XBiotech Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. XBiotech is a pre-commercial biopharmaceutical company developing naturally occurring “True Human” monoclonal antibodies. It reported no revenue in either 2017 or the comparable 2016 periods.
Financial performance
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $7.4 million | $11.2 million | $15.6 million | $19.0 million |
| General and administrative | $2.3 million | $2.4 million | $4.4 million | $4.8 million |
| Total operating expenses / operating loss | $9.7 million | $13.6 million | $20.0 million | $23.9 million |
| Net loss | $9.1 million | $13.6 million | $19.7 million | $23.9 million |
| Basic and diluted loss per share | $0.26 | $0.42 | $0.57 | $0.74 |
Research and development costs fell 34% in Q2 and 18% for the six-month period, largely reflecting lower manufacturing-supply costs and reduced clinical-trial activity. Operating cash use was $20.4 million for the first half, versus $18.2 million in 2016. Investing cash use was $0.9 million, down from $8.8 million, as the prior-year period included facility construction. Financing provided $33.3 million, primarily from a March share sale.
At June 30, cash and cash equivalents were $45.9 million, versus $34.3 million at December 31, 2016. Current assets were $47.3 million and current liabilities $4.7 million. Total liabilities were $4.7 million; the filing reports no debt. Total assets were $77.8 million. No meaningful operating margin is available because the company had no revenue and recorded operating losses.
Material developments, outlook and risks
- The EMA’s CHMP issued a negative opinion on the Xilonix European marketing application in May 2017. XBiotech pursued re-examination, with new rapporteurs expected to reassess the opinion.
- In June, the company discontinued its second Phase III metastatic colorectal cancer study after an interim review found results insufficient to meet efficacy or continuation thresholds. The IDMC reported no safety concerns. The company was analyzing data for potentially responsive subgroups.
- Following positive top-line results from Phase II studies in hidradenitis suppurativa and Staphylococcus aureus bloodstream infections, the company planned further development and sought FDA end-of-Phase-II meetings.
- Management estimated that June 30 cash would fund operating expenses and capital needs through 2018, including planned development work. This estimate depends on assumptions that may prove incorrect; the company expected significant ongoing losses and may require additional funding.
- Headcount declined to 60 from 103 at March 31 following a reorganization after developments in the Phase III oncology studies. The company said it had never been profitable and had an accumulated deficit of $203.1 million.
- A securities lawsuit was re-filed in Texas on July 6, 2017; the company could not estimate its outcome or financial impact. The related California case remained stayed. The filing reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Progress and outcome of the EMA re-examination, including any implications for Xilonix approval or commercialization.
- Full analyses of the discontinued Phase III trial and the rationale, design, timing and funding for proposed follow-on studies.
- Cash burn against management’s funding-through-2018 estimate, and whether additional financing will be needed.
- Developments in the Texas securities litigation and any resulting financial exposure.
- Effects of the workforce reorganization and reduced clinical activity on the company’s ability to advance its pipeline.