Exicure, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports unaudited fourth-quarter results; it is an annual report, not a standalone quarterly filing. Amounts below are in U.S. dollars.
Business context
Exicure is a clinical-stage biotechnology company developing therapeutics based on its spherical nucleic acid (SNA) platform. It has no approved products and has not generated product sales. Its principal clinical program is cavrotolimod (AST-008), in a Phase 1b/2 cancer trial; XCUR-FXN for Friedreich’s ataxia was in IND-enabling studies.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue, all collaboration | $16.6 million | $1.3 million |
| Research and development expense | $32.1 million | $19.3 million |
| General and administrative expense | $10.0 million | $8.6 million |
| Operating loss | $25.4 million | $26.6 million |
| Net loss | $24.7 million | $26.3 million |
| Basic and diluted loss per share | $0.28 | $0.46 |
| Net cash used in operating activities | $39.3 million | Net cash provided: $1.3 million |
Fourth-quarter 2020 revenue was $140,000, versus $310,000 in Q4 2019; net loss was $12.7 million, versus $10.0 million. Q4 revenue was limited partly because updated estimates of remaining AbbVie research hours reduced recognized progress in the quarter.
FY2020 collaboration revenue was primarily recognized from the $25 million AbbVie upfront payment received in 2019, rather than from product sales or equivalent new cash receipts. The company reported $83.3 million of cash, cash equivalents, short-term investments and restricted cash at year-end ($33.3 million cash and equivalents, $48.8 million short-term investments, and $1.2 million restricted cash). Current assets were $86.3 million and current liabilities $13.7 million.
Year-end MidCap debt was $17.5 million principal, reported at a net carrying value of $16.6 million. Stockholders’ equity was $61.5 million. The company reported no income tax provision. No operating margin is presented; the company remains loss-making and has no product revenue.
Material changes versus FY2019
- Revenue rose by $15.3 million, largely as the AbbVie upfront payment was recognized over time; AbbVie revenue was $16.5 million in 2020 versus $171,000 in 2019.
- R&D expense increased 66% to $32.1 million, reflecting increased staffing, platform work and clinical-development activity. R&D headcount rose from 29 to 54.
- Operating loss narrowed to $25.4 million from $26.6 million, but operating cash flow shifted from a $1.3 million inflow to a $39.3 million outflow. The prior-year inflow included the $25 million AbbVie upfront receipt.
- Cash, cash equivalents and restricted cash declined by $14.0 million; short-term investments declined to $48.8 million from $62.3 million.
- The company borrowed $17.5 million under a new secured MidCap facility and repaid its remaining $5.0 million Hercules principal. It also began occupying its approximately 30,000-square-foot Chicago headquarters and laboratory under a 10-year lease.
Outlook, risks and unusual items
- Management expected year-end 2020 working capital, including amounts borrowed and available under the MidCap facility, to fund operations for at least 12 months from the March 11, 2021 report date. A further $7.5 million MidCap tranche was available during April–September 2021 subject to conditions. Additional funding may be required; financing availability and terms are uncertain.
- COVID-19-related enrollment and site-startup delays shifted expected cavrotolimod overall response rate results from year-end 2021 to the first half of 2022. As of February 23, 2021, 16 Phase 2 sites were open, seven were pending activation, and 16 Phase 2 patients had received the 32 mg dose.
- In the Phase 1b/2 trial, one of 36 patients treated at any dose had a treatment-related serious adverse event: resolved hypotension and flu-like symptoms in a Phase 2 patient dosed at 32 mg. Phase 1b results were preliminary and from a small, open-label study.
- Management expected to initiate a first-in-patient Phase 1b trial of XCUR-FXN in 2022. The FDA granted cavrotolimod Fast Track designations for MCC and CSCC programs in January 2021; the company reported an MCC Orphan Drug Designation in March 2021.
- AbbVie may exercise options for two hair-loss programs; potential option, milestone and royalty payments are contingent and were not recognized as revenue. The filing states no collaboration milestone or royalty revenue had been recognized to date.
- MidCap debt bears a floating rate, is secured by substantially all assets except intellectual property, and includes restrictive covenants, prepayment fees and a 3.75% exit fee. The company also had a $50 million at-the-market offering authorization; no shares had been sold under it by December 31, 2020.
- Key risks include clinical and regulatory failure, continued losses, financing and dilution risk, COVID-19 disruption, reliance on third-party manufacturing and trial providers, competition, and intellectual-property protection. The auditor issued an unqualified opinion on the financial statements; management assessed disclosure controls and internal control over financial reporting as effective. The auditor did not attest to internal control.
Important facts for investors to verify
- Confirm the cash runway assumptions, MidCap tranche availability and covenant compliance, and any subsequent equity or debt financing.
- Track cavrotolimod enrollment, response data, safety findings and whether the first-half 2022 reporting timeline remains achievable.
- Assess the quality and timing of AbbVie collaboration work and distinguish recognized deferred upfront revenue from new cash receipts and contingent payments.
- Reconcile an apparent filing inconsistency: the balance sheet reports accumulated deficit of $106.0 million at December 31, 2020, while narrative sections state $124.8 million.
- Verify the treatment and impact of the Q4 2020 change in estimated AbbVie research hours on revenue recognition and future collaboration revenue.