Exicure, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed June 6, 2024. This is an annual report, not a standalone fourth-quarter report. Financial amounts below are in U.S. dollars unless noted.
Business context and reporting period
Exicure has halted its research and development activities and is no longer pursuing its historical biotechnology programs. It is exploring strategic transactions, potentially in industries unrelated to its former business, while seeking to monetize intellectual property. The company had six full-time employees at year-end and no current source of revenue or committed financing.
Financial performance, cash flow and liquidity
| Metric | FY2023 / December 31, 2023 | FY2022 / December 31, 2022 |
|---|---|---|
| Revenue | $0 | $28.826 million |
| Operating expenses | $14.996 million | $30.657 million |
| Operating loss | $14.996 million | $1.831 million |
| Net loss | $16.914 million | $2.582 million |
| Net loss per share, basic and diluted | $2.11 | $0.56 |
| Net cash used in operating activities | $10.357 million | $35.658 million |
| Cash and cash equivalents | $0.816 million | $8.577 million |
| Total assets / total liabilities | $11.580 million / $8.549 million | $23.328 million / $8.406 million |
There was no meaningful revenue margin in FY2023 because revenue was zero. FY2022 collaboration revenue reflected recognition of deferred amounts when the AbbVie and Ipsen agreements were terminated; it did not represent new cash proceeds and will not recur. The company recorded a $2.0 million loss to fully impair its convertible notes receivable investment and a $0.920 million loss on selling scientific equipment.
Year-end current assets were $2.024 million and current liabilities were $2.510 million. Accounts payable were $1.631 million, and the company reported deferring payments amid deteriorating liquidity. Total lease liabilities were $6.665 million; the company disclosed that it was several months past due on lease payments. The MidCap loan was repaid in March 2022, and no other borrowing is reported at December 31, 2023.
Cash and cash equivalents had fallen to approximately $0.2 million by May 31, 2024. The cash-flow statement reports $2.016 million of cash, cash equivalents and restricted cash at year-end, including $1.2 million of restricted cash; this differs from unrestricted cash and cash equivalents on the balance sheet.
Material changes versus the prior comparable period
- Revenue declined 100%, from $28.826 million to zero, following the 2022 termination of the AbbVie and Ipsen collaborations.
- Research and development expense fell 93%, to $1.423 million, as programs were wound down; the company said it stopped recording R&D expense after the first quarter of 2023.
- General and administrative expense increased 16% to $12.653 million, partly because certain facilities, legal and payroll costs were reclassified from R&D, alongside executive separation costs and higher franchise taxes.
- Net loss increased to $16.914 million, including the notes-receivable impairment and equipment-sale loss. Operating cash use decreased substantially, but year-end cash fell to $0.816 million.
- The February 2023 private placement raised $5.440 million gross and approximately $4.597 million net. The company reported that proceeds were used for operations, severance, warrant payments, the notes investment and working capital.
Outlook, risks, contingencies and unusual items
- Going concern and funding: Management and the auditor identified substantial doubt about the company’s ability to continue as a going concern. The company says substantial additional financing is required in the very near term; without it, it may seek bankruptcy protection or cease operations. Equity financing could materially dilute shareholders. The financial statements do not include adjustments that might result if the company cannot continue as a going concern.
- Strategic alternatives: The company is seeking transactions with potential partners, including possible reverse mergers, share exchanges, acquisitions or investments. It gives no assurance that a transaction or financing will be found or completed, and says historical assets are not expected to generate significant value.
- Convertible notes receivable: The company invested $2.0 million in notes in May 2023 and recorded them at zero fair value at year-end. It sought redemption for approximately $2.090 million after the first anniversary; the issuer disputed the timing and asserted redemption would not be available until August 2024. Recovery is uncertain.
- Subsequent financing and licensing: In February 2024, Exicure licensed hepatitis-related patents for a one-time $0.5 million payment and modest potential royalties. It received a $0.3 million loan from an individual investor in May 2024 and a $0.7 million related-party loan from DGP in June 2024, both at 6% interest.
- Nasdaq: The company disclosed deficiencies involving bid price, stockholders’ equity, annual-meeting and filing requirements. Nasdaq staff issued a delisting determination in May 2024; Exicure appealed, with a hearing scheduled for July 9, 2024. The company also said it did not expect to meet the $2.5 million equity requirement as of March 31, 2024.
- Controls and reporting: Management concluded that disclosure controls and internal control over financial reporting were not effective at year-end, citing material weaknesses in expense classification, accounting for non-routine transactions and controls over accounting and IT processes. The company previously restated its first- and second-quarter 2023 interim statements. It was not required to obtain an auditor attestation on internal controls.
- Legal and other exposures: Securities class-action and related derivative litigation remains pending; a former employee also sued in connection with separation. The company did not quantify potential damages in the described securities cases. Northwestern University alleged a license breach, and the relevant license agreements were terminated in 2023. The Chicago office lease runs through 2030, with about 57% subleased through its expiration.
- Ownership and governance: CBI USA and DGP reported beneficial ownership of approximately 45% of outstanding shares, with DGP agreeing to sell its remaining shares to a third party by or on June 30, 2024. The company notes potential conflicts, control and governance risks.
Most important facts an investor should verify
- Current unrestricted cash, unpaid obligations and runway, and whether additional financing has been secured on what terms.
- Whether the $2.0 million notes investment is redeemed or otherwise recovered, and the status of the issuer dispute.
- The Nasdaq appeal outcome, continued trading/listing status, and compliance with bid-price, equity, meeting and filing requirements.
- Progress, costs, dilution and proposed terms of any strategic transaction; also the completion and ownership impact of DGP’s share sale.
- Developments in the securities, derivative and former-employee litigation, and the company’s ability to meet lease obligations.
- Remediation of internal-control weaknesses and the effect of the prior interim-period restatements. The filing’s MD&A also cites an accumulated deficit of $208.4 million, while the balance sheet reports accumulated deficit of $189.563 million; investors should verify the apparent discrepancy.