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f
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the quarterly period ended June 30, 2020
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 No. 001-36517
Minerva Neurosciences, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
|
|
26-0784194
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
1601 Trapelo Road, Suite 286
Waltham, MA
|
|
02451
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Registrant’s telephone number, including area code: (617)
600-7373
(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
|
Common Stock, $0.0001 par value per share
|
NERV
|
The NASDAQ Global Market
|
The number of shares of Registrant’s Common Stock, $0.0001 par
value per share, outstanding as of July 29, 2020 was
41,204,869.
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
|
|
☒
|
|
|
|
|
|
|
|
|
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
Act). YES ☐ NO ☒
INDEX TO FORM 10-Q
2
Unless the context suggests otherwise, references in this Quarterly
Report on Form 10-Q, or Quarterly Report, to “Minerva,” “the
Company,”
“we,” “us,” and “our” refer to Minerva Neurosciences, Inc. and,
where appropriate, its subsidiaries.
This Quarterly Report on Form 10-Q contains forward-looking
statements. These forward-looking statements reflect our plans,
estimates and beliefs. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performances or achievements expressed or
implied by the forward-looking statements. In some cases, you can
identify forward-looking statements by terms such as “anticipates,”
“believes,” “could,” “estimates,” “expects,” “intends,” “may,”
“plans,” “potential,” “predicts,” “projects,” “should,” “would” and
similar expressions intended to identify forward-looking
statements. Forward-looking statements reflect our current views
with respect to future events and are based on assumptions and
subject to risks and uncertainties. Because of these risks and
uncertainties, the forward-looking events and circumstances
discussed in this report may not transpire. These risks and
uncertainties include, but are not limited to, the risks included
in this Quarterly Report on Form 10-Q under
Part II, Item IA, “Risk Factors.”
Given these uncertainties, you should not place undue reliance on
these forward-looking statements. Also, forward-looking statements
represent our estimates and assumptions only as of the date of this
document. You should read this document with the understanding that
our actual future results may be materially different from what we
expect. Except as required by law, we do not undertake any
obligation to publicly update or revise any forward-looking
statements contained in this report, whether as a result of new
information, future events or otherwise.
All trademarks, trade names and service marks appearing in this
Quarterly Report on Form 10-Q are the property of their
respective owners.
3
PART I – Financial
Information
Item 1 –
Financial Statements
MINERVA NEUROSCIENCES, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
June 30,
|
|
|
December 31,
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
32,252,075
|
|
|
$
|
21,412,623
|
|
Marketable securities
|
|
2,996,324
|
|
|
|
24,441,520
|
|
Restricted cash
|
|
100,000
|
|
|
|
100,000
|
|
Prepaid expenses and other current assets
|
|
542,746
|
|
|
|
1,182,483
|
|
Total current assets
|
|
35,891,145
|
|
|
|
47,136,626
|
|
|
|
|
|
|
|
|
|
Equipment, net
|
|
7,278
|
|
|
|
16,011
|
|
Other noncurrent assets
|
|
14,808
|
|
|
|
14,808
|
|
Operating lease right-of-use assets
|
|
184,020
|
|
|
|
261,952
|
|
In-process research and development
|
|
15,200,000
|
|
|
|
15,200,000
|
|
Goodwill
|
|
14,869,399
|
|
|
|
14,869,399
|
|
Total assets
|
$
|
66,166,650
|
|
|
$
|
77,498,796
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
3,138,559
|
|
|
$
|
2,317,004
|
|
Accrued expenses and other current liabilities
|
|
4,079,649
|
|
|
|
4,139,163
|
|
Operating leases
|
|
184,777
|
|
|
|
172,901
|
|
Total current liabilities
|
|
7,402,985
|
|
|
|
6,629,068
|
|
Deferred taxes
|
|
1,803,356
|
|
|
|
1,803,356
|
|
Deferred revenue
|
|
—
|
|
|
|
41,175,600
|
|
Noncurrent operating leases
|
|
16,288
|
|
|
|
111,229
|
|
Total liabilities
|
|
9,222,629
|
|
|
|
49,719,253
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
Preferred stock; $0.0001 par value; 100,000,000 shares authorized;
none issued
or outstanding as of June 30, 2020 and December 31,
2019, respectively
|
|
—
|
|
|
|
—
|
|
Common stock; $0.0001 par value; 125,000,000 shares authorized;
40,644,839 and
39,084,121 shares issued and outstanding as of June
30, 2020 and
December 31, 2019, respectively
|
|
4,065
|
|
|
|
3,908
|
|
Additional paid-in capital
|
|
326,297,963
|
|
|
|
314,511,853
|
|
Accumulated deficit
|
|
(269,358,007
|
)
|
|
|
(286,736,218
|
)
|
Total stockholders’ equity
|
|
56,944,021
|
|
|
|
27,779,543
|
|
Total liabilities and stockholders’ equity
|
$
|
66,166,650
|
|
|
$
|
77,498,796
|
|
See accompanying notes to condensed consolidated financial
statements.
4
MINERVA NEUROSCIENCES, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaborative revenue
|
$
|
41,175,600
|
|
|
$
|
—
|
|
|
$
|
41,175,600
|
|
|
$
|
—
|
|
Total revenues
|
|
41,175,600
|
|
|
|
—
|
|
|
|
41,175,600
|
|
|
|
—
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
$
|
5,766,984
|
|
|
$
|
8,319,612
|
|
|
$
|
13,849,494
|
|
|
$
|
19,925,809
|
|
General and administrative
|
|
5,900,518
|
|
|
|
4,584,361
|
|
|
|
10,089,586
|
|
|
|
9,290,035
|
|
Total expenses
|
|
11,667,502
|
|
|
|
12,903,973
|
|
|
|
23,939,080
|
|
|
|
29,215,844
|
|
Gain (loss) from operations
|
|
29,508,098
|
|
|
|
(12,903,973
|
)
|
|
|
17,236,520
|
|
|
|
(29,215,844
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange losses
|
|
(3,661
|
)
|
|
|
(6,718
|
)
|
|
|
(13,053
|
)
|
|
|
(13,031
|
)
|
Investment income
|
|
24,939
|
|
|
|
434,220
|
|
|
|
154,744
|
|
|
|
925,204
|
|
Net income (loss)
|
$
|
29,529,376
|
|
|
$
|
(12,476,471
|
)
|
|
$
|
17,378,211
|
|
|
$
|
(28,303,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic
|
$
|
0.75
|
|
|
$
|
(0.32
|
)
|
|
$
|
0.44
|
|
|
$
|
(0.73
|
)
|
Weighted average shares outstanding, basic
|
|
39,483,187
|
|
|
|
39,025,471
|
|
|
|
39,330,389
|
|
|
|
38,996,949
|
|
Net income (loss) per share, diluted
|
$
|
0.73
|
|
|
$
|
(0.32
|
)
|
|
$
|
0.43
|
|
|
$
|
(0.73
|
)
|
Weighted average shares outstanding, diluted
|
|
40,278,071
|
|
|
|
39,025,471
|
|
|
|
40,144,996
|
|
|
|
38,996,949
|
|
See accompanying notes to condensed consolidated financial
statements.
5
MINERVA NEUROSCIENCES, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balances at January 1, 2019
|
|
38,937,971
|
|
|
$
|
3,894
|
|
|
$
|
304,813,603
|
|
|
$
|
(214,552,728
|
)
|
|
$
|
90,264,769
|
|
Exercise of stock options
|
|
87,500
|
|
|
|
9
|
|
|
|
524,991
|
|
|
|
—
|
|
|
|
525,000
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
2,461,699
|
|
|
|
—
|
|
|
|
2,461,699
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,827,200
|
)
|
|
|
(15,827,200
|
)
|
Balances at March 31, 2019
|
|
39,025,471
|
|
|
|
3,903
|
|
|
|
307,800,293
|
|
|
|
(230,379,928
|
)
|
|
|
77,424,268
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
2,320,392
|
|
|
|
—
|
|
|
|
2,320,392
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,476,471
|
)
|
|
|
(12,476,471
|
)
|
Balances at June 30, 2019
|
|
39,025,471
|
|
|
$
|
3,903
|
|
|
$
|
310,120,685
|
|
|
$
|
(242,856,399
|
)
|
|
$
|
67,268,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 1, 2020
|
|
39,084,121
|
|
|
$
|
3,908
|
|
|
$
|
314,511,853
|
|
|
$
|
(286,736,218
|
)
|
|
$
|
27,779,543
|
|
Exercise of stock options
|
|
135,013
|
|
|
|
14
|
|
|
|
797,615
|
|
|
|
—
|
|
|
|
797,629
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
2,198,187
|
|
|
|
—
|
|
|
|
2,198,187
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,151,165
|
)
|
|
|
(12,151,165
|
)
|
Balances at March 31, 2020
|
|
39,219,134
|
|
|
$
|
3,922
|
|
|
$
|
317,507,655
|
|
|
$
|
(298,887,383
|
)
|
|
$
|
18,624,194
|
|
Issuance of common stock in a public
offering
|
|
1,361,956
|
|
|
|
136
|
|
|
|
5,178,324
|
|
|
|
—
|
|
|
|
5,178,460
|
|
Costs related to issuance of common
stock
|
|
—
|
|
|
|
—
|
|
|
|
(219,517
|
)
|
|
|
—
|
|
|
|
(219,517
|
)
|
Exercise of stock options
|
|
63,749
|
|
|
|
7
|
|
|
|
346,019
|
|
|
|
—
|
|
|
|
346,026
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
3,485,482
|
|
|
|
—
|
|
|
|
3,485,482
|
|
Net income
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,529,376
|
|
|
|
29,529,376
|
|
Balances at June 30, 2020
|
$
|
40,644,839
|
|
|
$
|
4,065
|
|
|
$
|
326,297,963
|
|
|
$
|
(269,358,007
|
)
|
|
$
|
56,944,021
|
|
See accompanying notes to condensed consolidated financial
statements.
6
MINERVA NEUROSCIENCES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
Six Months Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
17,378,211
|
|
|
$
|
(28,303,671
|
)
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
8,733
|
|
|
|
8,734
|
|
Accretion of marketable securities premium
|
|
(83,098
|
)
|
|
|
(501,227
|
)
|
Amortization of right-of-use assets
|
|
77,932
|
|
|
|
70,143
|
|
Stock-based compensation expense
|
|
5,683,669
|
|
|
|
4,782,091
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
639,737
|
|
|
|
452,516
|
|
Accounts payable
|
|
821,555
|
|
|
|
1,142,122
|
|
Accrued expenses and other current liabilities
|
|
(59,514
|
)
|
|
|
2,676,073
|
|
Operating lease liabilities, current
|
|
11,876
|
|
|
|
26,052
|
|
Deferred revenue
|
|
(41,175,600
|
)
|
|
|
—
|
|
Operating lease liabilities, noncurrent
|
|
(94,941
|
)
|
|
|
(83,065
|
)
|
Net cash used in operating activities
|
|
(16,791,440
|
)
|
|
|
(19,730,232
|
)
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Proceeds from the maturity and redemption of marketable
securities
|
|
25,400,000
|
|
|
|
30,000,000
|
|
Purchase of marketable securities
|
|
(3,871,706
|
)
|
|
|
(33,184,947
|
)
|
Net cash provided (used in) by investing activities
|
|
21,528,294
|
|
|
|
(3,184,947
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from sales of common stock in public offering
|
|
5,178,460
|
|
|
|
—
|
|
Fees paid in connection with public offering
|
|
(219,517
|
)
|
|
|
—
|
|
Proceeds from exercise of stock options
|
|
1,143,655
|
|
|
|
525,000
|
|
Net cash provided by financing activities
|
|
6,102,598
|
|
|
|
525,000
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash
|
|
10,839,452
|
|
|
|
(22,390,179
|
)
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
|
|
|
|
|
|
|
Beginning of period
|
|
21,512,623
|
|
|
|
50,334,871
|
|
End of period
|
$
|
32,352,075
|
|
|
$
|
27,944,692
|
|
Reconciliation of the Condensed Consolidated Statements of Cash
Flows to the
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
32,252,075
|
|
|
$
|
27,844,692
|
|
Restricted cash
|
|
100,000
|
|
|
|
100,000
|
|
Total cash, cash equivalents and restricted cash
|
$
|
32,352,075
|
|
|
$
|
27,944,692
|
|
See accompanying notes to condensed consolidated financial
statements.
7
MINERVA NEUROSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
As of June 30, 2020 and for the Six Months Ended June 30, 2020 and
2019
(Unaudited)
NOTE 1 — NATURE OF OPERATIONS AND LIQUIDITY
Nature of Operations
Minerva Neurosciences, Inc. (“Minerva” or the “Company”) is a
clinical-stage biopharmaceutical company focused on the development
and commercialization of a portfolio of product candidates to treat
patients suffering from central nervous system diseases. The
Company’s lead product candidate is roluperidone (also known as
MIN-101), a compound the Company is developing for the treatment of
negative symptoms in patients with schizophrenia, and MIN-301, a
compound the Company is developing for the treatment of Parkinson’s
disease. In addition, the Company possesses a potential royalty
stream from seltorexant (also known as MIN-202 or JNJ-42847922), a
compound that is being developed by Janssen Pharmaceutica NV
(“Janssen”) for the treatment of insomnia disorder and major
depressive disorder (“MDD”).
In November 2013, the Company merged with Sonkei
Pharmaceuticals Inc. (“Sonkei”), a clinical-stage
biopharmaceutical company and, in February 2014, the Company
acquired Mind-NRG, a pre-clinical-stage biopharmaceutical company.
The Company refers to these transactions as the Sonkei Merger and
Mind-NRG Acquisition, respectively. The Company holds licenses to
roluperidone and MIN-117 from Mitsubishi Tanabe Pharma Corporation
(“MTPC”) with the rights to develop, sell and import roluperidone
and MIN-117 globally, excluding most of Asia. With the acquisition
of Mind-NRG, the Company obtained exclusive rights to develop and
commercialize MIN-301.
Liquidity
The accompanying interim condensed consolidated financial
statements have been prepared as though the Company will continue
as a going concern, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
The Company has limited capital resources and has incurred
recurring operating losses and negative cash flows from operations
in each year since inception. As of June 30, 2020, the Company has
an accumulated deficit of approximately $269.4 million and net cash used in operating
activities was approximately $16.8 million during the six months
ended June 30, 2020. Management expects to continue to incur
operating losses and negative cash flows from operations. The
Company has financed its operations to date from proceeds from the
sale of common stock, warrants, loans and convertible promissory
notes.
As of June 30, 2020, the Company had cash, cash equivalents,
restricted cash, and marketable securities of $35.3 million.
The Company believes that its existing
cash, cash equivalents, restricted cash and marketable securities
will be sufficient to meet its cash commitments for at least the
next 12 months after the date that the interim condensed
consolidated financial statements are issued. As a result of the
roluperidone Phase 3 study not achieving a statistically
significant improvement on its primary and secondary endpoints, we
have significantly decreased our operating plan spending levels. We
plan to maintain the lower level of spending while we are
completing additional detailed analyses of data from this trial,
following which we plan to request a meeting with the U.S. FDA to
consult about the potential next steps in the development of
roluperidone. Therefore, the year-to-date cash used is not
representative of the future cash commitments and spending for the
next 12 months after the date that the interim condensed financial
statements are issued. The process of drug development can be
costly and the timing and outcomes of clinical trials is
uncertain. The assumptions upon which the Company has based
its estimates are routinely evaluated and may be subject to
change. The actual amount of the Company’s expenditures will
vary depending upon a number of factors including but not limited
to the design, timing and duration of future clinical trials, the
progress of the Company’s research and development programs, the
infrastructure to support a commercial enterprise, the cost of a
commercial product launch, and the level of financial resources
available. The Company has the ability to adjust its operating plan
spending levels based on the timing of future clinical trials,
which will be predicated upon adequate funding to complete the
trials. During June 2020, as described in Note 6, the Company
issued and sold 1,361,956 shares of the Company's common stock
under the Sales Agreement. The shares were sold at an average price
of $3.802 per share for aggregate net proceeds to the Company of
approximately $5.0 million, after deducting sales commissions and
offering costs payable by the Company. During the period from July
1, 2020 through July 29, 2020, the Company issued and sold 678,434
shares of the Company's common stock under the Sales Agreement. The
shares were sold at an average price of $3.6168 per share for
aggregate net proceeds to the Company of approximately $2.4
million, after deducting sales commissions and offering costs
payable by the Company.
The Company will need to raise additional capital in order to
continue to fund operations and fully fund later stage clinical
development programs. The Company believes that it will be able to
obtain additional working capital through equity financings or
other arrangements to fund future operations; however, there can be
no assurance that such additional financing, if available, can be
obtained on terms acceptable to the Company. If the Company is
unable to obtain such additional financing, future operations would
need to be scaled back or discontinued.
8
Significant Risks and Uncertainties
The Company’s business could be adversely affected by the effects
of the ongoing COVID-19 pandemic, which continues to have a
negative impact on the local, regional, national and global scale.
In response to the pandemic, a number of jurisdictions in which the
Company or its service providers operate implemented
shelter-in-place or similar type restrictions, which limited
on-site activity to certain service providers. Additionally, the
Company’s headquarters are located in Massachusetts, which
implemented such restrictions. In response, the Company implemented
work-from-home policies for its employees, which continue to be in
effect. While certain jurisdictions, including Massachusetts have
begun a phased re-opening of businesses and governmental agencies,
there remain limitations on the physical operations of businesses
and prohibitions on certain non-essential gatherings, and it is
unclear if such phased re-openings will continue or be rolled back,
and there is uncertainty about when, if, or how the Company’s
workforce may return. The effects of the state executive order,
local shelter-in-place orders, government-imposed quarantines and
the Company’s work-from-home policies, including the uncertainty
about their duration, may negatively impact productivity, disrupt
our business and delay the clinical programs and
timelines.
While the COVID-19 pandemic has not had a material adverse impact
on the Company’s operations to date, this disruption, if sustained
or recurrent, could have a material adverse effect on the Company’s
operating results, its ability to raise capital needed to develop
and commercialize products and the Company’s overall financial
condition. In addition, a recession or market correction resulting
from the spread of the coronavirus could materially affect the
value of the Company’s common stock. The impact of the COVID-19
pandemic may also exacerbate other risks discussed in this
Quarterly Report on Form 10-Q. Refer to Item 1A. “Risk Factors” in
this Quarterly Report on Form 10-Q for a complete description of
the material risks that the Company currently faces.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim condensed consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim
reporting and the requirements of the Securities and Exchange
Commission (“SEC”) in accordance with Regulation S-X,
Rule 8-03. Under those rules, certain notes and financial
information that are normally required for annual financial
statements can be condensed or omitted. In the opinion of the
Company’s management, the accompanying financial statements contain
all adjustments (consisting of items of a normal and recurring
nature) necessary to present fairly the financial position as of
June 30, 2020, the results of operations for the three and six
months ended June 30, 2020 and 2019 and cash flows for the six
months ended June 30, 2020 and 2019. The results of operations for
the three and six months ended June 30, 2020 are not necessarily
indicative of the results to be expected for the full year. When
preparing financial statements in conformity with GAAP, management
must make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Actual
results could differ from those estimates. The consolidated balance
sheet as of December 31, 2019 was derived from the audited annual
financial statements. The accompanying unaudited condensed
consolidated financial statements and notes thereto should be read
in conjunction with the audited consolidated financial statements
for the year ended December 31, 2019 included in the Company’s
Annual Report on Form 10-K filed with the SEC on March 9, 2020.
Consolidation
The accompanying consolidated financial statements include the
results of the Company and its wholly-owned subsidiaries, Mind-NRG
Sarl and Minerva Neurosciences Securities Corporation. Intercompany
transactions have been eliminated.
Significant risks and uncertainties
The Company’s operations are subject to a number of factors that
can affect its operating results and financial condition. Such
factors include, but are not limited to: the results of clinical
testing and trial activities of the Company’s products, the
Company’s ability to obtain regulatory approval to market its
products, competition from products manufactured and sold or being
developed by other companies, the price of, and demand for, Company
products, the Company’s ability to negotiate favorable licensing or
other manufacturing and marketing agreements for its products, and
the Company’s ability to raise capital.
The Company currently has no commercially approved products and
there can be no assurance that the Company’s research and
development will be successfully commercialized. Developing and
commercializing a product requires significant time and capital and
is subject to regulatory review and approval as well as competition
from other biotechnology and pharmaceutical companies. The Company
operates in an environment of rapid change and is dependent upon
the continued services of its employees and consultants and
obtaining and protecting intellectual property.
9
Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents
Cash equivalents include short-term, highly-liquid instruments,
consisting of money market accounts and short-term investments with
maturities from the date of purchase of 90 days or less. The
majority of cash and cash equivalents are maintained with major
financial institutions in North America. Deposits with these
financial institutions may exceed the amount of insurance provided
on such deposits. These deposits may be redeemed upon demand which
reduces counterparty performance risk.
Restricted cash
Cash accounts with any type of restriction are classified as
restricted. The Company maintained restricted cash balances as
collateral for corporate credit cards in the amount of $0.1 million
at each of June 30, 2020 and December 31, 2019.
Marketable securities
Marketable securities consist of corporate and U.S. government debt
securities maturing in two months or less. Based on the Company’s
intentions regarding its marketable securities, all marketable
securities are classified as held-to-maturity and are carried under
the amortized cost approach. The Company’s investments in
marketable securities are classified as Level 2 within the fair
value hierarchy. As of June 30, 2020, remaining final maturities of
marketable securities ranged from July 2020 to August 2020, with a
weighted average remaining maturity of approximately one month. The
following tables provide the amortized cost basis, aggregate fair
value, unrealized gains/losses, and the net carrying value of
investments in held-to-maturity securities as of June 30, 2020 and
December 31, 2019:
|
June 30, 2020
|
|
|
Amortized
|
|
|
Aggregate
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Net Carrying
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
$
|
2,996,324
|
|
|
$
|
2,996,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,996,324
|
|
Marketable securities total
|
$
|
2,996,324
|
|
|
$
|
2,996,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,996,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Amortized
|
|
|
Aggregate
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Net Carrying
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds/notes
|
$
|
2,701,114
|
|
|
$
|
2,700,678
|
|
|
$
|
436
|
|
|
$
|
—
|
|
|
$
|
2,701,114
|
|
Commercial paper
|
|
19,245,921
|
|
|
|
19,245,921
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,245,921
|
|
U.S. government agency securities
|
|
2,494,485
|
|
|
|
2,495,675
|
|
|
|
—
|
|
|
|
(1,190
|
)
|
|
|
2,494,485
|
|
Marketable securities total
|
$
|
24,441,520
|
|
|
$
|
24,442,274
|
|
|
$
|
436
|
|
|
$
|
(1,190
|
)
|
|
$
|
24,441,520
|
|
Research and development costs
Costs incurred in connection with research and development
activities are expensed as incurred. These costs include licensing
fees to use certain technology in the Company’s research and
development projects as well as fees paid to consultants and
various entities that perform certain research and testing on
behalf of the Company and costs related to salaries, benefits,
bonuses and stock-based compensation granted to employees in
research and development functions. The Company determines expenses
related to clinical studies based on estimates of the services
received and efforts expended pursuant to contracts with multiple
research institutions and contract research organizations (“CROs”)
that conduct and manage clinical studies on its behalf. The
financial terms of these agreements are subject to negotiation,
vary from contract to contract and may result in uneven payment
flows. Payments under some of these contracts depend on factors
such as the successful enrollment of patients and the completion of
clinical trial milestones. In accruing service fees, the Company
estimates the time period over which services will be performed and
the level of effort to be expended in each period. If the actual
timing of the performance of services or the level of effort varies
from the estimate, the accrual is adjusted accordingly. The
expenses for some trials may be recognized on a straight-line basis
if the anticipated costs are expected to be incurred ratably during
the period. Payments for these activities are based on the terms of
the individual arrangements, which may differ from the pattern of
costs incurred, and are reflected in the consolidated financial
statements as prepaid or accrued expenses.
10
In-process research and development
In-process research and development (“IPR&D”) assets represent
capitalized incomplete research projects that the Company acquired
through business combinations. Such assets are initially measured
at their acquisition date fair values. The initial fair value of
the research projects are recorded as intangible assets on the
balance sheet, rather than expensed, regardless of whether these
assets have an alternative future use.
The amounts capitalized are being accounted for as indefinite-lived
intangible assets, subject to impairment testing, until completion
or abandonment of research and development efforts associated with
the project. An IPR&D asset is considered abandoned when it
ceases to be used (that is, research and development efforts
associated with the asset have ceased, and there are no plans to
sell or license the asset or derive defensive value from the
asset). At that point, the asset is considered to be disposed of
and is written off. Upon successful completion of each project, the
Company will make a determination about the then remaining useful
life of the intangible asset and begin amortization. The Company
tests its indefinite-lived intangibles, IPR&D assets, for
impairment annually on November 30 and more frequently if
events or changes in circumstances indicate that it is more likely
than not that the asset is impaired. When testing indefinite-lived
intangibles for impairment, the Company may assess qualitative
factors for its indefinite-lived intangibles to determine whether
it is more likely than not (that is, a likelihood of more than
50 percent) that the asset is impaired. Alternatively, the
Company may bypass this qualitative assessment for some or all of
its indefinite-lived intangibles and perform the quantitative
impairment test that compares the fair value of the
indefinite-lived intangible asset with the asset’s carrying amount.
There was no impairment of IPR&D for the three and six months
ended June 30, 2020 or 2019.
Impairment of MIN-117 In-process Research and Development
Asset.
As a result of the Company’s Phase 2b trial of MIN-117 in adult
patients suffering from moderate to severe MDD not meeting its
primary and key secondary endpoints and the Company’s decision not
to further the clinical development of MIN-117 in MDD, the Company
determined that the MIN-117 IPR&D is fully impaired and
recognized a $19.0 million expense, which was included as a
component of research and development expense, during the year
ended December 31, 2019.
Stock-based compensation
The Company recognizes compensation cost relating to stock-based
payment transactions using a fair-value measurement method, which
requires all stock-based payments to employees, including grants of
employee stock options, to be recognized in operating results as
compensation expense based on fair value over the requisite service
period of the awards. The Company determines the fair value of
stock-based awards using the Black-Scholes option-pricing model
which uses both historical and current market data to estimate fair
value. The method incorporates various assumptions such as the
risk-free interest rate, expected volatility, expected dividend
yield, and expected life of the options. Forfeitures are recorded
as they occur instead of estimating forfeitures that are expected
to occur. The fair value of restricted stock units (“RSUs”) is
equal to the closing price of the Company’s common stock on the
date of grant.
An accounting policy change was made by the Company related to the
accounting for non-employee awards on January 1, 2019 as a result
of the adoption of ASU No. 2018-07, Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting for which the Company now
accounts for non-employee awards in the same manner as employee
awards.
The date of expense recognition for grants to non-employees is the
earlier of the date at which a commitment for performance by the
counterparty to earn the equity instrument is reached or the date
at which the counterparty’s performance is complete. The Company
determines the fair value of stock-based awards granted to
non-employees similar to the way fair value of awards are
determined for employees except that certain assumptions used in
the Black-Scholes option-pricing model, such as expected life of
the option, may be different.
Foreign currency transactions
The Company’s functional currency is the U.S. Dollar. The Company
pays certain vendor invoices in the respective foreign currency.
The Company records an expense in U.S. Dollars at the time the
liability is incurred. Changes in the applicable foreign currency
rate between the date an expense is recorded and the payment date
is recorded as a foreign currency gain or loss.
11
Income (loss) per share
Basic income (loss) per share is computed by dividing net income
(loss) by the weighted-average number of shares of common stock
outstanding for the period. Diluted income (loss) per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
shared in the earnings of the entity. The treasury stock method is
used to determine the dilutive effect of the Company’s stock
options and warrants.
Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash, cash equivalents
and marketable securities. The Company maintains its cash and cash
equivalent balances in the form of business checking accounts and
money market accounts, the balances of which, at times, may exceed
federally insured limits. Exposure to cash and cash equivalents
credit risk is reduced by placing such deposits with major
financial institutions and monitoring their credit ratings.
Marketable securities consist primarily of corporate bonds, with
fixed interest rates. Exposure to credit risk of marketable
securities is reduced by maintaining a diverse portfolio and
monitoring their credit ratings.
Equipment
Equipment is stated at cost less accumulated depreciation.
Equipment is depreciated on the straight-line basis over their
estimated useful lives of three years. Expenditures for maintenance
and repairs are charged to expense as incurred.
Leases
Effective January 1, 2019, the Company adopted Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 842, Leases (“ASC
842”), using the required modified retrospective approach and
utilizing the effective date as its date of initial application,
for which prior periods are presented in accordance with the
previous guidance in ASC 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether
the arrangement is or contains a lease based on the unique facts
and circumstances present in the arrangement. Most leases with a
term greater than one year are recognized on the balance sheet as
right-of-use assets and short-term and long-term lease liabilities,
as applicable. The Company has elected not to recognize on the
balance sheet leases with terms of 12 months or less. The Company
typically only includes an initial lease term in its assessment of
a lease arrangement. Options to renew a lease are not included in
the Company’s assessment unless there is reasonable certainty that
the Company will renew. The Company monitors its plans to renew its
material leases on a quarterly basis.
Operating lease liabilities and their corresponding right-of-use
assets are recorded based on the present value of lease payments
over the expected remaining lease term. Certain adjustments to the
right-of-use asset may be required for items such as incentives
received. The interest rate implicit in the Company’s leases is
typically not readily determinable. As a result, the Company
utilizes its incremental borrowing rate, which reflects the fixed
rate at which the Company could borrow on a collateralized basis
the amount of the lease payments in the same currency, for a
similar term and in a similar economic environment. In transition
to ASC 842, the Company utilized the remaining lease term of its
leases in determining the appropriate incremental borrowing
rates.
In accordance with ASC 842, components of a lease should be
allocated between lease components (e.g., land, building, etc.) and
non-lease components (e.g., common area maintenance, consumables,
etc.). The fixed and in-substance fixed contract consideration
(including any consideration related to non-components) must be
allocated based on the respective relative fair values to the lease
components and non-lease components.
Although separation of lease and non-lease components is required,
certain expedients are available. Entities may elect the practical
expedient to not separate lease and non-lease components by class
of underlying asset where entities would account for each lease
component and the related non-lease component together as a single
component. For new and amended leases beginning in 2019 and after,
the Company has elected to account for the lease and non-lease
components for leases for classes of all underlying assets and
allocate all of the contract consideration to the lease component
only.
12
Long-lived assets
The Company reviews the recoverability of all long-lived assets,
including the related useful lives, whenever events or changes in
circumstances indicate that the carrying amount of a long-lived
asset might not be recoverable. If required, the Company compares
the estimated undiscounted future net cash flows to the related
asset’s carrying value to determine whether there has been an
impairment. If an asset is considered impaired, the asset is
written down to fair value, which is based either on discounted
cash flows or appraised values in the period the impairment becomes
known. The Company believes that all long-lived assets are
recoverable, and no impairment was deemed necessary at June 30,
2020 and 2019.
Goodwill
The Company tests its goodwill for impairment annually, or whenever
events or changes in circumstances indicate an impairment may have
occurred, by comparing its reporting unit’s carrying value to its
fair value. Impairment may result from, among other things,
deterioration in the performance of the acquired business, adverse
market conditions, adverse changes in applicable laws or
regulations and a variety of other circumstances. If the Company
determines that an impairment has occurred, it is required to
record a write-down of the carrying value and charge the impairment
as an operating expense in the period the determination is made. In
evaluating the recoverability of the carrying value of goodwill,
the Company must make assumptions regarding estimated future cash
flows and other factors to determine the fair value of the acquired
assets. Changes in strategy or market conditions could
significantly impact those judgments in the future and require an
adjustment to the recorded balances. The Company tests its goodwill
for impairment as of November 30. There was no impairment of
goodwill for the six months ended June 30, 2020 and 2019.
Revenue recognition
The Company applies the revenue recognition guidance in accordance
with ASC 606, Revenue from
Contracts with Customers. Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred
and title has passed, the price is fixed or determinable, and
collectability is reasonably assured. The Company is a development
stage company and has had no revenues from product sales to
date.
When the Company enters into an arrangement that meets the
definition of a collaboration under ASC 808, Collaborative Arrangements, the Company
recognizes revenue as research and development is performed and its
respective share of the expenses are incurred. The Company assesses
whether the arrangement contains multiple elements or deliverables,
which may include (1) licenses to the Company's technology, (2)
research and development activities performed for the collaboration
partner, and (3) participation on Joint Steering Committees.
Payments may include non-refundable, upfront payments, milestone
payments upon achieving significant development events, and
royalties on future sales. Each required deliverable is evaluated
to determine whether it qualifies as a separate unit of accounting
based on whether the deliverable has “stand-alone value” to the
customer. The arrangement’s consideration is then allocated to each
separate unit of accounting based on the relative selling price of
each deliverable. The estimated selling price of each deliverable
is determined using the following hierarchy of values: (i)
vendor-specific objective evidence of fair value, (ii) third-party
evidence of selling price, and (iii) best estimate of selling
price. The best estimate of selling price reflects the Company’s
best estimate of what the selling price would be if the deliverable
was regularly sold by the Company on a stand-alone basis. The
consideration allocated to each unit of accounting is then
recognized as the related goods or services are delivered, limited
to the consideration that is not contingent upon future
deliverables. Supply or service transactions may involve the charge
of a nonrefundable initial fee with subsequent periodic payments
for future products or services. The up-front fees, even if
nonrefundable, are recognized as revenue as the products and/or
services are delivered and performed over the term of the
arrangement. During the three and six months ended June 30, 2020,
the Company recognized $41.2 million in collaborative revenue as a
result of opting out of its agreement with Janssen (see Note
5).
Deferred revenue
The Company applies the revenue recognition guidance in accordance
with ASC 606. Using ASC 606, revenue that is unearned is deferred.
Deferred revenue that is expected to be recognized as revenue more
than one year subsequent to the balance sheet date is classified as
long-term deferred revenue.
Segment information
Operating segments are defined as components of an enterprise
(business activity from which it earns revenue and incurs expenses)
about which discrete financial information is available and
regularly reviewed by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
The Company’s chief decision maker, who is the Chief Executive
Officer, reviews operating results to make decisions about
allocating resources and assessing performance for the entire
Company. The Company views its operations and manages its business
as one operating segment.
13
Comprehensive loss
The Company had no items of comprehensive loss other than its net
loss for each period presented.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the
FASB and are adopted by the Company as of the specified effective
date.
Recently adopted accounting pronouncements
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):
Clarifying the Interaction between Topic 808 and Topic 606.
This update is intended to clarify that certain transactions
between collaborative arrangement participants should be accounted
for as revenue under Topic 606. The Company adopted the new
standard on January 1, 2020.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic
350). The new standard simplifies the test for goodwill
impairment. The Company adopted the new standard on January 1,
2020.
NOTE 3 — ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the
following:
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Research and development costs and other accrued expenses
|
$
|
2,089,634
|
|
|
$
|
3,824,950
|
|
Accrued Severance
|
|
788,923
|
|
|
|
—
|
|
Accrued bonus
|
|
832,148
|
|
|
|
—
|
|
Professional fees
|
|
253,466
|
|
|
|
314,213
|
|
Vacation pay
|
|
115,478
|
|
|
|
—
|
|
|
$
|
4,079,649
|
|
|
$
|
4,139,163
|
|
NOTE 4 — NET INCOME (LOSS) PER SHARE OF COMMON STOCK
Basic income (loss) per share is calculated by dividing the net
income (loss) by the weighted average number of shares of common
stock outstanding. Diluted income per share is computed by dividing
the net income by the weighted average number of shares of common
stock outstanding, plus potential outstanding common stock for the
period. Potential outstanding common stock includes stock options
and shares underlying RSUs, but only to the extent that their
inclusion is dilutive. The following table sets forth the
computation of basic and diluted loss per share for common
stockholders:
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net income (loss)
|
$
|
29,529,376
|
|
|
$
|
(12,476,471
|
)
|
|
$
|
17,378,211
|
|
|
$
|
(28,303,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock
outstanding - basic
|
|
39,483,187
|
|
|
|
39,025,471
|
|
|
|
39,330,389
|
|
|
|
38,996,949
|
|
Dilutive effect
|
|
794,884
|
|
|
|
—
|
|
|
|
814,607
|
|
|
|
—
|
|
Weighted average shares of common stock
outstanding - diluted
|
|
40,278,071
|
|
|
|
39,025,471
|
|
|
|
40,144,996
|
|
|
|
38,996,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.75
|
|
|
$
|
(0.32
|
)
|
|
$
|
0.44
|
|
|
$
|
(0.73
|
)
|
Diluted
|
$
|
0.73
|
|
|
$
|
(0.32
|
)
|
|
$
|
0.43
|
|
|
$
|
(0.73
|
)
|
14
The following securities outstanding at June 30, 2020 and 2019 have
been excluded from the calculation of weighted average shares
outstanding as their effect on the calculation of loss per share is
antidilutive:
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Common stock options
|
|
6,528,386
|
|
|
|
8,508,672
|
|
|
|
6,528,386
|
|
|
|
8,508,672
|
|
Restricted stock units
|
|
48,650
|
|
|
|
127,300
|
|
|
|
48,650
|
|
|
|
127,300
|
|
Common stock warrants
|
|
40,790
|
|
|
|
40,790
|
|
|
|
40,790
|
|
|
|
40,790
|
|
NOTE 5 — CO-DEVELOPMENT AND LICENSE AGREEMENT
On February 13, 2014, the Company signed a co-development and
license agreement (the
“Agreement”) with Janssen, which became effective upon completion of
the Company’s initial public offering and provided for the payment
of a $22.0 million license fee by the Company. Under the Agreement,
Janssen, the licensor, granted the Company an exclusive license,
with the right to sublicense, in the Minerva Territory, under (i)
certain patent and patent applications to sell products containing
any orexin 2 compound, controlled by the licensor and claimed in a
licensor patent right as an active ingredient, and (ii)
seltorexant for any use in
humans.
The Company has accounted for the Agreement as a joint risk-sharing
collaboration in accordance with ASC 808, Collaborative Arrangements.
In June 2017, the Company entered into an amendment (“the
Amendment”) to the Agreement, which became effective on August 29,
2017. Under the Amendment, Janssen waived its right to royalties on
seltorexant insomnia sales in the Minerva Territory and made an
upfront payment to the Company of $30 million and agreed to waive
development payments from the Company until completion of the Phase
2b development milestone, referred to as “Decision Point 4”.
Top-line results have been reported from three Phase 2b trials and
one Phase 1b trial with seltorexant.
On June 30, 2020, the Company exercised its right to opt out of the
Agreement with Janssen pursuant to a Settlement Agreement with
Janssen dated June 24, 2020 (the “Settlement Agreement”), which
became effective upon exercise of the opt out, pursuant to which
the Company and Janssen resolved certain disputes under the
Agreement. Under the Settlement Agreement, the Company agreed not
to assert that Decision Point 4 has not been reached, Janssen
waived the requirement that opt-out occur after Decision Point 4 in
order for the Company to receive a royalty on sales of seltorexant
after opt-out, and the Company and Janssen agreed to waive any
payments to the other with respect to development costs for
seltorexant. As a result of the exercise of its right to opt out of
the Agreement with Janssen, the Agreement is deemed to have been
terminated effective as of October 2, 2019. The Company will now
collect a royalty on worldwide sales of seltorexant in all
indications in the mid-single digits, with no further financial
obligations to Janssen.
As a result of opting out of the Agreement with Janssen, the
Company recognized $41.2 million in collaborative revenue during
the second quarter of 2020 which had previously been included on
the balance sheet under deferred revenue. The $41.2 million in
collaborative revenue represents the $30 million payment made by
Janssen and $11.2 million in previously accrued collaborative
expenses forgiven by Janssen upon the effective date of the
Amendment. The Company does not have
any future performance obligations under the agreement and will
recognize any future royalty revenues in the periods of the sale of
the related products.
NOTE 6 — STOCKHOLDERS’ EQUITY
At-the-Market Equity Offering Program
On August 10, 2018, the Company entered into an Open Market Sale
Agreement (the “Sales Agreement”) with Jefferies, LLC,
(“Jefferies”), pursuant to which the Company may offer and sell,
from time to time, through Jefferies, up to $50.0 million in shares
of the Company's common stock, by any method permitted by law
deemed to be an “at-the-market” offering as defined in Rule 415
promulgated under the Securities Act of 1933, as amended. During
June 2020, the Company issued and sold 1,361,956 shares of the
Company's common stock under the Sales Agreement. The shares were
sold at an average price of $3.802 per share for aggregate net
proceeds to the Company of approximately $5.0 million, after
deducting sales commissions and offering costs payable by the
Company.
15
Term Loan Warrants
In connection with the Company’s former Loan and Security Agreement
with Oxford Finance LLC and Silicon Valley Bank (the “Lenders”),
which provided for term loans to the Company in an aggregate
principal amount of up to $15 million in two tranches on January
15, 2016, the Company issued the Lenders warrants to
purchase 40,790 shares of common stock at a per share exercise
price of $5.516. The warrants are immediately exercisable upon
issuance, and other than in connection with certain mergers or
acquisitions, will expire on the ten-year anniversary of the date
of issuance. The fair value of the warrants was estimated at $0.2
million using a Black-Scholes model and assuming: (i) expected
volatility of 100.8%, (ii) risk free interest rate of 1.83%, (iii)
an expected life of 10 years and (iv) no dividend payments. The
fair value of the warrants was included as a discount to the term
loans drawn at such time and also as a component of additional
paid-in capital and were amortized to interest expense over the
term of the loan. Although the term loans were repaid in August
2018, all related warrants were outstanding and exercisable as of
June 30, 2020.
NOTE 7 — STOCK AWARD PLAN AND STOCK-BASED
COMPENSATION
In December 2013, the Company adopted the 2013 Equity Incentive
Plan (as subsequently amended and restated, the “Plan”), which
provides for the issuance of options, stock appreciation rights,
stock awards and stock units. Pursuant to Nasdaq listing rules, the
Company issued inducement awards in December 2017 to the Company’s
President outside of the Plan in the form of an option to purchase
775,000 shares of the Company’s common stock and a RSU award
to purchase 40,000 shares of the Company’s common stock. In June
2020, the Company increased the aggregate number of shares of
common stock authorized for issuance under the Plan by 2,000,000
shares. Stock option activity for employees and non-employees for
the six months ended June 30, 2020 is as follows:
|
|
Shares Issuable
Pursuant to
Stock Options
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractual
Terms (years)
|
|
|
Total
Intrinsic Value
(in thousands)
|
|
Outstanding January 1, 2020
|
|
|
9,040,328
|
|
|
$
|
6.98
|
|
|
|
7.3
|
|
|
$
|
7,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,108,344
|
|
|
$
|
6.86
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(198,762
|
)
|
|
$
|
5.75
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(534,687
|
)
|
|
$
|
7.85
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(105,356
|
)
|
|
$
|
9.63
|
|
|
|
|
|
|
|
|
|
Outstanding June 30, 2020
|
|
|
10,309,867
|
|
|
$
|
6.90
|
|
|
|
7.3
|
|
|
$
|
29
|
|
Exercisable June 30, 2020
|
|
|
6,259,560
|
|
|
$
|
6.74
|
|
|
|
6.3
|
|
|
$
|
—
|
|
Available for future grant
|
|
|
574,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant-date fair value of stock options
outstanding on June 30, 2020 was $4.36 per share. Total
unrecognized compensation costs related to non-vested stock options
at June 30, 2020 were approximately $13.6 million and are expected
to be recognized within future operating results over a
weighted-average period of 2.37 years. The total intrinsic value of the options exercised
during the six months ended June 30, 2020, and 2019 was
approximately $0.9 million and $0.2 million,
respectively.
The expected term of the employee-related options was estimated
using the “simplified” method as defined by the SEC’s Staff
Accounting Bulletin No. 107, Share-Based Payment. The
volatility assumption was determined by examining the historical
volatilities for industry peer companies, as the Company did not
have sufficient trading history for its common stock. The risk-free
interest rate assumption is based on the U.S. Treasury instruments,
the term of which was consistent with the expected term of the
options. The dividend assumption is based on the Company’s history
and expectation of dividend payouts. The Company has never paid
dividends on its common stock and does not anticipate paying
dividends on its common stock in the foreseeable future.
Accordingly, the Company has assumed no dividend yield for purposes
of estimating the fair value of the options.
16
The Company uses the Black-Scholes model to estimate the fair value
of stock options granted. For stock options granted during the six
months ended June 30, 2020 and 2019, the Company utilized the
following assumptions:
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Expected term (years)
|
|
5.50-5.88
|
|
|
5.5
|
|
Risk free interest rate
|
|
0.37%-0.42%
|
|
|
1.91-1.96%
|
|
Volatility
|
|
68%-69%
|
|
|
74-77%
|
|
Dividend yield
|
|
0%
|
|
|
0%
|
|
Weighted average grant date fair value per share of
common stock
|
|
$
|
1.61
|
|
|
$
|
3.26
|
|
RSU activity under the Plan for the six months ended June 30,
2020 is as follows:
|
|
|
|
|
|
Weighted-
Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
RSUs
|
|
|
Fair Value
|
|
Unvested January 1, 2020
|
|
|
68,650
|
|
|
$
|
11.29
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
|
(10,000
|
)
|
|
$
|
6.05
|
|
Forfeited
|
|
|
(10,000
|
)
|
|
$
|
6.05
|
|
Unvested June 30, 2020
|
|
|
48,650
|
|
|
$
|
13.45
|
|
RSUs awarded to employees generally vest one-fourth per year over four
years from the anniversary of the date of grant, provided the
employee remains continuously employed with the Company. Shares of
the Company’s stock are delivered to the employee upon vesting,
subject to payment of applicable withholding taxes. The fair value
of RSUs is equal to the closing price of the Company’s common stock
on the date of grant. Total unrecognized compensation costs related
to non-vested RSUs at June 30, 2020 was approximately $0.3 million
and is expected to be recognized within future operating results
over a period of 0.5 years. The total fair value of shares vested
during the six months ended June 30, 2020 and 2019 was
approximately $61 thousand and zero, respectively. The following
table presents stock-based compensation expense included in the
Company’s consolidated statements of operation