NextCure, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines for cancer and immune-related diseases. It has no product sales and depends on external financing to fund development.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $22.4 |
| Research and development expense | $11.9 | $11.1 | $24.3 | $21.7 |
| General and administrative expense | $6.0 | $4.7 | $10.9 | $8.3 |
| Net loss | $(18.0) | $(14.5) | $(34.5) | $(4.8) |
| Loss per share, basic and diluted | $(0.65) | $(0.53) | $(1.25) | $(0.17) |
- At June 30, cash and cash equivalents were $34.9 million and marketable securities were $214.6 million; combined, $249.5 million, excluding restricted cash. Restricted cash was $1.7 million on the balance sheet.
- Six-month operating cash use was $31.1 million; investing activities provided $33.2 million, primarily from net marketable-security maturities; financing activities used $0.8 million, mainly for term-loan payments.
- Total assets were $275.4 million and stockholders’ equity was $263.6 million. Total liabilities were $11.8 million. Term-loan borrowings were $2.6 million, including $1.7 million current and $1.0 million long-term.
- Gross margin is not meaningful for this development-stage company; the filing reports no product revenue. Accumulated deficit was $152.2 million.
Material changes versus prior comparable periods
- Six-month revenue fell from $22.4 million to zero because the 2020 amount included recognition of deferred revenue from the Lilly collaboration, terminated in March 2020. No further support payments are due under that agreement.
- Q2 net loss increased by $3.5 million year over year, reflecting higher operating expenses and a $1.3 million decline in other income. Six-month net loss rose by $29.7 million, largely reflecting the absence of the prior-year Lilly revenue recognition.
- Q2 R&D expense increased $0.8 million; six-month R&D expense increased $2.6 million, attributed principally to personnel and development-program costs. G&A rose $1.3 million in Q2 and $2.6 million for the half, primarily from personnel-related costs, including stock compensation.
- Other income for the six months declined to $0.7 million from $2.8 million, which management attributed to lower investment balances and interest rates.
- Cash, cash equivalents and marketable securities declined from $283.4 million at December 31, 2020 to $249.5 million at June 30, 2021. Marketable securities had $0.4 million of gross unrealized losses at quarter-end; the company said credit-related losses were insignificant and it did not expect to sell the securities before maturity.
Outlook, operations and risks
- Management believes existing cash, cash equivalents and marketable securities will fund planned operations into the second half of 2023. This estimate depends on assumptions that may prove incorrect; the company expects continued losses and negative operating cash flows and says it will need substantial additional funding.
- NextCure may raise capital through equity or debt offerings, collaborations, strategic alliances or licensing. Its May 2021 at-the-market sales agreement permits up to $75 million of common-stock sales; no shares had been sold under it by June 30, 2021.
- NC318: The company resumed enrollment in the NSCLC adenocarcinoma cohort during Q2, modified screening to select for S15-positive tumors, and revised dosing to 800 mg weekly. It expected a monotherapy Phase 2 data update by year-end 2021. Yale began a Phase 2 combination trial with pembrolizumab in April 2021; initial data were anticipated in the first half of 2022. Prior trial results and low S15-positive enrollment have created uncertainty around the program.
- NC410: The Phase 1/2 trial is ongoing; the company expected Phase 1 data in Q4 2021. NC762: The FDA cleared its IND and a Phase 1/2 trial began in July 2021; initial Phase 1 data were expected in mid-2022.
- COVID-19 previously strained trial sites and slowed NC318 Phase 2 enrollment. Further infections, site disruptions, supply-chain issues or protocol difficulties could delay trials and affect patient enrollment and safety monitoring.
- Two securities-related lawsuits are pending: a putative class action concerning statements about NC318 and the FIND-IO platform, and a shareholder derivative action. Both were stayed pending resolution of the class-action motion to dismiss. The company intends to defend them, but says potential losses cannot be estimated.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level as of June 30, 2021, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether NC318’s revised patient-selection and dosing approach yields interpretable clinical data on the stated timeline.
- Progress, safety and data timing for NC410 and NC762, and the potential effect of COVID-19 or other trial disruptions.
- The assumptions underlying the cash runway into the second half of 2023, future operating burn and any additional financing needs.
- Potential dilution if the company uses its $75 million at-the-market facility, and the status and possible costs of the pending litigation.