enVVeno Medical Corp 10-Q

Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our unaudited condensed financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Such forward-looking statements involve significant risks and uncertainties. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. Such forward-looking statements also involve other factors which may cause our actual results, performance or achievements to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Unless the context requires otherwise, references in this document to “enVVeno” “we”, “our”, “us” or the “Company” are to enVVeno Medical Corporation. Overview enVVeno Medical Corporation is a med-tech company focused on improving the standard of care in the treatment of venous disease. We are developing tissue-based solutions that are designed to be life sustaining or life enhancing for patients with deep venous Chronic Venous Insufficiency (CVI). CVI occurs when valves inside of the veins of the leg fail, resulting in insufficient blood being returned to the heart. Our products are being developed to address large unmet medical needs by either offering treatments where none currently exist or by substantially increasing the current standards of care. Our lead product is a porcine based device to be surgically implanted in the deep venous system of the leg, and is called the VenoValve®. The VenoValve is currently being evaluated in the SAVVE U.S. pivotal trial for the purpose of obtaining approval to market and sell the device from the U.S. Food and Drug Administration (“FDA”). Our team of officers and directors has been affiliated with numerous medical devices that have received FDA approval or CE marking and that have been commercially successful. We currently lease a 14,507 sq. ft. manufacturing facility in Irvine, California, where we manufacture medical devices for our clinical trials, and which has capacity for commercial manufacturing. On September 21, 2021, we announced that we were changing our name from Hancock Jaffe to enVVeno Medical Corporation and that our development strategy is to focus on the treatment of venous disease. In addition to the VenoValve, we announced that we have a second product in the early stages of development called enVVe. In connection with this change in strategy, we indicated that we are deferring further development of the CoreoGraft, which is now outside of our primary focus area. Each of our products will be required to successfully complete significant clinical trials to demonstrate safety and efficacy before it will be able to be approved by the FDA. 14 VenoValve The VenoValve is a porcine based valve developed at enVVeno to be implanted in the deep venous system of the leg to treat severe CVI. By reducing reflux, and lowering venous hypertension, the VenoValve has the potential to reduce or eliminate the symptoms of deep venous, severe CVI, including venous leg ulcers. The current version of the VenoValve is designed to be surgically implanted into the femoral vein of the patient via a 5 to 6 inch incision in the upper thigh. There are presently no FDA approved medical devices to address valvular incompetence, or effective treatments for deep venous CVI. Current treatment options include compression garments, or constant leg elevation. These treatments are generally ineffective, as they attempt to alleviate the symptoms of CVI without addressing the underlying causes of the disease. In addition, we believe compliance with compression garments and leg elevation is extremely low, especially among the elderly. The premise behind the VenoValve is that by reducing the underlying causes of CVI, reflux and venous hypertension, the debilitating symptoms of CVI will decrease, resulting in improvement in the quality of the lives of CVI sufferers. We estimate that there are approximately 2.4 million people in the U.S. that suffer from deep venous CVI due to valvular incompetence. VenoValve Clinical Status After consultation with the FDA, and as a precursor to the U.S. pivotal trial, we conducted a small first-in-human study for the VenoValve in Colombia. The first-in-human trial included eleven (11) patients. In addition to providing safety and efficacy data, the purpose of the first-in-human study was to provide proof of concept, and to provide valuable feedback to make any necessary product modifications or adjustments to our surgical implantation procedures for the VenoValve prior to conducting the U.S. pivotal trial. Endpoints for the VenoValve first-in-human study include safety (device related adverse events), reflux, measured by doppler, a VCSS score used by the clinician to measure disease severity, and a VAS score used by the patient to measure pain, and a quality of life measurement. Final results from the one (1) year first-in-human study were presented at the Charing Cross International Symposium in April of 2021. Among the eleven (11) patients in the study, reflux improved an average of 54%, Venous Clinical Severity Scores (“VCSSs”) improved an average of 56%, and visual analog scale (VAS) scores, which are used by patients to measure pain, improved an average of 76%, all at one (1) year when compared to pre-surgery levels. VCSS scores are commonly used by clinicians in practice and in clinical trials to objectively assess outcomes in the treatment of venous disease, and include ten characteristics including pain, inflammation, skin changes such as pigmentation and induration, the number of active ulcers, and ulcer duration. The improvement in VCSS scores is significant and indicates the VenoValve patients who had severe CVI pre-surgery, had mild CVI or the complete absence of disease at one-year post surgery. Quality of life measured by a VEINES score showed statistically significant improvement. 15 VenoValve safety incidences during the one (1) year first-in-human study were minor with no reported device related adverse events. Minor non-device related adverse safety issues included one (1) fluid pocket (which was aspirated), intolerance from Coumadin anticoagulation therapy, three (3) minor wound infections (treated with antibiotics), and one occlusion due to patient non-compliance with anti-coagulation therapy. In preparation for the VenoValve U.S. pivotal trial, on March 5, 2021, we submitted an IDE application with the FDA. An investigational device exemption or IDE from the FDA is required before a medical device company can proceed with a pivotal trial for a class III medical device. On April 1, 2021, twenty-seven days after filing the IDE application, we received notification from the FDA that our IDE application was approved. We have named the U.S. pivotal for the VenoValve the SAVVE (Surgical Anti-reflux Veno Valve Endoprosthesis) study. It is a prospective, non-blinded, single arm, multi-center study of seventy-five (75) CVI patients to be enrolled at up to 20 U.S. sites. No product modifications for the VenoValve were necessary following the first-in-human study and the SAVVE trial will evaluate the same device that was used in the first-in-human study. Endpoints for the SAVVE trial mirror those endpoints used for the first-in-human trial. The primary safety endpoint for the pivotal trial is the absence of material adverse safety events (mortality, deep wound infection, major bleeding, ipsilateral deep vein thrombosis, pulmonary embolism) in twenty six percent (26%) or less of the patients at one (1) month post implantation, and the primary effectiveness endpoint for the pivotal trial is improvement in reflux of at least thirty percent (30%), measured at six (6) months post VenoValve implantation. In the first-in-human study there were no reported material adverse safety events at one (1) month post implantation, and reflux improved an average of fifty six percent (56%) at six (6) months post implantation. VCSS scoring to measure disease manifestations, VAS scores to measure pain, and quality of life measurements will also be monitored in the study. On August 3, 2020, we announced that the FDA granted Breakthrough Device Designation status to the VenoValve. The FDA’s Breakthrough Devices Program was established to enable priority review for devices that provide more effective treatment or diagnosis of life threatening or irreversibly debilitating diseases or conditions. The goal of the FDA’s Breakthrough Devices Program is to provide patients and health care providers with timely access to medical devices by speeding up their development, assessment, and review, while preserving the FDA’s mission to protect and promote public health. At the end of the VenoValve first-in-human study, we asked the study participants if we could continue to monitor them for an additional one (1) year period. Eight patients agreed to be monitored and in August of 2021, two (2) year follow-up data was presented at the Society of Vascular Surgery Conference in San Diego, for the cohort of eight (8) patients. That data indicated no recurrences of the severe CVI that was present pre-VenoValve, including no ulcer recurrences for those patients whose venous ulcers had healed following VenoValve surgery. There were no reported safety issues from the end of one (1) year first-in-human study to the end of the two (2) year reporting period. In October of 2021, we announced that the first patient in the SAVVE pivotal trial underwent successful VenoValve implantation surgery and had been discharged from the hospital. The surgery was performed by Dr. Adriana Laser, associate professor of surgery at Albany Medical College and a vascular surgeon with Albany Med Vascular Surgery. At the time of the first implantation, we had five (5) clinical sites that are actively enrolling patients in the SAVVE study and additional sites will become active on a rolling basis over the next several weeks. 16 Comparison of the three months ended September 30, 2021 and 2020 Overview We reported net losses of $2.4 million and $2.0 million for the three months ended September 30, 2021 and 2020, respectively, representing an increase in net loss of $0.4 million or 21%, due to an increase in operating expenses of $0.8 million, and a net increase in other income and expense of $0.4 million. Revenues As a developmental stage Company, our revenue, if any, is expected to be diminutive and dependent on our ability to commercialize our product candidates. Selling, General and Administrative Expenses For the three months ended September 30, 2021, selling, general and administrative expenses increased by $0.3 million or 27%, to $1.5 million from $1.2 million for the three months ended September 30, 2020. The net increase reflects increases of $0.2 million in compensation due to higher share-based compensation in 2021, $0.1 million in outside services related to human resources and information technology support fees which were higher primarily because of increases in personnel, $0.1 million in higher insurance and other office expense due to higher D&O insurance premiums, travel, and cleaning, all mainly due to increases in personnel and returning to full time use of the office in the 2021 period. These increases were partially offset by lower legal expenses, which were $0.1 million lower in 2021 because of the resolution of a number of legal matters during 2020. Research and Development Expenses For the three months ended September 30, 2021, research and development expenses increased by $0.5 million or 62%, to $1.2 million from $0.8 million for the three months ended September 30, 2020. The increase is primarily due to increases of $0.3 million in compensation and related costs due to a larger team in 2021, and $0.1 million in higher consulting costs and $0.1 million in lab testing, both related to preparations for SAVVE. Gain on Extinguishment of Note Payable For the quarter ended September 30, 2021 the Company recorded a one-time $0.3 million gain on extinguishment of note payable due to the forgiveness of the loan it had obtained under the PPP program authorized by the CARES act. Change in Fair Value of Derivative Liability For the quarter ended September 30, 2020, we recorded a loss on the change in fair value of derivative liabilities of $0.1 million. Our derivative liabilities were related to warrants issued in connection with our Bridge Offering in February 2020. There were no similar instruments outstanding during the quarter ended September 30, 2021. Comparison of the nine months ended September 30, 2021 and 2020 Overview We reported net losses of $7.5 million and $4.8 million for the nine months ended September 30, 2021 and 2020, respectively, representing an increase in net loss of $2.8 million, or 58%, due to an increase in operating expenses of $2.9 million, and an increase in other income and expense of $0.1 million. Revenues As a developmental stage Company, our revenue, if any, is expected to be diminutive and dependent on our ability to commercialize our product candidates. 17 Selling, General and Administrative Expenses For the nine months ended September 30, 2021, selling, general and administrative expenses increased by $1.0 million or 32%, to $4.0 million from $3.0 million the nine months ended September 30, 2020. The increase is primarily due to increases of approximately $0.3 million in stock-based compensation expense, $0.3 million in other compensation primarily from the additional personnel and directors’ cash compensation in 2021, $0.3 million in other administrative expenses due to higher Delaware franchise tax resulting from changes in the Company’s capital structure, and increases in cleaning and other office related expenses due to returning to full time use of the office in the 2021 period, $0.1 million in higher insurance due to higher D&O insurance premiums, and $0.1 million increase in outside services related to the Company’s increased investor outreach in 2021. These increases were partially offset by lower legal expenses, which were $0.1 million lower in 2021 because of the resolution of a number of legal matters during 2020. Research and Development Expenses For the nine months ended September 30, 2021, research and development expenses increased by $2.0 million or 100%, to $4.0 million from $2.0 million for the nine months ended September 30, 2020. The increase is due to expanded activity related to SAVVE and includes $0.8 million in higher compensation from additional personnel, $0.5 million in consulting costs for SAVVE, $0.4 million for testing related to FDA submissions and SAVVE preparation, and $0.3 million in lab supplies and other related lab costs to support those activities. Change in Fair Value of Derivative Liability For the nine months ended September 30, 2020, we recorded a gain on the change in fair value of derivative liabilities of $0.2 million. Our derivative liabilities were related to warrants issued in connection with our Bridge Offering in February 2020. There were no similar instruments outstanding during the period ended September 30, 2021. Gain on Extinguishment of Note Payable For the nine months ended September 30, 2021 the Company recorded a $0.3 million gain on extinguishment of note payable due to the forgiveness of the loan it had obtained under the PPP program authorized by the CARES act. Liquidity and Capital Resources We have incurred losses since inception and negative cash flows from operating activities for the nine months ended September 30, 2021. Since inception, we have funded our operations primarily through our public and private offerings of equity and private placement of convertible debt securities as well as modest revenues from royalties, contract research and sales of the ProCol Vascular Bioprosthesis. As of November 8, 2021, we had a cash balance of approximately $56,900,000. We measure our liquidity in a variety of ways, including the following: September 30 2021 December 31, 2020 (unaudited) Cash $ 57,896,922 $ 9,334,584 Working capital $ 57,088,836 $ 6,382,818 Based upon our cash and working capital as of September 30, 2021, we have sufficient cash to sustain the Company’s operations at least one year after the date of this Report. We have historically funded our operations through public and private issuances of debt and equity. Our current cash on hand is the result equity issuances completed in February and September of this year. We expect to use this cash to fund continued research and trials for our products such as the SAVVE for our VenoValve. If our trials are successful, we believe it may be necessary to raise additional capital to take our products to market. If this is necessary, we believe the Company could have access to additional capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means. However, there can be no assurance the Company will be able to raise additional capital or obtain new financing when needed on commercially acceptable terms, if at all. The COVID-19 pandemic has disrupted the global economy and has negatively impacted large populations including people and businesses that may be directly or indirectly involved with the operation of our Company and the manufacturing, development, and testing of our product candidates. The full scope and economic impact of COVID-19 is still unknown and there are many risks from the COVID-19 that could generally and negatively impact economies and healthcare providers in the countries where we do business, the medical device industry as a whole, and development stage, pre-revenue companies such as enVVeno. Off-Balance Sheet Arrangements None. Contractual Obligations As a smaller reporting company, we are not required to provide the information requested by paragraph (a)(5) of this Item. Critical Accounting Policies and Estimates For a description of our critical accounting policies, see Note 4 – Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. 18 Item 3. Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.