10-Q
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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 September 30, 2023

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.)

 

 

1500 District Avenue
Burlington, MA

 

01803

(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 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

 

 

 

 

 

 

 

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

The number of shares of Registrant’s Common Stock, $0.0001 par value per share, outstanding as of November 2, 2023 was 6,993,406.

 

 


 

INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

PART I — Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited):

 

4

 

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

 

4

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022

 

5

 

 

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the nine months ended September 30, 2023 and 2022

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

 

7

 

 

Notes to Condensed Consolidated Financial Statements

 

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

23

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

PART II — Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

25

Item 1A.

 

Risk Factors

 

25

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

Item 3.

 

Defaults Upon Senior Securities

 

39

Item 4.

 

Mine Safety Disclosures

 

39

Item 5.

 

Other Information

 

39

Item 6.

 

Exhibits

 

40

 

 

 

 

 

SIGNATURES

 

41

 

 

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” and in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part I, 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)

 

 

September 30,

 

 

December 31,

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

46,903,960

 

 

$

36,093,606

 

Restricted cash

 

100,000

 

 

 

100,000

 

Refundable regulatory fee

 

 

 

 

3,117,218

 

Prepaid expenses and other current assets

 

1,221,220

 

 

 

848,117

 

Total current assets

 

48,225,180

 

 

 

40,158,941

 

 

 

 

 

 

 

Equipment, net

 

12,245

 

 

 

16,326

 

Capitalized software, net

 

23,412

 

 

 

42,567

 

Goodwill

 

14,869,399

 

 

 

14,869,399

 

Total assets

$

63,130,236

 

 

$

55,087,233

 

 

 

 

 

 

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

1,395,070

 

 

$

969,667

 

Accrued expenses and other current liabilities

 

1,954,590

 

 

 

407,909

 

Total current liabilities

 

3,349,660

 

 

 

1,377,576

 

Liability related to the sale of future royalties

 

79,826,671

 

 

 

73,733,876

 

Total liabilities

 

83,176,331

 

 

 

75,111,452

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ (deficit) equity

 

 

 

 

 

Preferred stock; $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

Common stock; $0.0001 par value; 125,000,000 shares authorized; 6,993,406 and 5,340,193 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

699

 

 

 

534

 

Additional paid-in capital

 

367,746,175

 

 

 

346,785,322

 

Accumulated deficit

 

(387,792,969

)

 

 

(366,810,075

)

Total stockholders’ (deficit) equity

 

(20,046,095

)

 

 

(20,024,219

)

Total liabilities and stockholders’ (deficit) equity

$

63,130,236

 

 

$

55,087,233

 

See accompanying notes to condensed consolidated financial statements

4


 

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Research and development

$

3,443,537

 

 

$

2,367,364

 

 

$

7,984,566

 

 

$

11,459,205

 

General and administrative

 

2,635,583

 

 

 

2,839,784

 

 

 

7,963,067

 

 

 

8,702,390

 

Total expenses

 

6,079,120

 

 

 

5,207,148

 

 

 

15,947,633

 

 

 

20,161,595

 

Loss from operations

 

(6,079,120

)

 

 

(5,207,148

)

 

 

(15,947,633

)

 

 

(20,161,595

)

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange (losses) gains

 

(5,096

)

 

 

2,063

 

 

 

(20,988

)

 

 

(135

)

Investment income

 

348,681

 

 

 

180,091

 

 

 

1,078,522

 

 

 

259,886

 

Non-cash interest expense for the sale of future royalties

 

(2,084,911

)

 

 

(1,875,482

)

 

 

(6,092,795

)

 

 

(5,480,775

)

Net loss

$

(7,820,446

)

 

$

(6,900,476

)

 

$

(20,982,894

)

 

$

(25,382,619

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

$

(1.03

)

 

$

(1.29

)

 

$

(3.41

)

 

$

(4.75

)

Weighted average shares outstanding, basic and diluted

 

7,568,981

 

 

 

5,340,193

 

 

 

6,148,276

 

 

 

5,340,195

 

See accompanying notes to condensed consolidated financial statements.

5


 

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(Unaudited)

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid-In Capital

 

 

Deficit

 

 

Total

 

Balances at January 1, 2022

 

5,340,196

 

$

534

 

$

342,676,508

 

 

$

(334,701,399

)

 

$

7,975,643

 

Stock-based compensation

 

 

 

 

 

 

 

1,052,656

 

 

 

 

 

 

1,052,656

 

Net loss

 

 

 

 

 

 

 

 

 

 

(9,764,429

)

 

 

(9,764,429

)

Balances at March 31, 2022

 

5,340,196

 

 

$

534

 

 

$

343,729,164

 

 

$

(344,465,828

)

 

$

(736,130

)

Stock-based compensation

 

 

 

 

 

 

 

1,071,605

 

 

 

 

 

 

1,071,605

 

Adjustments due to the rounding impact from the reverse stock split for fractional shares

 

(3

)

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

(8,717,714

)

 

 

(8,717,714

)

Balances at June 30, 2022

 

5,340,193

 

 

$

534

 

 

$

344,800,764

 

 

$

(353,183,542

)

 

$

(8,382,244

)

Stock-based compensation

 

 

 

 

 

 

 

1,036,874

 

 

 

 

 

 

1,036,874

 

Net loss

 

 

 

 

 

 

 

 

 

 

(6,900,476

)

 

 

(6,900,476

)

Balances at September 30, 2022

 

5,340,193

 

 

$

534

 

 

$

345,837,638

 

 

$

(360,084,018

)

 

$

(14,245,846

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2023

 

5,340,193

 

$

534

 

$

346,785,322

 

 

$

(366,810,075

)

 

$

(20,024,219

)

Stock-based compensation

 

 

 

 

 

 

 

376,459

 

 

 

 

 

 

376,459

 

Net loss

 

 

 

 

 

 

 

 

 

 

(6,970,412

)

 

 

(6,970,412

)

Balances at March 31, 2023

 

5,340,193

 

 

$

534

 

 

$

347,161,781

 

 

$

(373,780,487

)

 

$

(26,618,172

)

Issuance of common stock and warrants pursuant to a private placement

 

1,425,000

 

 

 

142

 

 

 

19,999,852

 

 

 

 

 

 

19,999,994

 

Costs related to issuance of common stock and warrants

 

 

 

 

 

 

 

(309,602

)

 

 

 

 

 

(309,602

)

Vesting of performance-based restricted stock units

 

228,213

 

 

 

23

 

 

 

(23

)

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

608,915

 

 

 

 

 

 

608,915

 

Net loss

 

 

 

 

 

 

 

 

 

 

(6,192,036

)

 

 

(6,192,036

)

Balances at June 30, 2023

 

6,993,406

 

 

$

699

 

 

$

367,460,923

 

 

$

(379,972,523

)

 

$

(12,510,901

)

Stock-based compensation

 

 

 

 

 

 

 

371,943

 

 

 

 

 

 

371,943

 

Costs related to issuance of common stock and warrants

 

 

 

 

 

 

 

(86,691

)

 

 

 

 

 

(86,691

)

Net loss

 

 

 

 

 

 

 

 

 

 

(7,820,446

)

 

 

(7,820,446

)

Balances at September 30, 2023

 

6,993,406

 

 

$

699

 

 

$

367,746,175

 

 

$

(387,792,969

)

 

$

(20,046,095

)

See accompanying notes to condensed consolidated financial statements.

6


 

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(20,982,894

)

 

$

(25,382,619

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

4,081

 

 

 

 

Amortization of capitalized software

 

19,155

 

 

 

2,128

 

Stock-based compensation expense

 

1,357,317

 

 

 

3,161,135

 

Non-cash interest expense associated with the sale of future royalties

 

6,092,795

 

 

 

5,480,775

 

Changes in operating assets and liabilities

 

 

 

 

 

Refundable regulatory fee

 

3,117,218

 

 

 

(3,117,218

)

Prepaid expenses and other current assets

 

(373,103

)

 

 

(57,173

)

Accounts payable

 

425,403

 

 

 

(1,320,327

)

Accrued expenses and other current liabilities

 

1,546,681

 

 

 

698,232

 

Net cash used in operating activities

 

(8,793,347

)

 

 

(20,535,067

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Net cash provided by investing activities

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from sales of common stock and warrants in private placement

 

19,999,994

 

 

 

 

Costs paid in connection with private placements

 

(396,293

)

 

 

 

Fees paid in connection with the reverse stock split fractional shares

 

 

 

 

(5

)

Net cash provided by (used in) financing activities

 

19,603,701

 

 

 

(5

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

10,810,354

 

 

 

(20,535,072

)

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

Beginning of period

 

36,193,606

 

 

 

60,855,080

 

End of period

$

47,003,960

 

 

$

40,320,008

 

Reconciliation of the Condensed Consolidated Statements of Cash Flows to the
   Condensed Consolidated Balance Sheets

 

 

 

 

 

Cash and cash equivalents

$

46,903,960

 

 

$

40,220,008

 

Restricted cash

 

100,000

 

 

 

100,000

 

Total cash, cash equivalents and restricted cash

$

47,003,960

 

 

$

40,320,008

 

See accompanying notes to condensed consolidated financial statements.

7


 

MINERVA NEUROSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

As of September 30, 2023 and for the Nine Months Ended September 30, 2023 and 2022

(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 product candidates to treat patients suffering from central nervous system diseases. The Company’s lead product candidate is roluperidone (f/k/a MIN-101), a compound the Company is developing for the treatment of negative symptoms in patients with schizophrenia. The Company holds the license to roluperidone from Mitsubishi Tanabe Pharma Corporation (“MTPC”) with the rights to develop, sell and import roluperidone globally, excluding most of Asia. In August 2022, the Company submitted a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for its lead product candidate, roluperidone, for the treatment of negative symptoms in schizophrenia. In October 2022, the Company received a refusal to file letter (“RTF”) from the FDA for the NDA for roluperidone. Subsequently, the Company requested a formal dispute resolution and appealed the RTF, following which, on April 27, 2023, the FDA filed the Company’s NDA for roluperidone. In May 2023, the FDA confirmed that the NDA for roluperidone was assigned a standard review classification and a Prescription Drug User Fee Act goal date of February 26, 2024. The FDA advised that it identified potential review issues that had been previously cited in the RTF decision letter, which included those discussed at the Type C meeting in March 2022. See the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Clinical and Regulatory Updates—Type C Meeting” for more information.

The Company has exclusive rights to develop and commercialize MIN-301, a compound for the treatment of Parkinson’s disease. In addition, Minerva previously co-developed seltorexant (f/k/a MIN-202 or JNJ-42847922) with Janssen Pharmaceutica NV (“Janssen”) for the treatment of insomnia disorder and adjunctive treatment of Major Depressive Disorder (“MDD”). During 2020, Minerva exercised its right to opt out of the joint development agreement with Janssen for the future development of seltorexant. As a result, the Company was entitled to collect royalties in the mid-single digits on potential future worldwide sales of seltorexant in certain indications, with no further financial obligations to Janssen. In January 2021, the Company sold its rights to these potential royalties to Royalty Pharma plc (“Royalty Pharma”) for a $60 million up front payment and up to $95 million in potential future milestone payments.

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 since inception. As of September 30, 2023, the Company had an accumulated deficit of approximately $387.8 million and net cash used in operating activities was approximately $8.8 million during the nine months ended September 30, 2023. Management expects to continue to incur operating losses and negative cash flows from operations in the future. The Company has financed its operations to date from proceeds from the sale of common stock, warrants, loans, convertible promissory notes, collaboration agreements and royalty sales.

As of September 30, 2023, the Company had cash, cash equivalents, and restricted cash of $47.0 million, which it believes will be sufficient to meet the Companys operating commitments for the next 12 months from the date its 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 many 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, and the level of financial resources available. The Company can adjust its operating plan spending levels based on the timing of future clinical trials, which are predicated upon adequate funding to complete the trials. The Company routinely evaluates the status of its clinical development programs as well as potential strategic options.

The Company will need to raise additional capital to continue to fund operations and fully fund any potential 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


 

Further, if the Company does not satisfy The Nasdaq Capital Market continued listing requirements, its common stock may be subject to delisting, which could impact the Company’s ability to complete additional equity financings on terms acceptable to the Company.

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 September 30, 2023, the results of operations for the three and nine months ended September 30, 2023 and 2022 and cash flows for the nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet as of December 31, 2022 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, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2023.

Reverse Stock Split

On June 17, 2022, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect a one-for-eight (1-for-8) reverse stock split of its outstanding common stock. The Amendment became effective at 5:00 p.m. Eastern Time on June 17, 2022. A series of alternate amendments to effect a reverse stock split was approved by the Company’s stockholders at the Company’s 2022 Annual Meeting of Stockholders on June 10, 2022, and the specific one-for-eight (1-for-8) reverse stock split was subsequently approved by the Company’s board of directors on June 10, 2022.

The Amendment provided that, at the effective time of the Amendment, every eight (8) shares of the Company’s issued and outstanding common stock automatically combined into one issued and outstanding share of common stock, without any change in par value per share. The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the Amendment. As a result of the reverse stock split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock units and restricted stock awards issued by the Company and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock units and restricted stock awards, and, in the case of stock options, a proportionate increase in the exercise price of all such stock options. In addition, the number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective time of the Amendment was reduced proportionately. The reverse stock split did not affect the number of shares of common stock authorized for issuance under the Company’s Amended and Restated Certificate of Incorporation, which remained at 125,000,000 shares.

No fractional shares were issued as a result of the reverse stock split. Stockholders of record who would otherwise have been entitled to receive a fractional share received a cash payment in lieu thereof. The reverse stock split affected all stockholders proportionately and did not affect any stockholder’s percentage ownership of the Company’s common stock (except to the extent that the reverse stock split results in any stockholder owning only a fractional share). As a result of the reverse stock split, the number of the Company’s outstanding shares of common stock as of June 17, 2022 decreased from 42,721,566 (pre-split) shares to 5,340,193 (post-split) shares.

All share and per share amounts in the accompanying financial statements, related footnotes, and management’s discussion and analysis have been adjusted retroactively to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented. The Company’s common stock began trading on The Nasdaq Global Market on a split-adjusted basis when the market opened on June 21, 2022. Effective September 12, 2022, the Company transferred the listing of its common stock from The Nasdaq Global Market to The Nasdaq Capital Market.

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.

9


 

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.

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 September 30, 2023 and December 31, 2022.

Refundable regulatory fee

On August 12, 2022, the Company paid $3,117,218 to the FDA for the NDA user fee related to roluperidone. The Company met the conditions of the Federal Food, Drug, and Cosmetic Act, as amended, for the small business waiver of the user fees and its request for a waiver of an application user fee was granted by the FDA on November 2, 2022. On January 26, 2023, the refund was received from the FDA.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued, but not yet adopted, accounting pronouncements will not have a material impact on the condensed consolidated financial statements or do not apply to the Company.

NOTE 3 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

 

September 30, 2023

 

 

December 31, 2022

 

Research and development costs and other accrued expenses

$

656,341

 

 

$

279,434

 

Accrued bonus

 

1,089,783

 

 

 

14,832

 

Professional fees

 

128,225

 

 

 

113,643

 

Vacation pay

 

80,241

 

 

 

 

Accrued expenses and other current liabilities

$

1,954,590

 

 

$

407,909

 

 

10


 

NOTE 4 — NET LOSS PER SHARE OF COMMON STOCK

Diluted loss per share is the same as basic loss per share for all periods presented as the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. Basic loss per share is computed by dividing net loss 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.

In June 2023, in connection with the Private Placement (as defined and described in Note 6, Stockholders’ Equity), the Company issued and sold pre-funded warrants exercisable for an aggregate of 575,575 shares of common stock. The purchase price of the pre-funded warrants is $9.99 per share, which was paid to the Company upon issuance of the pre-funded warrants. The exercise price of the pre-funded warrants is $0.01 per share. The pre-funded warrants are exercisable by the holders at any time and do not expire. As the remaining shares underlying the pre-funded warrants are issuable for nominal consideration of $0.01 per share, 575,575 shares of common stock underlying the unexercised pre-funded warrants were considered outstanding for purposes of the calculation of loss per share as of September 30, 2023.

The following table sets forth the computation of basic and diluted loss per share for common stockholders:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

$

(7,820,446

)

 

$

(6,900,476

)

 

$

(20,982,894

)

 

$

(25,382,619

)

Weighted average shares of common stock outstanding

 

7,568,981

 

 

 

5,340,193

 

 

 

6,148,276

 

 

 

5,340,195

 

Net loss per share of common stock – basic and diluted

$

(1.03

)

 

$

(1.29

)

 

$

(3.41

)

 

$

(4.75

)

The following securities outstanding at September 30, 2023 and 2022 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 September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Common stock options

 

735,929

 

 

 

467,429

 

 

 

735,929

 

 

 

467,429

 

Performance-based restricted stock units (“PRSUs”)

 

228,209

 

 

 

456,422

 

 

 

228,209

 

 

 

456,422

 

Common stock warrants

 

5,099

 

 

 

5,099

 

 

 

5,099

 

 

 

5,099

 

In April 2023, the Compensation Committee of the Company’s board of directors certified the achievement of a performance condition occurring upon FDA acceptance of the NDA for roluperidone. As a result, 50% of the shares of common stock underlying the PRSUs vested. As of September 30, 2023, 228,213 PRSUs have vested, 20,218 have been cancelled and 228,209 remain outstanding.

NOTE 5 — SALE OF FUTURE ROYALTIES

The Company had previously co-developed seltorexant with Janssen for the treatment of insomnia disorder and adjunctive treatment of MDD. During 2020, the Company exercised its right to opt out of the joint development agreement with Janssen for the future development of seltorexant and, as a result, the Company was entitled to collect royalties in the mid-single digits on potential future sales of seltorexant worldwide in certain indications, with no further financial obligations to Janssen.

On January 19, 2021, the Company entered into an agreement with Royalty Pharma under which Royalty Pharma acquired the Company’s royalty interest in seltorexant for an upfront payment of $60 million and up to an additional $95 million in potential milestone payments. These milestone payments are contingent upon the achievement of certain clinical, regulatory and commercial milestones for seltorexant by Janssen or any other party in the event that Janssen sells seltorexant. Under the terms of the agreement, the Company has significant continuing involvement as Royalty Pharma has recourse against the Company relating to the payments due from Janssen. As such, the Company applied the debt recognition guidance under ASC 470, Debt, and recorded the upfront payment of $60 million as a liability related to the sale of future royalties (“Royalty Obligation”), which will be amortized under the interest method over the estimated life of the agreement. Under the terms of the agreement, all payments from Royalty Pharma to the Company, including the initial upfront payment of $60 million as well as amortized interest expense and potential milestone payments, are not repayable to Royalty Pharma in the event that Janssen discontinues the clinical development of seltorexant or ceases to pursue its commercialization at a future date for any reason. In addition, in accordance with ASC 470, Debt, the Company will account for any royalties received in the future as non-cash royalty revenue.

11


 

As royalties are remitted from Janssen to Royalty Pharma, the balance of the Royalty Obligation will be effectively repaid over the life of the co-development and license agreement (the “Agreement”) with Janssen. In order to determine the amortization of the Royalty Obligation, the Company is required to estimate the total amount of future royalty payments to Royalty Pharma over the life of the Agreement. In addition to the $60 million upfront payment, up to an additional $95 million in potential milestone payments will also be recorded as a liability related to the sale of future royalties and amortized as interest expense over the estimated remaining life of the agreement. At execution, the Company’s estimate of this total interest expense resulted in an effective annual interest rate of approximately 10.5%. As of September 30, 2023, the Company estimated the effective annual interest rate to be approximately 10.7%. This estimate contains significant assumptions, which are considered Level 3 fair value inputs, regarding the timing and amount of expected royalty and milestone payments that impact the interest expense that will be recognized over the royalty period. The Company will periodically assess the estimated royalty payments to Royalty Payments from Janssen and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty payments to Royalty Pharma from Janssen, and correspondingly, the amount of interest expense recorded by the Company, most of which are not within the Company’s control. Such factors include, but are not limited to, delays or discontinuation of development of seltorexant, regulatory approval, changing standards of care, the introduction of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in regulatory authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to Royalty Pharma are made in U.S. dollars (“USD”) while the underlying sales of seltorexant will be made in currencies other than USD, the ongoing COVID-19 pandemic, and other events or circumstances that are not currently foreseen. Changes to any of these factors could result in increases or decreases to both royalty revenues and interest expense. Janssen is currently conducting two Phase 3 studies with seltorexant, a third Phase 3 study was discontinued during 2022.

The following table shows the activity of the Royalty Obligation since the transaction inception through September 30, 2023:

 

September 30, 2023

 

Upfront payment from the sale of future royalties

$

60,000,000

 

Non-cash interest expense associated with the sale of future royalties

 

19,826,671

 

Liability related to the sale of future royalties

$

79,826,671

 

 

NOTE 6 — STOCKHOLDERS’ EQUITY

Private Placement of Common Stock and Warrants

On June 27, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a private placement (the “Private Placement”) (i) an aggregate of 1,425,000 shares (the “Shares”) of the Company’s common stock at a purchase price of $10.00 per Share, and (ii) in lieu of additional shares of common stock, pre-funded warrants to purchase an aggregate of 575,575 shares of common stock at a purchase price of $9.99 per pre-funded warrant. The price per pre-funded warrant represents the price of $10.00 per Share sold in the Private Placement, minus the $0.01 per share exercise price of each such pre-funded warrant. The pre-funded warrants are exercisable at any time after their original issuance and will not expire until exercised in full.

The pre-funded warrants issued in the Private Placement provide that a holder of the pre-funded warrants will not have the right to exercise any portion of its pre-funded warrants to the extent such holder, together with its affiliates, after giving effect to such exercise, would beneficially own in excess of the beneficial ownership limitation, as elected by such Investor, immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that each pre-funded warrant holder may increase or decrease the Beneficial Ownership Limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

On June 30, 2023, the Private Placement closed and the Company received aggregate gross proceeds from the Private Placement of $20.0 million, and, therefore, will be reflected on the condensed consolidated financial statements for the three and nine months ended September 30, 2023. The Company incurred approximately $0.4 million in offering expenses as of September 30, 2023, which have been included as a component of additional paid-in capital, resulting in net proceeds of $19.6 million as of September 30, 2023.

12


 

Pursuant to the Securities Purchase Agreement, the Company filed a registration statement on Form S-3 (File No. 333-273686), which was declared effective by the SEC on August 9, 2023, covering the resale of the Registrable Securities (as such term is defined in the Securities Purchase Agreement). The Company has agreed to use its commercially reasonable efforts to keep such registration statement effective until the earlier of (i) the third anniversary of the effective date of the initial registration statement covering the Registrable Securities; (ii) the date all Shares and all shares of common stock underlying the pre-funded warrants may be sold under Rule 144 of the Securities Act of 1933, as amended, without being subject to any volume, manner of sale or publicly available information requirements; or (iii) immediately prior to the closing of a Change of Control (as such term is defined in the Securities Purchase Agreement).

Pursuant to the Securities Purchase Agreement, in connection with the Private Placement, Boehringer Ingelheim International GmbH (“BI”), an Investor in the Private Placement, has the right to designate an observer to attend, subject to certain exceptions, meetings of the Company’s board of directors and its committees, until the earlier of (i) the occurrence of a Change of Control and (ii) the date that it and its affiliates collectively hold less than 10% of the Company’s common stock (which shall be calculated by including in the amount of common stock held by such Investor and its affiliates any shares of common stock issuable upon exercise of any portion of the pre-funded warrant issued to such Investor and not yet exercised). BI designated a board observer on August 29, 2023.

At-the-Market Equity Offering Program

In September 2022, 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 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 the nine months ended September 30, 2023, no shares of the Company’s common stock were issued or sold under the Sales Agreement. As of September 30, 2023, an aggregate of $22.6 million was eligible for sale pursuant to the Sales Agreement under the Company’s effective registration statement on Form S-3 (File No. 333-267424).

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 5,099 shares of common stock at a per share exercise price of $44.13. The warrants were 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 term loans were repaid in August 2018, all related warrants were outstanding and exercisable as of September 30, 2023.

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.

Stock Option Awards

Stock option activity for employees and non-employees for the nine months ended September 30, 2023 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, 2023

 

 

700,929

 

 

$

15.69

 

 

 

8.6

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

62,500

 

 

$

7.30

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

Forfeited

 

 

(27,500

)

 

$

36.60

 

 

 

 

 

 

 

Outstanding September 30, 2023

 

 

735,929

 

 

$

14.19

 

 

 

8.1

 

 

$

1,037

 

Exercisable September 30, 2023

 

 

301,197

 

 

$

27.33

 

 

 

6.7

 

 

$

85

 

Available for future grant

 

 

783,666

 

 

 

 

 

 

 

 

 

 

 

13


 

The weighted average grant-date fair value of stock options outstanding on September 30, 2023 was $9.88 per share. Total unrecognized compensation costs related to non-vested stock options at September 30, 2023 were approximately $1.6 million and are expected to be recognized within future operating results over a weighted-average period of 2.1 years. The total intrinsic value of the options exercised during the nine months ended September 30, 2023 and 2022 was zero.

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 volatility of the Company and volatilities for industry peer companies. 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 the purposes of estimating the fair value of the options.

The Company uses the Black-Scholes model to estimate the fair value of stock options granted. For stock options granted during the nine months ended September 30, 2023 and 2022, the Company utilized the following assumptions:

 

 

Nine Months Ended

 

 

September 30, 2023

 

September 30, 2022

Expected term (years)

 

5.50

 

5.50 - 6.25

Risk free interest rate

 

4.68%

 

1.96% - 3.25%

Volatility

 

119%

 

76% - 97%

Dividend yield

 

0%

 

0%

Weighted average grant date fair value per share of common stock

 

$6.26

 

$4.78

 

Performance-Based Restricted Stock Units

On August 6, 2021, options to purchase 953,980 shares of the Company’s common stock were exchanged for 476,640 PRSUs. Options surrendered in the one-time stock option exchange program (the “Exchange Program”) were cancelled and shares subject to the cancelled options again became available for issuance under the Plan. The Exchange Program was treated as a Type II modification (Probable-to improbable) under ASC 718.

The Company used the pre-modification stock options for determining the compensation cost related to the PRSUs as the vesting conditions remain uncertain for the outstanding PRSUs. The total unrecognized compensation cost related to non-vested stock options at September 30, 2023 was approximately $0.2 million and is expected to be recognized within future operating results over a weighted-average period of 0.3 year.

On April 28, 2023, the Compensation Committee of the Company’s board of directors certified the achievement of a performance condition occurring upon FDA acceptance of the NDA for roluperidone. As a result, 50% of the shares of common stock underlying the Company’s PRSUs vested. The remaining PRSUs vest upon roluperidone receiving FDA marketing approval, provided that such approval occurs within five years after the August 6, 2021 grant date. As of September 30, 2023, 228,213 PRSUs have vested, 20,218 have been cancelled, and 228,209 remain outstanding. As a result of the PRSUs vesting, the Company recognized approximately $0.2 million in non-cash compensation expense for the period ending September 30, 2023, representing 50% of the incremental cost of the PRSUs granted under the Exchange Program. The incremental cost was measured as the excess of the fair value of each new PRSU, measured as of the date the new PRSUs were granted, over the fair value of the stock options surrendered in exchange for the new PRSU, measured immediately prior to the cancellation.

The following table presents stock-based compensation expense included in the Company’s consolidated statements of operations:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Research and development

 

$

185,075

 

 

$

518,920

 

 

$

667,558

 

 

$

1,534,899

 

General and administrative

 

 

186,868

 

 

 

517,954

 

 

 

689,759

 

 

 

1,626,236

 

Total

 

$

371,943

 

 

$

1,036,874

 

 

$

1,357,317

 

 

$

3,161,135

 

 

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NOTE 8 — COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of the Company’s business activities. The Company is not aware of any claim or litigation, the outcome of which, if determined adversely to the Company, would have a material effect on the Company’s financial position or results of operations.

Leases

On October 11, 2022, the Company entered into an office lease agreement with Regus to lease approximately 491 rentable square feet of office space located at 1500 District Avenue, Burlington, MA 01803. The lease is on a month-to-month basis commencing on February 1, 2023, with a monthly payment of $8,290. The Company has elected to not recognize the lease agreement on the balance sheet as the term of the agreement is 12 months or less.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our annual audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on March 8, 2023. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a clinical-stage biopharmaceutical company focused on the development and commercialization of proprietary product candidates to treat patients suffering from central nervous system diseases. Leveraging our scientific insights and clinical experience, we have acquired or in-licensed compounds that we believe have innovative mechanisms of actions and therapeutic profiles that potentially address the unmet needs of patients with these diseases.

We are developing roluperidone (f/k/a MIN-101) for the treatment of negative symptoms in patients with schizophrenia and have exclusive rights to develop and commercialize MIN-301 for the treatment of Parkinson’s disease. In addition, we previously co-developed seltorexant (f/k/a MIN-202 or JNJ-42847922) with Janssen Pharmaceutica NV, one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”), for the treatment of insomnia disorder and adjunctive treatment of Major Depressive Disorder (“MDD”). In June 2020, we exercised our right to opt out of our agreement with Janssen for the future Phase 3 development and commercialization of seltorexant. Under the terms of the opt-out agreement, we were entitled to collect royalties in the mid-single digits on potential future worldwide sales of seltorexant in certain indications, with no further financial obligations to Janssen. In January 2021, we sold our rights to these potential royalties to Royalty Pharma plc (“Royalty Pharma”) for a $60 million cash payment and up to an additional $95 million in potential milestone payments, subject to completion of Phase 3 trials by Janssen and regulatory approvals. Janssen is currently conducting two Phase 3 studies with seltorexant, a third Phase 3 study was discontinued during 2022.

In August 2022, we submitted a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for our lead product candidate, roluperidone, for the treatment of negative symptoms in schizophrenia. The FDA initially notified us that they would not accept the file for review, issuing a refusal to file letter (“RTF”) in October 2022. Subsequently, we requested a formal dispute resolution and appealed the RTF, following which, on April 27, 2023, the FDA filed our NDA for roluperidone. In May 2023, the FDA confirmed that the NDA for roluperidone was assigned a standard review classification and a Prescription Drug User Fee Act (“PDUFA”) goal date of February 26, 2024. The FDA advised that it identified potential review issues that had been previously cited in the RTF decision letter, which included those discussed at the Type C meeting in March 2022. See “—Clinical and Regulatory Updates” below for more information.

We have not received any regulatory approvals to commercialize any of our product candidates, and we have not generated any revenue from the sales or license of our product candidates. We routinely evaluate the status of our drug development programs as well as potential strategic options. We have incurred significant operating losses since inception and expect to continue to incur net losses and negative cash flows from operating activities for the foreseeable future in connection with the clinical and regulatory activities associated with advancing our product candidates. As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $387.8 million and $366.8 million, respectively. For the nine months ended September 30, 2023 and 2022, we recorded net losses of $21.0 million and $25.4 million, respectively.

Clinical and Regulatory Updates

New Drug Application Filed

On April 27, 2023, the FDA filed our NDA for roluperidone for the treatment of negative symptoms in patients with schizophrenia. The decision to file the NDA followed our request for formal dispute resolution and appeal of the RTF. The issues cited in the RTF decision included those discussed at the Type C meeting in March 2022. In granting the appeal, the FDA deciding official agreed with us that the issues cited in the RTF decision should be considered during the FDA’s review of the NDA.

16


 

On May 8, 2023, we recei