NextCure, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance sheet compared with December 31, 2022. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines. It reported no product revenue and does not expect product sales revenue in the foreseeable future.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue reported |
| Research and development expense | $11.6 million | $15.0 million; down 22.5% |
| General and administrative expense | $5.4 million | $5.7 million; down $0.3 million |
| Total operating expenses / operating loss | $17.1 million | $20.8 million |
| Other income, net | $1.0 million | $0.2 million |
| Net loss | $16.1 million; $0.58 per share | $20.6 million; $0.74 per share |
| Net cash used in operating activities | $14.8 million | $15.4 million |
| Cash and cash equivalents | $30.0 million | $26.6 million at year-end 2022 |
| Marketable securities | $115.5 million | $133.3 million at year-end 2022 |
At March 31, cash, cash equivalents and marketable securities totaled approximately $145.5 million. Total assets were $167.8 million, total liabilities $13.6 million, and stockholders’ equity $154.2 million. Current liabilities were $6.3 million. The filing reports no financial borrowings; lease liabilities were $7.0 million, including current and long-term amounts. Operating margins are not meaningful given the absence of revenue.
Investing activities provided $18.1 million, primarily reflecting net sales and maturities of marketable securities, while financing activities provided no cash. Cash and cash equivalents increased $3.3 million during the quarter. The company’s accumulated deficit was $277.9 million.
Material changes and operating developments
- Net loss narrowed by $4.5 million year over year. R&D expense decreased by $3.4 million, mainly due to lower external program costs, including the discontinuation of NC318 clinical development announced in Q4 2022. Higher internal personnel costs partially offset the decrease.
- Other income increased by $0.8 million, primarily from higher interest income on investments.
- NC410 is being evaluated in clinical trials, including a Phase 1b/2 combination trial with pembrolizumab. NC762 safety expansion studies were ongoing, and the company said it intended to select a recommended Phase 2 dose. The Phase 1 NC525 trial began in February 2023.
- Shares outstanding were 27,774,536 at March 31, 2023. The company reported 27,834,911 shares outstanding as of May 1, 2023.
Outlook, risks and contingencies
- Management estimates existing cash, cash equivalents and marketable securities will fund planned operations into mid-2025. The liquidity note separately states the funds are sufficient for at least the next twelve months. Management cautions that its estimate relies on assumptions and capital could be used sooner than expected.
- The company expects continued operating losses and negative operating cash flows, with substantial spending on clinical development and research. It expects R&D expenses to increase and says additional capital will be needed. Financing may involve equity, debt, collaborations or licensing; availability on acceptable terms is not assured.
- Key risks include clinical-trial timing and outcomes, regulatory approval, manufacturing and third-party dependencies, competition, the unproven FIND-IO approach, and the need for additional financing. The company stated there were no material updates to the risk factors in its 2022 Form 10-K.
- Three legal matters remain pending: a securities class action, a related shareholder derivative action, and the Immunaccel trade-secret and related claims. The company intends to defend them and cannot estimate a reasonably possible loss or range of loss.
- Marketable securities had $99.2 million in an unrealized loss position, including $52.0 million continuously in a loss position for over twelve months. The company attributed the losses primarily to higher interest rates, considers them temporary, and said it does not intend or expect to be required to sell the securities before maturity.
- No formal revenue or earnings guidance is provided. Management reported effective disclosure controls at the reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether clinical progress and trial results for NC410, NC762 and NC525 support management’s development plans and spending assumptions.
- Whether the stated mid-2025 cash runway remains achievable as trial enrollment, costs and other cash needs evolve.
- The status and potential financial impact of the pending litigation, for which losses cannot currently be estimated.
- How marketable-security maturities, interest rates and unrealized losses affect available liquidity.
- The potential for future financing and dilution, including the unused $75 million at-the-market sales agreement.