Exicure, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Financial figures below are in U.S. dollars; statement amounts are in millions unless otherwise noted. The filing was signed July 14, 2023.
Business context and reporting period
Exicure had halted research and development and reduced its workforce by approximately 66% in 2022. During Q1 2023, it continued exploring strategic alternatives, including transactions in industries unrelated to its former biotechnology business. The company said historical-asset sales or licensing were not expected to generate significant near-term value. It had no current revenue source or committed financing.
On February 24, 2023, Exicure closed a private placement of 3.4 million shares to CBI USA for $5.44 million gross proceeds ($4.60 million net). CBI USA became the controlling stockholder, with approximately 50.4% ownership, and designated three directors.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $2.565 million |
| Operating expenses | $4.539 million | $10.302 million |
| Operating loss | $4.539 million | $7.737 million |
| Net loss | $4.407 million | $8.348 million |
| Basic and diluted loss per share | $0.70 | $2.07 |
| Cash used in operating activities | $3.318 million | $12.756 million |
Revenue fell to zero because the Ipsen and AbbVie collaboration agreements ended in December 2022; remaining deferred revenue was recognized in Q4 2022. R&D expense fell 72% to $1.981 million, reflecting suspended programs and lower headcount. General and administrative expense declined 19% to $2.558 million. The prior-year period included $0.595 million of interest expense; Exicure had repaid its MidCap debt in March 2022. No income tax provision was recorded. Profit margins are not meaningful given zero revenue and ongoing losses.
At March 31, 2023, cash and cash equivalents were $9.960 million, plus $1.200 million of restricted cash reported in noncurrent assets; cash, cash equivalents and restricted cash totaled $11.160 million for cash-flow reporting. Current assets were $11.277 million and current liabilities were $2.729 million. Total liabilities were $9.324 million, including a $6.595 million noncurrent lease liability. The company reported no outstanding long-term debt. Stockholders’ equity was $14.619 million. Operating cash use was partly offset by $4.595 million of net financing proceeds, primarily from the February private placement.
Common shares outstanding increased from 4.966 million at December 31, 2022 to 8.371 million at March 31, 2023 due primarily to the PIPE. The filing reports 8,648,307 shares outstanding as of July 10, 2023.
Material changes, outlook and risks
- Going concern and funding: Management concluded that substantial doubt exists about the company’s ability to continue as a going concern. It estimated existing cash would fund operations into Q4 2023, but said the estimate could be inaccurate and additional financing was needed within months. Exicure planned to seek financing in Q3 2023 to fund operations through 2024; availability and terms were uncertain. The company warned it might need to seek bankruptcy protection if it could not raise capital, potentially leaving common stockholders with little or no value.
- Strategic alternatives: No transaction was assured, and the process could take time, require additional funding, or fail to produce value. Management said historical asset opportunities were unlikely to generate significant near-term value.
- Nasdaq listing: The company disclosed deficiencies relating to listing and governance requirements. It said it believed it met the $2.5 million stockholders’ equity requirement based on its March 31 balance sheet, but had received a May 2023 notice concerning the requirement for three independent audit committee members and was seeking a qualified director. Delisting could impair liquidity and access to capital.
- Warrants and subsequent events: A change-of-control warrant put right resulted in an $0.800 million liability at March 31; Exicure paid the warrant holder on June 23, 2023. After quarter-end, it agreed to sublease approximately 57% of its Chicago office space through June 2030, with rent payments beginning August 15, 2023. It also purchased $2 million of Cyworld Z convertible bonds in May 2023, yielding 4.5% to maturity, with specified redemption options.
- Other exposures: The filing describes a securities class action and related derivative litigation concerning alleged past statements and conduct; allegations are disputed and the company intended to seek dismissal. A CBI-designated director also made a books-and-records demand. The filing notes potential dilution from future equity financing, controlled-company governance risks, management turnover, intellectual-property and lease commitments, and market and cybersecurity risks.
- Related party: Exicure paid Alta Companies LTD $0.218 million for a consulting fee tied to the PIPE closing; a company director was Alta’s president.
Management reported disclosure controls were effective at the reasonable-assurance level as of March 31, 2023, with no material quarterly change in internal control over financial reporting. The 10-Q also notes a delinquency notice for late filing of this report, which the company said would be cured by filing.
Most important facts for investors to verify
- Whether Exicure obtained sufficient financing after the filing, on what terms, and whether its cash runway and going-concern outlook changed.
- Whether a strategic transaction was identified or completed, and the expected value, costs and impact on shareholders.
- Whether Nasdaq listing and audit committee deficiencies were cured, and whether the company remained listed.
- The status and potential financial exposure of the securities and derivative litigation.
- The liquidity, valuation and redemption terms of the $2 million Cyworld Z bond investment, alongside the company’s near-term cash needs.
- The filing presents different accumulated-deficit figures: $177.056 million on the balance sheet and $195.9 million in narrative disclosures. Investors should verify the correct amount and explanation.