PepGen Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 11, 2023. PepGen is a clinical-stage biotechnology company developing peptide-conjugated oligonucleotide therapeutics using its Enhanced Delivery Oligonucleotide (EDO) platform. It has no approved products and has generated no revenue.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $14.4 million | $10.7 million |
| General and administrative expense | $3.7 million | $3.2 million |
| Total operating expenses / operating loss | $18.0 million | $13.9 million |
| Interest income | $1.8 million | $0.01 million |
| Net loss | $16.3 million | $18.2 million |
| Net loss per share, basic and diluted | $0.69 | $18.94 |
| Cash used in operating activities | $15.4 million | $12.3 million |
| Cash and cash equivalents at quarter-end | $165.4 million | — |
- At March 31, 2023, total current assets were $168.5 million and current liabilities were $18.0 million. Accumulated deficit was $119.2 million.
- Operating cash use plus $1.2 million of capital expenditures and $0.1 million of financing inflows resulted in a $16.3 million decrease in cash, cash equivalents and restricted cash. Quarter-end total cash, cash equivalents and restricted cash was $166.9 million, including $1.5 million restricted as lease collateral.
- No borrowings are disclosed. Operating lease liabilities totaled $21.8 million, including $3.7 million current; future minimum lease payments totaled $31.0 million before $9.2 million of imputed interest.
- Gross margin is not applicable because the company reported no revenue.
Changes versus the prior comparable period
- R&D expense rose $3.7 million, primarily reflecting higher clinical-program costs, personnel and facility expenses, including rent at the new Boston headquarters. G&A expense increased $0.5 million, mainly due to personnel and facility costs.
- Interest income increased by $1.8 million as cash was held in deposits and U.S. Treasury-backed money market funds.
- Net loss narrowed by $1.9 million, despite higher operating costs, because Q1 2022 included $4.4 million of tax expense related to the transfer of intellectual property from the U.K. subsidiary to the U.S. parent. Q1 2023 recorded no income tax expense; a $3.3 million related tax liability remained accrued at quarter-end, including a $0.7 million uncertain tax position.
- Operating cash use increased $3.2 million year over year. The comparison is affected by different working-capital movements between periods.
Outlook, development plans and risks
- Management estimates existing cash will fund currently planned operations into early 2025. The liquidity note also states cash is expected to cover at least the next 12 months from the financial-statement filing. These are estimates subject to development costs and other uncertainties; management expects to need additional financing over time.
- PGN-EDO51 completed a Phase 1 study in healthy volunteers in Q3 2022. The company reported it was generally well tolerated at pharmacologically active doses and described delivery and exon-skipping results favorably; these findings do not establish efficacy in patients.
- Management expected to initiate CONNECT1-EDO51, an open-label Phase 2 study in DMD, in Canada in the first half of 2023, with initial data after four monthly doses anticipated in 2024. CONNECT2-EDO51, a multinational randomized, placebo-controlled Phase 2 study, was expected in the second half of 2023, subject to regulatory clearance. The company said study learnings could inform a potential accelerated or conditional approval strategy; no approval pathway is assured.
- For PGN-EDODM1, management expected to open the FREEDOM-DM1 Phase 1 study in the first half of 2023, with safety and functional or molecular data anticipated in 2024. It also described additional DMD exon-skipping programs and expected to advance one or more additional programs into IND/CTA-enabling studies in 2024.
- Management expects R&D and operating losses to increase as clinical trials, preclinical work, manufacturing, hiring and public-company costs expand. Key risks include clinical failure or delay, safety findings, regulatory uncertainty, reliance on third-party manufacturers and research providers, financing needs, competition, and early-stage intellectual-property protection.
- The Harrison office and laboratory lease runs to May 2032 after a March 2023 amendment; base rent began in May 2023. The company reported no material legal proceedings. Management concluded disclosure controls were effective as of March 31, 2023 and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Confirm current cash, quarterly cash burn and whether the stated early-2025 runway remains achievable as trial spending grows.
- Check actual initiation, enrollment and regulatory status of CONNECT1-EDO51, CONNECT2-EDO51 and FREEDOM-DM1, and compare subsequent patient data with the company’s healthy-volunteer and preclinical claims.
- Monitor safety findings, especially the reported kidney-biomarker changes and one non-life-threatening serious adverse event in the PGN-EDO51 Phase 1 study, as well as the potential for repeat-dose risks.
- Assess whether manufacturing capacity, supplier access and clinical execution can support planned studies without material delays or cost increases.
- Track the accrued U.K. tax liability and lease-related cash commitments, and note that equity financing could dilute shareholders.