10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-36517

Minerva Neurosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		26-0784194
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1500 District Avenue Burlington, MA		01803
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (617) 600-7373

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	NERV	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of Registrant’s Common Stock, $0.0001 par value per share, outstanding as of August 1, 2024 was 6,993,406.

INDEX TO FORM 10-Q


		Page
	PART I — Financial Information

Item 1.	Financial Statements (unaudited):	4
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21

	PART II — Other Information

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

SIGNATURES		31

Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q, or Quarterly Report, to “Minerva,” “the Company,” “we,” “us,” and “our” refer to Minerva Neurosciences, Inc. and, where appropriate, its subsidiaries.

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our plans, estimates and beliefs. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not transpire. These risks and uncertainties include, but are not limited to, the risks included in this Quarterly Report on Form 10-Q under Part II, Item IA, “Risk Factors” and in our Annual Report on Form 10-K for the year ended December 31, 2023 under Part I, Item IA, “Risk Factors.”

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. You should read this document with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

PART I – Financial Information

Item 1 – Financial Statements

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


	June 30,			December 31,
	2024			2023
Assets
Current assets
Cash and cash equivalents	$	30,881,000		$	40,912,575
Restricted cash		100,000			100,000
Prepaid expenses and other current assets		428,018			989,865
Total current assets		31,409,018			42,002,440

Equipment, net		8,163			10,884
Capitalized software, net		4,257			17,027
Goodwill		14,869,399			14,869,399
Total assets	$	46,290,837		$	56,899,750

Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	828,345		$	1,805,320
Accrued expenses and other current liabilities		3,375,061			1,535,097
Total current liabilities		4,203,406			3,340,417
Liability related to the sale of future royalties		86,579,046			82,016,823
Total liabilities		90,782,452			85,357,240
Commitments and contingencies (Note 8)

Stockholders’ deficit
Preferred stock; $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding as of June 30, 2024 and December 31, 2023		—			—
Common stock; $0.0001 par value; 125,000,000 shares authorized; 6,993,406 shares issued and outstanding as of June 30, 2024 and December 31, 2023		699			699
Additional paid-in capital		369,125,406			368,357,239
Accumulated deficit		(413,617,720	)		(396,815,428	)
Total stockholders’ deficit		(44,491,615	)		(28,457,490	)
Total liabilities and stockholders’ deficit	$	46,290,837		$	56,899,750

See accompanying notes to condensed consolidated financial statements.

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Expenses
Research and development	$	3,860,499		$	1,887,476		$	8,027,786		$	4,541,029
General and administrative		2,417,069			2,632,519			4,931,745			5,327,484
Total expenses		6,277,568			4,519,995			12,959,531			9,868,513
Loss from operations		(6,277,568	)		(4,519,995	)		(12,959,531	)		(9,868,513	)

Foreign exchange (losses) gains		(4,694	)		(7,206	)		799			(15,892	)
Investment income		360,755			365,623			718,663			729,841
Non-cash interest expense for the sale of future royalties		(2,311,980	)		(2,030,458	)		(4,562,223	)		(4,007,884	)
Net loss	$	(8,233,487	)	$	(6,192,036	)	$	(16,802,292	)	$	(13,162,448	)

Net loss per share, basic and diluted	$	(1.09	)	$	(1.12	)	$	(2.22	)	$	(2.43	)
Weighted average shares outstanding, basic and diluted		7,568,981			5,511,163			7,568,981			5,426,150

See accompanying notes to condensed consolidated financial statements.

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(Unaudited)


	Common Stock				Additional			Accumulated
	Shares		Amount		Paid-In Capital			Deficit			Total
Balances at January 1, 2023		5,340,193	$	534	$	346,785,322		$	(366,810,075	)	$	(20,024,219	)
Stock-based compensation		—		—		376,459			—			376,459
Net loss		—		—		—			(6,970,412	)		(6,970,412	)
Balances at March 31, 2023		5,340,193	$	534	$	347,161,781		$	(373,780,487	)	$	(26,618,172	)
Issuance of common stock and warrants pursuant to a private placement		1,425,000		142		19,999,852			—			19,999,994
Costs related to issuance of common stock and warrants		—		—		(309,602	)		—			(309,602	)
Vesting of performance-based restricted stock units		228,213		23		(23	)		—			—
Stock-based compensation		—		—		608,915			—			608,915
Net loss		—		—		—			(6,192,036	)		(6,192,036	)
Balances at June 30, 2023		6,993,406	$	699	$	367,460,923		$	(379,972,523	)	$	(12,510,901	)

Balances at January 1, 2024		6,993,406	$	699	$	368,357,239		$	(396,815,428	)	$	(28,457,490	)
Stock-based compensation		—		—		438,849			—			438,849
Net loss		—		—		—			(8,568,805	)		(8,568,805	)
Balances at March 31, 2024		6,993,406	$	699	$	368,796,088		$	(405,384,233	)	$	(36,587,446	)
Stock-based compensation		—		—		329,318			—			329,318
Net loss		—		—		—			(8,233,487	)		(8,233,487	)
Balances at June 30, 2024		6,993,406	$	699	$	369,125,406		$	(413,617,720	)	$	(44,491,615	)

See accompanying notes to condensed consolidated financial statements.

MINERVA NEUROSCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(16,802,292	)	$	(13,162,448	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,721			2,721
Amortization of capitalized software		12,770			12,770
Stock-based compensation expense		768,167			985,374
Non-cash interest expense associated with the sale of future royalties		4,562,223			4,007,884
Changes in operating assets and liabilities
Refundable regulatory fee		—			3,117,218
Prepaid expenses and other current assets		561,847			518,964
Accounts payable		(976,975	)		(671,416	)
Accrued expenses and other current liabilities		1,839,964			1,201,646
Net cash used in operating activities		(10,031,575	)		(3,987,287	)

Cash flows from investing activities:
Net cash provided by investing activities		—			—

Cash flows from financing activities:
Proceeds from sales of common stock and warrants in private placement		—			19,999,994
Costs paid in connection with private placements		—			(309,602	)
Net cash provided by financing activities		—			19,690,392
Net (decrease) increase in cash, cash equivalents and restricted cash		(10,031,575	)		15,703,105

Cash, cash equivalents and restricted cash
Beginning of period		41,012,575			36,193,606
End of period	$	30,981,000		$	51,896,711
Reconciliation of the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	30,881,000		$	51,796,711
Restricted cash		100,000			100,000
Total cash, cash equivalents and restricted cash	$	30,981,000		$	51,896,711

See accompanying notes to condensed consolidated financial statements.

MINERVA NEUROSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

As of June 30, 2024 and for the Three and Six Months Ended June 30, 2024 and 2023

(Unaudited)

NOTE 1 — NATURE OF OPERATIONS AND LIQUIDITY

Nature of Operations

Minerva Neurosciences, Inc. (“Minerva” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of proprietary product candidates to treat patients suffering from central nervous system diseases. The Company’s lead product candidate is roluperidone, a compound the Company is developing for the treatment of negative symptoms in patients with schizophrenia. The Company previously submitted a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for roluperidone for the treatment of negative symptoms in schizophrenia in August 2022. On February 26, 2024, the FDA issued a Complete Response Letter regarding such NDA for roluperidone. Since receiving the Complete Response Letter, the Company has continued to have interactions with the FDA with the goal of addressing questions raised in such letter.

The Company also has exclusive rights to develop and commercialize MIN-301, a compound for the treatment of Parkinson’s disease. In addition, Minerva previously co-developed seltorexant with Janssen Pharmaceutica NV (“Janssen”) for the treatment of insomnia disorder and adjunctive treatment of Major Depressive Disorder (“MDD”). During 2020, Minerva exercised its right to opt out of the joint development agreement with Janssen for the future development of seltorexant. As a result, the Company was entitled to collect royalties in the mid-single digits on potential future worldwide sales of seltorexant in certain indications, with no further financial obligations to Janssen. In January 2021, the Company sold its rights to these potential royalties to Royalty Pharma plc (“Royalty Pharma”) for a $60 million up front payment and up to an additional $95 million in potential future milestone payments.

Liquidity

The accompanying interim condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has limited capital resources and has incurred recurring operating losses and negative cash flows from operations since inception. As of June 30, 2024, the Company had an accumulated deficit of approximately $413.6 million and net cash used in operating activities was approximately $10.0 million during the six months ended June 30, 2024. Management expects to continue to incur operating losses and negative cash flows from operations in the future. The Company has financed its operations to date from proceeds from the sale of common stock, warrants, loans, convertible promissory notes, collaboration agreements and royalty sales.

As of June 30, 2024, the Company had cash, cash equivalents, and restricted cash of $31.0 million, which it believes will be sufficient to meet the Company’s operating commitments for the next 12 months from the date its financial statements are issued. The process of drug development can be costly and the timing and outcomes of clinical trials is uncertain. The assumptions upon which the Company has based its estimates are routinely evaluated and may be subject to change. The actual amount of the Company’s expenditures will vary depending upon many factors, including, but not limited to, the design, timing and duration of future clinical trials, the progress of the Company’s research and development programs, the infrastructure to support a commercial enterprise, and the level of financial resources available. The Company can adjust its operating plan spending levels based on the timing of future clinical trials, which are predicated upon adequate funding to complete the trials. The Company routinely evaluates the status of its clinical development programs as well as potential strategic options.

The Company will need to raise additional capital to continue to fund operations and fully fund any potential later stage clinical development programs. The Company believes that it will be able to obtain additional working capital through equity financings or other arrangements to fund future operations; however, there can be no assurance that such additional financing, if available, can be obtained on terms acceptable to the Company. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

Further, if the Company does not satisfy The Nasdaq Capital Market continued listing requirements, its common stock may be subject to delisting, which could impact the Company’s ability to complete additional equity financings on terms acceptable to the Company. On April 10, 2024, the Company received a deficiency letter from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that for the last 31 consecutive business days, the market value of listed securities (“MVLS requirement”) for its common stock had been below the minimum MVLS requirement of $35 million pursuant to Nasdaq Listing Rule 5550(b)(2). In accordance with the listing rules of Nasdaq, the Company has been provided with a grace period of 180 calendar days, or until October 7, 2024, to regain

compliance. If the Company does not regain compliance within the grace period, the Company expects that Nasdaq would provide notice that its securities are subject to delisting.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and the requirements of the Securities and Exchange Commission (“SEC”) in accordance with Regulation S-X, Rule 8-03. Under those rules, certain notes and financial information that are normally required for annual financial statements can be condensed or omitted. In the opinion of the Company’s management, the accompanying financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of June 30, 2024, the results of operations for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet as of December 31, 2023 was derived from the audited annual financial statements. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2024.

Consolidation

The accompanying consolidated financial statements include the results of the Company and its wholly-owned subsidiaries, Mind-NRG Sarl and Minerva Neurosciences Securities Corporation. Intercompany transactions have been eliminated.

Significant risks and uncertainties

The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s products, the Company’s ability to obtain regulatory approval to market its products, competition from products manufactured and sold or being developed by other companies, the price of, and demand for, Company products, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, and the Company’s ability to raise capital.

The Company currently has no commercially approved products and there can be no assurance that the Company’s research and development will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and consultants and obtaining and protecting intellectual property.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash equivalents include short-term, highly-liquid instruments, consisting of money market accounts and short-term investments with maturities from the date of purchase of 90 days or less. The majority of cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand which reduces counterparty performance risk.

Restricted cash

Cash accounts with any type of restriction are classified as restricted. The Company maintained restricted cash balances as collateral for corporate credit cards in the amount of $0.1 million at each of June 30, 2024 and December 31, 2023.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board and are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued, but not yet adopted, accounting pronouncements will not have a material impact on the condensed consolidated financial statements or do not apply to the Company.

NOTE 3 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:


	June 30, 2024		December 31, 2023
Research and development costs and other accrued expenses	$	1,964,147	$	777,680
Accrued severance		245,387		—
Accrued bonus		727,302		590,769
Professional fees		381,775		166,648
Vacation pay		56,450		—
Accrued expenses and other current liabilities	$	3,375,061	$	1,535,097

NOTE 4 — NET LOSS PER SHARE OF COMMON STOCK

Diluted loss per share is the same as basic loss per share for all periods presented as the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period. Potential outstanding common stock includes stock options and shares underlying RSUs, but only to the extent that their inclusion is dilutive.

In June 2023, in connection with the Private Placement (as defined and described in Note 6, Stockholders’ Deficit), the Company issued and sold pre-funded warrants exercisable for an aggregate of 575,575 shares of common stock. The purchase price of the pre-funded warrants was $9.99 per share, which was paid to the Company upon issuance of the pre-funded warrants. The exercise price of the pre-funded warrants is $0.01 per share. The pre-funded warrants are exercisable by the holders at any time and do not expire. As the remaining shares underlying the pre-funded warrants are issuable for nominal consideration of $0.01 per share, 575,575 shares of common stock underlying the unexercised pre-funded warrants were considered outstanding for purposes of the calculation of loss per share as of June 30, 2024.

The following table sets forth the computation of basic and diluted loss per share for common stockholders:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net loss	$	(8,233,487	)	$	(6,192,036	)	$	(16,802,292	)	$	(13,162,448	)
Weighted average shares of common stock outstanding		7,568,981			5,511,163			7,568,981			5,426,150
Net loss per share of common stock – basic and diluted	$	(1.09	)	$	(1.12	)	$	(2.22	)	$	(2.43	)

The following securities outstanding at June 30, 2024 and 2023 have been excluded from the calculation of weighted average shares outstanding as their effect on the calculation of loss per share is antidilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Common stock options		1,063,234		700,929		1,063,234		700,929
Performance-based restricted stock units		228,209		228,209		228,209		228,209
Common stock warrants		5,099		5,099		5,099		5,099

NOTE 5 — SALE OF FUTURE ROYALTIES

The Company had previously co-developed seltorexant with Janssen for the treatment of insomnia disorder and adjunctive treatment of MDD. During 2020, the Company exercised its right to opt out of the joint development agreement with Janssen for the future development of seltorexant and, as a result, the Company was entitled to collect royalties in the mid-single digits on potential future sales of seltorexant worldwide in certain indications, with no further financial obligations to Janssen.

On January 19, 2021, the Company entered into an agreement with Royalty Pharma under which Royalty Pharma acquired the Company’s royalty interest in seltorexant for an upfront payment of $60 million and up to an additional $95 million in potential milestone payments. These milestone payments are contingent upon the achievement of certain clinical, regulatory and commercial milestones for seltorexant by Janssen or any other party in the event that Janssen sells seltorexant. Under the terms of the agreement, the Company has significant continuing involvement as Royalty Pharma has recourse against the Company relating to the payments due from Janssen. As such, the Company applied the debt recognition guidance under ASC 470, Debt, and recorded the upfront payment of $60 million as a liability related to the sale of future royalties (“Royalty Obligation”), which will be amortized under the interest method over the estimated life of the agreement. Under the terms of the agreement, all payments from Royalty Pharma to the Company, including the initial upfront payment of $60 million as well as amortized interest expense and potential milestone payments, are not repayable to Royalty Pharma in the event that Janssen discontinues the clinical development of seltorexant or ceases to pursue its commercialization at a future date for any reason. In addition, in accordance with ASC 470, Debt, the Company will account for any royalties received in the future as non-cash royalty revenue.

As royalties are remitted from Janssen to Royalty Pharma, the balance of the Royalty Obligation will be effectively repaid over the life of the co-development and license agreement (the “Agreement”) with Janssen. In order to determine the amortization of the Royalty Obligation, the Company is required to estimate the total amount of future royalty payments to Royalty Pharma over the life of the Agreement. In addition to the $60 million upfront payment, up to an additional $95 million in potential milestone payments will also be recorded as a liability related to the sale of future royalties and amortized as interest expense over the estimated remaining life of the agreement. At execution, the Company’s estimate of this total interest expense resulted in an effective annual interest rate of approximately 10.5%. As of June 30, 2024, the Company estimated the effective annual interest rate to be approximately 10.97%. This estimate contains significant assumptions, which are considered Level 3 fair value inputs, regarding the timing and amount of expected royalty and milestone payments that impact the interest expense that will be recognized over the royalty period. The Company will periodically assess the estimated royalty payments to Royalty Payments from Janssen and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty payments to Royalty Pharma from Janssen, and correspondingly, the amount of interest expense recorded by the Company, most of which are not within the Company’s control. Such factors include, but are not limited to, delays or discontinuation of development of seltorexant, regulatory approval, changing standards of care, the introduction of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in regulatory authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to Royalty Pharma are made in U.S. dollars (“USD”) while the underlying sales of seltorexant will be made in currencies other than USD and other events or circumstances that are not currently foreseen. Changes to any of these factors could result in increases or decreases to both royalty revenues and interest expense.

The following table shows the activity of the Royalty Obligation since the transaction inception through June 30, 2024:


	June 30, 2024
Upfront payment from the sale of future royalties	$	60,000,000
Non-cash interest expense associated with the sale of future royalties		26,579,046
Liability related to the sale of future royalties	$	86,579,046

NOTE 6 — STOCKHOLDERS’ DEFICIT

Private Placement of Common Stock and Warrants

On June 27, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a private placement (the “Private Placement”) (i) an aggregate of 1,425,000 shares (the “Shares”) of the Company’s common stock at a purchase price of $10.00 per Share, and (ii) in lieu of additional shares of common stock, pre-funded warrants to purchase an aggregate of 575,575 shares of common stock at a purchase price of $9.99 per pre-funded warrant. The price per pre-funded warrant represents the price of $10.00 per Share sold in the Private Placement, minus the $0.01 per share exercise price of each such pre-funded warrant. The pre-funded warrants are exercisable at any time after their original issuance and will not expire until exercised in full.

The pre-funded warrants issued in the Private Placement provide that a holder of the pre-funded warrants will not have the right to exercise any portion of its pre-funded warrants to the extent such holder, together with its affiliates, after giving effect to such exercise, would beneficially own in excess of the beneficial ownership limitation, as elected by such Investor, immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that each pre-funded warrant holder may increase or decrease the Beneficial Ownership Limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

On June 30, 2023, the Private Placement closed and the Company received aggregate gross proceeds from the Private Placement of $20.0 million. The Company incurred approximately $0.4 million in offering expenses during 2023, which were included as a component of additional paid-in capital, resulting in net proceeds of $19.6 million from the Private Placement.

Pursuant to the Securities Purchase Agreement, the Company filed a registration statement on Form S-3 (File No. 333-273686), which was declared effective by the SEC on August 9, 2023, covering the resale of the Registrable Securities (as such term is defined in the Securities Purchase Agreement). The Company has agreed to use its commercially reasonable efforts to keep such registration statement effective until the earlier of (i) the third anniversary of the effective date of the initial registration statement covering the Registrable Securities; (ii) the date all Shares and all shares of common stock underlying the pre-funded warrants may be sold under Rule 144 of the Securities Act of 1933, as amended, without being subject to any volume, manner of sale or publicly available information requirements; or (iii) immediately prior to the closing of a Change of Control (as such term is defined in the Securities Purchase Agreement).

Pursuant to the Securities Purchase Agreement, in connection with the Private Placement, Boehringer Ingelheim International GmbH (“BI”), an Investor in the Private Placement, has the right to designate an observer to attend, subject to certain exceptions, meetings of the Company’s board of directors and its committees, until the earlier of (i) the occurrence of a Change of Control and (ii) the date that it and its affiliates collectively hold less than 10% of the Company’s common stock (which shall be calculated by including in the amount of common stock held by such Investor and its affiliates any shares of common stock issuable upon exercise of any portion of the pre-funded warrant issued to such Investor and not yet exercised). BI designated a board observer on August 29, 2023.

At-the-Market Equity Offering Program

In September 2022, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company may offer and sell, from time to time, through Jefferies shares of the Company’s common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. During the six months ended June 30, 2024, no shares of the Company’s common stock were issued or sold under the Sales Agreement. As of June 30, 2024, an aggregate of $22.6 million was eligible for sale pursuant to the Sales Agreement under the Company’s effective registration statement on Form S-3 (File No. 333-267424).

Term Loan Warrants

In connection with the Company’s former Loan and Security Agreement with Oxford Finance LLC and Silicon Valley Bank (the “Lenders”), which provided for term loans to the Company in an aggregate principal amount of up to $15 million in two tranches on January 15, 2016, the Company issued the Lenders warrants to purchase 5,099 shares of common stock at a per share exercise price of $44.13. The warrants were immediately exercisable upon issuance, and other than in connection with certain mergers or acquisitions, will expire on the ten-year anniversary of the date of issuance. The term loans were repaid in August 2018. All related warrants were outstanding and exercisable as of June 30, 2024.

NOTE 7 — STOCK AWARD PLAN AND STOCK-BASED COMPENSATION

In December 2013, the Company adopted the 2013 Equity Incentive Plan (as subsequently amended and restated, the “Plan”), which provides for the issuance of options, stock appreciation rights, stock awards and stock units.

Stock Option Awards

Stock option activity for employees and non-employees for the six months ended June 30, 2024 is as follows:


	Shares Issuable Pursuant to Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (years)		Total Intrinsic Value (in thousands)
Outstanding January 1, 2024		1,157,229		$	11.36		8.5	$	745

Granted		—		$	—
Exercised		—		$	—
Cancelled/Forfeited		(87,500	)	$	8.33
Expired		(6,495	)	$	48.00
Outstanding June 30, 2024		1,063,234		$	11.39		8.1	$	17
Exercisable June 30, 2024		439,573		$	19.40		6.9	$	6
Available for future grant		456,361

The weighted average grant-date fair value of stock options outstanding on June 30, 2024 was $8.25 per share. Total unrecognized compensation costs related to non-vested stock options at June 30, 2024 were approximately $2.6 million and are expected to be recognized within future operating results over a weighted-average period of 2.7 years.

The expected term of the employee-related options was estimated using the “simplified” method as defined by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment. The volatility assumption was determined by examining the historical volatility of the Company and volatilities for industry peer companies. The risk-free interest rate assumption is based on the U.S. Treasury instruments, the term of which was consistent with the expected term of the options. The dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for the purposes of estimating the fair value of the options.

The Company uses the Black-Scholes model to estimate the fair value of stock options granted. There were no stock options granted during the six months ended June 30, 2024 and 2023.

Performance-Based Restricted Stock Units

On August 6, 2021, options to purchase 953,980 shares of the Company’s common stock were exchanged for 476,640 PRSUs. Options surrendered in the one-time stock option exchange program (the “Exchange Program”) were cancelled and shares subject to the cancelled options again became available for issuance under the Plan. The Exchange Program was treated as a Type II modification (Probable-to improbable) under ASC 718.

The Company used the pre-modification stock options for determining the compensation cost related to the PRSUs as the vesting conditions remain uncertain for the outstanding PRSUs. All expense related to the non-vested pre-modification stock options was fully recognized as of December 31, 2023.

On April 28, 2023, the Compensation Committee of the Company’s board of directors certified the achievement of a performance condition occurring upon FDA acceptance of the NDA for roluperidone. As a result, 50% of the shares of common stock underlying the Company’s PRSUs vested and the Company recognized approximately $0.2 million in non-cash compensation expense, representing 50% of the incremental cost of the PRSUs granted under the Exchange Program. The incremental cost was measured as the excess of the fair value of each new PRSU, measured as of the date the new PRSUs were granted, over the fair value of the stock options surrendered in exchange for the new PRSU, measured immediately prior to the cancellation. The remaining PRSUs vest upon roluperidone receiving FDA marketing approval, provided that such approval occurs within five years after the August 6, 2021 grant date. As of June 30, 2024, 228,213 PRSUs have vested, 20,218 have been cancelled, and 228,209 remain outstanding.

The following table presents stock-based compensation expense included in the Company’s consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development	$	84,109	$	297,756	$	276,494	$	482,483
General and administrative		245,209		311,159		491,673		502,891
Total	$	329,318	$	608,915	$	768,167	$	985,374

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of the Company’s business activities. The Company is not aware of any claim or litigation, the outcome of which, if determined adversely to the Company, would have a material effect on the Company’s financial position or results of operations.

Leases

On October 11, 2022, the Company entered into an office lease agreement with Regus to lease approximately 491 rentable square feet of office space located at 1500 District Avenue, Burlington, MA 01803. In January 2024, the Company renewed the month-to-month lease agreement commencing on February 1, 2024, with a monthly payment of $8,697. The Company has elected to not recognize the lease agreement on the balance sheet as the term of the agreement is 12 months or less.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our annual audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission on February 22, 2024. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a clinical-stage biopharmaceutical company focused on the development and commercialization of proprietary product candidates to treat patients suffering from central nervous system diseases. Leveraging our scientific insights and clinical experience, we have acquired or in-licensed compounds that we believe have innovative mechanisms of actions and therapeutic profiles that potentially address the unmet needs of patients with these diseases.

We are developing roluperidone for the treatment of negative symptoms in patients with schizophrenia and have exclusive rights to develop and commercialize MIN-301 for the treatment of Parkinson’s disease. In addition, we previously co-developed seltorexant with Janssen Pharmaceutica NV, one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”), for the treatment of insomnia disorder and adjunctive treatment of Major Depressive Disorder (“MDD”). In June 2020, we exercised our right to opt out of our agreement with Janssen for the Phase 3 development of seltorexant and as a result, we were entitled to collect royalties in the mid-single digits on potential future worldwide sales of seltorexant in certain indications, with no further financial obligations to Janssen. In January 2021, we sold our rights to these potential royalties to Royalty Pharma plc (“Royalty Pharma”) for a $60 million cash payment and up to an additional $95 million in potential future milestone payments, subject to completion of Phase 3 trials by Janssen and regulatory approvals.

In August 2022, we submitted a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for our lead product candidate, roluperidone, for the treatment of negative symptoms in schizophrenia. On February 26, 2024, the FDA issued a Complete Response Letter (“CRL”) regarding our NDA for roluperidone. Since receiving the CRL, we have continued to have interactions with the FDA with the goal of addressing questions raised in the CRL.

We have not received any regulatory approvals to commercialize any of our product candidates, and we have not generated any revenue from the sales or license of our product candidates. We routinely evaluate the status of our drug development programs as well as potential strategic options. We have incurred significant operating losses since inception and expect to continue to incur net losses and negative cash flows from operating activities for the foreseeable future in connection with the clinical and regulatory activities associated with advancing our product candidates. As of June 30, 2024 and December 31, 2023, we had an accumulated deficit of $413.6 million and $396.8 million, respectively. For the six months ended June 30, 2024 and 2023, we recorded net losses of $16.8 million and $13.2 million, respectively.

Clinical and Regulatory Updates

Complete Response Letter

On February 26, 2024, the FDA issued a CRL to our NDA for roluperidone for the treatment of negative symptoms in patients with schizophrenia. In the CRL, the FDA cited the following clinical deficiencies:

•

Although one study (MIN-101C03) demonstrated statistical significance on the primary efficacy endpoint, it is insufficient on its own to establish substantial evidence of effectiveness.

•

The NDA submission lacks data on concomitant antipsychotic administration.

•

The NDA submission lacks data needed to establish that the change in negative symptoms of schizophrenia with roluperidone treatment was clinically meaningful.

•

The submitted safety database included an inadequate number of subjects exposed to roluperidone at the proposed dose (64 mg) for at least 12 months.

To address these deficiencies, the FDA stated that we must submit at least one additional positive, adequate, and well-controlled study to support the safety and effectiveness of roluperidone for the treatment of negative symptoms. We must also provide additional data to demonstrate the safety and efficacy of roluperidone co-administered with antipsychotic medications, to support the observed effect on negative symptoms with roluperidone treatment corresponds to a clinically meaningful change, and to demonstrate the long-term safety of the proposed dose.

In addition to the clinical deficiencies described above, the FDA also provided comments on, among other items, clinical pharmacology, product quality, biopharmaceutics, and nonclinical issues.

Phase 1b Clinical Trial (MIN-101C18)

In the first quarter of 2024, we completed a clinical trial initiated in October 2023 to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetics of the co-administration of roluperidone and olanzapine in adult subjects with moderate to severe negative symptoms of schizophrenia. This clinical trial (NCT06107803) was designed to investigate the pharmacodynamic and pharmacokinetic effects and safety of the concomitant therapy of roluperidone with an established and widely used antipsychotic.

We enrolled 17 male and female subjects with moderate to severe negative symptoms of schizophrenia for this study. Out of the 17 enrolled subjects, 13 completed all 17 days of daily dosing with roluperidone 64 mg (for 7 days) and roluperidone with olanzapine 10 mg (for 10 additional days). Two subjects withdrew consent after enrollment, one patient was discontinued due to a major protocol deviation, and one was discontinued due to a treatment-unrelated serious adverse event. Roluperidone administered concomitantly with olanzapine was generally well tolerated and no unexpected safety signals were detected, with few treatment-emergent adverse events (TEAEs) reported, most of which were mild, and all resolved without sequelae. We observed no emergent clinically significant electrocardiogram or laboratory abnormalities during the study. We observed no symptomatic worsening during the administration of roluperidone alone (7 days) or when administered in combination with olanzapine at 10 mg (10 days). The study demonstrated that pharmacokinetic interactions between the two drugs were not relevant.

Financial Overview

Revenue

None of our product candidates have been approved for commercialization and we have not received any revenue in connection with the sale or license of our product candidates.

Research and Development Expenses

Research and development costs are expensed as they are incurred and consist principally of costs incurred in connection with the development of our product candidates including: fees paid to consultants and clinical research organizations (“CROs”), investigator grants, patient screening, laboratory work, database management, material management, statistical analysis, license fees, regulatory compliance, and costs related to salaries, benefits, bonuses and stock-based compensation granted to employees in research and development functions.

Completion dates and costs can vary significantly by product candidate and are difficult to predict. We anticipate making determinations as to which programs to pursue and the level of funding to direct to each program on an ongoing basis in response to the scientific and clinical success or failure of each product candidate, the estimated costs to continue the development program relative to our available resources, as well as an ongoing assessment of each product candidate’s commercial potential. We will need to raise additional capital or may seek additional product collaborations in the future to complete the development and commercialization of our product candidates.

General and Administrative Expenses

General and administrative costs are expensed as they are incurred and consist principally of costs for facility and information systems, professional fees for auditing, consulting and legal services and costs related to salaries, benefits, bonuses and stock-based compensation granted to employees in administrative functions. General and administrative costs also include costs for maintaining a publicly listed company including increased audit and legal fees, compliance with securities laws, corporate governance and investor relations.

Foreign Exchange Gains (Losses)

Foreign exchange gains (losses) are comprised primarily of gains and (losses) on foreign currency transactions primarily related to research and development expenses. We incur certain expenses, primarily in Euros, and record these expenses in United States Dollars at the time the liability is incurred. Changes in the applicable foreign currency rate between the date that an expense is recorded and the payment date is recorded as a foreign currency gain or (loss).

Investment Income

Investment income consists of income earned on our cash equivalents and marketable securities.

Non-cash interest expense for the sale of future royalties

Non-cash interest expense for the sale of future royalties consists of the non-cash interest expense associated with the Royalty Pharma agreement.

Results of Operations

Comparison of Three Months Ended June 30, 2024 versus June 30, 2023

Research and Development Expenses

Research and development expenses were $3.9 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively, an increase of approximately $2.0 million. The increase in research and development expenses was primarily due to higher subcontractor fees related to costs associated with our drug substance validation campaign, partially offset by lower compensation expenses. Non-cash stock compensation costs included in research and development expenses were $0.1 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

General and Administrative Expenses

General and administrative expenses were $2.4 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively, a decrease of approximately $0.2 million. The decrease in general and administrative expenses was primarily due to lower compensation expenses. Non-cash stock compensation costs included in general and administrative expenses were $0.2 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Foreign Exchange Losses

Foreign exchange losses were $5 thousand and $7 thousand for the three months ended June 30, 2024 and 2023, respectively, a decrease of $2 thousand, primarily due to currency movements.

Investment Income

Investment income was $361 thousand and $366 thousand for the three months ended June 30, 2024 and 2023, respectively, a decrease of approximately $5 thousand, primarily due to cash and cash equivalents balances and interest rates.

Non-cash interest expense for the sale of future royalties

Non-cash interest expense for the sale of future royalties was $2.3 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $0.3 million. The increase was primarily due to the amortization of non-cash interest expense for the difference between the balance of the liability related to the sale of future royalties and the estimated amount of future royalties to be received over the royalty period.

Comparison of Six Months Ended June 30,2024 versus June 30, 2023

Research and Development Expenses

Research and development expenses were $8.0 million and $4.5 million for the six months ended June 30, 2024 and 2023, respectively, an increase of approximately $3.5 million. The increase in research and development expenses was primarily due to

higher subcontractor fees related to costs associated with our drug substance validation campaign, and the conduct of the MIN-101C18 study. Non-cash stock compensation costs included in research and development expenses were $0.3 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively.

General and Administrative Expenses

General and administrative expenses were $4.9 million and $5.3 million for the six months ended June 30, 2024 and 2023, respectively, a decrease of approximately $0.4 million. The decrease in general and administrative expenses was primarily due to lower compensation expenses and professional service fees. Non-cash stock compensation costs included in general and administrative expenses were $0.5 million for both the six months ended June 30, 2024 and 2023.

Foreign Exchange Gains (Losses)

Foreign exchange gains were $1 thousand and foreign exchange losses were $16 thousand for the six months ended June 30, 2024 and 2023, respectively, an increase of $17 thousand, primarily due to currency movements.

Investment Income

Investment income was $719 thousand and $730 thousand for the six months ended June 30, 2024 and 2023, respectively, a decrease of approximately $11 thousand, primarily due to cash and cash equivalents balances and interest rates.

Non-cash interest expense for the sale of future royalties

Non-cash interest expense for the sale of future royalties was $4.6 million and $4.0 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $0.6 million. The increase was primarily due to the amortization of non-cash interest expense for the difference between the balance of the liability related to the sale of future royalties and the estimated amount of future royalties to be received over the royalty period.

Liquidity and Capital Resources

Sources of Liquidity

As of June 30, 2024, we had an accumulated deficit of approximately $413.6 million. We anticipate that we will continue to incur net losses for the foreseeable future as we continue the development and potential commercialization of our product candidates and to support our operations as a public company. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we may never generate product revenue or achieve profitability. As of June 30, 2024, we had approximately $31.0 million in cash, cash equivalents, and restricted cash, which we believe will be sufficient to meet our operating commitments for the next 12 months from the date our financial statements are issued. Our cash requirements primarily relate to expenditures to support the development of roluperidone, which includes advancing the program through the regulatory process.

The process of drug development can be costly and the timing and outcomes of clinical trials is uncertain. The assumptions upon which we have based our estimates are routinely evaluated and may be subject to change. The actual amount of our expenditures will vary depending upon many factors, including, but not limited to, the design, timing and duration of future clinical trials, the progress of our research and development programs, the infrastructure to support a commercial enterprise and the level of financial resources available. We can adjust our operating plan spending levels based on the timing of future clinical trials which are predicated upon adequate funding to complete the trials. We routinely evaluate the status of our clinical development programs as well as potential strategic options.

Private Placement of Common Stock and Warrants

On June 27, 2023, we entered into a securities purchase agreement with certain institutional accredited investors, pursuant to which we agreed to issue and sell in a private placement (i) an aggregate of 1,425,000 shares of our common stock at a purchase price of $10.00 per share, and (ii) in lieu of additional shares of common stock, pre-funded warrants to purchase an aggregate of 575,575 shares of common stock at a purchase price of $9.99 per pre-funded warrant. The price per pre-funded warrant represents the price of $10.00 per share sold in the private placement, minus the $0.01 per share exercise price of each such pre-funded warrant. The pre-funded warrants are exercisable at any time after their original issuance and will not expire until exercised in full.

On June 30, 2023, we received aggregate gross proceeds under the Private Placement of $20.0 million and incurred approximately $0.4 million in offering expenses. Pursuant to the securities purchase agreement, we filed a registration statement on Form S-3 (File No. 333-273686), which was declared effective by the SEC on August 9, 2023, covering the resale of the Registrable Securities (as defined in the securities purchase agreement). In connection with the private placement, on August 29, 2023, Boehringer Ingelheim International GmbH, an investor in the private placement, designated an observer to attend, subject to certain exceptions, meetings of our board of directors and our committees, until the earlier of (i) the occurrence of a Change of Control and (ii) the date that it and its affiliates collectively hold less than 10% of our Common Stock.

At-the-Market Equity Offering Program

In September 2022, we entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

During the six months ended June 30, 2024, no shares of our common stock were issued or sold under the Sales Agreement. As of June 30, 2024, an aggregate of $22.6 million was eligible for sale pursuant to the Sales Agreement under our effective registration statement on Form S-3 (File No. 333-267424).

Seltorexant Royalties

We previously co-developed seltorexant with Janssen for the treatment of insomnia disorder and adjunctive treatment of MDD. During 2020, we exercised our right to opt out of a joint development agreement with Janssen for the future development of seltorexant. As a result, we were entitled to collect royalties in the mid-single digits on potential future sales of seltorexant worldwide in certain indications, with no further financial obligations to Janssen.

On January 19, 2021, we sold our royalty interest in seltorexant to Royalty Pharma for an upfront payment of $60 million and up to an additional $95 million in potential future milestone payments, contingent upon the achievement of certain clinical, regulatory and commercial milestones for seltorexant by Janssen.

Uses of Funds

To date, we have not generated any revenue from sales of products. We have only generated collaborative revenue due to opting out of our license and co-development agreement with Janssen. Furthermore, the $60 million payment received from Royalty Pharma for the sale of our royalty interests in seltorexant has been included on our balance sheet under liability related to the sale of future royalties. We do not know when, or if, we will generate any revenue from sales of our products, or from the potential future non-cash royalty revenue associated with the sal

SEC Form 10-Q filed by Minerva Neurosciences Inc