Quince Therapeutics, Inc. — Q2 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three and six months ended June 30, 2023; balance-sheet comparisons are with December 31, 2022. Quince is a preclinical-stage biopharmaceutical company with no approved products or product revenue. After selling its legacy protease-inhibitor portfolio and deciding to stop internal development of NOV004, it planned to seek a partner for NOV004 and pursue clinical-stage assets for rare and debilitating diseases. The July 2023 EryDel agreement was a subsequent event and was not a completed acquisition at quarter-end.
Financial performance, liquidity and capital
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $1.4 million | $7.2 million | $4.6 million | $20.0 million |
| General and administrative expense | $4.2 million | $9.1 million | $8.1 million | $18.1 million |
| Net loss | $4.9 million | $16.6 million | $17.1 million | $38.2 million |
| Basic and diluted loss per share | $0.14 | $0.51 | $0.48 | $1.22 |
For the six months, operating cash outflow was $7.4 million, investing cash outflow was $14.8 million, and financing cash inflow was $0.1 million. Cash and cash equivalents fell to $22.7 million from $44.6 million at year-end; short-term investments rose to $64.9 million from $45.6 million. Together, cash, cash equivalents and short-term investments were $87.6 million at June 30. Total assets were $88.8 million, current liabilities $2.0 million, total liabilities $2.0 million, and stockholders’ equity $86.9 million. The filing reports no debt outstanding at quarter-end; it reports lease liabilities among accrued current liabilities.
No gross or operating margins are meaningful because the company reported no revenue. Accumulated deficit was $305.4 million. Interest income was $0.8 million for Q2 and $1.5 million for the six-month period, up from $0.1 million and $0.2 million, respectively, in 2022, primarily due to higher investment yields.
Material changes versus the prior period
- Q2 research and development expense declined 81% and general and administrative expense declined 53% year over year, reflecting reduced pipeline activity, lower headcount, and lower stock-based compensation and other costs.
- Six-month operating expenses included a $5.9 million non-cash impairment charge that fully wrote off the NOV004 in-process research and development asset after Quince discontinued internal development and shifted to out-licensing.
- Quince reduced its workforce by approximately 47%; the reduction was completed in April 2023. The company estimated approximately $0.4 million of restructuring expense, substantially all cash severance. It paid $0.3 million of severance during the first half.
- In January 2023, Quince sold its legacy portfolio to Lighthouse Pharmaceuticals for 7.5% of Lighthouse’s outstanding common stock, with potential milestones of up to $150 million plus royalties or sublicense income under specified terms. The contingent payments are not guaranteed.
Outlook, risks and unusual items
Management said available cash, cash equivalents and investments should fund planned operations for at least 12 months. Separately, the MD&A stated that, under its current business plan, resources could support anticipated development of EryDel’s lead asset through potential FDA NDA submission, assuming positive clinical results, into at least 2026. That longer-term estimate depends on the proposed acquisition closing and other assumptions, and excludes costs of additional asset acquisitions. Management warned that spending could exceed estimates and that additional capital may be needed; unavailable or unacceptable financing could force delays, reductions or discontinuation of programs.
On July 21, 2023, Quince agreed to acquire EryDel, whose lead asset EryDex is in Phase 3 development for ataxia-telangiectasia. The proposed consideration includes up to 7.25 million Quince shares and up to $485 million in contingent cash payments. Quince would also assume EryDel’s approximately $13 million European Investment Bank loan, with scheduled payments beginning in the second half of 2026. Closing remained subject to conditions and regulatory approvals.
Other notable risks include the uncertain success of the EryDel transaction and integration, clinical and regulatory failure, difficulty finding partners for NOV004 or new assets, future financing and dilution, and the limited liquidity or uncertain value of the Lighthouse shares. Quince adopted a stockholder rights plan expiring April 5, 2024 unless earlier redeemed or exchanged. The company reported effective disclosure controls and no material legal proceedings.
Important facts for investors to verify
- Whether and when the EryDel acquisition closed, its final share issuance and contingent payment terms, and the assumed loan obligations.
- Whether clinical progress and funding needs support management’s conditional runway estimate through at least 2026.
- Whether Quince secures a partner for NOV004 and whether the Lighthouse equity, milestone and royalty interests generate realizable value.
- Current cash burn, future financing plans, potential dilution, and the effect of any additional asset acquisition on liquidity.