NextCure, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines; it has no product sales and remains dependent on external capital and collaboration funding.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $22.4 | $1.4 |
| Research and development expense | $10.6 | $6.5 |
| General and administrative expense | $3.6 | $1.7 |
| Operating income (loss) | $8.2 | $(6.8) |
| Net income (loss) | $9.7 | $(6.2) |
| Basic / diluted EPS | $0.35 / $0.33 | $(4.46) / $(4.46) |
| Cash used in operating activities | $10.6 | $7.1 |
The reported profit primarily reflects recognition of $22.4 million of deferred revenue when Lilly terminated its collaboration agreement; it is not product revenue and should not be viewed as a recurring earnings result. The filing does not present a meaningful product gross margin. Operating expenses rose by $6.0 million year over year, reflecting increased research, clinical, staffing, and public-company costs. Other income, net was $1.5 million, principally investment interest, partially offset by loan interest.
At March 31, 2020, cash and cash equivalents were $28.9 million and marketable securities were $293.2 million, or $322.1 million combined excluding restricted cash. Total current assets were $326.7 million and current liabilities were $8.2 million. Total liabilities were $11.7 million. Term-loan borrowings totaled approximately $4.7 million; the loan matures in January 2023, with principal payments underway. Cash, cash equivalents, and restricted cash totaled $33.7 million. Accumulated deficit was $71.3 million. Marketable securities had $543,000 of unrealized losses recorded in comprehensive loss; the company reported no other-than-temporary impairment.
Material changes and outlook
- Lilly terminated the multi-year research and development agreement without cause effective March 3, 2020. NextCure recognized all remaining deferred revenue, and both parties were relieved of future obligations, including Lilly’s quarterly research and development support payments.
- Management said existing cash, cash equivalents, and marketable securities should fund planned operations for at least the next 12 months. It also expects substantial future spending and says additional funding will be needed; availability and terms are uncertain.
- COVID-19 strained clinical trial sites, raised patient-safety monitoring concerns, and slowed enrollment in the Phase 2 portion of the NC318 trial. NextCure temporarily delayed expected Phase 2 data and initiation of the NC318 combination trial and the NC410 Phase 1/2 trial.
- Management expects research and development and public-company costs to increase. The filing provides no quantified earnings or revenue guidance.
Risks, contingencies, and other matters
- Further COVID-19 effects—including site closures, enrollment disruption, supply-chain interruptions, and difficulty following trial protocols—could materially affect development timelines, operations, and financial condition.
- NextCure relies on third-party suppliers for manufacturing materials; interruption or inability to qualify alternatives could delay clinical development.
- The company expects continued operating losses and negative operating cash flows over the foreseeable future and may need to delay, reduce, or discontinue programs if additional capital is unavailable.
- Management reported effective disclosure controls as of March 31, 2020, and no material change in internal control over financial reporting during the quarter. It reported no material litigation and no material changes to contractual obligations outside the ordinary course.
Important facts for investors to verify
- That Q1 profit resulted from one-time Lilly deferred-revenue recognition, while future Lilly support payments ended.
- Whether reported cash runway assumptions remain valid given operating cash use, planned trial spending, and the need for additional financing.
- Updated enrollment, data timing, and trial-start timelines for NC318 and NC410, including continuing COVID-19 effects.
- Term-loan repayment terms and the cash-collateral requirement; the required reserve was $4.7 million at quarter end.
- Marketable-securities valuation and liquidity, including the reported unrealized loss and exposure to investment-market changes.