MeiraGTx Holdings plc — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. MeiraGTx is a clinical-stage gene therapy company; it reported no product sales. Financial figures below are in U.S. dollars, millions, unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| License revenue, related party | $5.1 | $4.8 | $12.0 | $21.2 |
| Operating expenses | $37.9 | $27.6 | $105.3 | $96.5 |
| Operating loss | $(32.8) | $(22.8) | $(93.3) | $(75.3) |
| Net loss | $(44.3) | $(37.3) | $(104.2) | $(102.3) |
| Basic and diluted loss per share | $(0.74) | $(0.83) | $(1.91) | $(2.29) |
| Cash used in operating activities | Not separately stated | Not separately stated | $(90.8) | $(56.8) |
- Balance sheet: At September 30, cash and cash equivalents were $63.4; restricted cash was $1.0; current assets were $103.5 and current liabilities $63.5. The resulting current ratio was approximately 1.6. Total assets were $267.2, total liabilities $175.3, and accumulated deficit $574.4.
- Debt: The company had $75.0 of principal outstanding under secured notes, plus $2.9 accrued interest. The notes mature August 2026, are interest-only, and bore a variable annual rate of 15.12% at quarter-end. A further $25.0 tranche may be requested through August 2, 2024 under the amended agreement. Manufacturing facilities and other assets secure the debt.
- Margins: Product gross margin is not applicable because the company has not generated product revenue. License revenue is recognized from Janssen collaboration payments; Janssen research reimbursements are recorded as an offset to R&D expense.
Material changes versus comparable periods
- Q3 net loss widened by $7.0, as operating loss increased by $10.0, partly offset by a $4.2 reduction in foreign-currency losses. Nine-month net loss increased by $1.9, despite foreign-currency losses falling by $23.0, as operating loss grew by $18.0 and interest expense rose by $7.7.
- Q3 R&D expense rose $11.0 to $27.9. Management cited higher manufacturing costs and lower Janssen reimbursements, partly offset by reduced preclinical and other R&D costs. Nine-month R&D expense rose $6.2 to $70.1, with manufacturing costs up $39.2, partially offset by lower preclinical and clinical costs and increased Janssen research funding.
- Nine-month license revenue decreased $9.2, reflecting lower amortization of the Janssen upfront and milestone payments. The company reported $31.1 of remaining deferred revenue associated with those payments, expected to be recognized over an estimated three years.
- Operating cash use increased $34.0 year over year. Cash, cash equivalents and restricted cash declined $51.7 from year-end 2022. The company raised $62.0 gross (approximately $57.8 net) in a May 2023 private placement.
Outlook, developments and risks
- Management estimated that September 30 resources, expected Janssen research funding and the subsequent Sanofi investment would fund operating expenses and capital expenditures into mid-2025. This is an estimate based on assumptions; management warned that available funds could be used sooner and that additional capital may be needed.
- On October 30, 2023, after quarter-end, Sanofi invested $30.0 for 4.0 million shares at $7.50 each. Sanofi also received rights of first negotiation for specified uses of the Riboswitch platform and the Phase 2 xerostomia program. The post-quarter placement is not included in September 30 cash.
- Management said bota-vec Phase 3 LUMEOS enrollment was completed in Q2 2023 and sponsorship was being transferred to Janssen country by country. Janssen was expected to begin paying certain program costs directly in Q4 2023; the company expects its related R&D expense and reimbursements to decline over the following year. Spending is expected to increase for AAV-hAQP1 and AAV-GAD activities.
- The company disclosed that multiple parties had expressed strategic interest in certain assets and that it was pursuing options; no transaction was assured. The debt agreement permits certain asset transactions involving AAV-hAQP1, AAV-GAD and gene-regulation technologies, subject to its terms.
- Principal risks include sustained losses and financing needs; high variable-rate secured debt and restrictive covenants; uncertain clinical outcomes, regulatory approval and commercialization; manufacturing capacity and compliance; foreign-exchange exposure; and whether strategic discussions result in a transaction. The company reported compliance with debt covenants at September 30 and no material legal proceedings or new material contingencies for the nine-month period.
Important facts for investors to verify
- Whether the mid-2025 cash runway remains achievable, including actual Janssen funding, spending and cash received from Sanofi after quarter-end.
- Progress and timing of the bota-vec sponsorship transfer and Janssen’s direct assumption of program expenses.
- Manufacturing cost accounting and the expected Q4 true-up: management said standard batch costs are charged to clinical programs upon batch completion and a year-to-date adjustment would be reflected in Q4.
- Current debt terms, variable interest expense, covenant compliance and availability and conditions of the additional $25.0 tranche.
- Any outcome from strategic discussions, and the terms and potential implications of Sanofi’s rights of first negotiation and share placement.