Minerva Neurosciences(NERV) - 2018 Q4 - Annual Report

Part I Business Minerva Neurosciences is a clinical-stage biopharmaceutical company developing product candidates for Central Nervous System diseases, with a portfolio of four proprietary compounds and no current revenue - Minerva is a clinical-stage biopharmaceutical company focused on developing and commercializing product candidates for Central Nervous System (CNS) diseases[13] - The company has not received regulatory approval for any product candidates and has not generated any revenue from sales, expecting significant operating losses to continue[19] Product Candidate Portfolio | Product Candidate | Indication(s) | |---|---| | Roluperidone (MIN-101) | Negative symptoms in schizophrenia | | Seltorexant (MIN-202) | Insomnia disorder, adjunctive treatment of Major Depressive Disorder (MDD) | | MIN-117 | Major Depressive Disorder (MDD) | | MIN-301 | Parkinson's disease | Our Pipeline of Advanced Clinical-Stage Programs The company's pipeline includes roluperidone in Phase 3, seltorexant and MIN-117 in Phase 2b, and MIN-301 in pre-clinical development Clinical Trial Status | Program | Primary Indications | Development Phase | |---|---|---| | Roluperidone (MIN-101) | Negative symptoms in Schizophrenia | Phase 3 initiated Dec 2017 | | Seltorexant (MIN-202) | Primary Insomnia | Phase 2b initiated Dec 2017 | | Seltorexant (MIN-202) | Major Depressive Disorder (adjunctive) | Phase 2b initiated Dec 2017 | | MIN-117 | Major Depressive Disorder (monotherapy) | Phase 2b initiated Apr 2018 | | MIN-301 | Parkinson's Disease | Pre-clinical | License Agreements Minerva holds exclusive licenses for roluperidone and MIN-117 from MTPC and a co-development agreement with Janssen for seltorexant, involving milestone and royalty payments - The company has an exclusive license from MTPC for roluperidone and MIN-117, with worldwide rights excluding most of Asia, obligated to pay tiered royalties and potential commercial milestone payments up to $47.5 million for each compound[62][63][64] - Under the amended agreement with Janssen for seltorexant, Minerva received a $30 million upfront payment, with up to $40 million in additional milestone payments for the insomnia indication, and Janssen waived its right to royalties on insomnia sales in Minerva's territory[71] - The amendment with Janssen also forgave $11.2 million in previously accrued collaborative expenses owed by Minerva, with these funds and the $30 million upfront payment recorded as deferred revenue[71] Competition The company faces significant competition across its pipeline from established and emerging therapies in schizophrenia, MDD, insomnia, and Parkinson's disease - Roluperidone's competitors for negative symptoms in schizophrenia include Acadia's Pimavanserin, Lundbeck's Lu AF11167, and products from Roche, Takeda, and others[78] - MIN-117 faces competition from numerous generic antidepressants (SSRIs, SNRIs) and newer branded therapies like Lundbeck's Brintellix, Janssen's esketamine, and Allergan's rapastinel[79][82] - Seltorexant's primary competitor in the orexin antagonist class is Merck's Belsomra®, though Minerva believes seltorexant's selectivity for the orexin 2 receptor may offer a superior profile[84][85] Intellectual Property The company protects its product candidates through patents and exclusivity, with key compound patents expiring between 2020 and 2030, and formulation patents extending later Key Patent Expiration Timelines | Product Candidate | Patent Type | Earliest Expiration Year | |---|---|---| | Roluperidone | Compound (US/Foreign) | 2021 | | Roluperidone | Modified-Release Formulation | 2035 | | MIN-117 | Compound (US/Foreign) | 2020 | | MIN-117 | Low-Dose Compositions/Use | 2034 | | Seltorexant | Compound (Europe) | 2030 | | MIN-301 | Method of Use | 2028 | - Product candidates may be eligible for data and marketing exclusivity, generally five years in the U.S. and ten years in the EU for small molecules, with MIN-301 potentially receiving twelve years in the U.S. if approved as a biologic[103][104] Government Regulation and Product Approval Product approval is subject to extensive regulation by the FDA and EMA, involving rigorous clinical trials, marketing authorization procedures, and ongoing post-approval compliance - In the EU, marketing authorization requires submitting an MAA through one of four procedures, with the centralized procedure granting approval across the EEA and having a standard review time of 210 days[110][111] - In the U.S., the FDA approval process requires submitting an IND before clinical trials and an NDA after successful trials, a lengthy process proving safety and effectiveness through adequate and well-controlled studies[118][119][125] - Commercial success depends on obtaining coverage and adequate reimbursement from government and private payors, who are increasingly implementing cost-containment measures[146][147] - The withdrawal of the United Kingdom from the EU (Brexit) could materially impact the future regulatory regime for product approval and commercialization in the UK[155] Risk Factors The company faces significant risks including financial losses, funding needs, clinical trial failures, regulatory uncertainty, reliance on third parties, and intellectual property challenges - The company has a history of significant losses ($50.2 million in 2018) and an accumulated deficit of $214.6 million as of December 31, 2018, expecting continued losses and potential unprofitability[160][161] - The company will require additional capital to finance operations, and failure to secure funding on acceptable terms could force delays, scale-backs, or discontinuation of development programs[163][165] - There is a high risk that product candidates could fail in clinical trials or not receive regulatory approval due to lack of efficacy, safety issues, or disagreement with regulators on trial design[169][173] - The company relies on third-party CROs to conduct clinical trials and third-party manufacturers for all product supply, increasing risks related to quality, compliance (cGMP), and supply chain continuity[271][275] - Key patents for roluperidone and MIN-117 are expected to expire as soon as 2021 and 2020, respectively, potentially leading to increased competition shortly after product launch[291] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[327] Properties The company's principal executive offices are in a leased 5,923 square foot facility in Waltham, Massachusetts, with the sublease expiring in July 2021 - The company leases approximately 5,923 square feet of office space at 1601 Trapelo Road, Suite 286, Waltham, Massachusetts 02451[328] - The current sublease expires on July 27, 2021[328] Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - As of the filing date, the company is not party to any claim or litigation expected to have a material adverse effect on the business[329] Mine Safety Disclosures This item is not applicable to the company - Not applicable[330] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "NERV" since July 2014, with no equity repurchases in Q4 2018 - Common stock has traded on the Nasdaq Global Market under the symbol "NERV" since July 1, 2014[333] - The company did not repurchase any of its equity securities during the quarter ended December 31, 2018[336] Selected Financial Data This item is not applicable - Not applicable[337] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $50.2 million in 2018 due to increased R&D and G&A expenses, holding $88.1 million in cash, sufficient for 12 months, but anticipates needing more capital Results of Operations (in thousands) | | 2018 | 2017 | |---|---:|---:| | Research and development | $34,889 | $30,256 | | General and administrative | $16,841 | $10,914 | | Total expenses | $51,730 | $41,170 | | Loss from operations | $(51,730) | $(41,170) | | Net loss | $(50,171) | $(31,523) | - The increase in R&D expenses in 2018 was primarily due to higher development costs for the Phase 3 trial of roluperidone and the Phase 2b trial of MIN-117, partially offset by lower expenses for the seltorexant program[361] - The increase in G&A expenses was mainly due to higher non-cash stock-based compensation and increased salary costs from staffing up for pre-commercial activities[362] - As of December 31, 2018, the company had cash, cash equivalents, restricted cash, and marketable securities of $88.1 million and believes this is sufficient to fund operations for at least the next 12 months[367] Quantitative and Qualitative Disclosures about Market Risk This item is not applicable - Not applicable[400] Financial Statements and Supplementary Data Consolidated financial statements show total assets of $139.1 million, liabilities of $48.9 million, and a net loss of $50.2 million for 2018, with a full valuation allowance on deferred tax assets Consolidated Balance Sheet Highlights (as of Dec 31, 2018, in millions) | | Amount | |---|---:| | Cash and cash equivalents | $50.2 | | Marketable securities | $37.8 | | In-process research and development | $34.2 | | Total Assets | $139.1 | | Deferred revenue | $41.2 | | Total Liabilities | $48.9 | | Total Stockholders' Equity | $90.3 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2018, in millions) | | Amount | |---|---:| | Research and development expense | $34.9 | | General and administrative expense | $16.8 | | Loss from operations | $(51.7) | | Net loss | $(50.2) | | Net loss per share | $(1.29) | - The company adopted the new revenue recognition standard (ASC 606) on January 1, 2018, which did not have a material impact on its consolidated financial statements[460] - As of December 31, 2018, the company had federal net operating loss carryforwards of approximately $53.9 million, which begin to expire in 2027[494] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[506] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with no auditor attestation report due to emerging growth company status - Management concluded that disclosure controls and procedures were effective as of December 31, 2018[508] - Management concluded that internal control over financial reporting was effective as of December 31, 2018, based on the COSO 2013 framework[510] - The annual report does not include an auditor's attestation report on internal control over financial reporting, as permitted for emerging growth companies under the JOBS Act[511] Other Information The company reports no other information - None[513] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 proxy statement - Information required by this item is incorporated by reference from the definitive proxy statement for the 2019 Annual Meeting of Stockholders[515] Executive Compensation Information on executive compensation is incorporated by reference from the 2019 proxy statement - Information required by this item is incorporated by reference from the definitive proxy statement for the 2019 Annual Meeting of Stockholders[516] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2019 proxy statement - Information required by this item is incorporated by reference from the definitive proxy statement for the 2019 Annual Meeting of Stockholders[517] Certain Relationships and Related Person Transactions, and Director Independence Information on certain relationships, related person transactions, and director independence is incorporated by reference from the 2019 proxy statement - Information required by this item is incorporated by reference from the definitive proxy statement for the 2019 Annual Meeting of Stockholders[518] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2019 proxy statement - Information required by this item is incorporated by reference from the definitive proxy statement for the 2019 Annual Meeting of Stockholders[519] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including consolidated financial statements and various exhibits - This section lists all exhibits filed with the Form 10-K, including material contracts, governance documents, and required certifications[521][523] Form 10-K Summary This item is not applicable - Not applicable[528]