PepGen Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. PepGen is a clinical-stage biotechnology company developing peptide-conjugated oligonucleotide therapies using its Enhanced Delivery Oligonucleotide (EDO) platform. It had no approved products and generated no revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 or comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $10.7 million | $5.5 million |
| General and administrative expense | $3.2 million | $1.1 million |
| Operating loss | $13.9 million | $6.6 million |
| Net loss | $18.2 million | $6.6 million |
| Net loss per share, basic and diluted | $18.94 | $7.42 |
| Net cash used in operating activities | $12.3 million | $2.8 million |
| Cash and cash equivalents at period end | $118.9 million | $132.9 million at Dec. 31, 2021 |
At March 31, 2022, total current assets were $125.7 million and current liabilities were $16.1 million. The filing reports no borrowings or debt. Accumulated deficit was $52.0 million. With no revenue, operating margins are not meaningful.
Cash used in investing activities was $1.6 million, primarily for property and equipment; financing activities used $0.02 million. Cash, cash equivalents and restricted cash totaled $120.3 million, including $1.5 million of restricted cash. Accrued expenses rose to $14.2 million from $7.1 million at year-end, including a $4.3 million tax payable.
Material changes and unusual items
- Total operating expenses more than doubled year over year. R&D increased $5.2 million, reflecting higher preclinical and manufacturing costs, headcount and facility expenses. G&A increased $2.1 million, mainly from personnel, legal, accounting and consulting costs.
- Net loss included a $4.4 million income tax expense arising from the January 2022 transfer of intellectual property from the U.K. subsidiary to the U.S. parent. The tax liability included $0.7 million for an uncertain tax position.
- Cash declined $14.0 million during the quarter. Operating cash use increased substantially year over year, partly offset by working-capital changes, including higher accrued expenses.
- In May 2022, after quarter-end, PepGen completed its IPO and a partial underwriters’ option exercise, raising $122.9 million gross and approximately $110.2 million net. Preferred stock converted into common stock in connection with the IPO; this will materially change reported loss per share in future periods.
Pipeline, outlook and risks
EDO51, for Duchenne muscular dystrophy (DMD), entered a Phase 1 trial in healthy volunteers in Q2 2022 after Canadian trial authorization. Management anticipated topline data by year-end 2022. EDODM1, for myotonic dystrophy type 1, was targeted for an IND submission in the first half of 2023; EDO53 preclinical exon-skipping data were anticipated in the second half of 2022. The filing describes these timelines as expectations, not guarantees.
After including IPO proceeds, management estimated that available cash would fund currently planned operations into the first half of 2025. This estimate depends on assumptions and may change; the company expects expenses and losses to rise as it advances research and trials, hires staff, and builds public-company capabilities. It expects no product revenue for at least several years, if ever, and may need further financing.
Key risks include early-stage clinical and preclinical uncertainty; safety, efficacy, enrollment and regulatory delays; reliance on third-party manufacturers, CROs and suppliers; competition; intellectual-property and licensing risks; limited funding beyond the estimated runway; and possible COVID-19-related disruption. Preclinical studies observed transient hypotension in some non-human primates at a dose higher than the intended clinical dose. The company had no material legal proceedings at March 31, 2022. A new 31,668-square-foot lab and office lease is expected to commence in late 2022 or early 2023, with an initial monthly payment of $0.2 million.
The filing states that disclosure controls and procedures were effective as of March 31, 2022, and that there were no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether EDO51’s Phase 1 trial met the stated timetable and produced acceptable safety and pharmacology results; verify subsequent trial disclosures.
- Whether the EDODM1 and EDO53 development milestones were achieved and how program spending and timelines have evolved.
- Whether cash burn, operating expenses and the projected first-half-2025 runway remain consistent with actual results and the company’s development plans.
- The treatment and resolution of the $4.4 million U.K. tax charge and $0.7 million uncertain tax position, as well as the post-IPO OUI exit fee of approximately $1.4 million expected to be recorded in Q2 2022.
- Share-count and dilution details: the filing reports 23,631,924 shares outstanding as of June 16, 2022, while another passage gives 23,361,924 as of June 1, 2022; confirm the applicable dates and subsequent equity awards or issuances.