Marinus Pharmaceuticals(US:MRNS)2022-11-07 21:04PART I – FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) Presents Marinus Pharmaceuticals' unaudited consolidated financial statements, detailing the ZTALMY® launch, a significant PRV sale gain, and financing activities Consolidated Balance Sheets Cash and equivalents significantly increased to $168.2 million by Q3 2022, driven by financing and a PRV sale Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $168,249 | $122,927 | | Total current assets | $177,006 | $131,678 | | Total assets | $184,841 | $136,840 | | Liabilities & Equity | | | | Total current liabilities | $21,050 | $40,566 | | Notes payable, net | $70,780 | $40,809 | | Total liabilities | $102,837 | $83,354 | | Total stockholders' equity | $82,004 | $53,486 | Consolidated Statements of Operations and Comprehensive Income (Loss) Q3 2022 net income of $73.3 million resulted from a $107.4 million PRV sale gain and initial ZTALMY® revenue Q3 2022 vs Q3 2921 Statement of Operations (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Product revenue, net | $555 | $0 | | Total revenue | $2,340 | $10,114 | | Research and development | $19,002 | $18,353 | | Selling, general and administrative | $13,389 | $9,452 | | Loss from operations | ($30,099) | ($19,169) | | Gain from sale of priority review voucher, net | $107,375 | $0 | | Net income (loss) | $73,290 | ($19,507) | | Net income (loss) per share—diluted | $1.89 | ($0.53) | Nine Months 2022 vs 2021 Statement of Operations (in thousands, except per share data) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Product revenue, net | $555 | $0 | | Total revenue | $18,316 | $13,825 | | Research and development | $58,488 | $55,506 | | Selling, general and administrative | $42,187 | $26,656 | | Loss from operations | ($83,576) | ($69,815) | | Gain from sale of priority review voucher, net | $107,375 | $0 | | Net income (loss) | $14,496 | ($70,471) | | Net income (loss) per share—diluted | $0.37 | ($1.92) | Consolidated Statements of Cash Flows Net cash used in operations was $91.0 million, offset by $105.7 million from PRV sale and financing Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($90,972) | ($33,727) | | Net cash provided by (used in) investing activities | $105,693 | ($694) | | Net cash provided by financing activities | $30,601 | $41,013 | | Net increase in cash and cash equivalents | $45,322 | $6,592 | | Cash and cash equivalents—end of period | $168,249 | $145,101 | Notes to Consolidated Financial Statements Notes detail ZTALMY® launch, $110 million PRV sale, Oaktree credit, Sagard financing, and liquidity assessment - ZTALMY® (ganaxolone) received FDA approval on March 18, 2022, and launched commercially in the U.S. in Q3 202220 - The company sold its Rare Pediatric Disease Priority Review Voucher (PRV) for $110.0 million in July 2022, with net proceeds received in August23 - As of September 30, 2022, $75.0 million was drawn from the Oaktree credit agreement, with $25.0 million remaining available through December 2023, subject to milestones26 - Post-quarter, on October 28, 2022, the company secured $32.5 million upfront from a revenue interest financing agreement with Sagard Healthcare Royalty Partners115 - Management concluded that existing cash, including $32.5 million from Sagard, is sufficient to fund operations for at least the next twelve months, resolving going concern uncertainty29 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses ZTALMY® launch, pipeline progress, financial results, and liquidity, projecting cash into Q1 2024 Our Products and Product Candidates Details ZTALMY® commercial launch and ganaxolone pipeline development for SE and TSC, with key trial data expected in 2H 2023 and Q1 2024 - ZTALMY® launched commercially in Q3 2022, generating $0.6 million in net product revenue and receiving over 50 prescription enrollment forms138147 - The Phase 3 RAISE trial for RSE resumed in May 2022 after delays, with top-line data now anticipated in 2H 2023137161162 - The global Phase 3 TrustTSC trial is actively screening patients, with top-line data expected in Q1 2024172 - A second-generation oral ganaxolone formulation is in development for twice-daily dosing, with a Phase 2 LGS trial planned for 2023173175 Results of Operations Q3 and nine-month results were significantly impacted by a $107.4 million PRV sale gain, leading to $73.3 million net income for Q3 Revenue Breakdown (in thousands) | Revenue Source | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $555 | $0 | $555 | $0 | | Federal contract revenue | $1,785 | $1,127 | $5,088 | $4,838 | | Collaboration revenue | $0 | $8,987 | $12,673 | $8,987 | | Total Revenue | $2,340 | $10,114 | $18,316 | $13,825 | - A one-time net gain of $107.4 million from the PRV sale was recognized in Q3 2022219 Operating Expenses (in thousands) | Expense Category | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $19,002 | $18,353 | $58,488 | $55,506 | | Selling, general and administrative | $13,389 | $9,452 | $42,187 | $26,656 | - Increased SG&A expenses were primarily due to higher personnel, training, and commercialization preparation costs for the ZTALMY® launch217 Liquidity and Capital Resources Cash and equivalents totaled $168.2 million as of Q3 2022, bolstered by PRV sale and financing, projected to fund operations into Q1 2024 - Cash and cash equivalents totaled $168.2 million at September 30, 2022222 - Existing cash, including $32.5 million from Sagard, is expected to fund operations into Q1 2024180242 - $75.0 million has been drawn from the Oaktree credit facility, with an additional $25.0 million available through December 2023, subject to milestones225226227 - Cash used in operating activities for the nine months ended September 30, 2022, was $91.0 million, up from $33.7 million in 2021237 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Marinus is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Marinus is not required to provide quantitative and qualitative disclosures about market risk249 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2022, with no material changes in internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022250 - No material changes to internal control over financial reporting occurred during Q3 2022251 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings or aware of any pending actions - The company is not currently involved in any material legal proceedings254 Item 1A. Risk Factors Highlights material changes to financial and IP risks, including potential debt defaults, Oaktree funding, and patent infringement litigation - Debt agreements with Oaktree and Sagard contain restrictive covenants and minimum liquidity requirements of $15.0 million, risking default if breached256269273 - Drawing the final $25.0 million Oaktree tranche is contingent on achieving financing and clinical trial milestones, which may not be met272 - Risk of legal proceedings from third parties, such as Ovid Therapeutics, regarding patents that may encompass the SE product candidate280 - Drug product quality issues, like the IV ganaxolone manufacturing problem, pose risks to clinical development timelines and approvals281283 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the nine months ended September 30, 2022, 10,802 shares were withheld for tax obligations from restricted stock vesting - A total of 10,802 shares were withheld to satisfy taxes related to vested restricted stock during the nine months ended September 30, 2022284 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported Item 4. Mine Safety Disclosures This item is not applicable to the company's operations Item 5. Other Information No other material information was reported Item 6. Exhibits Lists exhibits filed with Form 10-Q, including new financing agreements and officer certifications - Key exhibits filed include the Revenue Interest Financing Agreement with Sagard and the First Amendment to the Credit Agreement with Oaktree289