Exicure, Inc. — Q2 2021 Form 10-Q
Quarter ended June 30, 2021; filed August 12, 2021. Exicure is a clinical-stage biotechnology company developing spherical nucleic acid (SNA) therapeutics. Its lead programs included cavrotolimod (AST-008), in a Phase 1b/2 solid-tumor trial, and preclinical XCUR-FXN for Friedreich’s ataxia. The company had no approved products or product sales.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.079 million | $4.847 million | $1.076 million | $14.030 million |
| Research and development expense | $10.843 million | $7.008 million | $21.105 million | $13.083 million |
| General and administrative expense | $3.098 million | $2.229 million | $5.990 million | $4.803 million |
| Operating loss | $13.862 million | $4.390 million | $26.019 million | $3.856 million |
| Net loss | $14.269 million | $4.311 million | $26.746 million | $3.161 million |
| Loss per share | $0.16 | $0.05 | $0.30 | $0.04 |
Gross margin was not separately reported. Revenue was almost entirely collaboration revenue, principally from AbbVie. Exicure attributed the decline to an increase in estimated hours required to complete AbbVie services, which reduced measured progress and revenue recognized; the estimate could be revised again. Deferred AbbVie revenue was $7.267 million at June 30, expected to be recognized over the next 12 months as services are performed.
Six-month operating cash outflow was $25.885 million, versus $18.814 million a year earlier. Investing activities provided $34.533 million, largely reflecting maturities and sales of investments; financing activities provided $0.677 million. Cash, cash equivalents and restricted cash were $43.787 million at June 30. Including $13.472 million of short-term investments, liquidity was approximately $57.3 million.
At June 30, total assets were $74.467 million, total liabilities $37.827 million and stockholders’ equity $36.640 million. Long-term debt had a $17.5 million principal balance and $16.730 million carrying value; no principal was classified current. The secured MidCap facility permits an additional $7.5 million borrowing through September 30, 2021, subject to conditions. The Chicago operating lease liability totaled $8.116 million.
Material changes and developments
- Six-month revenue fell 92% year over year; operating expenses rose 51%, including a 61% increase in R&D. Management cited increased development activity, clinical-trial and XCUR-FXN manufacturing costs, and higher headcount. R&D staff increased from 41 to 66 year over year.
- On July 30, 2021, Exicure entered into an Ipsen collaboration covering Huntington’s disease and Angelman syndrome programs. The agreement provides a $20 million upfront payment, received in August, plus potential option fees, milestones and royalties. The filing’s liquidity assessment includes this subsequent payment.
- Common shares outstanding were 88,096,694 at June 30. There were no warrants outstanding; 413,320 warrants expired unexercised during the first half.
Outlook, commentary and key risks
- Management expected available working capital, including the Ipsen upfront payment and available MidCap borrowing, to fund current plans for at least 12 months from the report date. This is based on assumptions; further financing may be needed and is not assured. Equity financing could dilute holders.
- Management expected R&D expense to increase during 2021. It expected to complete XCUR-FXN GLP toxicology and file an IND in Q4 2021, with a first-in-patient Phase 1b trial targeted for H1 2022.
- For cavrotolimod, management expected to report overall response rate results in H1 2022, subject to enrollment and pandemic-related delays. As of August 4, 21 trial sites were open and eight were pending activation. Interim results included a complete response in one evaluable Phase 2 Merkel cell carcinoma patient, meeting the cohort’s threshold to continue enrollment; the data remain early and based on small patient numbers.
- Two of 51 patients treated at any dose through August 4 had serious adverse events assessed as related to cavrotolimod by investigators. Risks include clinical failure or delay, patient enrollment constraints, COVID-19 disruption, reliance on third-party manufacturers and CROs, uncertain regulatory pathways for a novel modality, and continuing losses and financing needs.
- The MidCap debt is secured by substantially all assets other than intellectual property, which is subject to a negative pledge; the agreement has restrictive covenants and default provisions. The filing reported no material legal proceedings and no off-balance-sheet arrangements.
- Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Reconcile the filing’s accumulated-deficit figures: the balance sheet reports $132.711 million at June 30, while notes and MD&A state approximately $151.5 million since inception.
- Track AbbVie service-hour estimates and the timing and recognition of the remaining $7.267 million deferred revenue.
- Confirm receipt and use of the Ipsen upfront payment, the amount and availability of the MidCap second tranche, and the runway assumptions underlying management’s 12-month liquidity statement.
- Monitor XCUR-FXN IND-enabling milestones and trial initiation, and cavrotolimod enrollment, safety, response durability and the timing of H1 2022 results.
- Assess the pace of cash burn, rising R&D costs, potential dilution from future financing, and debt and lease obligations.