UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019
Or
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-37524
vTv Therapeutics Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
47-3916571 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
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4170 Mendenhall Oaks Pkwy High Point, NC |
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27265 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(336) 841-0300
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
Class A common stock, par value $0.01 per share |
VTVT |
NASDAQ Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
|
|
|
|
|
|
Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
|
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Emerging growth company |
☒ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
|
Class of Stock |
|
Shares Outstanding as of October 30, 2019 |
|
|
|
Class A common stock, par value $0.01 per share |
|
|
36,808,933 |
|
|
Class B common stock, par value $0.01 per share |
|
|
23,094,221 |
|
vTv THERAPEUTICS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED September 30, 2019
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PAGE |
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Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018 |
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4 |
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5 |
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6 |
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8 |
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9 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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23 |
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Item 3. |
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31 |
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Item 4. |
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32 |
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Item 1. |
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32 |
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Item 1A. |
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33 |
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Item 2. |
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33 |
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Item 3. |
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33 |
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Item 4. |
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33 |
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Item 5. |
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33 |
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Item 6. |
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34 |
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35 |
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2
PART I – FINANCIAL INFORMATION
The financial statements and other disclosures contained in this report include those of vTv Therapeutics Inc. (“we”, the “Company” or the “Registrant”), which is the registrant, and those of vTv Therapeutics LLC (“vTv LLC”), which is the principal operating subsidiary of the Registrant. Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “we”, “us” and “our” refer to vTv Therapeutics Inc. and its consolidated subsidiaries.
3
Condensed Consolidated Balance Sheets
(in thousands, except number of shares and per share data)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
||
|
|
(Unaudited) |
|
|
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|
|
|
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Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
2,436 |
|
|
$ |
1,683 |
|
|
Accounts receivable, net |
|
10 |
|
|
|
— |
|
|
Prepaid expenses and other current assets |
|
870 |
|
|
|
666 |
|
|
Current deposits |
|
251 |
|
|
|
1,124 |
|
|
Total current assets |
|
3,567 |
|
|
|
3,473 |
|
|
Restricted cash and cash equivalents, long-term |
|
2,500 |
|
|
|
2,500 |
|
|
Property and equipment, net |
|
46 |
|
|
|
70 |
|
|
Operating lease right-of-use assets |
|
85 |
|
|
|
— |
|
|
Long-term investments |
|
2,480 |
|
|
|
2,480 |
|
|
Long-term deposits |
|
444 |
|
|
|
36 |
|
|
Total assets |
$ |
9,122 |
|
|
$ |
8,559 |
|
|
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
6,898 |
|
|
$ |
7,702 |
|
|
Operating lease liabilities |
|
91 |
|
|
|
— |
|
|
Current portion of deferred revenue |
|
31 |
|
|
|
1,752 |
|
|
Current portion of notes payable |
|
7,442 |
|
|
|
9,383 |
|
|
Total current liabilities |
|
14,462 |
|
|
|
18,837 |
|
|
Notes payable, net of current portion |
|
1,363 |
|
|
|
6,330 |
|
|
Deferred revenue, net of current portion |
|
1,040 |
|
|
|
1,067 |
|
|
Warrant liability, related party |
|
1,878 |
|
|
|
2,436 |
|
|
Other liabilities |
|
260 |
|
|
|
260 |
|
|
Total liabilities |
|
19,003 |
|
|
|
28,930 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
37,268 |
|
|
|
62,482 |
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized, 35,439,070 and 20,347,065 shares outstanding as of September 30, 2019 and December 31, 2018, respectively |
|
354 |
|
|
|
203 |
|
|
Class B Common Stock, $0.01 par value; 100,000,000 shares authorized, and 23,094,221 outstanding as of September 30, 2019 and December 31, 2018 |
|
232 |
|
|
|
232 |
|
|
Additional paid-in capital |
|
175,990 |
|
|
|
150,595 |
|
|
Accumulated deficit |
|
(223,725 |
) |
|
|
(233,883 |
) |
|
Total stockholders’ deficit attributable to vTv Therapeutics Inc. |
|
(47,149 |
) |
|
|
(82,853 |
) |
|
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit |
$ |
9,122 |
|
|
$ |
8,559 |
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
Condensed Consolidated Statements of Operations - Unaudited
(in thousands, except number of shares and per share data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
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September 30, |
|
|
September 30, |
|
||||||||||
|
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2019 |
|
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2018 |
|
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2019 |
|
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2018 |
|
||||
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Revenue |
$ |
8 |
|
|
$ |
3,375 |
|
|
$ |
2,757 |
|
|
$ |
7,912 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Research and development |
|
3,663 |
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|
|
2,698 |
|
|
|
10,713 |
|
|
|
20,235 |
|
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General and administrative |
|
1,770 |
|
|
|
2,158 |
|
|
|
6,548 |
|
|
|
7,150 |
|
|
Total operating expenses |
|
5,433 |
|
|
|
4,856 |
|
|
|
17,261 |
|
|
|
27,385 |
|
|
Operating loss |
|
(5,425 |
) |
|
|
(1,481 |
) |
|
|
(14,504 |
) |
|
|
(19,473 |
) |
|
Other income |
|
— |
|
|
|
10 |
|
|
|
1 |
|
|
|
46 |
|
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Other (expense) income – related party |
|
(146 |
) |
|
|
319 |
|
|
|
1,050 |
|
|
|
610 |
|
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Interest income |
|
15 |
|
|
|
13 |
|
|
|
41 |
|
|
|
47 |
|
|
Interest expense |
|
(404 |
) |
|
|
(822 |
) |
|
|
(1,544 |
) |
|
|
(2,547 |
) |
|
Loss before income taxes and noncontrolling interest |
|
(5,960 |
) |
|
|
(1,961 |
) |
|
|
(14,956 |
) |
|
|
(21,317 |
) |
|
Income tax provision |
|
— |
|
|
|
— |
|
|
|
100 |
|
|
|
200 |
|
|
Net loss before noncontrolling interest |
|
(5,960 |
) |
|
|
(1,961 |
) |
|
|
(15,056 |
) |
|
|
(21,517 |
) |
|
Less: net loss attributable to noncontrolling interest |
|
(2,352 |
) |
|
|
(1,165 |
) |
|
|
(6,411 |
) |
|
|
(14,697 |
) |
|
Net loss attributable to vTv Therapeutics Inc. |
$ |
(3,608 |
) |
|
$ |
(796 |
) |
|
$ |
(8,645 |
) |
|
$ |
(6,820 |
) |
|
Net loss attributable to vTv Therapeutics Inc. common shareholders |
$ |
(4,115 |
) |
|
$ |
(796 |
) |
|
$ |
(12,880 |
) |
|
$ |
(6,820 |
) |
|
Net loss per share of vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
$ |
(0.13 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.64 |
) |
|
Weighted-average number of vTv Therapeutics Inc. Class A Common Stock, basic and diluted |
|
32,126,130 |
|
|
|
12,305,949 |
|
|
|
27,709,486 |
|
|
|
10,701,599 |
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit - Unaudited
(in thousands, except number of shares)
|
For the three months ended September 30, 2019 |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
Class A Common Stock |
|
|
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Deficit |
|
||||||||
|
Balance at June 30, 2019 |
$ |
37,060 |
|
|
|
29,826,782 |
|
|
$ |
298 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
167,125 |
|
|
$ |
(217,557 |
) |
|
$ |
(49,902 |
) |
|
Net loss |
|
(2,352 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,608 |
) |
|
|
(3,608 |
) |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
413 |
|
|
|
— |
|
|
|
413 |
|
|
Issuance of Class A Common Stock to a related party under the Letter Agreements |
|
— |
|
|
|
5,612,288 |
|
|
|
56 |
|
|
|
— |
|
|
|
— |
|
|
|
8,944 |
|
|
|
— |
|
|
|
9,000 |
|
|
Issuance of Letter Agreement and warrants to purchase Class A Common Stock - related party |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(492 |
) |
|
|
— |
|
|
|
(492 |
) |
|
Change in redemption value of noncontrolling interest |
|
2,560 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,560 |
) |
|
|
(2,560 |
) |
|
Balances at September 30, 2019 |
$ |
37,268 |
|
|
|
35,439,070 |
|
|
$ |
354 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
175,990 |
|
|
$ |
(223,725 |
) |
|
$ |
(47,149 |
) |
|
For the three months ended September 30, 2018 |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
Class A Common Stock |
|
|
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Deficit |
|
||||||||
|
Balances at June 30, 2018 |
$ |
39,413 |
|
|
|
10,871,498 |
|
|
$ |
109 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
134,587 |
|
|
$ |
(206,525 |
) |
|
$ |
(71,597 |
) |
|
Net loss |
|
(1,165 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(796 |
) |
|
|
(796 |
) |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
579 |
|
|
|
— |
|
|
|
579 |
|
|
Issuance of Class A Common Stock to a related party under the Letter Agreements |
|
— |
|
|
|
4,900,951 |
|
|
|
49 |
|
|
|
— |
|
|
|
— |
|
|
|
9,951 |
|
|
|
— |
|
|
|
10,000 |
|
|
Issuance of Letter Agreement and warrants to purchase Class A Common stock - related party |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(500 |
) |
|
|
— |
|
|
|
(500 |
) |
|
Change in redemption value of noncontrolling interest |
|
(18,336 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,336 |
|
|
|
18,336 |
|
|
Balances at September 30, 2018 |
$ |
19,912 |
|
|
|
15,772,449 |
|
|
$ |
158 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
144,617 |
|
|
$ |
(188,985 |
) |
|
$ |
(43,978 |
) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit - Unaudited
(in thousands, except number of shares)
|
For the nine months ended September 30, 2019 |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
Class A Common Stock |
|
|
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Deficit |
|
||||||||
|
Balances at December 31, 2018 |
$ |
62,482 |
|
|
|
20,347,065 |
|
|
$ |
203 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
150,595 |
|
|
$ |
(233,883 |
) |
|
$ |
(82,853 |
) |
|
Net loss |
|
(6,411 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,645 |
) |
|
|
(8,645 |
) |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,095 |
|
|
|
— |
|
|
|
1,095 |
|
|
Issuance of Class A Common Stock under registered direct offering |
|
— |
|
|
|
3,636,364 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
5,406 |
|
|
|
— |
|
|
|
5,443 |
|
|
Issuance of Class A Common Stock to a related party under the Letter Agreements |
|
— |
|
|
|
11,443,975 |
|
|
|
114 |
|
|
|
— |
|
|
|
— |
|
|
|
19,386 |
|
|
|
— |
|
|
|
19,500 |
|
|
Issuance of Letter Agreement and warrants to purchase Class A Common Stock - related party |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(492 |
) |
|
|
— |
|
|
|
(492 |
) |
|
Vesting of restricted stock units |
|
— |
|
|
|
11,666 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Change in redemption value of noncontrolling interest |
|
(18,803 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,803 |
|
|
|
18,803 |
|
|
Balances at September 30, 2019 |
$ |
37,268 |
|
|
|
35,439,070 |
|
|
$ |
354 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
175,990 |
|
|
$ |
(223,725 |
) |
|
$ |
(47,149 |
) |
|
For the nine months ended September 30, 2018 |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
Class A Common Stock |
|
|
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Total Stockholders' Deficit |
|
||||||||
|
Balances at December 31, 2017 |
$ |
131,440 |
|
|
|
9,693,254 |
|
|
$ |
97 |
|
|
|
23,119,246 |
|
|
$ |
232 |
|
|
$ |
127,682 |
|
|
$ |
(279,058 |
) |
|
$ |
(151,047 |
) |
|
Net loss |
|
(14,697 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,820 |
) |
|
|
(6,820 |
) |
|
Cumulative effect of accounting change |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
213 |
|
|
|
213 |
|
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,345 |
|
|
|
— |
|
|
|
2,345 |
|
|
Exchange of Class B Common Stock for Class A Common Stock |
|
(151 |
) |
|
|
25,025 |
|
|
|
— |
|
|
|
(25,025 |
) |
|
|
— |
|
|
|
151 |
|
|
|
— |
|
|
|
151 |
|
|
Issuance of Class A Common Stock to a related party under the Letter Agreements |
|
— |
|
|
|
6,042,503 |
|
|
|
61 |
|
|
|
— |
|
|
|
— |
|
|
|
14,939 |
|
|
|
— |
|
|
|
15,000 |
|
|
Issuance of Letter Agreement and warrants to purchase Class A Common stock - related party |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(500 |
) |
|
|
— |
|
|
|
(500 |
) |
|
Vesting of restricted stock units |
|
— |
|
|
|
11,667 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Change in redemption value of noncontrolling interest |
|
(96,680 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
96,680 |
|
|
|
96,680 |
|
|
Balances at September 30, 2018 |
$ |
19,912 |
|
|
|
15,772,449 |
|
|
$ |
158 |
|
|
|
23,094,221 |
|
|
$ |
232 |
|
|
$ |
144,617 |
|
|
$ |
(188,985 |
) |
|
$ |
(43,978 |
) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
Condensed Consolidated Statements of Cash Flows - Unaudited
(in thousands)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2019 |
|
|
2018 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss before noncontrolling interest |
|
$ |
(15,056 |
) |
|
$ |
(21,517 |
) |
|
Adjustments to reconcile net loss before noncontrolling interest to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
(Gain) loss on disposal of property and equipment, net |
|
|
(312 |
) |
|
|
(12 |
) |
|
Depreciation expense |
|
|
24 |
|
|
|
111 |
|
|
Share-based compensation expense |
|
|
1,095 |
|
|
|
2,345 |
|
|
Change in fair value of warrants, related party |
|
|
(1,050 |
) |
|
|
(610 |
) |
|
Amortization of debt discount |
|
|
450 |
|
|
|
795 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(8 |
) |
|
|
8,000 |
|
|
Prepaid expenses and other assets |
|
|
659 |
|
|
|
(1,475 |
) |
|
Long-term deposits |
|
|
(408 |
) |
|
|
2,256 |
|
|
Accounts payable and accrued expenses |
|
|
(788 |
) |
|
|
(4,936 |
) |
|
Deferred revenue |
|
|
(1,748 |
) |
|
|
(5,912 |
) |
|
Other liabilities |
|
|
— |
|
|
|
(32 |
) |
|
Net cash used in operating activities |
|
|
(17,142 |
) |
|
|
(20,987 |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from sale of assets |
|
|
310 |
|
|
|
12 |
|
|
Purchases of property and equipment |
|
|
— |
|
|
|
(5 |
) |
|
Net cash provided by investing activities |
|
|
310 |
|
|
|
7 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Class A Common Stock to a related party under the Letter Agreements |
|
|
19,500 |
|
|
|
15,000 |
|
|
Proceeds from issuance of Class A Common Stock, net of offering costs |
|
|
5,443 |
|
|
|
— |
|
|
Proceeds from debt issuance |
|
|
500 |
|
|
|
500 |
|
|
Repayment of notes payable |
|
|
(7,858 |
) |
|
|
(2,674 |
) |
|
Net cash provided by financing activities |
|
|
17,585 |
|
|
|
12,826 |
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents |
|
|
753 |
|
|
|
(8,154 |
) |
|
Total cash, cash equivalents and restricted cash and cash equivalents, beginning of period |
|
|
4,183 |
|
|
|
14,420 |
|
|
Total cash, cash equivalents and restricted cash and cash equivalents, end of period |
|
$ |
4,936 |
|
|
$ |
6,266 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities: |
|
|
|
|
|
|
|
|
|
Change in redemption value of noncontrolling interest |
|
$ |
(18,803 |
) |
|
$ |
(96,680 |
) |
|
Exchange of vTv Therapeutics Inc. Class B Common Stock and vTv Therapeutics, LLC member units for vTv Therapeutics Inc. Class A Common Stock |
|
$ |
— |
|
|
$ |
151 |
|
|
Issuance of Letter Agreements and warrants to purchase vTv Therapeutics Inc. Class A Common Stock to a related party |
|
$ |
492 |
|
|
$ |
500 |
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8
Notes to Condensed Consolidated Financial Statements – Unaudited
(dollar amounts are in thousands, unless otherwise noted)
|
Note 1: |
Description of Business, Basis of Presentation and Going Concern |
Description of Business
vTv Therapeutics Inc. (the “Company,” the “Registrant,” “we” or “us”) was incorporated in the state of Delaware in April 2015. The Company was formed to discover and develop orally administered small molecule drug candidates to fill significant unmet medical needs.
Principles of Consolidation
vTv Therapeutics Inc. is a holding company and its principal asset is a controlling equity interest in vTv Therapeutics LLC (“vTv LLC”), the Company’s principal operating subsidiary, which is a clinical-stage biopharmaceutical company engaged in the discovery and development of orally administered small molecule drug candidates to fill significant unmet medical needs.
The Company has determined that vTv LLC is a variable-interest entity (“VIE”) for accounting purposes and that vTv Therapeutics Inc. is the primary beneficiary of vTv LLC because (through its managing member interest in vTv LLC and the fact that the senior management of vTv Therapeutics Inc. is also the senior management of vTv LLC) it has the power and benefits to direct all of the activities of vTv LLC, which include those that most significantly impact vTv LLC’s economic performance. vTv Therapeutics Inc. has therefore consolidated vTv LLC’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation” in its Condensed Consolidated Financial Statements. As of September 30, 2019, various holders own non-voting interests in vTv LLC, representing a 39.5% economic interest in vTv LLC, effectively restricting vTv Therapeutics Inc.’s interest to 60.5% of vTv LLC’s economic results, subject to increase in the future, should vTv Therapeutics Inc. purchase additional non-voting common units (“vTv Units”) of vTv LLC, or should the holders of vTv Units decide to exchange such units (together with shares of Class B Common Stock) for shares of Class A Common Stock (or cash) pursuant to the Exchange Agreement (as defined in Note 9). vTv Therapeutics Inc. has provided financial and other support to vTv LLC in the form of its purchase of vTv Units with the net proceeds of the Company’s initial public offering (“IPO”) in 2015 and its registered direct offering in March 2019, its agreeing to be a co-borrower under the Venture Loan and Security Agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation and Silicon Valley Bank (together, the “Lenders”) which was entered into in 2016, and its entrance into the letter agreements, dated as of December 5, 2017, July 30, 2018, December 11, 2018, March 18, 2019, and September 26, 2019 with MacAndrews and Forbes Group LLC (the “Letter Agreements”). vTv Therapeutics Inc. will not be required to provide financial or other support for vTv LLC outside of its obligations pertaining to the Loan Agreement as a co-borrower. However, vTv Therapeutics Inc. will control its business and other activities through its managing member interest in vTv LLC, and its management is the management of vTv LLC. The creditors of vTv LLC do not have any recourse to the general credit of vTv Therapeutics Inc. except as allowed under the provisions of the Loan Agreement. Nevertheless, because vTv Therapeutics Inc. will have no material assets other than its interests in vTv LLC, any financial difficulties at vTv LLC could result in vTv Therapeutics Inc. recognizing a loss.
Going Concern and Liquidity
To date, the Company has not generated any product revenue and has not achieved profitable operations. The continuing development of our drug candidates will require additional financing. From its inception through September 30, 2019, the Company has funded its operations primarily through a combination of private placements of common and preferred equity, research collaboration agreements, upfront and milestone payments for license agreements, debt and equity financings and the completion of its IPO in August 2015. As of September 30, 2019, the Company had an accumulated deficit of $223.7 million and has generated net losses in each year of its existence.
In March 2019, the Company completed a registered direct offering through which it sold 3,636,364 shares of its Class A Common Stock and raised net proceeds of approximately $5.4 million, net of related transaction costs. Further, the Company entered into an additional Letter Agreement with MacAndrews and Forbes Group LLC (the “March 2019 Letter Agreement”) under which it may sell, at the Company’s option, up to 5,454,546 shares of its Class A Common Stock at a fixed price of $1.65 per share for aggregate proceeds of up to $9.0 million during a one-year period after the date of the March 2019 Letter Agreement (the “Investment Period”). The March 2019 Letter Agreement also permits MacAndrews and Forbes Group LLC to exercise an option to purchase Class A Common Stock at the same price up to three times during the Investment Period.
9
In September 2019, the Company entered into another Letter Agreement with MacAndrews and Forbes Group LLC (the “September 2019 Letter Agreement”) under which it may sell, at the Company’s option, up to 6,849,315 shares of its Class A Common Stock at a fixed price of $1.46 per share for aggregate proceeds of $10.0 million during a one-year period after the date of the September 2019 Letter Agreement. The September 2019 Letter Agreement also permits MacAndrews and Forbes Group LLC to exercise an option to purchase Class A Common Stock at the same price up to three times during the one-year period after the date of the September 2019 Letter Agreement. In consideration for entering into the September 2019 Letter Agreement, the Company issued to MacAndrews and Forbes Group LLC warrants to purchase 400,990 shares of its Class A Common Stock at a price of $1.68 per share.
As of September 30, 2019, the Company’s liquidity sources included cash and cash equivalents of $2.4 million and $8.0 million of remaining funds available under the Letter Agreements. Based on the Company’s current operating plan, management believes that its current cash and cash equivalents and the remaining funds available under the Letter Agreements will allow the Company to meet its liquidity requirements into the fourth quarter of 2019, which is less than twelve months from the issuance of these Condensed Consolidated Financial Statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The Company has completed enrollment in a Phase 2 clinical trial of TTP399 in patients with type 1 diabetes and continues to enroll patients in a Phase 2 trial to evaluate azeliragon as a potential treatment of mild-AD in patients with type 2 diabetes. In order to complete these trials and continue its operations, the Company will require additional financing. The Company is evaluating several financing strategies to provide continued funding which may include additional direct equity investments or future public offerings of our common stock. The timing and availability of such financing is not yet known.
The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Condensed Consolidated Financial Statements do not include adjustments to reflect the possible future effects on the recoverability and classification of recorded assets or the amounts of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
Note 2: |
Summary of Significant Accounting Policies |
Unaudited Interim Financial Information
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018, Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit for the three and nine months ended September 30, 2019 and 2018 and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes for the year ended December 31, 2018 contained in the Company’s Annual Report on Form 10-K. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2019, the results of operations for the three and nine months ended September 30, 2019 and 2018 and cash flows for the nine months ended September 30, 2019 and 2018. The December 31, 2018 Condensed Consolidated Balance Sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.
The financial data and other information disclosed in these notes to the financial statements related to the three and nine months ended September 30, 2019 and 2018 are unaudited. Interim results are not necessarily indicative of results for an entire year.
The Company does not have any components of other comprehensive income recorded within its Condensed Consolidated Financial Statements, and, therefore, does not separately present a statement of comprehensive income in its Condensed Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
10
On an ongoing basis, the Company evaluates its estimates, including those related to the grant date fair value of equity awards, the fair value of warrants to purchase shares of its Class A Common Stock, the fair value of the Class B Common Stock, the useful lives of property and equipment, the fair value of derivative liabilities, and the fair value of the Company’s debt, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit with multiple financial institutions. The balances of these cash accounts frequently exceed insured limits.
One and three customers represented 100% of the revenue earned during the three months ended September 30, 2019 and 2018, respectively. Three customers represented 100% of the revenue earned during each of the nine months ended September 30, 2019 and 2018.
Cash and Cash Equivalents
The Company considers any highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents, long-term as of September 30, 2019 and December 31, 2018 was $2.5 million at each date. These amounts relate to the minimum balance that the Company must maintain in a deposit account that is pledged to secure the Loan Agreement and is subject to an account control agreement pursuant to the Loan Agreement.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
|
Cash and cash equivalents |
$ |
2,436 |
|
|
$ |
1,683 |
|
|
Restricted cash and cash equivalents, long-term |
|
2,500 |
|
|
|
2,500 |
|
|
Total cash, cash equivalents and restricted cash and cash equivalents shown in the consolidated statement of cash flows |
$ |
4,936 |
|
|
$ |
4,183 |
|
11
In connection with the license agreement with Reneo Pharmaceuticals, Inc. (“Reneo”) (the “Reneo License Agreement”), the Company received common stock representing a minority equity interest in Reneo that is classified as a long-term investment in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018. The Company owns less than 20% of the voting equity of Reneo and does not have the ability to exercise significant influence over Reneo. Since it does not have a readily determinable market value, the Company has elected to measure its investment in Reneo at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment.
No adjustments were made to the value of the Company’s investment in Reneo for the three and nine months ended September 30, 2019 and 2018 either due to impairment or based on observable price changes.
Leases
The Company determines if an arrangement is a lease at inception. Balances recognized related to operating leases are included in operating lease right-of-use assets and operating lease liabilities in the Condensed Consolidated Balance Sheets. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company also elected a practical expedient to not separate its lease and non-lease components and instead account for them as a single lease component.
Revenue Recognition
The Company uses the revenue recognition guidance established by ASC Topic 606, “Revenue From Contracts With Customers” (“ASC Topic 606”).
The majority of the Company’s revenue results from its license and collaboration agreements associated with the development of investigational drug products. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For each contract meeting these criteria, the Company identifies the performance obligations included within the contract. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company then recognizes revenue under each contract as the related performance obligations are satisfied.
The transaction price under the contract is determined based on the value of the consideration expected to be received in exchange for the transferred assets or services. Development, regulatory and sales milestones included in the Company’s collaboration agreements are considered to be variable consideration. The amount of variable consideration expected to be received is included in the transaction price when it becomes probable that the milestone will be met. For contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using the Company’s best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus margin approach. Revenue is recognized over the related period over which the Company expects the services to be provided using a proportional performance model or a straight-line method of recognition if there is no discernable pattern over which the services will be provided.
Research and Development
Major components of research and development costs include cash and share-based compensation, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, regulatory and compliance costs, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf, facilities costs and overhead costs. Research and development costs are expensed as incurred.
The Company records accruals based on estimates of the services received, efforts expended, and amounts owed pursuant to contracts with numerous contract research organizations. In the normal course of business, the Company contracts with third parties to perform various clinical study activities in the ongoing development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events and the completion of portions of the clinical study or similar conditions. The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical studies are recognized based on the Company’s estimate of the degree of completion of the event or events specified in the specific clinical study.
12
The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses. Prepaid expenses are recognized as expense in the Condensed Consolidated Statements of Operations as the Company receives the related goods or services.
Research and development costs that are reimbursed under a cost-sharing arrangement are reflected as a reduction of research and development expense.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Lease (Topic 842)” (“ASU 2016-02”), which increases transparency and comparability among companies accounting for lease transactions. The Company adopted this guidance effective January 1, 2019 using a modified retrospective application and recorded a cumulative-effect adjustment at the beginning of the period of adoption. The adoption resulted in the recognition of $0.3 million of additional assets and liabilities related to the Company’s operating leases within its Condensed Consolidated Balance Sheets. See Note 7 for further details.
|
Note 3: |
Collaboration Agreements |
Reneo License Agreement
The Company is party to the Reneo License Agreement, under which Reneo obtained an exclusive, worldwide, sublicensable license to develop and commercialize the Company’s peroxisome proliferation activated receptor delta (PPAR-δ) agonist program, including the compound HPP593, for therapeutic, prophylactic or diagnostic application in humans.
The Company has fully allocated the transaction price to the license and the technology transfer services, which represents a single combined performance obligation because they were not capable of being distinct on their own. The revenue related to this performance obligation was recognized on a straight-line basis over the technology transfer service period.
The revenue related to this performance obligation has been fully recognized as of September 30, 2019. No revenue related to this performance obligation was recognized for the three months ended September 30, 2019. For the three months ended September 30, 2018, the Company recognized revenue related to this performance obligation of $0.9 million. For the nine months ended September 30, 2019 and 2018 the Company has recognized revenue of $1.7 million and $2.7 million, respectively related to this performance obligation. There have been no adjustments to the transaction price for this performance obligation during the three and nine months ended September 30, 2019 and 2018.
Huadong License Agreement
The Company is party to a License Agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”) (the “Huadong License Agreement”), under which Huadong obtained an exclusive and sublicensable license to develop and commercialize the Company’s glucagon-like peptide-1 receptor agonist (“GLP-1r”) program, including the compound TTP273, for therapeutic uses in humans or animals, in China and certain other pacific rim countries, including Australia and South Korea (collectively, the “Huadong License Territory”). Additionally, under the Huadong License Agreement, the Company obtained a non-exclusive, sublicensable, royalty-free license to develop and commercialize certain Huadong patent rights and know-how related to the Company’s GLP-1r program for therapeutic uses in humans or animals outside of the Huadong License Territory.
Under the Huadong License Agreement, the Company is also responsible for conducting a Phase 2 multi-region clinical trial (the “Phase 2 MRCT”) including sites in both the United States and Huadong License Territory for the purpose of assessing the safety and efficacy of TTP273 in patients with type 2 diabetes. The Phase 2 MRCT will be designed to satisfy the requirements of the China Food and Drug Administration necessary in order for Huadong to begin a Phase 3 clinical trial in China. The Company will also be responsible for contributing up to $3.0 million in connection with the Phase 2 MRCT.
The significant performance obligations under this license agreement were determined to be (i) the exclusive license to develop and commercialize the Company’s GLP-1r program, (ii) technology transfer services related to the chemistry and manufacturing know-how for a defined period after the effective date, (iii) the obligation to sponsor and conduct the Phase 2 MRCT, (iv) the Company’s obligation to participate on a joint development committee (the “JDC”), and (v) other obligations considered to be de minimis in nature.
The Company has determined that the license and technology transfer services related to the chemistry and manufacturing know-how represent a combined performance obligation because they were not capable of being distinct on their own. The Company also determined that there was no discernable pattern in which the technology transfer services would be provided during the transfer service period. As such, the Company recognized the revenue related to this combined performance obligation using the straight-line method over the transfer service period. The revenue related to this combined performance obligation has been fully recognized as of
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September 30, 2019. No revenue related to this combined performance obligation was recognized during the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, $1.2 million and $3.5 million of revenue was recognized related to this combined performance obligation, respectively.
The portion of the transaction price allocated to the obligation to sponsor and conduct a portion of the Phase 2 MRCT was $1.0 million and remained deferred as of September 30, 2019. Revenue for this performance obligation will be recognized using the proportional performance model over the period during which the Company conducts the Phase 2 MRCT trial. No revenue for this performance obligation has yet been recognized.
The portion of the transaction price allocated to the obligation to participate in the joint development committee (the “JDC”) to oversee the development of products and the Phase 2 MRCT in accordance with the development plan remained deferred as of September 30, 2019 and revenue will be recognized using the proportional performance model over the period of the Company’s participation on the JDC. The unrecognized amount of the transaction price allocated to this performance obligation as of September 30, 2019 was $0.1 million. An immaterial amount of revenue for this performance obligation has been recognized during the three and nine months ended September 30, 2019 and 2018.
There have been no adjustments to the transaction price for the performance obligations under the Huadong License Agreement during the three months ended September 30, 2019 and 2018.
Newsoara License Agreement
The Company is party to a license agreement with Newsoara under which Newsoara obtained an exclusive and sublicensable license to develop and commercialize the Company’s phosphodiesterase type 4 inhibitors (“PDE4”) program, including the compound HPP737, in China, Hong Kong, Macau, Taiwan and other pacific rim countries (collectively, the “Newsoara License Territory”). Additionally, under the Newsoara License Agreement, the Company obtained a non-exclusive, sublicensable, royalty-free license to develop and commercialize certain Newsoara patent rights and know-how related to the Company’s PDE4 program for therapeutic uses in humans outside of the Newsoara License Territory.
The Company has fully allocated the transaction price to the license and the technology transfer services which represents a single performance obligation because they were not capable of being distinct on their own. The Company recognized revenue for this performance obligation using the straight-line method over the transfer service period. The revenue for this performance obligation has been fully recognized as of September 30, 2019. The Company recognized revenue related to this performance obligation of $1.0 million for the nine months ended September 30, 2019 and recognized revenue of $1.3 million and $1.7 million for the three and nine months ended September 30, 2018, respectively. During the nine months ended September 30, 2019, the transaction price for this performance obligation was increased by $1.0 million due to the satisfaction of a development milestone under the license agreement. This amount was fully recognized as revenue during the nine months ended September 30, 2019, as the related performance obligation has been fully satisfied.
JDRF Agreement
In August 2017, the Company entered into a research and collaboration agreement with JDRF International (the “JDRF Agreement”) to support the funding of the Simplici-T1 Study, a Phase 2 study to explore the effects of TTP399 in patients with type 1 diabetes. The Company has completed the Sentinel and Part 1 portions of this study and has completed enrollment of patients in the Part 2 portion of the study. According to the terms of the JDRF Agreement, JDRF will provide research funding of up to $3.0 million based on the achievement of research and development milestones,