What changed in this filing

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Item 1A. Risk Factors

2023-08-04 compared with 2023-05-05 · 42 added, 50 removed, 947 unchanged (9% of the section changed)

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• Under the RLT Agreement, we are entitled to receive royalty and milestone payments in connection with the development and commercialization of soticlestat.

If Takeda fails to progress, delays or discontinues the development of soticlestat, we may not receive some or all of such payments, which would materially harm our business.

If Takeda fails to progress, delays, or discontinues the development of soticlestat, or if soticlestat fails to achieve market acceptance or commercial success, we may not receive some or all of such payments, which would materially harm our business.

• Our relationships with customers, physicians, and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations.

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We have historically incurred significant operating losses with the exception of net income we reported in 2021 primarily due to a one-time, upfront payment of $196.0 million received pursuant to the RLT Agreement with Takeda.

As of March 31, 2023, we had an accumulated deficit of $238.9 million.

We expect to incur increasing operating losses for the foreseeable future.

As of June 30, 2023, we had an accumulated deficit of $251.3 million.

We expect to incur substantial operating losses for the foreseeable future.

Since inception, we have devoted substantially all of our efforts to research and preclinical and clinical development of our drug candidates, as well as hiring employees and building our infrastructure.

We have no drugs approved for commercialization and have never generated any revenue from drug sales.

All of our drug candidates are still in the preclinical testing stage.

All of our drug candidates are still in the preclinical or clinical testing stage.

It could be several years, if ever, before we have a commercialized drug.

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If we obtain marketing approval for any drug candidates that we develop or otherwise acquire, we expect to incur significant expenses related to manufacturing, marketing, sales and distribution.

As of March 31, 2023, our cash, cash equivalents and marketable securities were $117.7 million, and we had an accumulated deficit of $238.9 million.

As of June 30, 2023, our cash, cash equivalents and marketable securities were $96.5 million, and we had an accumulated deficit of $251.3 million.

We believe that our cash, cash equivalents and marketable securities will fund our current operating plans through at least 12 months from the filing of this Quarterly Report on Form 10-Q.

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Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future drug candidates.

While the long-term economic impacts of the COVID-19 pandemic and the ongoing war between Russia and Ukraine are difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown.

While the long-term economic impacts associated with public health crises and global geopolitical tensions, like the ongoing war between Russia and Ukraine are difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown.

Furthermore, inflation rates have increased recently to levels not seen in decades.

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Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks.

If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.

If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable

terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.

If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise develop and market ourselves.

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In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

For the three months ended March 31, 2023, we recorded no U.S.

For the three months ended June 30, 2023, we recorded no U.S.

federal or state income tax provision, based on a pre-tax loss of approximately $12.4 million.

As of March 31, 2023, we had available approximately $130.9 million of unused NOL carryforwards for federal income tax purposes, $13.0 million of unused NOL carryforwards for Massachusetts income tax purposes, $164.1 million of unused NOL carryforwards for New York income tax purposes, and $163.9 million of unused NOL carryforwards for New York City income tax purposes, that may be applied against future taxable income.

Our NOL carryforwards are significantly limited such that even if we achieve profitability in future periods, we may not be able to utilize a material portion of our NOL carryforwards and certain other tax attributes, which could have a material adverse effect on our cash flow and results of operations.

As of June 30, 2023, we had available approximately $141.6 million of unused NOL carryforwards for federal income tax purposes, $13.0 million of unused NOL carryforwards for Massachusetts income tax purposes, $164.1 million of unused NOL carryforwards for New York income tax purposes, and $163.9 million of unused NOL carryforwards for New York City income tax purposes, that may be applied against future taxable income.

All of our NOL carryforwards are significantly limited such that even if we achieve profitability in future periods, we may not be able to utilize a material portion of our NOL carryforwards and certain other tax attributes, which could have a material adverse effect on our cash flow and results of operations.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.

New tax laws, statutes, rules, regulations, or ordinances could be enacted at any time.

For instance, the recently enacted Inflation Reduction Act imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.

For instance, the recently enacted Inflation Reduction Act of 2022 (the “IRA”) imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.

Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time.

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Risks Related to the Development and Commercialization of Our Drug Candidates

We are very early in our development efforts and all our drug candidates are in preclinical development.

We are very early in our development efforts and all of our drug candidates are in Phase 1 clinical trials or preclinical development.

If we are unable to successfully develop, receive regulatory approval for and commercialize our drug candidates for these or any other indications, or successfully develop any other drug candidates, or experience significant delays in doing so, our business will be harmed.

We are very early in our development efforts and most of the drug candidates for which we control developmental and commercial responsibility are still in preclinical development.

For example, we previously announced that we anticipate filing three IND applications in three years, beginning in 2022;

however, we cannot guarantee success of preclinical development to achieve all such IND applications or whether FDA will impose clinical holds on any of these INDs.

Following IND acceptance, each of our drug candidates will need to be progressed through clinical development in order to achieve regulatory approval, and we will also need to address issues relating to manufacture and supply, which may involve building our own capacity and expertise.

In order to commercialize any product that achieves regulatory

approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.

We are very early in our development efforts and the drug candidates for which we control developmental and commercial responsibility are still in Phase 1 clinical trials or preclinical development.

We cannot guarantee success of preclinical development to achieve filing investigational new drug (“IND”) applications or whether the FDA will impose clinical holds on any of our planned INDs.

Following IND acceptance, each of our drug candidates will need to be

progressed through clinical development in order to achieve regulatory approval, and we will also need to address issues relating to manufacture and supply, which may involve building our own capacity and expertise.

In order to commercialize any product that achieves regulatory approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.

We do not have any drugs that are approved for commercial sale, and we may never be able to develop or commercialize marketable drugs.

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Our business is dependent on our ability to successfully complete preclinical and clinical development of, obtain regulatory approval for, and, if approved, successfully commercialize our current and future drug candidates in a timely manner.

Activities associated with the development and commercialization of our current and future drug candidates are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and similar regulatory authorities outside the United States.

Activities associated with the

development and commercialization of our current and future drug candidates are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and similar regulatory authorities outside the United States.

Failure to obtain regulatory approval in the United States or other jurisdictions would prevent us from commercializing and marketing our current and future drug candidates.

An inability to effectively develop and commercialize our current and future drug candidates could have an adverse effect on our business, financial condition, results of operations and growth prospects.

Soticlestat, the most advanced compound we helped to develop, is continuing to be developed by Takeda and is currently in a pivotal trial program.

Soticlestat, the most advanced compound we aided in developing, is continuing to be developed by Takeda and is currently in a pivotal trial program.

If the pivotal trials are unsuccessful, or the compound is not approved, we will not receive the milestone payments and royalties from the RLT Agreement.

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Frequently, drug candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials.

For instance, our NEPTUNE trial of OV101, one of our former drug candidates, did not meet its primary endpoints despite earlier encouraging results from our Phase 2 trial STARS, the first clinical trial evaluating efficacy of OV101 in patients with Angelman syndrome.

We closed our OV101 program in Angelman syndrome in early 2021.

The results from preclinical studies of our current and future drug candidates may not be predictive of the effects of these compounds in later stage clinical trials.

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Further, we may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy in our preclinical studies and clinical trials to the satisfaction of applicable regulatory authorities.

All of our current drug candidates are in preclinical development and their risk of failure is high.

All of our current drug candidates are in Phase 1 clinical trials or preclinical development and their risk of failure is high.

We must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that each of our drug candidates are safe and effective for its intended indications before we are prepared to submit a new drug application (“NDA”) or Biologics License Application (“BLA”) for regulatory approval.

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Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials.

If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our drug candidates could be negatively impacted, and our ability to generate revenues from our drug candidates may be delayed.

If we experience delays in the commencement or

completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our drug candidates could be negatively impacted, and our ability to generate revenues from our drug candidates may be delayed.

If we are not successful in discovering, developing and commercializing additional drug candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

A key element of our current strategy is to discover, develop and potentially commercialize a portfolio of drug candidates to treat rare epilepsies, seizure-related disorders, and rare neurological disorders.

A key element of our current strategy is to identify, discover, develop and potentially commercialize a portfolio of drug candidates to treat rare epilepsies, seizure-related disorders, and rare neurological disorders.

However, our business development activities and research activities may present attractive opportunities outside of rare epilepsies and seizure-related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders that we believe would be in the best interest of the Company and our stockholders.

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We have previously acquired and we may acquire or in-license drug candidates for preclinical or clinical development in the future as we continue to build our pipeline.

Such arrangements with third parties may impose, diligence, development and commercialization obligations, milestone payments, royalty payments, indemnification and other obligations on us.

Such arrangements with third parties, such as our collaboration and license agreement with Graviton, may impose, diligence, development and commercialization obligations, milestone payments, royalty payments, indemnification and other obligations on us.

Our obligations to pay milestone, royalty and other payments to our licensors may be substantial, and the amount and timing of such payments may impact our ability to progress the development and commercialization of our drug candidates.

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Further, there have been a number of health reform measures by the Biden administration that have impacted the PPACA.

For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.

For example, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.

The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and by creating a new manufacturer discount program.

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We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As of March 31, 2023, we had 46 full-time employees.

As of June 30, 2023, we had 40 full-time employees.

As our development and commercialization plans and strategies for our current pipeline of product candidates develop, we expect to need additional managerial, operational, sales, marketing, financial, legal and other resources.

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• being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure.

Effective as of December 31, 2022, we ceased to be an "emerging growth company", which will increase our costs and demands on management.

On December 31, 2022, we ceased to be an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012.

In addition, as a result of the market value of our common stock held by non-affiliates as of June 30, 2022, we also qualified as a smaller reporting company and an accelerated filer.

Due to our exit from EGC status and our qualification as a smaller reporting company that is also classified as an accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies that did not previously apply to us due to our status as an EGC.

These requirements include, but are not limited to:

• the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Section 404”);

• the requirement that we hold a non-binding advisory vote on executive compensation, the frequency of such advisory vote on executive compensation, and obtain stockholder approval of any golden parachute payments not previously approved.

We expect that compliance with these additional requirements will increase our legal and financial compliance costs and may cause management and other personnel to divert attention from operational and other business matters to devote increased time to public company reporting requirements.

In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities, which would require additional financial and management resources.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

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This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Section 404 also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

While we were an EGC, our independent registered public accounting firm was not required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.

This exemption no longer applied to us as of December 31, 2022.

Accordingly, beginning with our Annual Report on Form 10-K for the year ending December 31, 2022, we are required to include and have included an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

We are required to include and have included an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

However, as of the last business day of our second fiscal quarter of 2023, we determined that we continue to qualify as a smaller reporting company and requalify as a non-accelerated filer for the year ended December 31, 2023.

We therefore will no longer be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Our compliance with Section 404 requires that we incur substantial expense and expend significant management efforts.

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The market price of our common stock has been and likely will remain volatile.

The stock market in general and the market for biopharmaceutical or pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, including very recently in connection with the

ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.

Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to new or ongoing public health crises or other inflationary factors, may negatively affect the market price of our common stock, regardless of our actual operating performance.

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The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty about economic stability.

For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.

Similarly, the Russia-Ukraine war has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.

The Russia-Ukraine war has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.

Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely.

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333-250054) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities and/or warrants (the “S-3 Registration Statement”), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to an at-the-market (“ATM”) offering program.

As of December 31, 2022, we had $250.0 million available under our S-3 Registration Statement, including $75.0 million available pursuant to our ATM program.

As of June 30, 2023, we had $250.0 million available under our S-3 Registration Statement, including $75.0 million available pursuant to our ATM program.

Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, issuing additional equity, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business.

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You will be diluted by any conversions of outstanding Series A convertible preferred stock and exercises of outstanding options.

As of March 31, 2023, we had outstanding options to purchase an aggregate of 15,418,177 shares of our common stock at a weighted average exercise price of $3.86 per share and 1,250,000 shares of common stock issuable upon conversion of outstanding Series A convertible preferred stock for no additional consideration.

As of June 30, 2023, we had outstanding options to purchase an aggregate of 15,448,835 shares of our common stock at a weighted average exercise price of $3.87 per share and 1,250,000 shares of common stock issuable upon conversion of outstanding Series A convertible preferred stock for no additional consideration.

Such Series A convertible preferred stock is convertible any time at the option of the holder thereof subject to the beneficial ownership limitations described in Note 7 to the financial statements contained in this Quarterly Report on Form 10-Q.

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Concentration of ownership of our common stock among our executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Based upon our shares of our common stock outstanding as of March 31, 2023, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 49% of our outstanding common stock.

Based upon our shares of our common stock outstanding as of June 30, 2023, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 50% of our outstanding common stock.

Takeda, a greater than 5% holder, has agreed to, among other things, (i) a standstill provision, (ii) restrictions on its ability to sell or otherwise transfer its shares of our stock, (iii) vote its shares on certain matters in accordance with the holders of a majority of shares of our common stock and (iv) restrictions on the percentage of our outstanding common stock it may own, in accordance with the terms of the RLT Agreement with Takeda.

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We do not have any control over these analysts.

If additional analysts covering our business downgrade their evaluations of our stock, the price of our

stock could decline.

If additional analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline.

If additional analysts cease to cover our stock or fail to regularly publish reports, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

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Under the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly.

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OVID THERAPEUTICS INC.

August 4, 2023

/s/ Jeremy M.

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(Principal Executive Officer)

August 4, 2023

/s/ Jeffrey Rona

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors