Quince Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statements are unaudited. The company is a development-stage biotechnology company with no approved products and no product revenue.
Business context and strategic changes
Before the period-end, Quince had prioritized acquiring or in-licensing clinical-stage assets and planned to out-license its bone-targeting platform and NOV004. It had also sold its legacy protease-inhibitor portfolio to Lighthouse. On October 20, 2023, after quarter-end, Quince completed its acquisition of EryDel, shifting its focus to EryDex for Ataxia-Telangiectasia (A-T).
Financial performance and position
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Operating expenses | $6.1 million for Q3; $24.7 million for nine months | $7.6 million for Q3 2022; $45.7 million for nine months 2022 |
| Net loss | $5.4 million for Q3; $22.5 million for nine months | $7.9 million for Q3 2022; $46.1 million for nine months 2022 |
| Net loss per share | $0.15 for Q3; $0.63 for nine months | $0.22 for Q3 2022; $1.41 for nine months 2022 |
| Cash, cash equivalents and short-term investments | $83.2 million | $90.2 million at December 31, 2022 |
| Operating cash used | $12.2 million for nine months | $38.2 million for nine months 2022 |
| Total assets / liabilities | $85.4 million / $2.3 million | $103.9 million / $3.3 million at December 31, 2022 |
Quince reported no product revenue, so product margins are not applicable. The filing reports no material borrowings on the September 30 balance sheet; it does disclose a debt facility entered into with the subsequent EryDel acquisition.
Changes versus prior comparable periods
- Nine-month net loss narrowed by about 51% year over year, while operating cash use fell by about $26.0 million.
- Research and development expense declined 73% to $6.0 million for nine months, largely reflecting discontinued or wound-down legacy programs and lower personnel costs. General and administrative expense fell 43% to $12.8 million, mainly due to reduced headcount and stock-based compensation.
- Interest income increased to $2.5 million for nine months from $0.5 million, reflecting higher investment yields, partly offset by lower average balances.
- The 2023 results include a $5.9 million noncash impairment of the NOV004 in-process R&D asset. The 2022 comparison included a $0.8 million goodwill impairment.
Outlook, liquidity, risks and unusual items
- Management said the September 30 cash, cash equivalents and short-term investments were expected to fund planned operations through at least 2026, including the planned EryDex Phase 3 trial and potential NDA submission assuming positive results. This estimate excludes costs of additional acquisitions and depends on assumptions that could prove incorrect.
- Management expected the Phase 3 NEAT trial to begin enrollment in Q2 2024. The planned trial is under an FDA Special Protocol Assessment; this does not guarantee trial success or FDA approval. The filing describes a target enrollment of approximately 86 patients aged six to nine and approximately 20 patients aged 10 or older.
- Under the October 2023 EryDel acquisition, Quince issued 6.53 million shares, with up to 725,037 additional shares potentially issuable after one year. EryDel shareholders may also receive up to $485 million in milestone-based cash payments, contingent on development, regulatory and commercial achievements.
- Quince and its subsidiaries guaranteed EryDel’s European Investment Bank facility. The facility provides up to $31.8 million; approximately $10.6 million had been disbursed as of October 20, 2023. It bears 9% fixed interest and matures August 11, 2026. Quince is subject to a minimum unrestricted-cash requirement and other covenants; default could trigger payment obligations under the guarantees.
- The company reduced headcount by approximately 47%, completing the reduction in April 2023. It recorded $0.4 million of restructuring expenses and disclosed a $0.46 million ending severance accrual. Its Chief Medical Officer also departed effective September 1, 2023, under a separation agreement that included cash and equity-related benefits.
- Key risks include clinical and regulatory uncertainty, execution and integration of EryDel, access to future capital, compliance with EIB covenants, and the ability to out-license NOV004. Quince has never been profitable and expects continued losses. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether EryDex’s Phase 3 NEAT trial starts on the expected schedule, enrolls as planned, and produces results adequate to support an NDA.
- The post-acquisition cash position and cash runway, including Phase 3 costs, integration expenses, and the EIB facility’s drawdown, covenants and guarantee exposure.
- The final accounting for the EryDel acquisition, including acquired assets and liabilities, contingent consideration, and any additional shares due.
- Whether Quince secures a partner for NOV004 and what value, if any, it realizes from the Lighthouse portfolio sale and related contingent royalties or milestones.
- Whether continued operating losses, future financing needs, equity dilution, or Nasdaq listing requirements materially affect the company and shareholders.