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. Such statements include, without limitation, statements related to the exercise of the warrants issued in our recent private placement transaction and receipt the proceeds therefrom, our ability to utilize cash on hand (including the funds from our recent private placement) to fund operations well past several significant milestones, our ability to achieve the various milestones indicated herein and other statements identified by 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 late clinical-stage medical device company focused on the advancement of innovative bioprosthetic (tissue-based) solutions to improve the standard of care for the treatment of venous disease. Chronic Venous Disease (CVD) is the world’s most prevalent chronic disease, impacting approximately 71% of the adult population of the U.S. Chronic Venous Insufficiency (CVI), is a large subset of CVD, which most often occurs when valves inside of the veins of the leg become damaged, resulting in the backwards flow of blood (reflux), blood pooling in the lower leg, increased pressure in the veins of the leg (venous hypertension) and in severe cases, venous ulcers that are difficult to heal. The Company is developing surgical and non-surgical replacement venous valves for patients suffering from severe CVI of the deep venous system of the leg. The Company’s lead product is the VenoValve®, which is a first-in-class surgical replacement venous valve that is currently being evaluated in a U.S. pivotal study. The Company is also developing a second product called enVVe®, which is a first-in-class, non-surgical, transcatheter based replacement venous valve. The Company is currently conducting pre-clinical testing on enVVe. Both the VenoValve and enVVe are designed to act as one-way valves, to help assist in propelling blood up the veins of the leg, and back to the heart and lungs. The VenoValve and enVVe are being developed first for approval by the U.S. Food and Drug Administration (FDA). We expect the VenoValve to be eligible for FDA approval first, followed two to three years later by enVVe. If approved, we expect the VenoValve and enVVe to co-exist, with the VenoValve as a surgical replacement venous valve option and enVVe as a non-surgical replacement venous valve option, although we cannot provide any assurance that either the VenoValve or enVVe will receive approval from the FDA (see the section entitled “Risk Factors” in our Annual Report on Form 10-K). There are currently no devices approved as surgical or non-surgical replacement venous valves, and there are currently no effective treatments for deep venous CVI caused by incompetent valves. 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. 10 CVI Background Chronic venous disease (“CVD”) is the world’s most prevalent chronic disease. CVD is generally classified using a standardized system known as CEAP (clinical, etiological, anatomical, and pathophysiological). The CEAP system consists of seven clinical classifications (C0 to C6) with C4, C5 and C6 being the most severe categories of CVD. Chronic Venous Insufficiency (“CVI”) is a large subset of CVD and is generally used to describe patients with C4 to C6 CVD. CVI is a debilitating condition that affects the venous system of the leg causing pain, swelling, edema, skin changes, and ulcerations. The human leg contains three vein systems: the deep vein system, the superficial vein system, and the perforator vein system which connects the deep system to the superficial system. The deep venous system is located below the muscle and facia in the center portion of the leg and is responsible for approximately 90% of the blood flow. In order for blood to return to the heart from the foot, ankle, and lower leg, the calf muscle serves as a pump and pushes the blood up the veins of the leg against gravity and through a series of one-way valves. Each valve is supposed to open as blood passes through, and then close as blood progresses up the veins of the leg to the next valve. CVI occurs when the one-way valves in the veins of the leg fail and become incompetent. When the valves fail, gravity causes the blood to flow backwards and in the wrong direction (reflux). As blood pools in the lower leg, pressure inside the veins increases (venous hypertension). Reflux, and the resulting venous hypertension, causes the leg to swell, resulting in debilitating pain, and in the most severe cases, venous ulcers. Severe CVI sufferers experience a significantly reduced quality of life. Daily activities such as preparing meals, housework, and personal hygiene (washing and bathing) become difficult due to reduced mobility. For many severe CVI sufferers, intense pain, which frequently occurs at night, prevents patients from getting adequate sleep. Severe CVI sufferers are known to miss approximately 40% more workdays than the average worker. A high percentage of venous ulcer patients also experience severe itching, leg swelling, and an odorous discharge. Wound dressing changes, which occur several times a week, can be extremely painful. Venous ulcers from deep venous CVI are very difficult to heal, and a significant percentage of venous ulcers remain unhealed for more than a year. Even if healed, recurrence rates for venous ulcers are known to be high (20% to 40%) within the first year and as high as 60% after five years. Patients with severe CVI often become housebound and experience social isolation due to difficulty with ambulation. As a result, studies have shown that patients with active venous ulcers experience higher rates of anxiety and depression, with reported rates of anxiety of up to 30% and depression up to 40%. Rates of depression caused by venous ulcers among the elderly are even higher, with 48% of elderly venous ulcer patients having severe depressive symptoms. Prevalence is generally defined as the portion of the population that has a given condition. Estimates indicate that the prevalence of people in the U.S. with severe, deep venous CVI (C4 to C6 disease) with reflux to be approximately 20 million. Incidence is generally defined as the number of new cases of an ailment that develop in a given time period. We estimate that approximately 3.5 million new patients with severe deep venous CVI are diagnosed each year in the U.S. including patients that develop venous leg ulcers (C6 patients). The average patient seeking treatment of a venous ulcer spends as much as $30,000 a year on wound care, and the total direct medical costs from venous ulcer sufferers in the U.S. has been estimated to exceed $3 billion a year. VenoValve The VenoValve® is a porcine based replacement venous valve developed at enVVeno Medical to be surgically implanted in the deep venous system of the leg to treat severe CVI caused by valvular incompetence. 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 VenoValve is implanted into the femoral vein of the patient in an open surgical procedure via a 5-to-6-inch incision in the upper thigh. As our planned initial entrant to the replacement venous valve market, we estimate that approximately 2.5 million people with severe deep venous CVI in the U.S. would be candidates for the VenoValve. 11 VenoValve Clinical Status After consultation with the FDA, and as a precursor to the U.S. pivotal trial, in 2020 we conducted a small first-in-human study for the VenoValve in Colombia which included eleven (11) patients. The purpose of the first-in-human study was to provide proof of concept, and to provide feedback to make any necessary product modifications or adjustments to our surgical implantation procedure for the VenoValve prior to conducting the VenoValve pivotal trial. Endpoints for the VenoValve first-in-human study included safety (device related adverse events), reflux time, measured by Duplex Ultrasound, rVCSS scoring, which is a measurement created by international vascular societies and is used by the clinician to measure disease progression and regression a VAS score used by the patient to measure pain, and quality of life measurements. Results from the one 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 time 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 a validated measurement commonly used 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. Related safety incidences during the one year first-in-human study for the VenoValve 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. At the end of the VenoValve first-in-human study, eight (8) study participants agreed to additional monitoring. In November of 2022, three-year follow-up data was presented for this cohort of patients at the 49th Annual VEITH Symposium in New York city. 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. In March 2021, we submitted an IDE application with the FDA and in April 2021, we received notification from the FDA that our IDE application was approved. 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. This approval allowed us to proceed with our U.S. pivotal study for the VenoValve which is called the SAVVE -(Surgical Anti-reflux Venous Valve Endoprosthesis) clinical study. The SAVVE study is a prospective, non-blinded, single arm, multi-center study of seventy-five (75) CVI patients to be enrolled at up to 30 U.S. sites. Efficacy endpoints for the SAVVE pivotal study include rVCSS scores, which will be used to provide evidence of clinical meaningful benefit, as well as reflux time measurements, VAS pain scores, quality of life measurements, ulcer healing (for CEAP class C6 patients), and intra-operative and one-year vein patency and valve functionality. Safety endpoints include device related events including mortality, pulmonary embolism, and ipsilateral deep vein thrombosis, and procedure related events including infection and bleeding. 12 The first patient in the SAVVE pivotal study was enrolled in October of 2021. Following enrollment of the first patient the SAVVE study was delayed due to COVID-19 restrictions. In November of 2022, we announced we had passed a preliminary safety review by the FDA for the first twenty (20) patients enrolled in the SAVVE trial. The FDA had requested that we submit preliminary safety data at thirty (30) days post VenoValve® implantation for the first twenty (20) patients enrolled in the study. The preliminary safety data included one (1) device related (mild) and two (2) procedure related (moderate) adverse events. After review by the FDA, the study was cleared to continue without modification or interruption. On October 6, 2023, we announced we had achieved full enrollment (75 subjects) in the SAVVE trial, having enrolled eighteen (18) patients over the final two (2) months of the study. Full enrollment occurred approximately four (4) months earlier than expected due to increased demand for the VenoValve. The Company expects to release initial, topline safety data from the SAVVE study in Q4 of 2023, and initial, topline rVCSS efficacy data from the SAVVE study in Q2 of 2024. With the FDA indicating that one-year data for all 75 patients will be necessary prior to the filing of the application seeking pre-market (PMA) approval for the VenoValve, the Company will be eligible to file the PMA application seeking approval in Q4 of 2024. enVVe On September 21, 2022, we announced the development of a non-surgical transcatheter based replacement venous valve called enVVe®, for the treatment of CVI of the deep veins of the leg. Initial preliminary bench testing and pre-clinical testing for enVVe have been successfully completed. On October 6, 2023, contemporaneously with the announcement of a Twenty-eight-million-dollar capital raise, we announced plans to expedite the development of enVVe. The Company expects to begin a six (6) month GLP animal study for enVVe in the first quarter of 2024 and to be ready to file for IDE approval for the enVVe pivotal trial by the end of 2024. enVVe is delivered into the femoral vein of the patient via a minimally invasive procedure requiring no general anesthesia and no overnight hospital stay. Due to the minimally invasive nature of the procedure, we expect to be able to reach patients with less severe CVI or who may otherwise not be good candidates for a surgical device, and estimate the U.S. market for enVVe to be approximately 3.5 million patients. Capital We finished 2022 with approximately $39.1 million of cash and investments and had approximately $25.7 million of cash and investments at September 30, 2023. On October 11, 2023, we closed an offering raising approximately $25.7 million net cash proceeds. This financing has the potential to fund the Company through several significant milestones, including the release of initial topline efficacy data from SAVVE, our anticipated FDA pre-market approval of the VenoValve, the beginning of preparations for VenoValve commercialization, and accelerated plans for the pivotal trial for enVVe, our transcatheter based replacement venous valve. Although we expect our quarterly cash burn rate will increase over time to support these milestones, after the additional proceeds from our offering, we believe we have sufficient cash to fund operations past what we expect will be regulatory approval of the VenoValve and the start of the enVVe pivotal trial. 13 Comparison of the three months ended September 30, 2023 and 2022 Overview We reported net losses of $5.0 million and $6.1 million for the three months ended September 30, 2023 and 2022, respectively, representing a decrease in net loss of $1.1 million or 18%, due to a decrease in operating expenses of $0.8 million, and a net increase in other income and expense of $0.3 million. Revenues As a developmental stage Company, we are not currently generating revenue and our future revenue, if any, is expected to be diminutive in the near future and dependent on our ability to commercialize our product candidates. Selling, General and Administrative Expenses For the three months ended September 30, 2023, selling, general and administrative expenses decreased by $1.1 million or 30%, to $2.6 million from $3.7 million for the three months ended September 30, 2022. This decrease was due to share-based compensation reflecting the reduction in expense from grants made during 2021, the cost for portions of which have been fully recognized. Research and Development Expenses For the three months ended September 30, 2023, research and development expenses increased by $0.3 million or 12%, to $2.8 million from $2.5 million for the three months ended September 30, 2022. This increase primarily resulted from $0.2 million in increased personnel costs to support the SAVVE study, and $0.1 million in lab costs, also to support the SAVVE study and continued product development. Other (Income) Expense For the three months ended September 30, 2023, other (income) expense increased $0.2 million from $0.1 million in net expense for the three months ended September 30, 2022 to $0.3 million other income for the three months ended September 30, 2023. Other (income) expense is primarily related to interest income and realized gains and unrealized (gain)/loss from investments reflecting the Company’s investment activities in US Treasuries including realized gains, interest income and unrealized gains and losses resulting from changes in market value of the US Treasuries purchased by the Company. The increase reflects higher yields realized for the three months ended September 30, 2023 due to changes in interest rates resulting from recent US Federal Reserve actions. 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 nine months ended September 30, 2023 and 2022 Overview We reported net losses of $17.9 million and $18.5 million for the nine months ended September 30, 2023 and 2022, respectively, representing a decrease in net loss of $0.6 million, or 3%, due to a decrease in operating expenses of $0.5 million, and an increase in other income and expense, net, of $1.1 million. Revenues As a developmental stage Company, we are not currently generating revenue and our future revenue, if any, is expected to be diminutive in the near future and dependent on our ability to commercialize our product candidates. 14 Selling, General and Administrative Expenses For the nine months ended September 30, 2023, selling, general and administrative expenses decreased $3.0 million or 26%, to $8.4 million from $11.4 million for the nine months ended September 30, 2022. Of this decrease, $2.7 million was due to a reduction in share-based compensation reflecting the reduction in expense from grants made during 2021, the cost for portions of which have been fully recognized. The remaining $0.3 million decrease is attributable to $0.2 million from lower patent related legal costs, and $0.1 million from lower insurance costs related to decreased costs for cyber risk and D&O insurance premiums driven by an improving insurance market. Research and Development Expenses For the nine months ended September 30, 2023, research and development expenses increased by $3.5 million or 49%, to $10.6 million from $7.1 million for the nine months ended September 30, 2022. This increase primarily resulted from $2.5 million in costs related the SAVVE study, $0.8 million higher compensation cost due to increases in staffing, $0.2 million in travel cost and $0.1 million in lab costs, both to support the SAVVE study and VenoValve continued development. Other (Income) Expense For the nine months ended September 30, 2023, other (income) expense increased $1.1 million from less than $0.1 million in other (income) expense for the nine months ended September 30, 2022 to $1.1 million other income for the nine months ended September 30, 2023. Other (income) expense is primarily related to interest income and realized gains and unrealized (gain)/loss from investments reflecting the Company’s investment activities in US Treasuries including realized gains, interest income and unrealized gains and losses resulting from changes in market value of the US Treasuries purchased by the Company. The increase reflects higher yields realized for the nine months ended September 30, 2023 due to changes in interest rates resulting from recent US Federal Reserve actions. 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. Liquidity and Capital Resources For the nine-months ended September 30, 2023, the Company incurred a net loss of $17.9 million and used $13.9 million cash in operating activities. Net cash used in operating activities for the period ended September 30, 2023 increased by $2.1 million from $11.8 million for the period ended September 30, 2022. 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 our product candidates, currently the VenoValve® and enVVe®. 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 product candidates. We are not currently generating revenue and do not expect significant revenue until we successfully commercialize one or more of our product candidates. Our cash flows from investing activity consist of maturities and purchases of US Treasury bills from our program to invest excess cash, and purchases of property and equipment for our lab and offices. During the nine months ended September 30, 2023 we purchased $24.3 million of treasury bills and $38.6 million of them matured generating $0.5 million in realized gains and interest income. We expect to continue investing as the treasury bills mature and as allowed by the cash requirements of our operations. In the nine months ended September 30, 2023, our purchases of property and equipment consisting primarily of lab and test equipment, were less than $0.1 million. We do not currently have material commitments for capital expenditures or other expenditures except for 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, plan for commercialization of the VenoValve and continue development of enVVe. 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. 15 The Company has historically funded its operations through financing activities. On October 11, 2023, we closed an offering issuing stock and warrants and raising approximately $25.7 million net cash proceeds. Based upon our cash and working capital as of September 30, 2023, and after considering the transaction closed on October 11, 2023, 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 October 23, 2023, we had a cash and investment balances of $1.9 million and $48.6 million, respectively. 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. 16 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.