PepGen Inc. 2023 Third-Quarter Form 10-Q Summary
Business context and reporting period
PepGen is a clinical-stage biotechnology company developing Enhanced Delivery Oligonucleotide (EDO) therapeutics for neuromuscular and neurologic diseases. This unaudited report covers the quarter and nine months ended September 30, 2023; it was filed November 8, 2023. The company has no approved products and has generated no revenue.
Lead programs are PGN-EDO51 for Duchenne muscular dystrophy (DMD) and PGN-EDODM1 for myotonic dystrophy type 1 (DM1). The filing describes PGN-EDO51’s Canadian Phase 2 study as cleared, with patient dosing expected in late 2023 or early 2024; it also anticipates a multinational Phase 2 study in early 2024, subject to regulatory clearance. PGN-EDODM1 received Canadian CTA clearance in September, and the FDA lifted its clinical hold in October 2023. The FDA also granted PGN-EDODM1 Orphan Drug Designation in September.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $20.5 million | $16.0 million | $51.8 million | $40.9 million |
| General and administrative expense | $4.2 million | $3.6 million | $12.1 million | $10.2 million |
| Total operating expenses | $24.8 million | $19.6 million | $64.0 million | $51.1 million |
| Net loss | $23.3 million | $18.6 million | $59.1 million | $54.2 million |
| Net loss per share, basic and diluted | $0.98 | $0.79 | $2.49 | $4.18 |
| Operating cash used | Not provided by quarter | Not provided by quarter | $49.6 million | $45.9 million |
There is no operating revenue or gross margin to report. At September 30, 2023, cash and cash equivalents were $129.5 million, compared with $181.8 million at December 31, 2022. Current assets were $133.1 million and current liabilities $21.0 million. Cash, cash equivalents and restricted cash totaled $131.1 million. The company reported $38.4 million in total liabilities, including $20.4 million of operating lease liabilities; the filing reports no borrowings.
For the first nine months, investing cash use was $2.4 million, primarily for property and equipment, and financing cash use was $0.2 million. Cash and cash equivalents declined by $52.2 million over the period. Accumulated deficit was $162.0 million.
Changes versus comparable periods
- Q3 operating expenses rose $5.2 million year over year, with R&D up $4.6 million and G&A up $0.7 million. Management attributed increases to program advancement, clinical and manufacturing activity, headcount and costs of the new Boston premises.
- Q3 net loss increased $4.7 million year over year. Higher interest income partly offset higher expenses.
- Nine-month operating expenses increased $12.9 million. R&D rose $10.9 million, driven by development spending, personnel, facilities and depreciation; G&A increased $2.0 million.
- Nine-month net loss increased $5.0 million, despite higher interest income and the absence of the $4.4 million tax expense recorded in 2022. That prior-year tax related to the transfer of intellectual property from the UK subsidiary to the parent.
- Cash used in operations increased $3.7 million year over year. The 2022 period included substantial IPO proceeds; there were no ATM share sales through September 30, 2023.
Outlook, risks and other notable items
Management stated that existing cash was expected to fund planned operations into 2025. The financial-statement liquidity note separately says cash would fund planned operations for at least 12 months from filing. These are differently framed runway disclosures and should be reconciled with later updates and actual spending. The company expects expenses and losses to continue increasing as it advances clinical and preclinical programs. It may need further equity, debt, collaboration or other financing; the filing warns that financing may be unavailable or dilutive and that development programs could be delayed, reduced or discontinued if funds are insufficient.
- Management anticipated CONNECT1-EDO51 dosing in late 2023 or early 2024 and initial proof-of-concept, safety and dystrophin/exon-skipping data in mid-2024. CONNECT2-EDO51 was anticipated to start in early 2024, subject to regulatory clearances. Initial FREEDOM-DM1 data were expected in 2024.
- A $300 million shelf registration became effective in June 2023. An August 2023 at-the-market agreement permits up to $100 million of common-stock sales, subject to a sales-agent commission of up to 3%; no shares had been sold by quarter-end.
- Key risks include clinical safety or efficacy failures, trial delays and enrollment challenges, reliance on third-party manufacturers and CROs, financing needs, competition, and intellectual-property protection. The filing notes kidney-biomarker changes and one non-life-threatening serious adverse event at the highest tested 15 mg/kg dose in the PGN-EDO51 Phase 1 trial; it also describes transient hypotension in higher-dose nonhuman-primate studies.
- The nine-year Harrison Avenue office and laboratory lease has a remaining term of 8.7 years. Future minimum lease payments were $28.8 million before $8.3 million of imputed interest.
- The company reported no material legal proceedings and no material changes in internal control over financial reporting. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Reconcile the stated cash runway into 2025 with the liquidity note’s “at least the next 12 months” statement, and monitor cash burn against clinical milestones.
- Check actual trial initiation, enrollment, dose escalation, safety findings and 2024 data timing for CONNECT1/CONNECT2 and FREEDOM-DM1, including the effect of the former FDA clinical hold.
- Track future R&D spending, quarterly operating cash use and any ATM or other financing activity, including potential dilution.
- Assess whether PGN-EDO51’s early human findings translate to repeated-dose results and meaningful dystrophin production in DMD patients, and whether PGN-EDODM1’s preclinical findings translate clinically.
- Monitor manufacturing capacity, third-party supply reliability, licensing obligations and the durability and scope of PepGen’s patent protection.