Marinus Pharmaceuticals(MRNS) - 2020 Q4 - Annual Report

Form 10-K Cover Page This is the 2020 annual report for Marinus Pharmaceuticals, Inc, traded on Nasdaq as MRNS - This is an Annual Report on Form 10-K for Marinus Pharmaceuticals, Inc for the fiscal year ended December 31, 2020[2] - The company's common stock is traded on the Nasdaq Global Market under the symbol MRNS[3] - The aggregate market value of the registrant's common stock held by non-affiliates as of June 30, 2020, was $303,163,851[5] - As of March 8, 2021, there were 36,578,460 shares of common stock outstanding[6] Cautionary Note Regarding Forward-Looking Statements The report contains forward-looking statements involving substantial risks and uncertainties that are not guaranteed - This report contains forward-looking statements involving substantial risks and uncertainties, and these statements are based on current facts, factors, and future expectations, which are not guaranteed[9] - Key forward-looking statements relate to the development and commercialization of ganaxolone, timing of clinical trials and regulatory submissions (NDA and MAA), capital requirements, market size estimates, and the potential impact of the COVID-19 pandemic[10][14] - The company expects to submit an NDA for ganaxolone for CDD in mid-2021 and an MAA in Q3 2021, with top-line data from the Phase 3 RSE trial expected in the first half of 2022[10][14] Risk Factor Summary The company faces principal risks related to its financial position, clinical development, and commercialization of ganaxolone - The company faces principal risks related to its financial position, clinical development, commercialization, dependence on third parties, regulatory compliance, intellectual property, business operations (including COVID-19), and common stock ownership[15] - Financial risks include a history of significant losses, no product revenue to date, and the need for additional capital, which could be dilutive[16][18] - Development and commercialization risks are centered on the success of its sole clinical-stage product candidate, ganaxolone, including uncertain clinical trial outcomes, potential for undesirable side effects, and competition[17][18] - The company relies on third parties for clinical trials and manufacturing and is subject to risks from government funding contracts (BARDA)[20][24] - Intellectual property risks include the inability to protect IP rights and potential infringement lawsuits from third parties like Ovid Therapeutics, Inc[22][25] Part I Business Marinus Pharmaceuticals is a clinical-stage company focused on developing ganaxolone for rare seizure disorders Overview and COVID-19 Impact The company is developing ganaxolone for rare seizure disorders, with the COVID-19 pandemic causing some operational delays - Marinus is a clinical-stage pharmaceutical company focused on developing ganaxolone, a positive allosteric modulator of GABAA, for rare seizure disorders in both intravenous (IV) and oral formulations[28] - The COVID-19 pandemic has affected operations, causing some delays in Phase 1 trial enrollment, but did not have a material impact on business, operating results, or financial condition for the year ended December 31, 2020[30] - The company has implemented measures like remote site monitoring and telemedicine to mitigate the impact of COVID-19 on its clinical trials[30] Our Pipeline The pipeline is focused on ganaxolone for Status Epilepticus, CDD, TSC, and PCDH19-Related Epilepsy - The company is developing ganaxolone for several indications, including Status Epilepticus (SE), CDKL5 Deficiency Disorder (CDD), Tuberous Sclerosis Complex (TSC), and PCDH19-Related Epilepsy (PCDH19-RE)[32] - Status Epilepticus (SE): A Phase 3 trial (RAISE) in Refractory Status Epilepticus (RSE) began enrollment in January 2021, with top-line data expected in H1 2022, partly funded by a BARDA contract worth up to $51 million[36][38][39] Phase 2 RSE Trial Efficacy Data | Cohort | No escalation to IV anesthetics within 24 hrs (Primary Endpoint) | Status-free through 24 hrs from infusion initiation* | No SE relapse during the 4-wk follow up period | | :--- | :--- | :--- | :--- | | Target (713 mg/day) | 100% (8 of 8) | 88% (7 of 8) | 100% (6 of 6) | | Medium (650 mg/day) | 100% (4 of 4) | 100% (4 of 4) | 67% (2 of 3) | | Low (500 mg/day) | 100% (5 of 5) | 100% (5 of 5) | 50% (1 of 2) | - CDKL5 Deficiency Disorder (CDD): The Phase 3 Marigold Study met its primary endpoint, showing a 32.2% median reduction in major motor seizure frequency compared to 4.0% for placebo (p=0.002), with an NDA submission planned for mid-2021[43][44] - Tuberous Sclerosis Complex (TSC): A Phase 2 open-label trial (CALM Study) is ongoing, with top-line data expected in Q3 2021, and a Phase 3 trial planned for Q3 2021[50] - PCDH19-Related Epilepsy (PCDH19-RE): Top-line data from the Phase 2 Violet Study showed a median 61.5% reduction in seizure frequency for ganaxolone versus 24.0% for placebo, but the result was not statistically significant (p=0.17)[56] Ganaxolone and Strategy The company's strategy is to develop ganaxolone, a generally well-tolerated GABAA receptor modulator, for hospital and orphan indications - Ganaxolone is a synthetic analog of allopregnanolone that modulates both synaptic and extrasynaptic GABAA receptors, important for its anti-seizure, antidepressant, and anxiolytic potential[28][58][59] - Oral ganaxolone has been administered to over 1,600 individuals and was generally well-tolerated, with the most common side effect being somnolence; IV ganaxolone also had an acceptable safety profile[61][62][67] - The company's strategy is to pursue hospital-based indications like SE, orphan genetic epilepsies like CDD and TSC, and potentially targeted depression disorders[71][76] Intellectual Property and Collaborations The company relies on patents for formulations and methods of use, alongside key collaborations with CyDex and NovaMedica - The company owns patent families covering nanoparticle formulations (expiring 2026), manufacturing processes (expiring 2030), IV formulations (expiring 2036-2040), and methods of use for various indications (expiring 2037-2040)[75][79][80][81] - Marinus has an exclusive license agreement with CyDex for its Captisol® drug formulation system, used in the IV formulation, which requires milestone and royalty payments[87][88] - The company has an agreement with NovaMedica for the development and commercialization of ganaxolone in Russia and certain other countries[77][90][92] - Marinus has a license agreement with Purdue Neuroscience Company for know-how and technology related to ganaxolone, requiring royalties in the high single digits up to 10% of net product sales[94] Competition, Manufacturing, and Commercial Operations The company faces competition from established firms, outsources all manufacturing, and plans to build its own US sales infrastructure - The company faces competition from established AEDs and companies developing therapies for rare seizure disorders, including Novartis, Jazz Pharmaceuticals, and Ovid Therapeutics[95][101] - Manufacturing is fully outsourced to contract manufacturing organizations (CMOs) under cGMP regulations[102][104] - If ganaxolone is approved, the company intends to build its own sales and marketing infrastructure in the U.S. to target specialists[106] Government Regulation and Healthcare Reform The company is subject to extensive FDA regulation and healthcare laws that create pricing pressure and compliance risks - The company is subject to extensive regulation by the FDA in the U.S. and similar agencies abroad, covering all stages from preclinical development to post-approval marketing[107] - The FDA has granted ganaxolone Orphan Drug Designation for SE, CDD, and PCDH19-RE, and Rare Pediatric Disease (RPD) Designation for CDD, which may provide market exclusivity and a priority review voucher[57][133] - Healthcare legislation like the Affordable Care Act (ACA) and other reforms exert downward pressure on pricing and reimbursement, potentially impacting future profitability[168][173] - The company must comply with numerous healthcare laws, including the Anti-Kickback Statute (AKS), False Claims Act (FCA), and data privacy laws like HIPAA and GDPR, with violations leading to significant penalties[180][183][188] Human Capital and Corporate Information The company had 72 employees at year-end 2020 and effected a 1-for-4 reverse stock split - As of December 31, 2020, the company had 65 full-time and 7 part-time employees, with a voluntary turnover rate of less than 5% in 2020[205][206] - On September 23, 2020, the company effected a 1-for-4 reverse stock split, and all share and per-share amounts in the report are adjusted to reflect this split[209] Risk Factors The company faces substantial risks in finance, clinical development, commercialization, third-party reliance, and regulatory compliance Risks Related to Financial Position and Need for Additional Capital The company has a history of significant losses and will require substantial additional capital to fund future operations - The company has a history of significant operating losses ($67.5 million in 2020) and an accumulated deficit of $311.9 million as of December 31, 2020, and may never achieve profitability[212] - Marinus will require substantial additional capital to fund operations, as existing cash is expected to last only into Q2 2022[220][221] - The company's ability to use its net operating loss (NOL) carryforwards of approximately $212.0 million may be limited due to ownership changes under Section 382 of the tax code[229][230] Risks Related to Clinical Development and Regulatory Approval Success depends entirely on ganaxolone, which faces uncertain regulatory approval and potential safety or efficacy issues - The company's success is entirely dependent on the successful clinical development, regulatory approval, and commercialization of its sole clinical-stage product candidate, ganaxolone[231] - There is a risk that the FDA may not find the single Phase 3 Marigold Study sufficient for approval of ganaxolone for CDD, despite prior feedback[233] - Ganaxolone may cause undesirable side effects, such as somnolence, which could delay or prevent regulatory approval or result in a restrictive label[239][241] - The company may not receive a rare pediatric disease (RPD) priority review voucher for CDD even with the RPD designation, as the NDA must meet several eligibility criteria at the time of approval[272] Risks Related to Commercialization Commercial success is uncertain and depends on market acceptance, reimbursement, and competition from established players - Commercial success depends on gaining market acceptance and adequate reimbursement from payers, which is uncertain[281][294] - The company faces substantial competition from over 25 approved AEDs and other drugs in development from companies like GW Pharmaceuticals, Zogenix, and Ovid[285][287] - Marinus currently has no sales and marketing organization and will need to build one or partner with third parties, which carries its own risks and costs[293] - Market size estimates for rare seizure disorders may prove to be incorrect, which would adversely affect results[298] Risks Related to Dependence on Third Parties The company relies on third-party CROs and CMOs for all clinical and manufacturing activities and is subject to BARDA contract terms - The company relies on third-party CROs to conduct clinical trials and CMOs for all manufacturing, and failure of these parties to perform could delay or halt development[307][313][314] - The BARDA contract for RSE development, while providing funding, subjects the company to government contract provisions, including potential termination, audit rights, and U.S. manufacturing requirements[317][319][322] - Future collaborations are key to the company's strategy, but dependence on partners for development and commercialization creates risks related to performance and potential termination of agreements[327][328] Risks Related to Regulatory Compliance The company must navigate complex healthcare laws and pricing programs where non-compliance can lead to significant penalties - Healthcare reform, such as the ACA, and other legislative changes could increase costs, add pricing pressure, and make it more difficult to commercialize ganaxolone[333][335] - Participation in government pricing programs like Medicaid Drug Rebate and 340B imposes complex reporting and payment obligations, and failure to comply can result in significant penalties and fines[342][344] - The company is subject to anti-kickback, fraud and abuse, and other healthcare laws (e.g., FCPA, HIPAA, GDPR), which could expose it to criminal sanctions, civil penalties, and reputational harm[354][360][364] Risks Related to Intellectual Property The company faces IP risks from a lack of patent on the ganaxolone compound and a potential infringement lawsuit from Ovid Therapeutics - The ganaxolone compound itself is not patented, and the company relies on patents for formulations, manufacturing methods, and methods of use, which may not provide sufficient protection[378][382] - Ovid Therapeutics, Inc. owns patents with claims that may encompass ganaxolone for CDD and PCDH19, which could lead to a costly infringement lawsuit that could prevent or delay commercialization[389] - Protecting IP rights globally is expensive and difficult, and laws in some countries offer less protection than in the U.S[390] - Intellectual property developed under the BARDA contract may be subject to government rights, including "march-in" rights and a preference for U.S. manufacturing[402] Risks Related to Business Operations The COVID-19 pandemic and the challenges of organizational growth pose significant operational risks - The COVID-19 pandemic could adversely affect business by delaying clinical trials, disrupting supply chains, and impacting the ability to raise capital[405][408][409] - The company will need to grow its organization to support development and commercialization, which presents challenges in managing growth effectively[414][417] Risks Related to Ownership of Common Stock The company's stock price is highly volatile, and significant insider ownership could prevent a change in control - The market price of the company's common stock has been and may continue to be highly volatile[418] - Executive officers, directors, and 5%+ stockholders collectively own approximately 42.7% of voting stock, giving them substantial influence and potentially preventing a change in control[423] - The company's charter includes anti-takeover provisions, such as a classified board and the inability for stockholders to act by written consent, which could discourage an acquisition[429][430] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[443] Properties The company leases approximately 22,500 square feet of office space in Radnor, Pennsylvania, under a lease expiring in 2025 - The company's principal offices are located in a leased space of approximately 22,500 square feet in Radnor, Pennsylvania, with the lease expiring in 2025[444] Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[445] Mine Safety Disclosures This item is not applicable to the company - Not applicable[446] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is listed on the Nasdaq Global Market under the symbol 'MRNS' with approximately 20 holders of record - The company's common stock is listed on the Nasdaq Global Market under the symbol 'MRNS'[449] - As of March 8, 2021, there were approximately 20 holders of record of the company's common stock[449] Selected Financial Data As a smaller reporting company, Marinus Pharmaceuticals is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide this information[453] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2020 net loss increased to $67.5 million, driven by higher R&D and G&A expenses, with cash expected to fund operations into Q2 2022 Comparison of Operations (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Federal contract revenue | $1,718 | $0 | | Research and development | $51,106 | $42,966 | | General and administrative | $18,549 | $11,456 | | Loss from operations | ($67,937) | ($54,422) | | Net loss | ($67,475) | ($54,121) | | Net loss per share | ($2.80) | ($3.97) | Research & Development Expenses by Program (in thousands) | Program | 2020 | 2019 | | :--- | :--- | :--- | | CDKL5 deficiency disorder (CDD) | $13,044 | $10,108 | | Refractory status epilepticus (RSE) | $9,767 | $3,996 | | PCDH19-related epilepsy (PCDH19-RE) | $6,011 | $7,417 | | Tuberous Sclerosis (TSC) | $1,821 | $0 | | Postpartum depression | $0 | $6,809 | | Indirect research and development | $20,463 | $14,636 | | Total | $51,106 | $42,966 | - The increase in R&D expenses in 2020 was primarily due to enhanced drug development activity for the RSE program and continued costs for the CDD program, offset by decreased spending on PCDH19-RE and the halt of the postpartum depression program[475][477] - General and administrative expenses increased by $7.1 million, primarily due to a $2.7 million increase in legal and consulting fees and a $1.5 million increase in headcount costs as the company prepares for potential commercialization[478] - The company ended 2020 with $140.0 million in cash, cash equivalents, and investments, which management believes is sufficient to fund operations into the second quarter of 2022[457][490] - During 2020, the company raised approximately $107.8 million in net proceeds from two underwritten public offerings and its at-the-market (ATM) equity program[482][483][485] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Marinus Pharmaceuticals is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide this information[502] Financial Statements and Supplementary Data This section incorporates by reference the company's financial statements, notes, and auditor reports, which begin on page F-1 - The company's financial statements, notes, and auditor reports are included starting on page F-1[503] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[504] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2020 - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2020[505] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2020[508] - A material weakness in IT general controls related to segregation of duties, disclosed in the 2019 Form 10-K, was successfully remediated as of September 2020[510] Other Information The company appointed Steven E Pfanstiel as its new CFO, effective April 2021, following the separation of the former CFO - On March 9, 2021, CFO Edward F. Smith separated from the company and will receive nine months of base salary ($307,500) as severance and accelerated vesting of all unvested stock options[511][513] - Steven E. Pfanstiel was appointed as the new Chief Financial Officer and Treasurer, effective April 12, 2021[516] - Mr. Pfanstiel's employment agreement includes an annual base salary of $380,000, a target bonus of 40% of base salary, and a sign-on inducement stock option to purchase 220,000 shares of common stock[519][520] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Certain Relationships Information for Items 10 through 14 is incorporated by reference from the company's 2021 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting of shareholders[530][532][533][534][535] Part IV Exhibits, Financial Statement Schedules This section lists all documents filed as part of the report, including financial statements and material contracts - This section lists all exhibits filed with the Form 10-K, including charter documents, material contracts like the BARDA contract and license agreements, and employment agreements for key executives[537][539] Form 10-K Summary No Form 10-K summary is provided - None[544] Financial Statements Reports of Independent Registered Public Accounting Firms Ernst & Young LLP audited the 2020 financial statements, identifying 'Clinical Trial Prepaid and Accrued Expenses' as a Critical Audit Matter - Ernst & Young LLP audited the 2020 financial statements and issued an unqualified opinion[552] - KPMG LLP audited the 2019 financial statements[561] - A Critical Audit Matter for the 2020 audit was identified as 'Clinical Trial Prepaid and Accrued Expenses' due to the significant estimation required by management to determine the progress of services performed by vendors[556][557][558] Financial Statements Data The company's total assets increased to $150.5 million in 2020, while the net loss grew to $67.5 million Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $138,509 | $90,943 | | Total current assets | $146,267 | $94,134 | | Total assets | $150,462 | $98,842 | | Total current liabilities | $10,729 | $8,031 | | Total liabilities | $13,263 | $11,073 | | Total stockholders' equity | $137,199 | $59,569 | Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Federal contract revenue | $1,718 | $0 | | Research and development | $51,106 | $42,966 | | General and administrative | $18,549 | $11,456 | | Loss from operations | ($67,937) | ($54,422) | | Net loss | ($67,475) | ($54,121) | Statement of Cash Flows Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($60,912) | ($48,633) | | Net cash (used in) provided by investing activities | ($738) | $3,881 | | Net cash provided by financing activities | $109,216 | $67,968 | | Net increase in cash and cash equivalents | $47,566 | $23,216 | Notes to Financial Statements The notes detail accounting policies, liquidity needs, and significant commitments, including royalty and milestone payments - The company's critical accounting policy involves estimating clinical trial expenses by matching costs with the period in which services are performed, which requires significant judgment[497][612] - As of December 31, 2020, the company had $212.0 million in federal and $209.5 million in state net operating loss (NOL) carryforwards, for which a full valuation allowance has been recorded[671][676] - The company is obligated to make future milestone payments and pay royalties to CyDex and Purdue upon successful development and commercialization of ganaxolone[661][663] - In December 2019, the company issued 30,000 shares of Series A Convertible Preferred Stock in a private placement for net proceeds of $28.2 million, resulting in an $8.9 million charge to equity due to a beneficial conversion feature[654][659]