REGENXBIO Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. REGENXBIO is a clinical-stage gene-therapy biotechnology company; it has no commercial product of its own. Its revenue comes primarily from licensing and royalties, especially royalties on Novartis’s Zolgensma.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $22.2 million | $18.9 million; up $3.3 million (18%), mainly higher Zolgensma royalties |
| Operating expenses | $93.7 million | $62.9 million |
| Operating loss | $71.5 million | $44.0 million |
| Net loss | $76.7 million; $1.79 per share | $50.1 million; $1.20 per share |
| Operating cash flow | $(55.9) million | $(44.0) million |
| Cash, cash equivalents and marketable securities | $764.8 million at March 31 | $849.3 million at December 31, 2021 |
Cost of revenues was $15.7 million versus $4.9 million. Reported revenue less cost of revenues was $6.5 million, compared with $14.0 million in Q1 2021; the 2022 figure includes a $9.2 million non-recurring Penn-related charge. Research and development expense rose to $55.6 million from $39.7 million, while general and administrative expense rose to $22.3 million from $17.8 million.
Cash and cash equivalents were $191.9 million and marketable securities were $572.9 million. Investing cash outflow was $90.6 million, primarily reflecting purchases of marketable securities and $11.0 million of property and equipment. Financing cash outflow was $6.8 million, including $7.5 million of net royalty-liability repayments. The filing reports no conventional borrowings; the liability from sale of future royalties was $163.9 million, and operating lease liabilities totaled $87.7 million. Management said available cash and securities should fund operations and commitments for at least 12 months from the report date.
Material changes and notable items
- Zolgensma royalties increased to $21.5 million from $18.3 million. Novartis reported Q1 2022 Zolgensma sales 14% higher year over year.
- Operating expenses increased by $30.8 million overall. R&D growth reflected clinical-trial, personnel, manufacturing, facility and platform costs; AbbVie reimbursed $2.9 million of collaboration costs during the quarter.
- The March 2022 Penn letter agreement settled current and future sublicense-fee obligations for $20.0 million. REGENXBIO recorded a $9.2 million cost-of-revenues charge; $17.4 million was recorded as payable at quarter-end, net of discount.
- Available-for-sale securities had $11.1 million of unrealized losses at March 31, contributing to comprehensive loss of $86.1 million. The company said it intended and was able to hold the securities until recovery and recorded no credit-loss allowance on them.
- The filing corrected the presentation of Q1 2021 royalty-sale payments between operating and financing cash flows. The company judged the prior-period presentation error immaterial; it did not affect previously reported balance sheets or results of operations.
Outlook, risks and contingencies
- Management expects continued losses and operating cash outflows for the foreseeable future, with R&D and G&A expected to increase. It says additional capital will be needed over time; future financing may not be available on acceptable terms.
- RGX-314 pivotal wet-AMD trials ATMOSPHERE and ASCENT were enrolling; the company expected them to support a BLA submission in 2024. It expected enrollment in the AAVIATE wet-AMD trial to finish in the first half of 2022.
- First-patient dosing in the RGX-202 AFFINITY DUCHENNE trial was delayed after an unexpected observation during final-stage manufacturing by a third-party manufacturer. The company anticipated first dosing in the first half of 2023.
- The company’s business depends on uncertain clinical, regulatory and commercial outcomes and on partners and licensees. Revenue is concentrated among a small number of licensees and licenses may be terminated. The $1.58 billion of potential unachieved license milestones is contingent, and some or all may never be received.
- Future Zolgensma royalties are pledged to HCR up to contractual caps; the company estimated remaining amounts payable at $194.2 million if paid by November 7, 2024, or $234.2 million if paid after that date. The estimated effective interest rate was 14.8%.
- Abeona settlement receivables totaled $8.9 million gross, with a $3.9 million allowance against the non-current receivable. The company reported no pending legal actions it believed would likely have a material adverse effect. It said risk factors were materially unchanged from its 2021 Form 10-K.
- COVID-19 could affect trials, manufacturing and partners, although the company said Q1 2022 results were not significantly affected. Management cautioned that future impacts remain uncertain.
Important facts for investors to verify
- Whether RGX-314 trial progress and the anticipated 2024 BLA-supporting timeline remain achievable.
- Whether the manufacturing issue delaying RGX-202 dosing is resolved and whether first dosing occurs on the stated timetable.
- How Zolgensma sales, royalties and the HCR royalty commitment evolve, given revenue concentration and the pledged royalty stream.
- Whether spending and cash burn remain consistent with management’s stated minimum 12-month liquidity horizon and longer-term financing needs.
- Whether the Penn settlement payments, Abeona receivables and associated credit assumptions are realized as expected.