NextCure, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. NextCure is a clinical-stage biopharmaceutical company developing immunotherapies; it has no product sales and expects continued operating losses. Financial amounts below are in U.S. dollars.
Financial performance and position
- Revenue: $0, versus $22.4 million in Q1 2020. The prior-year revenue reflected recognition of deferred revenue under the Lilly collaboration, terminated in March 2020; no further support payments are payable.
- Net result: Net loss of $16.5 million, or $0.60 per basic and diluted share, versus net income of $9.7 million, or $0.35 basic and $0.33 diluted per share, in Q1 2020.
- Expenses: Research and development was $12.4 million, up $1.8 million year over year; general and administrative expense was $4.8 million, up $1.3 million. Total operating expenses were $17.2 million.
- Margins: Gross margin is not meaningful for this development-stage company with no product sales. Operating loss was $17.2 million; operating margin is not meaningful with zero revenue.
- Cash flow: Operating cash use was $13.9 million, compared with $10.6 million used in Q1 2020. Investing activities provided $17.6 million, principally from net marketable-security maturities; financing activities used $0.4 million. Cash, cash equivalents and restricted cash increased $3.3 million to $39.6 million.
- Liquidity: Cash, cash equivalents and marketable securities, excluding restricted cash, totaled $268.2 million at March 31, 2021, versus $283.4 million at December 31, 2020. Total current assets were $273.1 million and current liabilities were $8.2 million.
- Debt and equity: Term-loan borrowings totaled approximately $3.1 million, including $1.7 million current and $1.4 million long term. Stockholders’ equity was $279.2 million; accumulated deficit was $134.2 million.
Material changes versus Q1 2020
- The shift from $22.4 million of Lilly-related revenue and $9.7 million net income to no revenue and a $16.5 million net loss was the principal year-over-year change; the comparison is substantially affected by the collaboration’s termination.
- R&D expense rose 17% to $12.4 million, primarily due to personnel-related costs and advancement of NC410 and other programs. NC318 external R&D expense declined $1.5 million, partly reflecting clinical supply and trial-cost timing.
- G&A expense increased 35% to $4.8 million, primarily due to personnel-related costs. Other income declined to $0.7 million from $1.5 million, reflecting lower investment balances and interest rates.
Outlook, developments and risks
- Management expects existing cash, cash equivalents and marketable securities to fund planned operations into the second half of 2023. This estimate depends on assumptions that may prove incorrect; the company expects substantial further R&D spending and says additional funding will be needed.
- NC318: The company expected to begin pre-selecting Phase 2 patients based on tumor Siglec-15 expression in Q2 2021 after retrospective testing showed only 13% of evaluable enrolled patients had S15-positive tumors. It also planned to study NC318 with anti-PD-1 therapy in NSCLC. The company had previously decided not to advance the NSCLC and ovarian monotherapy cohorts to the second stage of the Simon two-stage trial.
- NC410: Phase 1/2 trial ongoing; management expected to announce Phase 1 data in the second half of 2021.
- NC762: FDA had cleared the IND; management intended to initiate a Phase 1/2 trial in Q2 2021.
- COVID-19 had strained trial sites and slowed NC318 Phase 2 enrollment; future effects on enrollment, trial timing, supply chains and operations remained uncertain.
- Two securities-related matters are pending: a putative class action alleging statements concerning NC318 and FIND-IO, and a shareholder derivative suit. The company intends to defend them, but said it could not estimate a reasonably possible loss or range of loss.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the NC318 patient-selection changes improve enrollment and produce interpretable efficacy data, and how the prior cohort decisions affect its development path.
- Whether the NC410 data and planned NC762 trial milestones occur on the stated timelines.
- Whether the stated cash runway remains achievable as clinical and manufacturing spending increases, and whether additional financing becomes necessary.
- How the pending litigation develops, including potential defense costs, insurance coverage and any eventual loss estimate.