MeiraGTx Holdings plc — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019; financial statements are unaudited. MeiraGTx is a clinical-stage gene therapy company with six clinical programs and a preclinical pipeline. It has no approved products and has not generated product-sale revenue.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| License revenue | $3.6 million | None | $6.3 million | None |
| Operating expenses | $14.5 million | $14.7 million | $59.2 million | $58.0 million |
| Operating loss | $10.9 million | $14.7 million | $52.8 million | $58.0 million |
| Net loss | $10.5 million | $15.4 million | $49.3 million | $61.8 million |
| Net loss per ordinary share | $0.30 | $0.59 | $1.53 | $3.89 |
- License revenue reflects recognition of Janssen’s upfront collaboration payment, not product sales. The company also recorded $13.3 million of Janssen research-cost reimbursements as an offset to R&D expense during the first nine months.
- Cash and cash equivalents were $253.3 million at September 30, 2019, versus $68.1 million at year-end 2018. Current assets were $271.1 million and current liabilities $39.3 million. Accumulated deficit was $197.6 million.
- Operating cash flow was positive $42.0 million for the nine months, compared with negative $47.4 million in 2018. The 2019 result was substantially supported by the $100 million Janssen upfront payment and a $93.1 million increase in deferred revenue; it should not be read as evidence of recurring operating profitability.
- Investing cash outflow was $4.2 million, primarily property and equipment purchases; financing cash inflow was $147.8 million, chiefly net proceeds from share offerings. The company reported no conventional borrowings; lease obligations totaled $22.6 million, primarily operating leases.
- No meaningful product gross margin is reported; the company remains loss-making and incurs research, development and administrative costs.
Changes versus prior periods
- Q3 net loss narrowed by $5.0 million year over year, while nine-month net loss narrowed by $12.5 million. Lower losses reflected Janssen license revenue and research funding, as well as favorable foreign-exchange movements.
- Nine-month operating expenses increased $1.2 million. R&D rose $4.5 million, including higher clinical-trial, manufacturing and UCL license-amendment costs; Janssen research funding partially offset the increase. G&A fell $3.3 million, largely due to lower payroll and share-based compensation, partly offset by higher legal, accounting and insurance costs.
- Cash increased following an $80 million February private placement and a $75 million August public offering, both stated as gross proceeds. Share count rose to 36.6 million at September 30 from 27.4 million at December 31, 2018.
Outlook, commentary and risks
- Management estimated cash, together with expected Janssen research funding, would cover operating expenses and capital expenditures into 2022. The liquidity note separately states funds are expected to cover at least the next 12 months; both estimates depend on assumptions and spending may exceed expectations.
- Management expects R&D and G&A costs to increase as clinical development, staffing and manufacturing capacity expand. It planned a second cGMP viral-vector facility and a cGMP plasmid facility, with construction of the second facility expected to begin in 2020.
- Clinical updates included positive six-month Phase 1/2 AAV-RPE65 data on safety and tolerability and statistically significant improvements on several secondary measures; initiation of the multi-site Phase 1/2 AQUAX trial for radiation-induced xerostomia; and continued work with regulators on the clinical path for AAV-GAD. Janssen-partnered retinal programs remained in development.
- The Janssen agreement provides a $100 million nonrefundable upfront payment, research and development funding, potential development and commercialization milestones up to $340 million for three clinical IRD candidates, and 20% untiered royalties on their net sales. The remaining upfront-payment deferred revenue was $93.7 million, expected to be recognized over an estimated 7.25 years. Additional research candidates have separate opt-in economics.
- Key risks include clinical and regulatory uncertainty, potential adverse events or trial delays, manufacturing scale-up and supply constraints, dependence on collaborators and licensed intellectual property, need for future capital, competition, and foreign-exchange exposure. The company reported no material legal proceedings, no material new commitments, and no subsequent events; management judged disclosure controls effective.
Important facts for investors to verify
- Whether trial progress and final data support the company’s stated development plans, particularly for AAV-RPE65, AQUAX, and Janssen-partnered retinal programs.
- The assumptions behind the cash runway into 2022, including future trial, facility and staffing costs and anticipated Janssen funding.
- How Janssen reimbursements, variable consideration and upfront-fee revenue recognition affect reported R&D expense, revenue and cash flow.
- Timing, cost and execution risks for planned manufacturing expansion and the company’s ability to maintain compliant, scalable supply.
- Potential dilution and future financing needs, given increased share count, continuing losses and substantial expected development spending.