Marinus Pharmaceuticals(MRNS) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Consolidated Financial Statements Unaudited consolidated financial statements for Marinus Pharmaceuticals, Inc. as of June 30, 2021, detail financial position, operations, and cash flows Consolidated Balance Sheets As of June 30, 2021, total assets decreased to $125.0 million due to reduced cash, while liabilities increased to $29.9 million from new notes payable Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $112,493 | $138,509 | | Total current assets | $120,924 | $146,267 | | Total assets | $124,989 | $150,462 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $16,694 | $10,729 | | Notes payable, net | $10,970 | $— | | Total liabilities | $29,930 | $13,263 | | Total stockholders' equity | $95,059 | $137,199 | Consolidated Statements of Operations and Comprehensive Loss Net losses for the three and six months ended June 30, 2021, increased to $23.8 million and $51.0 million, driven by higher R&D and G&A expenses Statement of Operations Summary (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Federal contract revenue | $1,905 | $— | $3,711 | $— | | Research and development | $18,562 | $11,752 | $37,153 | $26,756 | | General and administrative | $6,828 | $4,130 | $17,204 | $7,980 | | Loss from operations | $(23,485) | $(15,882) | $(50,646) | $(34,736) | | Net loss | $(23,823) | $(15,675) | $(50,964) | $(34,347) | | Net loss per share | $(0.65) | $(0.63) | $(1.39) | $(1.86) | Consolidated Statements of Cash Flows For the six months ended June 30, 2021, net cash used in operating activities increased to $39.1 million, resulting in a $26.0 million net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(39,130) | $(30,045) | | Net cash provided by (used in) investing activities | $178 | $(6,202) | | Net cash provided by financing activities | $12,936 | $44,234 | | Net (decrease) increase in cash | $(26,016) | $7,987 | Notes to Consolidated Financial Statements Detailed notes cover business, liquidity, and accounting policies, disclosing COVID-19 impacts, a new Orion collaboration, and a $125 million Oaktree credit facility - The company, a clinical-stage pharmaceutical firm developing ganaxolone for seizure disorders, has incurred significant losses since inception and has not generated any product revenue[31][34] - COVID-19 has delayed clinical trial enrollment, particularly for the Phase 3 RAISE trial in RSE, pushing top-line data readout to H2 2022[33] - On July 30, 2021, the company collaborated with Orion Corporation, receiving a €25 million upfront fee for European ganaxolone rights, with a potential 75% refund obligation based on genotoxicity study results[37] - In May 2021, the company secured a term loan facility of up to $125.0 million from Oaktree, with an initial $15.0 million tranche borrowed, contingent on milestones[38][70][71] - The company has a BARDA contract for up to $51 million to support IV-ganaxolone development for RSE, with approximately $21 million provided for the base period[39][40] - The company believes its $112.5 million cash and cash equivalents as of June 30, 2021, will fund operations for at least the next 12 months[44][116] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, detailing the ganaxolone pipeline, analyzing increased R&D and G&A expenses, and confirming sufficient liquidity Pipeline Update The company is advancing ganaxolone for multiple seizure disorders, with an NDA submitted for CDD, and key trial data for RSE and TSC expected in H2 2022 and Q3 2021 - Status Epilepticus (SE): The Phase 3 RAISE trial faces COVID-19 related delays, with top-line data now expected in H2 2022, and a European RAISE II trial planned for H1 2022[96][97] - CDKL5 Deficiency Disorder (CDD): An NDA was submitted to the FDA in July 2021 with a Priority Review request, supported by the Phase 3 Marigold Study's statistically significant seizure reduction, with an MAA submission to the EMA planned by Q3 2021[100][101][103] - Tuberous Sclerosis Complex (TSC): Top-line data from the Phase 2 CALM Study is expected in Q3 2021, with a Phase 3 trial planned to initiate in Q4 2021 following FDA alignment[108] - PCDH19-Related Epilepsy (PCDH19-RE): Further development for this indication has been deferred to reallocate resources to other ongoing programs[112] Results of Operations For the six months ended June 30, 2021, federal contract revenue was $3.7 million, with R&D expenses increasing to $37.2 million and G&A expenses rising to $17.2 million - Federal contract revenue of $3.7 million was recognized in H1 2021 from the BARDA contract, compared to none in H1 2020[131] Research & Development Expenses by Program (in thousands) | Program | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Oral Indications Subtotal | $12,131 | $9,326 | | IV Indications Subtotal | $5,032 | $3,057 | | Other Drug Development | $6,139 | $5,479 | | Indirect R&D | $13,851 | $8,894 | | Total R&D Expenses | $37,153 | $26,756 | - G&A expenses for H1 2021 increased by $9.2 million compared to H1 2020, driven by a $3.1 million increase in personnel costs, $3.5 million in noncash stock-based compensation, and $1.9 million in commercialization preparation costs[136] Liquidity and Capital Resources As of June 30, 2021, the company held $112.5 million in cash, bolstered by a €25 million Orion upfront fee, a $125 million Oaktree credit facility, and a $51 million BARDA contract - The company had cash and cash equivalents of $112.5 million at June 30, 2021[138] - Entered a collaboration with Orion, receiving a €25 million upfront fee in August 2021, with eligibility for up to an additional €97 million in milestones and R&D reimbursement, plus royalties[139] - Secured a five-year senior secured term loan facility from Oaktree for up to $125.0 million, available in five tranches contingent on milestones, with the first $15.0 million drawn in May 2021[140][141] - The company believes its cash position as of June 30, 2021, plus the Orion upfront fee, will fund operations for at least the next 12 months[153] Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, Marinus Pharmaceuticals is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[159] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2021[160] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2021[161] PART II – OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened actions that would materially affect its business - The company reports no material legal proceedings as of the filing date[163] Risk Factors This section details substantial risks, including a history of losses, dependence on ganaxolone, clinical and regulatory uncertainties, competition, third-party reliance, intellectual property, COVID-19, and stock price volatility Risks Related to Financial Position and Need for Additional Capital The company has a history of significant losses, with a $362.9 million accumulated deficit, requiring substantial additional capital for operations and ganaxolone commercialization, risking program delays or termination - The company has incurred significant losses since inception, with an accumulated deficit of $362.9 million as of June 30, 2021, and anticipates future losses[165] - The company will require significant additional capital, and failure to obtain it could force delays or termination of ganaxolone development and commercialization efforts[171] - The Oaktree Credit Agreement contains restrictive covenants and minimum cash requirements, where a breach could lead to default and debt acceleration[179][187] - The company may need to refund 75% of the €25 million upfront fee to Orion if a planned genotoxicity study on the M2 metabolite yields positive results, potentially terminating the collaboration[193] Risks Related to Clinical Development and Regulatory Approval The company's success hinges entirely on ganaxolone, with no guarantee of FDA approval for the CDD NDA due to M2 metabolite studies, potential side effects, and DEA scheduling - The company's future is solely dependent on the successful clinical development, regulatory approval, and commercialization of its only product candidate, ganaxolone[198] - The FDA may not accept the CDD NDA or could require additional trials, with approval potentially impacted by non-clinical studies on the M2 metabolite indicating a safety issue[202][203] - Ganaxolone may cause undesirable side effects, such as dizziness, fatigue, and somnolence, potentially delaying or preventing approval or leading to a restrictive label[208] - The FDA is expected to recommend scheduling ganaxolone as a controlled substance, subjecting it to significant DEA regulation and potentially delaying marketing and limiting commercialization[214] Risks Related to Commercialization Commercial success depends on market acceptance and adequate reimbursement, facing substantial competition from over 25 approved AEDs, with risks from lacking a sales organization and smaller rare disorder markets - Commercial success depends on achieving significant market acceptance and adequate reimbursement from payers, which is not guaranteed[251][265] - The company faces substantial competition from more than 25 approved AEDs and numerous companies developing treatments for the same indications[255][257] - The company currently has no sales, marketing, or distribution organization and may not be able to build one effectively, potentially hindering revenue generation[262] Risks Related to Dependence on Third Parties The company relies on third-party CROs for clinical trials and CMOs for all ganaxolone manufacturing, lacking its own facilities, and depends on Orion for European commercialization, risking development delays or revenue loss - The company relies on third-party CROs for clinical trials and is dependent on third-party CMOs for all ganaxolone manufacturing, having no manufacturing facilities of its own[274][278] - The company depends on its collaboration partner, Orion, for ganaxolone commercialization in Europe; agreement termination would adversely affect European presence and potential revenue[283] - Funding from the BARDA contract is subject to government rights, including "march-in" rights and a preference for U.S.-based manufacturing, potentially limiting exclusive rights and manufacturing options[285][371] Risks Related to Intellectual Property Commercial success depends on intellectual property protection, relying on formulation and method patents as ganaxolone is off-patent, with significant litigation risk from third parties like Ovid Therapeutics - The ganaxolone compound itself is not patented; the company relies on patents for formulations, manufacturing methods, and methods of treatment, which may not provide sufficient protection[351] - Ovid Therapeutics claims patents encompassing Marinus's CDD and PCDH19 candidates, creating infringement litigation risk that could prevent or delay commercialization or require licensing[358] - Protecting intellectual property rights globally is expensive and may not be possible in all jurisdictions, potentially allowing competitors to develop and sell similar products[359] Other Information (Items 2-6) This section covers remaining disclosures, reporting no unregistered equity sales, no defaults on senior securities, and no other information requiring disclosure, concluding with filed exhibits - There were no unregistered sales of equity securities during the period[402] - There were no defaults upon senior securities[403]