Minerva Neurosciences(NERV) - 2019 Q1 - Quarterly Report

PART I — Financial Information This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Minerva Neurosciences, Inc. Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes. Condensed Consolidated Balance Sheets This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates. Condensed Consolidated Balance Sheets (Selected Items, in millions): | Item | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $30.6 | $50.2 | | Marketable securities | $48.6 | $37.8 | | Total current assets | $80.3 | $90.0 | | Total assets | $129.8 | $139.1 | | Total current liabilities | $6.9 | $3.6 | | Total liabilities | $52.4 | $48.9 | | Total stockholders' equity | $77.4 | $90.3 | - Total current assets decreased from $90.0 million at December 31, 2018, to $80.3 million at March 31, 2019, primarily due to a decrease in cash and cash equivalents[13] - Total liabilities increased from $48.9 million at December 31, 2018, to $52.4 million at March 31, 2019, driven by increases in accounts payable and accrued expenses[13] Condensed Consolidated Statements of Operations This table outlines the company's financial performance over specific periods, focusing on expenses and net loss. Condensed Consolidated Statements of Operations (Selected Items, in millions, except per share data): | Item | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $11.6 | $8.4 | | General and administrative | $4.7 | $4.3 | | Total expenses | $16.3 | $12.7 | | Net loss | $(15.8) | $(12.4) | | Net loss per share, basic and diluted | $(0.41) | $(0.32) | | Weighted average shares outstanding | 38,968,110 | 38,749,343 | - Net loss increased to $15.8 million for the three months ended March 31, 2019, from $12.4 million in the prior year period, primarily due to higher research and development expenses[15] - Research and development expenses increased by approximately $3.2 million year-over-year, reflecting increased clinical trial activities[15] Condensed Consolidated Statement of Stockholders' Equity This table details changes in the company's equity, including total equity, accumulated deficit, and additional paid-in capital. Condensed Consolidated Statement of Stockholders' Equity (Selected Items, in millions, except share data): | Item | March 31, 2019 | March 31, 2018 | | :-------------------------- | :------------- | :------------- | | Total Stockholders' Equity | $77.4 | $121.3 | | Accumulated Deficit | $(230.4) | $(176.8) | | Additional Paid-In Capital | $307.8 | $298.1 | | Common Stock Shares Outstanding | 39,025,471 | 38,749,343 | - Total stockholders' equity decreased from $90.3 million at January 1, 2019, to $77.4 million at March 31, 2019, primarily due to the net loss incurred during the period[18] - Accumulated deficit increased by $15.8 million to $230.4 million as of March 31, 2019, reflecting the net loss for the quarter[18] Condensed Consolidated Statements of Cash Flows This table summarizes the cash inflows and outflows from operating, investing, and financing activities for the reported periods. Condensed Consolidated Statements of Cash Flows (Selected Items, in millions): | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(9.6) | $(10.9) | | Net cash (used in) provided by investing activities | $(10.5) | $31.3 | | Net cash provided (used in) by financing activities | $0.5 | $(1.3) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(19.6) | $19.1 | | Cash, cash equivalents and restricted cash, End of period | $30.7 | $45.2 | - Net cash used in operating activities decreased to $9.6 million in Q1 2019 from $10.9 million in Q1 2018, despite a higher net loss, due to favorable changes in operating assets and liabilities[21] - Investing activities shifted from providing $31.3 million in Q1 2018 to using $10.5 million in Q1 2019, primarily due to increased purchases of marketable securities[21] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements. NOTE 1 — Nature of Operations and Liquidity Minerva Neurosciences, Inc. is a clinical-stage biopharmaceutical company focused on developing product candidates for central nervous system diseases. - Minerva Neurosciences is a clinical-stage biopharmaceutical company developing four proprietary compounds for CNS diseases: roluperidone (schizophrenia), seltorexant (insomnia/MDD), MIN-117 (MDD), and MIN-301 (Parkinson's disease)[22] - The company has an accumulated deficit of approximately $230.4 million as of March 31, 2019, and incurred $9.6 million in net cash used in operating activities for the three months ended March 31, 2019[24] - As of March 31, 2019, the company had $79.3 million in cash, cash equivalents, marketable securities, and restricted cash, which is believed to be sufficient for at least the next 12 months, but additional capital will be needed for later-stage clinical development[25][26] NOTE 2 — Significant Accounting Policies This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including revenue recognition and lease accounting. - The company adopted ASC Topic 842, Leases, effective January 1, 2019, using a modified retrospective approach, resulting in the recognition of operating lease liabilities and right-of-use assets of approximately $0.4 million each on the balance sheet[44][58][60] - Research and development costs, including licensing fees and fees paid to consultants and CROs, are expensed as incurred[35] - The company has no commercially approved products and has not generated revenue from product sales to date, applying ASC 606 for revenue recognition, deferring unearned revenue[51][53] NOTE 3 — Accrued Expenses and Other Liabilities This note provides a breakdown of accrued expenses and other liabilities, showing a significant increase in research and development costs and accrued bonus. Accrued Expenses and Other Liabilities (in millions): | Item | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Research and development costs and other accrued expenses | $2.6 | $1.4 | | Accrued bonus | $0.5 | — | | Professional fees | $0.4 | $0.5 | | Vacation pay | $0.3 | — | | Total | $3.7 | $1.8 | - Total accrued expenses and other current liabilities increased by over $1.9 million from December 31, 2018, to March 31, 2019, primarily due to increases in research and development costs and accrued bonus[65] NOTE 4 — Net Loss Per Share of Common Stock This note details the computation of basic and diluted net loss per share, indicating that diluted loss per share is the same as basic loss per share. Net Loss Per Share of Common Stock (in millions, except per share and share data): | Item | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(15.8) | $(12.4) | | Weighted average shares outstanding | 38,968,110 | 38,749,343 | | Net loss per share – basic and diluted | $(0.41) | $(0.32) | - The net loss per share increased from $(0.32) in Q1 2018 to $(0.41) in Q1 2019[66] - Potentially dilutive securities, including common stock options, restricted stock units, and common stock warrants, were excluded from diluted EPS calculation as their effect was anti-dilutive due to the net loss[67] NOTE 5 — Debt This note describes the company's Loan and Security Agreement, with all Term A Loans fully repaid in August 2018, resulting in zero outstanding borrowings. - The company's Term A Loans, totaling $10 million, matured and were fully repaid on August 1, 2018[69][70] - Interest expense decreased from $0.1 million in Q1 2018 to zero in Q1 2019 due to the repayment of the Term A loans[71] NOTE 6 — Co-Development and License Agreement This note details the co-development and license agreement with Janssen Pharmaceutica NV for seltorexant, including an amendment that provided a $30 million upfront payment. - Minerva has a co-development and license agreement with Janssen for seltorexant, granting Minerva exclusive commercialization rights in the Minerva Territory (EU, Switzerland, Liechtenstein, Iceland, Norway)[23][72] - An August 2017 amendment resulted in a $30 million upfront payment from Janssen, waiver of $11.2 million in previously accrued collaborative expenses, and future milestone payments of up to $40 million for Phase 3 insomnia trials[75][78] - Under the amendment, Minerva assumed strategic control of seltorexant's clinical development for insomnia and has no further financial obligations until after 'Decision Point 4'[76] NOTE 7 — Stockholders' Equity This note describes the warrants issued to lenders in connection with the Loan Agreement, allowing for the purchase of common stock. - In connection with the Loan Agreement, Minerva issued warrants to lenders to purchase 40,790 shares of common stock at an exercise price of $5.516 per share[80] - The fair value of these warrants was estimated at $0.2 million using a Black-Scholes model and was included as a discount to the Term A Loans and a component of additional paid-in capital[80] NOTE 8 — Stock Award Plan and Stock-Based Compensation This note details the company's 2013 Equity Incentive Plan, including stock option and restricted stock unit (RSU) activity and related compensation expense. Stock Option Activity (Q1 2019): | Item | Shares Issuable Pursuant to Stock Options | Weighted Average Exercise Price | | :-------------------------- | :-------------------------------------- | :------------------------------ | | Outstanding January 1, 2019 | 8,498,047 | $6.99 | | Exercised | (87,500) | $6.00 | | Forfeited | (31,875) | $6.51 | | Outstanding March 31, 2019 | 8,378,672 | $7.00 | | Exercisable March 31, 2019 | 4,078,271 | $6.46 | Stock-Based Compensation Expense (in millions): | Category | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $0.7 | $0.5 | | General and administrative | $1.8 | $1.6 | | Total | $2.5 | $2.1 | - Total unrecognized compensation costs related to non-vested stock options at March 31, 2019, was approximately $21.2 million, expected to be recognized over a weighted-average period of 3.0 years[81] NOTE 9 — Commitments and Contingencies The company is not currently aware of any legal proceedings or claims that would have a material adverse effect on its financial position or results of operations. - The company is not currently involved in any legal proceedings or claims that are expected to have a material adverse effect on its financial position or results of operations[87] NOTE 10 — Leases This note details the company's operating sublease for its corporate headquarters, which commenced in November 2017 and expires in July 2021. - The company's primary lease commitment is an office sublease expiring July 31, 2021, with monthly rental rates escalating from $14,808 to $16,288[89] Future Operating Sublease Payments (as of March 31, 2019, in millions): | Year | Waltham | | :--- | :------ | | 2019 (remaining) | $0.14 | | 2020 | $0.19 | | 2021 | $0.11 | | Total Sublease payments | $0.45 | | Less: imputed interest | $(0.05) | | Total operating Sublease liabilities | $0.40 | NOTE 11 — Related Party Transactions This note discloses a services agreement with V-Watch SA for approximately $105 thousand, where Minerva's CEO is the chairman of V-Watch's board. - Minerva entered into a $105,000 services agreement with V-Watch SA for the use of its SomnoArt device in clinical trials[92] - This is considered a related party transaction as Minerva's CEO is the chairman of V-Watch's board, and a Minerva stockholder (Index Ventures) holds over 10% of V-Watch's capital stock[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its status as a clinical-stage biopharmaceutical company. Overview Minerva Neurosciences is a clinical-stage biopharmaceutical company focused on developing product candidates for central nervous system (CNS) diseases. - Minerva Neurosciences is a clinical-stage biopharmaceutical company focused on developing product candidates for central nervous system (CNS) diseases, with four proprietary compounds in its portfolio[95][96] - The company has not received regulatory approvals for any product candidates and has not generated revenue from sales or licenses, expecting to incur net losses and negative cash flow for the foreseeable future[97] Clinical Updates This section provides updates on the clinical development progress of the company's key product candidates. Roluperidone (MIN-101) The Phase 3 clinical trial for roluperidone (MIN-101) for negative symptoms in schizophrenia is ongoing, with top-line results expected in Q4 2019. - Enrollment for the pivotal Phase 3 clinical trial of roluperidone for negative symptoms in schizophrenia is expected to complete in the second half of 2019, with top-line results available in Q4 2019[98][100] - Pre-clinical studies showed roluperidone significantly increased Brain-Derived Neurotrophic Factor (BDNF) and Glial Cell-Derived Neurotrophic Factor (GDNF) release, suggesting potential for disease modification and improved neuroplasticity[104][105][106] - The Journal of Clinical Psychiatry published results demonstrating cognitive improvements in schizophrenia patients treated with roluperidone, correlating with improvements in negative symptoms[107] MIN-117 A Phase 2b trial for MIN-117 in Major Depressive Disorder (MDD) with anxious distress is ongoing, with top-line results expected in Q4 2019. - A Phase 2b trial for MIN-117 in MDD with anxious distress is recruiting approximately 324 patients in the U.S. and Europe, with enrollment expected to complete in Q3 2019 and top-line results in Q4 2019[108][109][110] - A U.S. patent application has been filed for MIN-117 to treat pain, based on pre-clinical rat models showing significant reduction in nociceptive and chemotherapy-induced neuropathic pain[111][112] Seltorexant (MIN-202) Enrollment is complete for two Phase 2b trials of seltorexant in MDD and one in insomnia disorder, with top-line results expected in Q2 and Q3 2019. - Enrollment is complete for the Phase 2b 2001 Trial (MDD adjunctive therapy) and 2005 Trial (insomnia disorder), with top-line results expected in Q2 2019[113][118][119] - Enrollment is also complete for the Phase 2b 2002 Trial (seltorexant vs. quetiapine in MDD), with top-line results expected in Q3 2019[114][117] MIN-301 Pre-clinical studies of MIN-301 in non-human primates showed improvements in Parkinson's disease models, supporting its advancement towards clinical trials. - Results from a non-human primate study showed that treatment with an analog of MIN-301 improved symptoms in a Parkinson's disease model[120] - These findings support advancing MIN-301 into clinical trials for Parkinson's disease, with a Phase 1 study expected to commence after an IND or IMPD filing[120] Financial Overview This section provides an overview of the company's revenue, expenses, and other financial components. Revenue The company has not generated any revenue from product sales or licenses to date, but has deferred revenue from the Janssen co-development agreement. - Minerva has not recognized any revenue from product sales or licenses as none of its product candidates have been approved for commercialization[121] - Deferred Revenue from the Amendment to the Co-Development and License Agreement with Janssen will be recognized in future periods, subject to certain future events[121] Research and Development Expenses Research and development expenses are expensed as incurred and are expected to be the largest category of operating expenses, increasing with ongoing trials. - Research and development expenses include fees for consultants, CROs, clinical trials, licensing, materials, regulatory compliance, and R&D employee compensation, all expensed as incurred[122] - R&D expenses are expected to increase as the company continues planned pre-clinical and clinical trials and hires additional R&D staff[123] General and Administrative Expenses General and administrative expenses cover executive, finance, legal, auditing, and tax functions, and are expected to increase due to public company operations. - General and administrative expenses primarily consist of costs for executive, finance, legal, auditing, and tax functions, including salaries, bonuses, facility costs, professional fees, and non-cash stock-based compensation[125] - These expenses are expected to increase due to operating as a publicly-traded company, compliance costs, investor relations, and infrastructure enhancements to support business growth[126] Foreign Exchange (Losses) Gains Foreign exchange losses or gains arise from clinical trial expenses denominated in Euros, reflecting changes in currency rates. - Foreign exchange losses/gains result from clinical trial expenses denominated in Euros, reflecting currency rate fluctuations between the date an expense is recorded and the payment date[127] - The company expects to continue incurring Euro-denominated expenses as certain planned clinical trials are conducted in Europe[127] Investment Income Investment income is generated from the company's cash equivalents and marketable securities. - Investment income is derived from earnings on the company's cash equivalents and marketable securities[128] Interest Expense Interest expense relates to the company's outstanding loan with Oxford Finance LLC and Silicon Valley Bank. - Interest expense is associated with the company's loan agreement with Oxford Finance LLC and Silicon Valley Bank[128] Results of Operations This section analyzes the company's financial performance, comparing key financial metrics between the reported periods. Comparison of Three Months Ended March 31, 2019 versus March 31, 2018 This section compares the financial performance for the three months ended March 31, 2019, against the same period in 2018, detailing changes in key expense categories. - Research and development expenses increased by $3.2 million to $11.6 million in Q1 2019 (from $8.4 million in Q1 2018), primarily due to higher development expenses for roluperidone Phase 3 and MIN-117 Phase 2b clinical trials[129] - General and administrative expenses increased by $0.4 million to $4.7 million in Q1 2019 (from $4.3 million in Q1 2018), mainly due to increased non-cash stock-based compensation and salary costs[130] - Investment income increased by $0.1 million to $0.5 million in Q1 2019 (from $0.4 million in Q1 2018), while interest expense decreased by $0.1 million to zero due to the repayment of Term A loans[132][133] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including sources and uses of funds. Sources of Liquidity The company has incurred significant losses and negative cash flows, with existing cash resources expected to be sufficient for the next 12 months, but future funding is uncertain. - As of March 31, 2019, the company had an accumulated deficit of approximately $230.4 million and $79.3 million in cash, cash equivalents, marketable securities, and restricted cash[134] - Existing cash resources are believed to be sufficient for at least the next 12 months, but future expenditures are subject to variability based on clinical trial design, timing, and funding availability[134] Sources of Funds Key funding sources include an amendment to the co-development and license agreement with Janssen, a public offering of common stock, and proceeds from warrant exercises. - The Amendment to the Co-Development and License Agreement with Janssen provided a $30 million upfront payment in August 2017 and includes future milestone payments of $20 million at the start of a Phase 3 insomnia trial and another $20 million at 50% patient enrollment[135] - A public offering of common stock in July 2017 generated net proceeds of approximately $41.6 million from the sale of 5,750,000 shares at $7.75 per share[136] - The exercise of warrants in March 2017 generated gross proceeds of approximately $9.4 million from 1,621,073 shares of common stock[137] Uses of Funds The company has not generated revenue and expects expenses to increase due to ongoing development activities, clinical trials, regulatory approvals, and public company operations. - The company has not generated revenue and expects increasing expenses from ongoing R&D, clinical trials, regulatory approvals, and public company operations, including potential commercialization costs[138] - Future cash needs are expected to be financed through equity offerings, debt financings, third-party funding, or collaborations, which may lead to stockholder dilution or restrictive covenants[139] - The company fully repaid its $10.0 million Term A Loan on August 1, 2018[140] Cash Flows This section summarizes the company's cash flows from operating, investing, and financing activities for the three months ended March 31, 2019 and 2018. Net Cash Flows (in millions): | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(9.6) | $(10.9) | | Investing activities | $(10.5) | $31.3 | | Financing activities | $0.5 | $(1.3) | | Net (decrease) increase in cash | $(19.6) | $19.1 | - Net cash used in operating activities decreased to $9.6 million in Q1 2019 from $10.9 million in Q1 2018, primarily due to changes in operating assets and liabilities offsetting the net loss[143][144] - Net cash used in investing activities was $10.5 million in Q1 2019, a significant shift from $31.3 million provided in Q1 2018, mainly due to increased purchases of marketable securities[145][146] - Net cash provided by financing activities was $0.5 million in Q1 2019 from stock option exercises, compared to $1.3 million used in Q1 2018 for loan repayments[147] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented. - The company did not have any off-balance sheet arrangements as defined under SEC rules during the periods presented[148] Critical Accounting Policies and Estimates The company's critical accounting policies and estimates remain consistent with those disclosed in its 2018 Annual Report on Form 10-K. - The critical accounting policies and estimates for Q1 2019 remain consistent with those identified in the 2018 Annual Report on Form 10-K, covering areas such as stock-based compensation, R&D costs, IPR&D, goodwill, income taxes, and impairment of long-lived assets[149] Recent Accounting Pronouncements The company has adopted several new accounting pronouncements, including ASU No. 2016-02 (Leases), with no material impact except for lease assets and liabilities. - The company adopted ASU No. 2016-02 (Leases), ASU No. 2017-08 (Receivables—Nonrefundable Fees), and ASU No. 2018-07 (Stock Compensation) effective January 1, 2019[57][62][63] - The adoption of ASC 842 (Leases) resulted in the recognition of $0.4 million in operating lease liabilities and right-of-use assets, but other pronouncements had no material impact on the consolidated financial statements[60][62][63] - The company is currently evaluating the impact of ASU No. 2017-04 (Intangibles — Goodwill and Other), effective for annual periods beginning after December 15, 2019[64] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reported period. - The company has no applicable quantitative and qualitative disclosures about market risk for the reported period[151] Item 4. Controls and Procedures Management evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2019, concluding they were effective. - The company's disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of March 31, 2019[154] - There were no material changes in internal control over financial reporting during the latest fiscal quarter[155] PART II — Other Information This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits. Item 1. Legal Proceedings The company is not currently involved in any legal proceedings or claims that are expected to have a material adverse effect on its business. - The company is not currently party to any claim or litigation that is reasonably expected to have a material adverse effect on its business, financial condition, or results of operations[157] Item 1A. Risk Factors The company operates in a rapidly changing environment with inherent risks, including significant losses and the expectation of continued losses requiring additional capital. - The company has incurred significant losses since its inception in 2007, with a net loss of $15.8 million for Q1 2019 and an accumulated deficit of $230.4 million as of March 31, 2019[159][160] - The company expects to continue incurring significant losses and will require additional capital to finance operations and complete product development, which may not be available on acceptable terms[161][162][164] - Future funding requirements depend on factors such as clinical trial timing and costs, regulatory approvals, intellectual property maintenance, market acceptance, and commercialization expenses[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered equity securities or repurchase any equity securities during the three months ended March 31, 2019. - No unregistered securities were sold during the three months ended March 31, 2019[165] - No equity securities were repurchased during the three months ended March 31, 2019[166] Item 3. Defaults Upon Senior Securities This section states that there are no defaults upon senior securities applicable to the company for the reported period. - This item is not applicable to the company for the reported period[167] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures applicable to the company for the reported period. - This item is not applicable to the company for the reported period[168] Item 5. Other Information This section states that there is no other information applicable to the company for the reported period. - This item is not applicable to the company for the reported period[169] Item 6. Exhibits This section lists the exhibits incorporated by reference or filed as part of the report, including organizational documents and certifications. - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, an Employment Agreement, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and XBRL related documents[171] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the financial report. - The report is signed by Geoffrey Race, Chief Financial Officer (Principal Financial Officer) on behalf of Minerva Neurosciences, Inc. on May 6, 2019[174][175]