REGENXBIO Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020; unaudited. REGENXBIO is a clinical-stage gene therapy company that develops products using its NAV AAV-vector platform and licenses the platform to third parties. Its only commercially approved partnered product was Zolgensma.
Financial performance
Amounts below are in millions of dollars, except per-share data. Margins are calculated from reported figures.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $98.9 | $14.7 | $133.1 | $23.5 |
| Gross profit / margin | $81.5 / 82.4% | $12.2 / 83.0% | $107.7 / 80.9% | $19.0 / 81.0% |
| Operating income (loss) | $14.0 | $(35.9) | $(65.6) | $(108.7) |
| Net income (loss) | $8.8 | $(34.6) | $(65.0) | $(68.3) |
| Net income (loss) per diluted share | $0.23 | $(0.94) | $(1.75) | $(1.86) |
- Q3 revenue included an $80.0 million Zolgensma sales milestone after cumulative sales reached $1.0 billion, plus $18.8 million of Zolgensma royalties. The milestone was paid in October 2020; no further development or sales-based milestones remain under that AveXis license.
- Q3 R&D expense was $44.0 million, up from $35.7 million; G&A was $15.9 million, up from $12.4 million. Nine-month R&D and G&A were $119.1 million and $46.2 million, respectively.
- Q3 investment loss was $6.6 million, mainly reflecting losses on Prevail Therapeutics equity securities. Nine-month investment loss was $4.1 million, compared with $38.0 million income in 2019, which included a substantial Prevail valuation gain.
Cash, liquidity and balance sheet
- At September 30, cash and cash equivalents were $93.2 million and marketable securities were $196.6 million, totaling $289.8 million. Management said this was sufficient to fund operations for at least 12 months from issuance of the statements.
- Nine-month operating cash use was $93.5 million, versus $82.2 million in 2019. Investing activities provided $111.2 million and financing activities provided $6.0 million. Operating cash use included an $89.4 million increase in receivables, largely reflecting Zolgensma royalties and the unpaid milestone recorded at quarter-end.
- Total liabilities were $125.5 million, including $61.0 million of operating lease liabilities. The filing reports no material changes in contractual obligations and no off-balance-sheet arrangements; it does not identify borrowings as a material liability.
- Accumulated deficit was $242.8 million. The company expects continued losses and higher R&D, G&A and capital spending; it says additional capital will be needed to achieve its objectives.
Material changes, outlook and risks
- Revenue rose sharply year over year, principally because of the one-time $80.0 million Zolgensma milestone and higher royalties. Zolgensma royalties were $40.7 million for the first nine months, versus $10.1 million in 2019. License revenue is concentrated among a small number of partners and depends on their development and commercial success.
- REGENXBIO recorded a $7.7 million credit-loss provision against $30.1 million due from Abeona. Abeona had not paid the $28.0 million in license fees or related interest as of October 30, 2020. The parties are in arbitration, scheduled for March 2021; the company seeks full payment but acknowledges collection, timing and outcome are uncertain.
- Management’s stated development expectations included initiating a pivotal subretinal RGX-314 wet AMD program in Q1 2021; reporting initial safety data from the AAVIATE trial in early 2021; and advancing RGX-121, RGX-111, RGX-181 and RGX-381 trials or IND filings on the timelines described in the filing. These are plans, not guarantees.
- The new 9804 Medical Center Drive facility lease commenced in September 2020. Remaining buildout capital expenditures, net of landlord allowance, were estimated in the upper double-digit millions through 2022. COVID-19 had not significantly affected reported-period results, but management warned it could delay trials, operations and construction. The company also expects continuing operating losses and may need financing, which may not be available on acceptable terms.
Key facts for investors to verify
- Collection of the Abeona receivable and outcome and timing of arbitration.
- Post-quarter receipt of the $80.0 million AveXis milestone and subsequent Zolgensma royalty trends.
- Clinical-trial enrollment, data and regulatory milestones against management’s stated timelines.
- Cash burn, construction spending and the assumptions underlying the stated 12-month liquidity outlook.
- COVID-19 effects on trials, partners, manufacturing and facility construction.