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 “NVNO”, “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 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. We aim to develop products 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 develop and manufacture our products in a 14,507 sq. ft. leased manufacturing facility in Irvine, California, which has been ISO 13485-2016 certified for the design, development and manufacturing of tissue based implantable medical devices. 9 VenoValve The VenoValve is a porcine based valve developed at enVVeno Medical to be implanted in the deep venous system of the leg to treat severe CVI. By reducing reflux and lowering pressure (venous hypertension) within the deep venous system of the leg, the VenoValve has the potential to reduce or eliminate the symptoms of severe deep venous CVI, including the potential to heal recurring venous leg ulcers. The current version of the VenoValve is designed to be implanted into the femoral vein of the patient in an open surgical procedure via a 5-to-6-inch incision in the upper thigh. There are presently no FDA approved medical devices to address valvular incompetence in the deep venous system, or effective treatments for deep venous CVI. Current treatment options include compression garments, or constant leg elevation, and wound care for venous ulcers. 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 which 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 procedure for the VenoValve prior to conducting the U.S. pivotal trial. Endpoints for the VenoValve first-in-human study included safety (device related adverse events), reflux, measured by doppler, a VCSS score used by the clinician to measure disease severity and progress, 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. There were no device related safety incidences during the one (1) year first-in-human study. Non-device related safety incidences were minor and 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 investigational device exemption or IDE application with the FDA. An 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, we received notification from the FDA that our IDE application was approved. We have named the U.S. pivotal trial 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 twenty (20) U.S. sites. No product modifications for the VenoValve were necessary following the first-in-human study and the SAVVE trial is evaluating 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 study. The primary safety endpoint for the pivotal trial is a material adverse safety event (mortality, deep wound infection, major bleeding, ipsilateral deep vein thrombosis, pulmonary embolism) in no more than twenty six percent (26%) 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. 10 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, eight (8) study participants agreed to additional monitoring. In August of 2021, longer term 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 addition, the patients continued to improve, reporting 63%, 60%, and 93%, average improvements in reflux, VCSS, and VAS scores, respectively, at an average of two (2) years post VenoValve surgery compared to pre-VenoValve levels. 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. During April 2022 our twentieth site in the SAVVE study became active and is eligible to enroll patients. The resurgence of COVID and the Omicron variant had both direct and indirect consequences on our clinical trial. Several of our clinical sites put elective surgeries on hold and prohibited potential study subjects from coming to the hospital for screening. Further, as reported in the media, COVID resurgences put an enormous strain on all hospital resources including clinical staffs. In addition to caring for the influx of COVID patients, hospitals become short staffed due to their own employees’ COVID sicknesses, resulting in clinical staff being reassigned to cover the shortfall. This lack of available clinical personnel continues to slow enrollment at our clinical sites. Finally, COVID impacts our patient population. Patients with COVID or who have had COVID within ninety (90) days of their screening, are excluded from our study until after the ninety (90) day period has passed. In addition, concerns about getting COVID impact the patients’ willingness to undergo an elective surgical procedure with a one-night hospital stay. As hospital clinical operations return to more normal levels, our goal is to fully enroll the SAVVE pivotal trial by the end of 2022 or the beginning of 2023. We continue to monitor the ongoing overall impact of COVID on the SAVVE clinical trial and will issue updates when appropriate. In February of 2021, we raised $41.4 million of capital in a public offering of our common stock. In September of 2021, we raised $20 million dollars of capital in a registered direct offering priced at the market under Nasdaq rules and purchased by a fund managed by Perceptive Advisors, a leading life sciences investment firm. We finished 2021 with approximately $55 million of cash and had approximately $9.1 million of cash and $38.1 million of investments at June 30, 2022. At our existing cash burn rate of approximately $4 million per quarter, we should have sufficient cash to fund operations through the end of 2024 and into 2025. With primary endpoints following full enrollment in the SAVVE pivotal trial of thirty (30) days for safety, and six (6) months for effectiveness, we expect to have primary endpoint data well in advance of the need to raise additional capital. 11 Results of Operations Comparison of the three months ended June 30, 2022 and 2021 Overview We reported net losses of $7.1 million and $2.4 million for the three months ended June 30, 2022 and 2021, respectively, representing an increase in net loss of $4.7 million, or 197%, resulting from an increase in operating expenses and other expenses. 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. We are not currently generating revenue and do not expect significant revenue until we successfully commercialize our lead product candidate. Selling, General and Administrative Expenses For the three months ended June 30, 2022, selling, general and administrative expenses increased by $2.6 million or 202%, to $3.9 million from $1.3 million for the three months ended June 30, 2021. Of this increase, $2.1 million was due to share based compensation from grants made during 2021, which increased share-based compensation cost to $2.3 million in 2022 from $0.2 million in 2021. The remaining $0.5 million increase reflects $0.2 million from consulting for reimbursement codes for the Company’s product once commercially approved, $0.1 million from higher Delaware franchise taxes in 2022 which increased due to changes in our capital structure, $0.1 million from higher information technology and other office expense to support increases in staff, and $0.1 million in compensation due to increased staff. Research and Development Expenses For the three months ended June 30, 2022, research and development expenses increased by $2.0 million or 182%, to $3.1 million from $1.1 million for the three months ended June 30, 2021. This increase primarily resulted from $1.4 million in costs related the SAVVE study, $0.4 million in lab costs to support the SAVVE study and VenoValve continued development, $0.1 million increase in personnel costs due to additional staff, and $0.1 million in travel costs mainly to support the SAVVE study. Other (Income) Expense For the three months ended June 30, 2022 other (income) expense increased $0.1 million from nil for the three months ended June 30, 2021. This change is primarily related to unrealized loss from investments which reflects changes in market value of the US Treasuries purchased by the Company. We expect the market value of these investments to fluctuate somewhat during their term, however all these Treasuries were purchased to provide a positive yield over their term. Comparison of the six months ended June 30, 2022 and 2021 Overview We reported net losses of $12.4 million and $5.2 million for the six months ended June 30, 2022 and 2021, respectively, representing an increase in net loss of $7.2 million or 141%, due to an increase in operating expenses of $7.1 million and an increase in other income and expense of $0.1 million. Selling, General and Administrative Expenses For the six months ended June 30, 2022, selling, general and administrative expenses increased $5.2 million or 211%, to $7.7 million from $2.5 million for the six months ended June 30, 2021. Of this increase, $4.2 million was due to share based compensation from grants made during 2021, which increased share-based compensation cost to $4.5 million in 2022 from $0.3 million in 2021. The remaining $1.0 million increase in expenses is attributable to $0.3 million of consulting costs for reimbursement codes for the Company’s product to be used once the product is commercially approved, if ever, $0.2 million from higher legal costs mainly related to intellectual property, $0.2 million from higher Delaware franchise taxes in 2022 which increased due to changes in our capital structure, $0.2 million from higher information technology and other office expense to support increases in staff and $0.1 million from higher insurance costs related to increased coverages for cyber risks and higher a D&O insurance premium. Research and Development Expenses For the six months ended June 30, 2022, research and development expenses increased by $1.9 million or 70%, to $4.6 million from $2.7 million for the six months ended June 30, 2021. This increase primarily resulted from $1.5 million in costs related the SAVVE study, $0.1 million in lab costs to support the SAVVE study and VenoValve continued development, $0.1 million increase in personnel costs due to additional staff, $0.1 million in travel costs to support the SAVVE study, and $0.1 million in costs for the preparing regulatory submissions related to SAVVE. Other (Income) Expense For the six months ended June 30, 2022 other (income) expense increased $0.1 million from nil for the six months ended June 30, 2021. This change is primarily related to unrealized loss from investments which reflects changes in market value of the US Treasuries purchased by the Company. We expect the market value of these investments to fluctuate somewhat during their term, however all these Treasuries were purchased to provide a positive yield over their term. 12 Liquidity and Capital Resources For the six-months ended June 30, 2022, the Company incurred losses from operations of $12.4 million and used $7.3 million cash in operating activities. The net cash used in operating activities during the 2022 period increased by $0.8 from $6.5 million for the six-months ended June 30, 2021. The losses and the uses of cash are primarily due to the Company’s administrative and product research and development activities. Administrative functions relate to costs to support the Company’s public reporting and investor relations activities as well as internal administrative functions. Research and development activities are for continued product development and clinical trials for the VenoValve, currently primarily the SAVVE study. The Company will continue to incur these costs to complete its clinical trials, enhance products, develop new products, and operate as a public company. Although we have discretion in how we use the Company’s cash resources, we expect to continue these activities for the foreseeable future as we seek to obtain regulatory approval for our lead product candidate. We are not currently generating revenue and do not expect significant revenue until we successfully commercialize our lead product candidate. Our cash flows from investing activity have historically consisted of purchases of property and equipment for our lab and offices. However, during the period ending June 30, 2022, we commenced a program to invest excess cash in US Treasury bills. In the six months ended June 30, 2022, we purchased $38.3 million of these investments and expect to continue investing as the treasury bills mature and as allowed by the cash requirements of our operations. Also, during the six months ending June 30, 2022, we purchased $0.1 million of property and equipment consisting primarily of lab and test equipment. We do not currently have material commitments for capital expenditures or other expenditures with the exception of our facility lease commitment of $0.4 million per year. However, we expect a modest increase in purchases of property and equipment as we continue SAVVE and plan for commercialization of the VenoValve. The Company has historically funded its operations through financing activities such as the capital raises completed in 2021. During 2021, the Company raised an aggregate of $57.4 million in net proceeds in private and public placements of its securities. Our cash balance as of June 30, 2022, is $9.1 million. In addition, we have $38.1 million in investments, for total cash and investments of $47.2 million. Our future capital requirements will remain dependent upon a variety of factors, especially including the success of our clinical trials and related product development costs and our ability to successfully bring products to market. At our existing cash burn rate of approximately $4 million per quarter, we should have sufficient cash to fund operations through the end of 2024 and into 2025. With primary endpoints following full enrollment in the SAVVE pivotal trial of thirty (30) days for safety, and six (6) months for effectiveness, we expect to have primary endpoint data well in advance of the need to raise additional capital. Any inability to raise additional financing would have a material adverse effect on us. Based upon our cash and working capital as of June 30, 2022, we have sufficient capital resources to meet our obligations as they become due for at least one year after the date of this Report and sustain operations. As of August 1, 2022, our cash balance was $5.5 million and our investment balance was $40.7 million. The COVID-19 pandemic continues to disrupt 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. COVID with its variants continues to have both direct and indirect consequences on our clinical trial. Several of our clinical sites put elective surgeries on hold and prohibited potential study subjects from coming to the hospital for screening. Further COVID resurgences put an enormous strain on all hospital resources including clinical staffs. The lack of available clinical personnel both slows enrollment and impacts the speed at which we can activate clinical sites. COVID has also impacted our patient population. Patients with COVID or who have had COVID within ninety (90) days of their screening, are excluded from our study until after the ninety (90) day period has passed. In addition, concerns about getting COVID impact the patients’ willingness to undergo an elective surgical procedure with a one-night hospital stay. As hospital clinical operations return to more normal levels, our goal is to fully enroll the SAVVE pivotal trial by the end of 2022 or the beginning of 2023. We continue to monitor the ongoing overall impact of COVID on the SAVVE clinical trial and will issue updates when appropriate. 13 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 3 – Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. 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.