Voyager Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. Voyager is a clinical-stage gene therapy company focused on severe neurological diseases. It had no approved products and generated no product sales; revenue was from collaborations.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $46.1 million | $2.6 million | $51.3 million | $3.5 million |
| Research and development expense | $28.6 million | $16.5 million | $53.4 million | $31.4 million |
| General and administrative expense | $8.3 million | $11.8 million | $18.0 million | $18.9 million |
| Net income (loss) | $11.2 million | $(25.5) million | $(16.0) million | $(45.5) million |
| Basic earnings (loss) per share | $0.30 | $(0.80) | $(0.46) | $(1.43) |
- Q2 operating income was $9.2 million, versus an operating loss of $25.7 million a year earlier; first-half operating loss was $20.1 million, versus $46.8 million.
- Revenue and Q2 profit were materially affected by the Sanofi Genzyme collaboration termination: Voyager recognized $28.7 million of previously deferred revenue at termination, in addition to collaboration services revenue. The resulting recognition is not a reliable indicator of recurring operating profitability.
- At June 30, cash and cash equivalents were $79.9 million and marketable securities were $248.9 million, totaling $328.8 million including equity securities; cash, cash equivalents and marketable debt securities were reported as $327.5 million. Current assets were $340.8 million and current liabilities $69.1 million.
- Six-month operating cash flow was positive $93.6 million, primarily because deferred revenue increased $106.1 million, rather than from operating profits. Investing cash outflow was $139.5 million; financing cash inflow was $79.0 million, including $77.6 million net proceeds from Neurocrine-related stock issuance.
- Total liabilities were $270.2 million, including $219.7 million of deferred revenue. The filing reports $35.4 million of operating lease liabilities and $48.6 million of undiscounted future lease payments; it does not identify material conventional borrowings.
- Accumulated deficit was $285.1 million. Management estimated cash, cash equivalents and marketable debt securities, together with expected Neurocrine cost reimbursements, would fund operating and capital needs into mid-2022.
Material changes and business developments
- Revenue increased sharply year over year, principally because of the Sanofi termination-related recognition and new Neurocrine and AbbVie collaborations. First-half collaboration revenue comprised $31.6 million from Sanofi Genzyme, $14.4 million from Neurocrine, $4.9 million from AbbVie Tau and $0.4 million from AbbVie Alpha-Synuclein.
- R&D expense rose $22.0 million year over year for the first half, reflecting higher external program costs, personnel and facility costs. G&A declined modestly, partly because 2018 included a former CEO retirement-related stock compensation charge.
- Neurocrine paid $115 million upfront under its collaboration, including a $50 million equity investment, and a further $5 million in connection with the June amendment. It funds specified program development costs subject to agreed budgets. Voyager retained options to co-develop and co-commercialize the existing AADC and Friedreich’s ataxia programs after specified trial readouts.
- Voyager and Sanofi Genzyme terminated their collaboration in June. Voyager regained worldwide rights to Huntington’s disease program VY-HTT01 and transferred ex-U.S. Friedreich’s ataxia rights to Neurocrine; it relinquished rights to the spinal muscular atrophy program and future Sanofi milestone and royalty opportunities. Voyager paid Sanofi $10 million and agreed to another $10 million payment upon a specified Huntington’s IND filing, plus certain sublicensing payments and royalties.
- Voyager issued 4.18 million shares to Neurocrine in the collaboration financing. Common shares outstanding were 36.68 million at quarter-end and 36.93 million as of August 2, 2019.
Outlook, commentary and risks
- Management expects expenses and operating losses to continue and R&D spending to increase as programs advance. No product-revenue guidance was provided; management does not expect product sales revenue in the foreseeable future.
- VY-AADC is being studied in completed-enrollment Phase 1b and separate Phase 1 trials, with patients continuing follow-up, and in the RESTORE-1 Phase 2 trial. The filing reports preliminary PD-1102 results in eight patients: treatment was described as well tolerated, with no serious adverse events reported; the study observed improved motor-function measures and reduced medication dosage. These small, early-stage results do not establish efficacy in controlled or later-stage trials.
- RESTORE-1 was planned to enroll 75–100 patients in a randomized, double-blind, placebo-surgery-controlled trial. Voyager and Neurocrine were evaluating FDA feedback, including guidance that two adequate and well-controlled trials may be expected for Parkinson’s disease.
- Further preclinical VY-HTT01 work was expected to support a potential 2019 IND filing if successful. Voyager no longer expected to file a 2019 IND for VY-SOD102 and intended to seek a partner for that ALS program after reallocating resources.
- Key risks include clinical and regulatory failure or delay; uncertain translation of early VY-AADC findings; formulation, manufacturing-process and delivery differences between trials; surgical and gene-therapy safety risks; manufacturing scale-up and third-party supply dependence; reliance on collaborators and possible option non-exercise or termination; and the need for future financing if development costs, reimbursements or timelines differ from plan.
- Other notable items: adoption of lease accounting added a right-of-use asset and lease liability; the former Chief Scientific Officer’s consulting arrangement triggered $2.2 million of stock-based compensation expense. The company reported no material litigation, no off-balance-sheet arrangements, and effective disclosure controls as of June 30, 2019.
Most important facts for investors to verify
- How much of reported collaboration revenue and Q2 income reflects the one-time Sanofi termination accounting, and how much is expected to recur?
- Whether Neurocrine reimbursements arrive on schedule and support the stated mid-2022 cash runway as development spending increases.
- Progress, enrollment and protocol status for RESTORE-1; FDA expectations for confirmatory trials; and comparability of VY-AADC manufactured using the newer baculovirus/Sf9 process.
- Timing and costs of the potential VY-HTT01 IND filing, the $10 million Sanofi milestone if filed, and plans to partner or otherwise advance VY-SOD102.
- Potential dilution and the economics of collaboration options, co-commercialization elections, milestones, royalties and termination rights.