Minerva Neurosciences(NERV) - 2021 Q2 - Quarterly Report

PART I — Financial Information Presents the unaudited condensed consolidated financial statements and related disclosures for the company Item 1. Financial Statements (Unaudited) Presents Minerva Neurosciences' unaudited condensed consolidated financial statements and detailed notes for Q2 2021 and 2020 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2021, and December 31, 2020 | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :-------------- | :------------------ | | Assets | | | | Cash and cash equivalents | $74,214,767 | $25,356,952 | | Total current assets | $75,225,344 | $27,440,216 | | Total assets | $105,324,490 | $57,626,209 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $4,444,410 | $3,160,252 | | Liability related to sale of future royalties | $62,907,895 | — | | Total liabilities | $69,155,661 | $4,963,608 | | Total stockholders' equity | $36,168,829 | $52,662,601 | | Total liabilities and stockholders' equity | $105,324,490 | $57,626,209 | - Total assets increased significantly from $57.6 million at December 31, 2020, to $105.3 million at June 30, 2021, primarily driven by a substantial increase in cash and cash equivalents[13] - A new liability of $62.9 million related to the sale of future royalties was recorded as of June 30, 2021, contributing to a large increase in total liabilities[13] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income/loss for the three and six months ended June 30, 2021 and 2020 | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (YoY) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (YoY) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Collaborative Revenue | $0 | $41,175,600 | -$41,175,600 | $0 | $41,175,600 | -$41,175,600 | | Research and development expenses | $5,520,928 | $5,766,984 | -$246,056 | $8,779,635 | $13,849,494 | -$5,069,859 | | General and administrative expenses | $3,442,365 | $5,900,518 | -$2,458,153 | $7,691,179 | $10,089,586 | -$2,398,407 | | Total expenses | $8,963,293 | $11,667,502 | -$2,704,209 | $16,470,814 | $23,939,080 | -$7,468,266 | | Net (loss) income | $(10,589,163) | $29,529,376 | -$40,118,539 | $(19,393,896) | $17,378,211 | -$36,772,107 | | Net (loss) income per share, basic | $(0.25) | $0.75 | -$1.00 | $(0.45) | $0.44 | -$0.89 | - The company reported a net loss for both the three and six months ended June 30, 2021, compared to net income in the prior year periods, primarily due to the absence of collaborative revenue recognized in 2020 and the new non-cash interest expense from the sale of future royalties[15] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity for the six months ended June 30, 2021 and 2020, including net loss and stock-based compensation | Metric | January 1, 2021 | June 30, 2021 | | :-------------------------- | :-------------- | :-------------- | | Common Stock (Amount) | $4,272 | $4,272 | | Additional Paid-In Capital | $337,453,776 | $340,353,900 | | Accumulated Deficit | $(284,795,447) | $(304,189,343) | | Total Stockholders' Equity | $52,662,601 | $36,168,829 | - Total stockholders' equity decreased from $52.7 million at January 1, 2021, to $36.2 million at June 30, 2021, primarily due to the net loss incurred during the period, partially offset by stock-based compensation[18] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(11.1) million | $(16.8) million | | Net cash provided by investing activities | $0 | $21.5 million | | Net cash provided by financing activities | $60.0 million | $6.1 million | | Net increase in cash | $48.9 million | $10.8 million | | Cash, cash equivalents and restricted cash - End of period | $74,314,767 | $32,352,075 | - Net cash provided by financing activities significantly increased in 2021 due to the $60 million upfront payment from the sale of future seltorexant royalties[21] - The company's cash, cash equivalents, and restricted cash increased substantially to $74.3 million at June 30, 2021, from $32.4 million at June 30, 2020, primarily driven by the royalty sale proceeds[21] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 — Nature of Operations and Liquidity Describes the company's biopharmaceutical focus, accumulated deficit, liquidity position, and future capital needs - Minerva Neurosciences is a clinical-stage biopharmaceutical company developing roluperidone for schizophrenia and MIN-301 for Parkinson's disease[23] - The company has an accumulated deficit of approximately $304.2 million as of June 30, 2021, and incurred $11.1 million in net cash used in operating activities for the six months ended June 30, 2021[25] - As of June 30, 2021, the company had $74.3 million in cash, cash equivalents, and restricted cash, which is expected to be sufficient for at least the next 12 months[26] - The company will need to raise additional capital for later-stage clinical development programs, with no assurance of obtaining financing on acceptable terms[27] - A securities class action lawsuit filed against the company and its CEO regarding roluperidone development was voluntarily dismissed by the lead plaintiff on July 9, 2021[29] - The ongoing COVID-19 pandemic could adversely affect the company's business, productivity, clinical programs, and financial condition, though it has not had a material adverse impact to date[30][31] NOTE 2 — Significant Accounting Policies Outlines key accounting principles, including revenue recognition, R&D costs, and the treatment of royalty sales - The interim condensed consolidated financial statements are prepared in accordance with GAAP for interim reporting and SEC Regulation S-X, Rule 8-03[32] - Research and development costs are expensed as incurred, including licensing fees, consultant fees, and clinical study expenses[41] - In-process research and development (IPR&D) assets are capitalized at fair value and accounted for as indefinite-lived intangible assets, subject to annual impairment testing[43][44] - Stock-based compensation is recognized using a fair-value measurement method, with the Black-Scholes model for options and closing price for RSUs[45] - The sale of future royalties to Royalty Pharma is treated as debt financing due to the company's continuing involvement and Royalty Pharma's recourse, with the upfront payment recorded as a liability and amortized to interest expense[63] - The company adopted ASU 2018-18 (Collaborative Arrangements) and ASU 2017-04 (Goodwill Impairment) on January 1, 2020[69][70] NOTE 3 — Accrued Expenses and Other Liabilities Details the breakdown and changes in accrued expenses and other liabilities between periods | Accrued Expense Category | June 30, 2021 | December 31, 2020 | | :--------------------------------------- | :-------------- | :------------------ | | Research and development costs and other accrued expenses | $1,631,882 | $1,880,552 | | Accrued bonus | $766,522 | — | | Professional fees | $349,922 | $140,981 | | Vacation pay | $86,099 | — | | Accrued severance | — | $31,876 | | Total | $2,834,425 | $2,053,409 | - Total accrued expenses and other liabilities increased from $2.05 million at December 31, 2020, to $2.83 million at June 30, 2021, primarily due to accrued bonuses and professional fees[71] NOTE 4 — Net (Loss) Income Per Share of Common Stock Explains the calculation of basic and diluted net (loss) income per share and excluded antidilutive securities | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income | $(10,589,163) | $29,529,376 | $(19,393,896) | $17,378,211 | | Weighted average shares outstanding - basic | 42,721,566 | 39,483,187 | 42,721,566 | 39,330,389 | | Dilutive effect | — | 794,884 | — | 814,607 | | Weighted average shares outstanding - diluted | 42,721,566 | 40,278,071 | 42,721,566 | 40,144,996 | | Net (loss) income per share: Basic | $(0.25) | $0.75 | $(0.45) | $0.44 | | Net (loss) income per share: Diluted | $(0.25) | $0.73 | $(0.45) | $0.43 | - For the periods ended June 30, 2021, common stock options, restricted stock units, and common stock warrants were excluded from diluted EPS calculation as their effect was antidilutive due to the net loss[72] NOTE 5 — Co-Development and License Agreement Details Minerva's opt-out from the Janssen seltorexant agreement and subsequent royalty entitlement - Minerva exercised its right to opt out of the co-development agreement with Janssen for seltorexant in June 2020[76] - Upon opting out, Minerva became entitled to mid-single digit royalties on potential future worldwide sales of seltorexant, with no further financial obligations to Janssen[76] - The company recognized $41.2 million in collaborative revenue during the second quarter of 2020, representing a $30 million payment from Janssen and $11.2 million in forgiven accrued expenses[77] NOTE 6 — Sale of Future Royalties Describes the sale of seltorexant royalties to Royalty Pharma, treated as debt financing, and related interest expense - On January 19, 2021, Minerva sold its seltorexant royalty interest to Royalty Pharma for an upfront payment of $60 million and up to $95 million in contingent milestone payments[79] - The transaction is treated as debt financing, with the $60 million upfront payment recorded as a liability related to the sale of future royalties[79] - The liability is amortized to interest expense using the effective interest method, with an estimated effective annual interest rate of approximately 10.5%[80] | Metric | June 30, 2021 | | :------------------------------------------ | :-------------- | | Upfront payment from the sale of future royalties | $60,000,000 | | Non-cash interest expense associated with the sale of future royalties | $2,907,895 | | Liability related to the sale of future royalties | $62,907,895 | NOTE 7 — Stockholders' Equity Provides information on the At-the-Market Equity Offering Program and outstanding term loan warrants - Under the At-the-Market Equity Offering Program, the company sold 3,381,608 shares of common stock in 2020, generating approximately $12.1 million in net proceeds[82] - Warrants to purchase 40,790 shares of common stock, issued in 2016, remained outstanding and exercisable as of June 30, 2021[83] NOTE 8 — Stock Award Plan and Stock-Based Compensation Details stock option activity, unrecognized compensation costs, and stock-based compensation expense | Stock Option Activity | Shares Issuable | Weighted Average Exercise Price | | :-------------------------- | :-------------- | :------------------------------ | | Outstanding January 1, 2021 | 10,050,523 | $6.60 | | Granted | 140,000 | $2.90 | | Forfeited | (465,775) | $6.53 | | Outstanding June 30, 2021 | 9,724,748 | $6.55 | | Exercisable June 30, 2021 | 6,943,670 | $6.80 | | Available for future grant | 483,391 | | - Total unrecognized compensation costs related to non-vested stock options at June 30, 2021, were approximately $7.6 million, to be recognized over a weighted-average period of 1.64 years[84] | Stock-Based Compensation Expense | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $641,373 | $694,540 | $1,285,549 | $1,376,153 | | General and administrative | $742,687 | $2,790,942 | $1,614,575 | $4,307,516 | | Total | $1,384,060 | $3,485,482 | $2,900,124 | $5,683,669 | NOTE 9 — Commitments and Contingencies Refers to other notes for details on legal proceedings and lease commitments - Legal proceedings are discussed in Note 1[88] - Lease commitments are discussed in Note 10[89] NOTE 10 — Leases Outlines the company's office sublease, new license agreement, and associated lease costs - The company's office sublease for its Waltham, MA office space expires on July 31, 2021[90] - A new 12-month office license agreement, starting August 1, 2021, for the same office space, will not be recognized on the balance sheet due to its short term[91] | Lease Information | Six Months Ended June 30, 2021 | | :-------------------------------- | :--------------------------- | | Operating Sublease cost | $89,635 | | Operating cash flows used for operating Sublease | $97,730 | | Weighted average remaining Sublease term | 0.1 years | | Weighted average discount rate | 10% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition, operations, liquidity, and critical accounting policies Overview Introduces Minerva's clinical-stage focus, product candidates, seltorexant royalty sale, and future financial outlook - Minerva Neurosciences is a clinical-stage biopharmaceutical company focused on developing product candidates for central nervous system (CNS) diseases[95] - The company is developing roluperidone for negative symptoms in schizophrenia and MIN-301 for Parkinson's disease[96] - In January 2021, Minerva sold its rights to potential seltorexant royalties to Royalty Pharma[96] - The company plans to continue communication with the FDA regarding roluperidone data and aims for an NDA submission in the first half of 2022[97] - Minerva has not generated revenue from product sales and expects to incur net losses and negative cash flow for the foreseeable future[98] Clinical and Regulatory Update Provides updates on the clinical development and regulatory status of roluperidone and seltorexant Roluperidone Summarizes Phase 3 trial results for roluperidone, including OLE data, prior trial outcomes, and bioequivalence study progress - The 40-week open-label extension (OLE) of the Phase 3 trial for roluperidone showed mean improvements in negative symptoms (6.8 points for 32 mg, 7.5 points for 64 mg) and functional improvement (PSP total score: 12.3 points for 32 mg, 14.5 points for 64 mg)[100] - Roluperidone was safe and well-tolerated in the OLE, with headaches (7.8%) and worsening schizophrenia (5.4%) as the most frequently reported treatment-emergent adverse events[103] - The 12-week double-blind, placebo-controlled portion of the Phase 3 trial did not meet its primary or key secondary endpoints in the intent-to-treat population[104] - A subsequent analysis of the modified ITT population treated with the 64 mg dose showed nominally statistically significant results for NSFS (p ≤0.044) and PSP total score (p ≤0.017)[104] - Enrollment for a pivotal bioequivalence study comparing roluperidone formulations was completed on June 29, 2021, with top-line results anticipated in Q3 2021[105] Seltorexant Details Minerva's opt-out from the Janssen agreement and the subsequent sale of seltorexant royalty rights - Minerva opted out of the seltorexant development agreement with Janssen in June 2020, securing mid-single digit royalties on future worldwide sales[106] - The company sold its seltorexant royalty rights to Royalty Pharma in January 2021 for a $60 million upfront payment and up to $95 million in additional milestone payments[106] Financial Overview Explains the company's revenue sources, R&D and G&A expenses, foreign exchange, and non-cash interest expense - The company has not generated revenue from product sales and recognized $41.2 million in collaborative revenue in 2020 due to opting out of the Janssen agreement[107][108] - Research and development expenses include costs for clinical trials, licensing fees, materials, regulatory compliance, and personnel[109] - General and administrative expenses cover executive, finance, legal, auditing, and tax functions, including salaries, facility costs, and professional fees[112] - Foreign exchange losses primarily arise from clinical trial expenses denominated in Euros[114] - Non-cash interest expense for the sale of future royalties is associated with the Royalty Pharma agreement[115] Results of Operations Compares financial performance for the three and six months ended June 30, 2021, versus 2020 Comparison of Three Months Ended June 30, 2021 versus June 30, 2020 Compares collaborative revenue, expenses, and other financial metrics for the three months ended June 30, 2021 and 2020 | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Collaborative Revenue | $0 | $41,175,600 | -$41,175,600 | | Research and Development Expenses | $5,520,928 | $5,766,984 | -$246,056 | | General and Administrative Expenses | $3,442,365 | $5,900,518 | -$2,458,153 | | Foreign Exchange Losses | $18,997 | $3,661 | +$15,336 | | Investment Income | $4,566 | $24,939 | -$20,373 | | Non-cash interest expense for sale of future royalties | $1,611,439 | $0 | +$1,611,439 | - The decrease in R&D expenses was primarily due to the completion of the three-month core study portion of the roluperidone Phase 3 clinical trial in May 2020[117] - The decrease in G&A expenses was mainly driven by lower non-cash stock-based compensation and severance benefits[118] Comparison of Six Months Ended June 30, 2021 versus June 30, 2020 Compares collaborative revenue, expenses, and other financial metrics for the six months ended June 30, 2021 and 2020 | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Collaborative Revenue | $0 | $41,175,600 | -$41,175,600 | | Research and Development Expenses | $8,779,635 | $13,849,494 | -$5,069,859 | | General and Administrative Expenses | $7,691,179 | $10,089,586 | -$2,398,407 | | Foreign Exchange Losses | $23,853 | $13,053 | +$10,800 | | Investment Income | $8,666 | $154,744 | -$146,078 | | Non-cash interest expense for sale of future royalties | $2,907,895 | $0 | +$2,907,895 | - The decrease in R&D expenses was primarily due to lower costs for the Phase 3 clinical trial of roluperidone following the completion of its core study portion in May 2020[123] - The decrease in G&A expenses was mainly due to a reduction in non-cash stock-based compensation expenses and severance benefits[124] Liquidity and Capital Resources Discusses the company's cash position, accumulated deficit, future capital needs, and funding strategies Sources of Liquidity Details the company's cash reserves and accumulated deficit, assessing sufficiency for future operations - As of June 30, 2021, the company had an accumulated deficit of approximately $304.2 million[128] - The company held approximately $74.3 million in cash, cash equivalents, and restricted cash as of June 30, 2021, which is believed to be sufficient for at least the next 12 months[128][129] - Future expenditures will depend on clinical trial design, R&D progress, commercial infrastructure, and product launch costs, necessitating additional capital[130] Sources of Funds Outlines funding mechanisms, including the ATM program and the seltorexant royalty sale proceeds - Under its ATM Equity Offering Program, the company sold 3,381,608 shares of common stock in 2020, generating approximately $12.1 million in net proceeds[131] - In January 2021, Minerva received a $60 million upfront payment from Royalty Pharma for the sale of its seltorexant royalty interest, with potential for up to $95 million in future milestone payments[133] Uses of Funds Explains expected increases in expenses and the need for future financing, acknowledging market uncertainties - The company has not generated revenue from product sales and expects expenses to increase with ongoing development, clinical trials, and regulatory approval processes[134] - Future cash needs are expected to be financed through equity offerings, debt financings, and collaborations, which may result in stockholder dilution or restrictive covenants[135] - The uncertainty and volatility in capital markets, exacerbated by the COVID-19 pandemic, may negatively impact the availability and cost of capital[135] Cash Flows Summarizes cash flow activities from operations, investing, and financing for the six months ended June 30, 2021 and 2020 | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash (used in) provided by: Operating activities | $(11.1) million | $(16.8) million | | Net cash (used in) provided by: Investing activities | $0 | $21.5 million | | Net cash (used in) provided by: Financing activities | $60.0 million | $6.1 million | | Net increase in cash | $48.9 million | $10.8 million | - Net cash used in operating activities for the six months ended June 30, 2021, was $11.1 million, primarily due to a net loss of $19.4 million, partially offset by stock-based compensation and non-cash interest expense[139] - Net cash provided by financing activities for the six months ended June 30, 2021, was $60 million, entirely from the proceeds of the sale of future royalties[142] Critical Accounting Policies and Estimates Identifies key accounting policies and estimates, including R&D, IPR&D, goodwill, and royalty sale liability - The most critical accounting policies and estimates for the six months ended June 30, 2021, include research and development costs, in-process research and development, goodwill, income taxes, and the liability related to the sale of future royalties[144][145] - The sale of future royalties to Royalty Pharma is treated as debt financing, with the upfront payment recorded as a liability and amortized to interest expense using the effective interest rate method[146] - Estimates of future royalty payments are periodically assessed, and material differences from previous estimates will result in prospective adjustments to non-cash interest expense[147] Recent Accounting Pronouncements Refers to Note 2 for details on recently adopted accounting pronouncements - The company's significant accounting policies, including recently adopted pronouncements, are described in Note 2 to the condensed consolidated financial statements[149] Item 3. Quantitative and Qualitative Disclosures about Market Risk States that no market risk disclosures are applicable for the reported period - This item is not applicable to the company[150] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures and absence of material internal control changes - The company's disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of June 30, 2021[152] - There were no material changes in internal control over financial reporting during the latest fiscal quarter[153] PART II — Other Information Presents other required disclosures including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Details the consolidation and voluntary dismissal of securities class action lawsuits against the company - Two securities class action complaints were filed against the company and its executives regarding alleged false statements about roluperidone development[155] - The lawsuits were consolidated, and the appointed lead plaintiff voluntarily dismissed the case on July 9, 2021, resulting in the closure of the lawsuit[155] Item 1A. Risk Factors Updates on significant risks including accumulated losses, capital needs, and COVID-19 impacts - The company has incurred significant losses since inception, with an accumulated deficit of $304.2 million as of June 30, 2021, and expects to continue incurring losses[157][158] - Additional capital will be required to finance operations and product development, and there is no guarantee that such funding will be available on acceptable terms, potentially leading to dilution or scaling back operations[159][160] - The ongoing COVID-19 pandemic poses risks including negative impacts on productivity, delays in clinical programs, difficulties in patient enrollment, and adverse effects on capital markets and the company's financial condition[161][162][163] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered equity sales or repurchases during the reported period - No unregistered securities were sold during the six months ended June 30, 2021[165] - No securities were repurchased during the six months ended June 30, 2021[166] Item 3. Defaults Upon Senior Securities States that no defaults upon senior securities are applicable for the reported period - This item is not applicable to the company[167] Item 4. Mine Safety Disclosures States that no mine safety disclosures are applicable for the reported period - This item is not applicable to the company[168] Item 5. Other Information States that no other information is applicable for the reported period - This item is not applicable to the company[169] Item 6. Exhibits Lists exhibits filed with the report, including corporate documents and certifications - The exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[172] SIGNATURES Contains the official signature certifying the filing of the report - The report is signed by Geoffrey Race, Chief Financial Officer and Chief Business Officer of Minerva Neurosciences, Inc., on August 2, 2021[177]