and scientific and medical personnel; |
|
|
• |
the effect of competing technological and market developments; |
|
|
• |
our need to implement additional internal systems and infrastructure, including financial and reporting systems; |
|
|
• |
the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future; |
|
|
• |
the amount of any payments we are required to make to M&F TTP Holdings Two LLC in the future under the Tax Receivable Agreement; and |
|
|
• |
the impact and duration of the COVID-19 outbreak / pandemic. |
Until such time, if ever, as we can generate substantial revenue from drug sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We do not currently have any committed external source of funds other than those available through the ATM Offering and LPC Purchase Agreement. We are evaluating several financing strategies to fund the on-going and future clinical trials of TTP399, including direct equity investments and future public offerings of our common stock. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be
30
diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants that will further limit or restrict our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or drug candidates or grant licenses on terms that may not be favorable to us. If we are unable to obtain additional funding, we could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts, or pursue one or more alternative strategies, such as restructuring, any of which could adversely affect our business prospects.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have outstanding any off-balance sheet arrangements as defined under SEC rules.
Discussion of Critical Accounting Policies
For a discussion of our critical accounting policies and estimates, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies and estimates in 2021.
Forward-Looking Statements
This quarterly report includes certain forward-looking statements within the meaning of the federal securities laws regarding, among other things, our management’s intentions, plans, beliefs, expectations or predictions of future events, which are considered forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “outlook”, “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based upon assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read this quarterly report, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including those described under the heading “Risk Factors” under Item 1A of Part I in our Annual Report on Form 10-K for the year ended December 31, 2020. Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” under Item 1A of Part I in our Annual Report on Form 10-K for the year ended December 31, 2020, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.
Our forward-looking statements made herein are made only as of the date of this quarterly report. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.
Effect of Recent Accounting Pronouncements
See discussion of recent accounting pronouncements in Note 2, “Summary of Significant Accounting Policies”, to the Condensed Consolidated Financial Statements in this Form 10-Q.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Interest Rate Risk
We do not currently have any material interest rate exposure.
Market Risk
Our exposure to market risk is limited to our cash and cash equivalents, all of which have maturities of one year or less. The goals of our investment strategy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we maintain a portfolio of cash equivalents and investments in a variety of securities that management believes to be of high credit
31
quality. The securities in our investment portfolio are not leveraged and are, due to their short-term nature, subject to minimal interest rate risk. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a material negative impact on the value of our investment portfolio.
Foreign Currency Risk
We do not have any material foreign currency exposure.
|
ITEM 4. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934) as of September 30, 2021. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective in causing material information relating to us (including our consolidated subsidiaries) to be recorded, processed, summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures pursuant to SEC disclosure obligations.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Changes to Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Website Availability of Reports and other Corporate Governance Information
The Company maintains a comprehensive corporate governance program, including Corporate Governance Guidelines for its Board of Directors, Board Guidelines for Assessing Director Independence and charters for its Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee. The Company maintains a corporate investor relations website, www.vtvtherapeutics.com, where stockholders and other interested persons may review, without charge, among other things, corporate governance materials and certain SEC filings, which are generally available on the same business day as the filing date with the SEC on the SEC’s website http://www.sec.gov. The contents of our website are not made a part of this Quarterly Report on Form 10-Q.
PART II – OTHER INFORMATION
|
ITEM 1. |
LEGAL PROCEEDINGS |
We are not currently a party to any material legal proceedings.
32
|
ITEM 1A. |
RISK FACTORS |
Our risk factors are set forth under the heading “Risk Factors” under Item 1A of Part I in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
|
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There were no sales of unregistered equity securities during the three months ended September 30, 2021.
|
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
None.
|
ITEM 4. |
MINE SAFETY DISCLOSURES |
None.
|
ITEM 5. |
OTHER INFORMATION |
None.
.
33
|
ITEM 6. |
EXHIBITS |
|
Exhibit |
|
Description |
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
101* |
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations (unaudited), (iii) Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited) and (v) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags. |
|
|
|
|
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104* |
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The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL |
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†† |
Confidential treatment received with respect to portions of this exhibit. |
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* |
Filed herewith |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 9, 2021
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VTV THERAPEUTICS INC. |
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(Registrant) |
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By: |
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/s/ Deepa Prasad |
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Deepa Prasad |
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President and Chief Executive Officer |
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By: |
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/s/ Rudy C. Howard |
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Rudy C. Howard |
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Chief Financial Officer |
35