Voyager Therapeutics, Inc. quarterly report, Q3 FY2017

Voyager Therapeutics, Inc. — Q3 2017 Form 10-Q

Reporting period: Quarter and nine months ended September 30, 2017. Voyager is a clinical-stage gene therapy company developing AAV-based treatments for severe neurological diseases. It had no approved products and generated no product-sales revenue; collaboration revenue came exclusively from Sanofi Genzyme.

Financial results and liquidity

Metric	Three months ended September 30, 2017	Nine months ended September 30, 2017
Collaboration revenue	$1.1 million	$3.8 million
Research and development expense	$19.6 million	$48.9 million
General and administrative expense	$4.9 million	$14.4 million
Total operating expenses	$24.5 million	$63.3 million
Operating loss	$23.4 million	$59.5 million
Net loss	$23.3 million	$58.9 million
Basic and diluted loss per share	$0.89	$2.27

• For the nine months, operating cash use was $46.5 million, investing activities provided $56.4 million, and financing activities provided $1.7 million. Cash and cash equivalents increased by $11.6 million to $48.2 million.
• At September 30, cash, cash equivalents and marketable debt securities totaled $125.6 million. Marketable securities also included $1.0 million of equity securities. Total current assets were $128.2 million; total assets were $140.9 million.
• Total liabilities were $55.7 million, including $37.9 million of deferred collaboration revenue. The filing reports no conventional borrowings; it records a $1.0 million non-current liability under a research-and-development funding arrangement.
• The company reported an accumulated deficit of $148.9 million and said existing cash, cash equivalents and marketable securities were expected to fund its current operating plan into 2019. No meaningful product margin was reported.

Changes versus the prior comparable period

• Q3 revenue fell to $1.1 million from $3.3 million; nine-month revenue fell to $3.8 million from $11.9 million. Management attributed the decline mainly to revised, longer estimated service periods under the Sanofi collaboration, including prior changes that reduced quarterly revenue by $2.4 million and 2017 revisions that reduced it by a further $0.5 million per quarter.
• Q3 operating expenses rose $10.8 million year over year, primarily from higher external research, clinical, preclinical and manufacturing-preparation costs. Nine-month R&D expense increased $19.4 million, while G&A increased $4.6 million.
• Net loss widened to $23.3 million in Q3 from $9.0 million and to $58.9 million for nine months from $25.5 million in 2016. Cash used in operations increased to $46.5 million from $29.4 million for the nine-month period.
• Cash and cash equivalents rose from $36.6 million at year-end 2016 to $48.2 million, while marketable securities declined from $139.1 million to $78.3 million, reflecting portfolio maturities and purchases.

Outlook, developments and risks

• Parkinson’s program: Interim Phase 1b results in 15 patients showed progressively greater putamen coverage and AADC activity across dose cohorts, medication reductions and reported motor-function improvements. Treatment was reported as well tolerated with no vector-related serious adverse events. One patient had a pulmonary embolism and related arrhythmia, which investigators considered likely related to immobility; thrombosis prevention was added to the protocol.
• A separate posterior-delivery Phase 1 trial had dosed four patients; the company reported approximately 50% average putamen coverage and no serious adverse events in those patients. Updated results were planned for Q1 2018.
• Management planned to begin a pivotal Phase 2-3 Parkinson’s program in late 2017 and dose its first patient in Q2 2018. It expected Phase 3 enrollment to begin in the first half of 2019, Phase 2 top-line results in the second half of 2020 and Phase 3 top-line results in the first half of 2022. Potential U.S. and European filings could be in the first half of 2021 if Phase 2 results were sufficiently strong, or around mid-2022 following favorable Phase 2 and Phase 3 results. These are forward-looking estimates, subject to regulatory discussions and trial execution.
• The planned later-stage candidate, VY-AADC02, uses the same vector as VY-AADC01 but a different manufacturing system. Voyager said it must file an IND and obtain clearance before dosing; comparability to VY-AADC01 is not assured.
• After further large-animal studies, Voyager delayed its planned IND filing for the SOD1-ALS candidate to investigate additional delivery routes and novel capsids. The company expected two IND filings from its ALS, Huntington’s disease and Friedreich’s ataxia programs during 2019.
• Subsequent event: In October 2017, Sanofi Genzyme declined its option for ex-U.S. Parkinson’s rights, leaving Voyager with global VY-AADC rights. Voyager thereby lost potential Parkinson’s regulatory and commercial milestone payments of $45 million and $60 million, respectively. If Voyager uses specified Sanofi technology, low-single-digit royalties may be payable; certain third-party regulatory milestone payments may also apply.
• Voyager expects significant future R&D and operating losses and will need additional funding. Financing may not be available on acceptable terms and could dilute shareholders, impose restrictions or require the company to license or relinquish rights.
• Other exposures include $27.4 million in operating lease payments through 2024 and contingent intellectual-property milestone payments. A nonprofit funding arrangement could require repayment in specified circumstances and payments of up to 2.6 times funding received upon successful development and commercialization. The company reported no material legal proceedings and no off-balance-sheet arrangements.

Important facts for investors to verify

• Whether cash burn and the stated runway into 2019 remain consistent with operating plans, including expected clinical, manufacturing and capital needs.
• Updated Phase 1b and posterior-delivery safety and efficacy data, and whether results support the planned pivotal trial design and timelines.
• IND clearance and manufacturing comparability for VY-AADC02, plus the revised timing and progress of the ALS, Huntington’s disease and Friedreich’s ataxia programs.
• The financial and strategic effects of Sanofi Genzyme’s Parkinson’s option decision, including any technology royalties or third-party obligations and the status of remaining collaboration programs and potential payments.
• The assumptions underlying deferred collaboration revenue recognition, future collaboration income and the company’s need for external financing.