# Medicinova Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Medicinova Inc](/companies/mnov.md) (CIK 1226616)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 16:15 ET
- Period: 2023-09-30
- Accession: 0000950170-23-062079
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1226616/000095017023062079/mnov-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1226616/000095017023062079/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $700.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $3.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$1.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$7.4m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$723.1k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$6.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 49,046,246 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 49,046,246 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$6.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $21.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $51.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $53.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $68.1m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $3.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $64.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,155 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2022 included in our Annual Report on Form 10-K, as amended, as filed with the Securities and Exchange Commission (SEC) on March 28, 2023 (Annual Report on Form 10-K, as amended). Past operating results are not necessarily indicative of results that may occur in future periods.*

*This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results may differ from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II of this Quarterly Report on Form 10-Q under the caption “Item 1A. Risk Factors” and under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended. The differences may be material. Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, statements regarding our plans, strategies, objectives, product development programs, clinical trials, industry, financial condition, liquidity and capital resources, future performance and other statements that are not historical facts. Such forward-looking statements include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not rely unduly on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.*

### Overview

We are a biopharmaceutical company focused on developing novel therapeutics for the treatment of serious diseases with unmet medical needs and a commercial focus on the United States market. Our current strategy is to focus our development activities on MN-166 (ibudilast) for neurological and other disorders such as progressive multiple sclerosis (MS), amyotrophic lateral sclerosis (ALS), chemotherapy-induced peripheral neuropathy, degenerative cervical myelopathy, glioblastoma, substance dependence and addiction (e.g., methamphetamine dependence, opioid dependence, and alcohol dependence), prevention of acute respiratory distress syndrome, and Long COVID, and MN-001 (tipelukast) for fibrotic and other diseases such as nonalcoholic fatty liver disease (NAFLD) and idiopathic pulmonary fibrosis (IPF). Our pipeline also includes MN-221 (bedoradrine) for the treatment of acute exacerbation of asthma and MN-029 (denibulin) for solid tumor cancers. We were incorporated in Delaware in September 2000.

We have incurred significant net losses since our inception. As of September 30, 2023, from inception, our accumulated deficit was $413.6 million. We expect to incur substantial net losses for the next several years as we continue to develop certain of our existing product development programs, and over the long-term if we expand our research and development programs and acquire or in-license products, technologies or businesses that are complementary to our own.

Our goal is to build a sustainable biopharmaceutical business through the successful development of differentiated products for the treatment of serious diseases with unmet medical needs in high-value therapeutic areas. Key elements of our strategy are as follows:

- *Pursue the development of MN-166 (ibudilast) for multiple potential indications with the support of non-dilutive financings.*

We intend to advance our diverse MN-166 (ibudilast) program through a combination of investigator-sponsored clinical trials, trials funded through government grants or other grants, and trials funded by us. We intend to pursue additional strategic alliances to help support further clinical development of MN-166 (ibudilast).

- *Pursue the development of MN-001 (tipelukast) for fibrotic and other diseases.*

We intend to advance development of MN-001 (tipelukast) through a variety of means, which may include investigator-sponsored trials with or without grant funding as well as trials funded by us.

- *Consider strategic partnerships with one or more leading pharmaceutical companies to complete product development and successfully commercialize our products.*

We develop and maintain relationships with pharmaceutical companies that are therapeutic category leaders. We intend to discuss strategic alliances with leading pharmaceutical companies who seek product candidates, such as MN-166 (ibudilast), MN-001 (tipelukast), MN-221 (bedoradrine), and MN-029 (denibulin), which could support our clinical development and product commercialization.

### Impact of COVID-19 and the Macroeconomic Environment on Our Business

The recent COVID-19 pandemic resulted in significant national and global economic disruption and has, and may continue to adversely affect our business. To date, we have experienced certain adverse effects on our business as well as been provided certain opportunities as a result of the pandemic. The pandemic caused a decrease in the number of patient visits at some clinical trial sites which we believe resulted in slower enrollment in our clinical trials than would have occurred without the pandemic. However, we have seen an increase in the number of patient visits compared to earlier in the pandemic and we continue to enroll patients in clinical trials. Throughout the pandemic, we continued with routine clinical trial activities including executing new clinical trial agreements, negotiating budgets, institutional review board (IRB) approvals, site training, and other activities related to the initiation of new clinical trials and the opening of new clinical trial sites, although some of these activities took longer to complete than what we experienced prior to the pandemic.

The pandemic created certain opportunities for our clinical development and we have pursued those opportunities. Following the outbreak of the pandemic, we designed a clinical trial to evaluate MN-166 (ibudilast) for prevention of acute respiratory distress syndrome (ARDS) caused by COVID-19. In June 2022, we announced positive top-line results from this Phase 2 clinical trial in which MN-166 (ibudilast) demonstrated large improvements compared to placebo for all four clinical endpoints analyzed. Separately, in August 2022, we announced plans to participate in RECLAIM (Recovering from COVID-19 Lingering Symptoms Adaptive Integrative Medicine Trial), a grant-funded clinical trial to evaluate MN-166 (ibudilast) and other therapies for the treatment of Long COVID, the lingering symptoms of COVID-19. In February 2023, we announced that Health Canada completed its review of the clinical trial application and granted authorization to commence the RECLAIM trial.

We continue to actively monitor the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce resulting from the recent pandemic. To the extent that there is a resurgence in the COVID-19 pandemic, or other health epidemics or outbreaks, our operations could be disrupted and our business adversely impacted.

Further, the recent COVID-19 pandemic and government responses to the pandemic resulted in, and may continue to result in, downward pressure, extreme volatility, and disruptions in the capital and credit markets, reducing our ability to raise additional capital through equity, equity-linked or debt financings, which could negatively impact our short-term and long-term liquidity, access to capital markets, and our ability to operate in accordance with our operating plan, or at all.

In addition, we may be exposed to credit risk on deposits at financial institutions to the extent our account balances exceed the amount insured by the Federal Deposit Insurance Corporation. We are monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions.

### Revenues

In December 2005, Avigen, Inc. and Genzyme Corporation entered into an Assignment Agreement (the “Genzyme Agreement”) in which Genzyme acquired certain gene therapy intellectual property, programs and other related assets from Avigen in exchange for an upfront payment and potential additional development milestone payments, sublicensing fees and royalty payments based on the successful development of products by Genzyme utilizing technologies previously developed by Avigen. We subsequently acquired Avigen in December 2009 along with Avigen’s rights and obligations under the Genzyme Agreement. If Genzyme fails to diligently pursue the commercialization or marketing of products using the assigned technology, as specified in the Genzyme Agreement, some of the rights assigned could revert back to us at a future date.

The development milestones outlined in the Genzyme Agreement did not meet the definition of a substantive milestone obligation under authoritative guidance on revenue recognition for milestone payments, as Genzyme was responsible for the development of the products and there is no further substantive service effort required by us. In September 2023, we received notice that a gene therapy product based on AAV (adeno-associated virus) vector technology, which was covered under the Genzyme Agreement, achieved one clinical development milestone, triggering one milestone payment. Accordingly, we recognized revenue of $1.0 million during the three and nine months ended September 30, 2023.

### Research, Development and Patents Expenses

Our research, development and patents expenses consist primarily of license fees related to our product candidates, salaries and related employee benefits, costs associated with the preclinical and clinical development of our product development programs, costs associated with non-clinical activities, such as regulatory expenses, and pre-commercialization manufacturing development activities. We use external service providers to manufacture our compounds to be used in clinical trials and for the majority of the services performed in connection with the preclinical and clinical development of our product candidates. Research, development and patents expenses include fees paid to consultants, contract research organizations, contract manufacturers and other external service providers, including professional fees and costs associated with legal services, patents and patent applications for our intellectual property. Internal research and development expenses include costs of compensation and other expenses for research and development personnel, supplies, facility costs and depreciation. Research, development and patents costs are expensed as incurred and we expect to increase such costs through the remainder of 2023 as our development programs progress.

The following table summarizes our research, development and patents expenses for the periods indicated for each of our product development programs. To the extent that costs, including personnel costs, are not tracked to a specific product development program, such costs are included in the “Other R&D expense” category (in thousands):

| External development expense: | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| MN-221 | $2 | $1 | $14 | $402 |
| MN-166 | 66 | 1,835 | 1,760 | 4,990 |
| MN-001 | 143 | 116 | 427 | 158 |
| MN-029 | 1 | 1 | 3 | 3 |
| Other | — | — | — | 11 |
| Total external development expense | 212 | 1,953 | 2,204 | 5,564 |
| R&D personnel expense | 412 | 350 | 1,338 | 1,049 |
| R&D facility and depreciation expense | 16 | 16 | 42 | 42 |
| Patent expenses | 93 | 90 | 263 | 319 |
| Other R&D expense | 62 | 45 | 160 | 157 |
| Total research, development and patent expense | $795 | $2,454 | $4,007 | $7,131 |

### General and Administrative

Our general and administrative costs primarily consist of salaries, stock-based compensation, benefits and consulting and professional fees related to our administrative, finance, human resources, business development, legal, information systems support functions, facilities and insurance costs. General and administrative costs are expensed as incurred.

Our general and administrative expenses may increase in future periods if we are required to expand our infrastructure based on the success of our product development programs and in raising capital to support our product development programs or otherwise in connection with increased business development activities related to partnering, out-licensing or product disposition.

### Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with United States generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting periods. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances at the time the estimates are made, the results of which form the basis for making judgments about the book values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We periodically evaluate our estimates and judgments in light of changes in circumstances, facts and experience.

Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Use of Estimates” contained in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2022. There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2023.

### Results of Operations

### Comparison of the three months ended September 30, 2023 and 2022

#### Revenues

Revenues were $1.0 million and $0.0 million for the three months ended September 30, 2023 and 2022, respectively. The increase of $1.0 million was due to the receipt of a milestone payment under the Genzyme Agreement in September 2023.

#### Research, Development and Patents Expenses

Research, development and patents expenses were $0.8 million and $2.5 million for the three months ended September 30, 2023 and 2022, respectively. The decrease of $1.7 million expense was primarily due to a decrease in MN-166 related manufacturing expenses and the receipt of a $0.7 million payment from the Biomedical Advanced Research and Development Authority (BARDA) to partially reimburse us for pre-clinical study costs, which was recorded as an offset to MN-166 research and development expense.

#### General and Administrative Expenses

General and administrative expenses were $1.4 million and $1.4 million for the three months ended September 30, 2023 and 2022, respectively. The expense was relatively the same quarter over quarter. Changes were primarily due to a decrease in legal fees offset by an increase in performance-based stock option expense.

#### Interest Income

Interest income was $0.4 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively. The increase of $0.1 million was primarily driven by higher interest rates on cash and bank certificates of deposit. Interest income consists of interest earned on our cash and cash equivalents and investments.

### Comparison of the nine months ended September 30, 2023 and 2022

#### Revenues

Revenues were $1.0 million and $0.0 million for the nine months ended September 30, 2023 and 2022, respectively. The increase of $1.0 million was due to the receipt of a milestone payment under the Genzyme Agreement in September 2023.

#### Research, Development and Patents Expenses

Research, development and patents expenses were $4.0 million and $7.1 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease of $3.1 million expense was primarily due to a decrease in MN-221 and MN-166 related manufacturing expenses and receipt of a $0.7 million payment from BARDA to partially reimburse us for pre-clinical study costs, which was recorded as an offset to MN-166 research and development expense, partially offset by increased MN-001 related expenses.

#### General and Administrative Expenses

General and administrative expenses were $4.4 million and $4.3 million for the nine months ended September 30, 2023 and 2022, respectively. The increase of $0.1 million was primarily due to an increase in performance-based stock option expense, partially offset by lower legal fees.

#### Interest Income

Interest income was $1.4 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively. The increase of $1.0 million was primarily driven by higher interest rates on cash and bank certificates of deposit. Interest income consists of interest earned on our cash and cash equivalents and investments.

#### Other Expense

Other expense was $0.5 million and $0.1 million for the nine months ended September 30, 2023 and 2022, respectively. The increase of $0.4 million was primarily driven by penalties on early disposal of bank certificates of deposit.

### Liquidity and Capital Resources

Net cash used in operating activities during the nine months ended September 30, 2023 was $6.9 million compared to $8.9 million during the same period in 2022. The $2.0 million change is primarily related to the decreased net loss and increased non-cash stock-based compensation expense, partially offset by the increase in accounts receivable of $1.0 million and changes in operating assets and liabilities for those periods.

Net cash provided by investing activities during the nine months ended September 30, 2023 was $39.9 million compared to $10.0 million used during the same period in 2022. The $49.9 million change is related to the purchase of certificates of deposits during the nine months ended September 30, 2022 and the subsequent disposal of certificates of deposit of $39.9 million during the same period in 2023.

As of September 30, 2023, we had available cash and cash equivalents of $51.5 million and working capital of $50.2 million. As of the date of this report, we believe we have working capital sufficient to fund operations at least through the end of 2024. However, we cannot provide assurance that these capital resources will be sufficient to conduct all our research and development programs as planned.

#### Equity Financing

On August 23, 2019, we entered into an at the market issuance sales agreement, which was amended on August 26, 2022 (as amended, the “ATM Agreement”) with B. Riley FBR, Inc. (B. Riley FBR) pursuant to which we may sell common stock through B. Riley FBR from time to time up to an aggregate offering price of $75.0 million. Sales of our common stock through B. Riley FBR, if any, will be made by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on Nasdaq, on any other existing trading market for the common stock or through a market maker. B. Riley FBR may also sell the common stock in privately negotiated transactions, subject to our prior approval. We agreed to pay B. Riley FBR an aggregate commission rate of up to 3.5% of the gross proceeds of any common stock sold under this agreement. Proceeds from sales of common stock will depend on the number of shares of common stock sold to B. Riley FBR and the per share purchase price of each transaction.

No shares of common stock were sold under the ATM Agreement in the three and nine months ended September 30, 2023 and 2022.

## Controls and procedures

As filed, 2,004 characters.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is (1) recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and (2) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our procedures or our internal controls will prevent or detect all errors and all fraud. Any internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of our controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

### Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 863 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2022, which are incorporated herein by reference and which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, as amended, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. We do not believe that there have been any material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2022.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-062079. Last ingested by Listed: Oct 30, 2026, 17:11 ET. No prices; not investment advice.