Nurix Therapeutics, Inc. — Form 10-Q
Reporting period: Quarter and nine months ended August 31, 2021. The request metadata says “2020 Q3,” but the filing itself covers 2021 Q3.
Business context
Nurix is an early-stage biopharmaceutical company developing small-molecule therapies that modulate cellular protein levels through its DELigase platform. It has no approved products and has not generated product-sales revenue; reported revenue comes from collaborations, principally with Gilead and Sanofi.
Its lead programs include NX-2127, a BTK degrader in a Phase 1 trial, and NX-1607, a CBL-B inhibitor. NX-5948, another BTK degrader, and DeTIL-0255, a cell-therapy candidate, were expected to enter Phase 1 trials in the second half of calendar 2021. The filing also says DeTIL-0255’s IND was on clinical hold pending additional manufacturing information; Nurix had submitted a response and expected trial initiation in the second half of 2021, subject to FDA acceptance.
Financial results and liquidity
| Metric | Three months ended Aug. 31, 2021 | Nine months ended Aug. 31, 2021 | Comparable 2020 period |
|---|---|---|---|
| Collaboration revenue | $10.3 million | $22.4 million | $4.1 million / $11.1 million |
| Research and development expense | $30.9 million | $79.9 million | $18.9 million / $46.0 million |
| General and administrative expense | $8.3 million | $22.4 million | $4.3 million / $10.1 million |
| Net loss | $28.8 million | $79.5 million | $18.5 million / $23.3 million |
| Basic and diluted loss per share | $0.65 | $1.88 | $1.09 / $2.90 |
At August 31, 2021, cash and cash equivalents were $147.4 million, short- and long-term investments totaled $317.9 million, and total cash, cash equivalents and investments were $465.4 million. Management said resources were sufficient for at least 12 months after issuance of the financial statements, while noting substantial additional capital will be needed for development and commercialization.
Nine-month operating cash use was $53.5 million, versus $20.4 million of operating cash provided in 2020. Investing activities used $71.7 million; financing activities provided $153.4 million, primarily from the March 2021 follow-on offering. Cash, cash equivalents and restricted cash increased $28.2 million. No interest-bearing debt is reported in the presented balance sheet; total liabilities were $117.9 million, including $101.6 million of deferred revenue. Product gross margins are not applicable because there are no product sales.
Changes, outlook, risks and unusual items
- Nine-month collaboration revenue more than doubled year over year, mainly from greater research activity and milestone-related revenue under the Gilead and Sanofi agreements. R&D and G&A spending rose substantially, reflecting increased personnel, stock compensation, research, manufacturing, clinical-startup and public-company costs.
- The nine-month 2020 net loss benefited from a $20.6 million income-tax benefit related primarily to CARES Act loss carrybacks; the company received the full $19.6 million refund claims by August 2021. This makes the year-over-year net-loss comparison less representative of underlying operating trends.
- Nurix recognized a $5.0 million Gilead research milestone in August as a contract asset, invoiced Gilead in September, and expected payment in Q4 2021. The milestone is not recurring product revenue.
- Nurix completed a $150.2 million net follow-on offering in March 2021. It also established an at-the-market program of up to $150.0 million in August; no shares had been sold under it by August 31. Further equity issuance could dilute shareholders.
- The company expects losses and expenses to increase as programs advance. Trial timing, clinical outcomes, regulatory review, manufacturing availability, collaboration payments and financing needs are uncertain; the filing provides no revenue or earnings guidance.
- Key risks include early-stage drug-development and safety uncertainty, dependence on single-source suppliers and third-party manufacturers, collaboration-partner decisions, competition, intellectual-property challenges and possible COVID-19-related disruption. The filing reported no material pending or threatened litigation.
- Disclosure controls were deemed ineffective as of August 31, 2021 because of an unremediated material weakness in financial reporting controls. Management reported additional review procedures and ongoing remediation, but said effectiveness had not yet been demonstrated. The weakness had led to revision of previously reported 2020 weighted-average share counts and loss per share.
- A California tax authority proposed an assessment of approximately $0.6 million plus interest over revenue sourcing; Nurix disagreed and intended to challenge it and had not recorded an unrecognized tax benefit for the position.
Important facts for investors to verify
- Whether NX-5948, NX-1607 and DeTIL-0255 entered trials on the anticipated timetable, including resolution of the DeTIL-0255 clinical hold.
- Clinical safety, efficacy and enrollment progress for NX-2127 and NX-1607; early-stage results may not predict later outcomes.
- Actual cash burn, collaboration milestone receipts and the duration of the stated runway as R&D spending grows.
- Whether the $5.0 million Gilead milestone was collected in Q4 2021, and future collaboration milestone or option activity.
- Any ATM share sales, associated dilution, and progress in remediating the disclosed material weakness.
- The outcome of the California tax assessment challenge and any material changes to supplier, manufacturing or COVID-19 risks.