REGENXBIO Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Filed May 7, 2020. REGENXBIO is a clinical-stage gene-therapy biotechnology company that licenses its NAV AAV-vector platform and develops internal product candidates. It had one commercially available partner product, Zolgensma, and reported no sales of its own products.
Key financial metrics
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $17.6 | $0.9 |
| Cost of revenue | $3.4 | $0.03 |
| Revenue less cost of revenue | $14.2; approximately 80.7% of revenue | Not stated |
| Research and development | $37.0 | $25.2 |
| General and administrative | $14.8 | $11.6 |
| Operating loss | $(37.7) | $(35.9) |
| Net loss | $(40.0) | $(32.2) |
| Net loss per share, basic and diluted | $(1.08) | $(0.89) |
| Net cash used in operating activities | $(35.6) | $(29.3) |
| Cash, cash equivalents and marketable securities | $356.6 at March 31, 2020 | $399.995 at December 31, 2019 |
- Revenue growth primarily reflected $10.0 million of Zolgensma royalties and $7.2 million of license revenue from a new Ultragenyx license. Zolgensma royalty revenue was $10.0 million versus none in the prior-year quarter.
- Investment loss was $3.2 million, compared with investment income of $3.0 million. Prevail Therapeutics securities generated $12.2 million of unrealized losses and $7.1 million of realized gains during the quarter.
- Total assets were $463.9 million and total liabilities were $43.8 million at quarter-end. The filing reports no borrowings or other debt; operating lease liabilities totaled approximately $10.4 million.
- Cash and cash equivalents plus restricted cash decreased by $0.1 million during the quarter. Investing cash flow was positive $32.7 million, largely reflecting security maturities and sales; financing cash flow was positive $2.8 million, mainly from stock-option exercises and employee stock purchases.
Material changes and business developments
- Revenue increased $16.8 million year over year, while operating expenses rose $18.6 million. R&D spending increased $11.8 million, primarily due to personnel, manufacturing, laboratory, clinical-trial and regulatory costs. G&A increased $3.3 million, including higher professional-service and personnel costs.
- Operating cash use increased $6.3 million year over year. Management attributed this primarily to higher operating expenses, partly offset by Zolgensma-related royalty receipts.
- Accounts receivable was $48.9 million, including $26.9 million related to Abeona Therapeutics. In May 2020, after Abeona failed to pay an $8.0 million fee due April 1, REGENXBIO terminated the license following the cure period. Upon termination, Abeona was required to pay the $8.0 million and an additional $20.0 million fee within 15 days. These post-quarter amounts are subject to collection and should not be treated as cash received.
- Stock-based compensation was $8.0 million, up from $5.7 million. The company had $82.4 million of unrecognized stock-based compensation expected to be recognized over a weighted-average 2.9 years.
Outlook, management commentary and risks
- Management said the $356.6 million in cash, cash equivalents and marketable securities was expected to fund operations and capital needs for at least 12 months from the filing date, based on the current business plan. The company expected continued losses for at least several years and anticipated rising R&D, G&A and capital expenditures, including construction of its Rockville headquarters and manufacturing capacity.
- RGX-314: Management planned a pivotal program for subretinal delivery in wet AMD in the second half of 2020; it also planned suprachoroidal Phase II studies for wet AMD and diabetic retinopathy. Interim data for the wet AMD study were expected by year-end 2020. As of April 6, all 42 Phase I/IIa participants had been dosed; the company reported no drug-related serious adverse events and described encouraging results in certain cohorts.
- Other anticipated milestones included additional RGX-121 data and completion of second-cohort enrollment, an RGX-501 update, RGX-111 program updates, and an RGX-181 IND submission. These were plans and expectations, not assured outcomes.
- COVID-19 had not significantly affected Q1 results, but management warned it could delay trials, enrollment, site activity, supply, regulatory reviews and construction, and could affect licensee operations and revenue. The ultimate effect was uncertain.
- License revenue is concentrated among a limited number of licensees; milestone and royalty receipts depend on partners’ development and commercial success, and licenses may be terminable. The company cited clinical, regulatory, manufacturing, intellectual-property, financing and commercialization risks.
- The filing states that there were no material changes in contractual obligations from the 2019 Form 10-K, no off-balance-sheet arrangements, and no pending legal actions believed likely to have a material adverse effect. Disclosure controls were assessed as effective; the new ERP system was implemented during the quarter.
Important facts for investors to verify
- Whether Abeona paid the $8.0 million and $20.0 million termination-related fees, and the collectability and accounting treatment of the $26.9 million receivable.
- Subsequent Zolgensma sales and royalty receipts, and progress toward the $80.0 million milestone tied to $1.0 billion in cumulative sales.
- Clinical-trial execution, safety and efficacy results, regulatory timelines, and any COVID-19-related delays or added costs.
- Cash burn, construction and manufacturing-capacity spending, and whether liquidity remains sufficient as programs advance.
- Volatility in the Prevail equity investment and the resulting effect on reported investment income or loss.