Nurix Therapeutics, Inc. — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended August 31, 2022, and the nine months then ended—not 2021 Q3. It was signed October 6, 2022. Unless stated otherwise, financial amounts below are in millions of dollars.
Business context and reporting period
Nurix is a clinical-stage biopharmaceutical company developing therapies based on targeted protein modulation. Its four wholly owned clinical-stage candidates—NX-2127, NX-5948, NX-1607 and DeTIL-0255—were in Phase 1 trials, with enrollment ongoing. The company had no approved products and no product-sales revenue; reported revenue came from collaborations, principally with Gilead and Sanofi.
Financial results and liquidity
| Metric | Three months ended Aug. 31, 2022 | Nine months ended Aug. 31, 2022 | Comparable 2021 period |
|---|---|---|---|
| Collaboration revenue | $10.8 | $31.8 | $10.3 quarter; $22.4 nine months |
| Research and development expense | $47.8 | $138.4 | $30.9 quarter; $79.9 nine months |
| General and administrative expense | $9.7 | $28.6 | $8.3 quarter; $22.4 nine months |
| Net loss | $45.7 | $133.6 | $28.8 quarter; $79.5 nine months |
| Basic and diluted loss per share | $0.90 | $2.85 | $0.65 quarter; $1.88 nine months |
| Net cash used in operating activities | Not separately presented | $121.9 | $53.5 nine months |
Operating loss was $46.7 million for the quarter and $135.2 million for the nine-month period. Product margins are not applicable because Nurix had no product sales. Interest and other income was $1.0 million for the quarter and $1.5 million for the nine months.
At August 31, 2022, cash and cash equivalents were $47.6 million and marketable securities were $366.0 million, totaling $413.6 million in cash, cash equivalents and marketable securities. Total assets were $459.3 million, total liabilities $116.8 million, and stockholders’ equity $342.5 million. The filing reports no borrowings or interest-bearing debt; lease liabilities totaled $13.2 million. Deferred revenue was $77.9 million. Management said available funds were expected to support operations for at least 12 months after issuance of the financial statements.
Cash, cash equivalents and restricted cash declined by $32.3 million during the nine months. Investing activities used $27.8 million, including $9.7 million for property and equipment, while financing activities provided $117.3 million. Unrealized losses on available-for-sale securities were $3.1 million for the nine months and were reported as non-credit-related.
Material changes versus the prior comparable period
- Nine-month collaboration revenue increased $9.5 million, while R&D expense rose $58.5 million and G&A expense rose $6.2 million. The nine-month net loss widened by $54.2 million.
- Management attributed higher R&D spending primarily to increased headcount and stock compensation, expanded discovery and preclinical work, and the ramp-up of clinical trials, enrollment and manufacturing.
- Operating cash use increased to $121.9 million from $53.5 million, partly reflecting the lower deferred-revenue balance as collaboration obligations were performed.
- Nurix raised approximately $94.8 million net through July registered direct offerings of pre-funded warrants and approximately $19.3 million net through its June ATM stock sale. The warrants cover 6.8 million shares, are immediately exercisable for $0.001 per share, and all remained outstanding at August 31.
- Marketable securities increased to $366.0 million from $352.4 million at November 30, 2021, while cash and cash equivalents fell to $47.6 million from $80.5 million. Property and equipment, net, rose to $16.5 million from $11.3 million.
Outlook, commentary, risks and unusual items
- Management expects continued losses and substantial expense growth as clinical development, research, manufacturing and infrastructure expand. It expects no product revenue unless candidates are successfully developed and approved, which could take years, if ever.
- Gilead collaboration revenue was $7.2 million for the quarter and $19.5 million for the nine months; Sanofi revenue was $3.6 million and $12.4 million, respectively. Nurix recognized a $2.5 million Gilead research milestone in August and anticipated payment in fiscal Q4 2022. Potential future milestone payments and royalties under both collaborations are contingent, not assured revenue.
- Sanofi’s July 2022 target substitutions extended research terms and increased forecast costs; the filing says the revenue-recognition effect was immaterial. Amendments to the Gilead agreement and other Sanofi amendments did not materially affect revenue recognition.
- Key risks include early-stage clinical uncertainty, potential safety issues, patient enrollment, reliance on single-source manufacturers and other third parties, competition, intellectual-property disputes, and access to future capital. The company cited COVID-19 and financial-market volatility as possible disruptors, though COVID-19 had not materially affected the reported financial statements.
- Nurix disclosed a material weakness in internal controls involving IT general controls and segregation of duties over account reconciliations and manual journal entries. Disclosure controls were therefore deemed ineffective as of August 31, 2022. The weakness had not been remediated; management reported no resulting financial-statement misstatement and described remediation as ongoing.
- A new Texas laboratory lease is expected to commence in fiscal 2023, with rent initially about $154,000 per month for the first year and approximately $205,000 per month thereafter, increasing 3% annually. The lease extends to 2035.
- The company reported no material legal proceedings. It is challenging proposed California tax audit assessments; the filing does not quantify a material recorded liability for the disputed sourcing position.
Important facts for investors to verify
- Confirm the filing period: the document covers Q3 2022, despite the request metadata saying 2021 Q3.
- Track clinical-trial enrollment, safety and efficacy updates for all four Phase 1 candidates; early-stage results may not predict later outcomes.
- Monitor operating cash use and the duration of the $413.6 million liquidity balance against management’s stated 12-month runway, particularly as R&D spending rises.
- Assess dilution from the 6.8 million pre-funded warrants, the remaining $130.0 million ATM capacity, stock-based compensation and other reserved shares.
- Verify collaboration milestone timing, cash collection and partner progress; stated multibillion-dollar milestone opportunities are contingent.
- Follow remediation and testing of the material weakness in financial controls, and review future disclosures for any changes in control effectiveness.