Voyager Therapeutics, Inc. annual report, FY2018

Voyager Therapeutics, Inc. — FY 2018 Form 10-K

Reporting period: Fiscal year ended December 31, 2018. The filing was signed February 26, 2019. Quarterly figures below include the fourth quarter ended December 31, 2018. Voyager is a clinical-stage AAV gene-therapy company focused on severe neurological diseases; it had no approved products and generated no product sales.

Financial performance and liquidity

Metric	FY 2018	FY 2017
Collaboration revenue	$7.6 million	$10.1 million
Research and development expense	$64.9 million	$62.3 million
General and administrative expense	$33.8 million	$19.7 million
Operating loss	$91.1 million	$71.9 million
Net loss	$88.3 million	$70.7 million
Basic and diluted loss per share	$2.75	$2.64
Net cash used in operating activities	$15.9 million	$61.4 million

• Fourth-quarter 2018 collaboration revenue was $2.0 million, operating expenses were $25.2 million, net loss was $22.5 million and loss per share was $0.70. In fourth-quarter 2017, the corresponding figures were $6.3 million, $18.7 million, $11.8 million and $0.40.
• At year-end, cash and cash equivalents were $46.9 million and marketable securities were $109.6 million, totaling approximately $155.8 million. Working capital was $130.8 million; total assets were $177.0 million and stockholders’ equity was $46.4 million.
• Total liabilities were $130.6 million, including $113.0 million of deferred revenue. The filing does not disclose interest-bearing debt on the balance sheet.
• Operating cash use fell year over year mainly because Voyager received AbbVie’s $69.0 million upfront payment in 2018. Net cash used in investing and financing activities was not the primary source of operating liquidity; investing activities provided $26.5 million, mainly reflecting marketable-security maturities, while financing activities provided $4.7 million.
• No meaningful product gross margin or operating margin is reported; the company had no product sales. Collaboration revenue covered only a small portion of operating expenses.

Material changes and significant developments

• Net loss increased by $17.6 million year over year. R&D expense rose modestly, while G&A increased $14.1 million, including higher staffing and legal costs and $5.4 million of stock-based compensation associated with the former CEO’s retirement agreement.
• Collaboration revenue declined $2.5 million. The 2017 comparison included recognition of revenue allocated to Sanofi Genzyme’s Parkinson’s option after it declined to exercise that option. In 2018, Voyager adopted ASC 606; under the new method, reported revenue was $3.5 million lower and net loss $3.5 million greater than under the prior revenue standard. Adoption also produced a $20.0 million opening adjustment to deferred revenue and accumulated deficit.
• VY-AADC for Parkinson’s disease remained the lead clinical program. The Phase 1b trial had enrolled 15 patients; interim results reported improvements in good ON time, medication use and other measures, but were from a small, open-label trial. Voyager randomized the first patient in the placebo-surgery-controlled RESTORE-1 Phase 2 trial in December 2018.
• The FDA’s December 2018 feedback led Voyager to plan a revised RESTORE-1 target of 75–100 patients and a staggered-parallel RESTORE-2 Phase 3 trial of similar size and design. The company planned to begin RESTORE-2 enrollment in the first half of 2020, subject to development progress and regulatory requirements.
• V-TAG, Voyager’s MRI-compatible surgical delivery device, received FDA 510(k) clearance in July 2018. The company was still working on manufacturing and process development; it also planned to use the ClearPoint system in trials.

Outlook, collaborations and key risks

• Management expected existing year-end cash and securities, together with anticipated Neurocrine upfront funding and development-cost reimbursements and the AbbVie alpha-synuclein upfront payment, to fund operations and capital needs into mid-2022. This was a forward-looking estimate dependent on payments and collaboration conditions, not a year-end cash balance or guaranteed runway.
• The January 2019 Neurocrine collaboration provided for $165 million upfront, including a proposed $50 million equity purchase, plus development-cost funding and potential milestones and royalties. Its effectiveness and share issuance were subject to customary closing conditions, including antitrust clearance, which had not been satisfied when the 10-K was filed.
• The February 2019 AbbVie alpha-synuclein collaboration provided for a $65 million upfront payment and potential option, milestone and royalty payments. These post-year-end amounts were not part of FY 2018 reported cash or revenue.
• Voyager expected continued significant spending and losses and stated it might need additional financing if development, regulatory, collaboration or commercial plans require more resources. Equity financing could dilute stockholders; collaboration options and milestones are uncertain and may not be achieved.
• Key risks include failure to reproduce early VY-AADC results in controlled, larger trials; surgical delivery complications; the change to baculovirus/Sf9 manufacturing for later trials; clinical-trial enrollment and regulatory delays; reliance on contract manufacturers and delivery-device suppliers; and competition, intellectual-property, reimbursement and gene-therapy safety risks. Earlier VY-AADC studies included procedure-related hemorrhages; one Phase 1b patient had pulmonary embolism and related arrhythmia attributed by investigators to immobility during the procedure.
• The independent auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2018; the auditor did not express an opinion on internal-control effectiveness.

Most important facts for investors to verify

• Whether the Neurocrine agreement became effective and the upfront cash and equity proceeds were received, and whether the AbbVie alpha-synuclein upfront payment was collected.
• RESTORE-1 enrollment, protocol changes, safety findings and controlled 12-month primary-endpoint results; assess interim Phase 1b findings in light of the small, uncontrolled sample.
• Whether RESTORE-2 began on the anticipated timeline and whether the FDA’s requirements or trial design changed.
• Manufacturing comparability and clinical performance of baculovirus/Sf9-produced VY-AADC, plus availability of V-TAG and ClearPoint delivery systems.
• Quarterly cash burn, deferred-revenue recognition under ASC 606, collaboration funding and milestone conditions, and whether management’s mid-2022 runway assumptions remain achievable.