NextCure, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines for cancer and other immune-related diseases using its FIND-IO platform. It has no approved products and has not generated product-sales revenue.
Financial performance and position
| Metric | Q3 2019 | Nine months 2019 | Comparable 2018 period |
|---|---|---|---|
| Collaboration revenue | $1.6 million | $4.3 million | None reported |
| Research and development expense | $8.7 million | $22.8 million | $4.9 million / $13.5 million |
| General and administrative expense | $2.6 million | $7.0 million | $0.9 million / $2.6 million |
| Net loss | $8.4 million | $22.8 million | $5.7 million / $15.9 million |
| Operating cash used | Not stated quarterly | $25.6 million | $14.5 million |
Amounts are in U.S. dollars; financial statement figures are in thousands unless noted. No gross margin is presented. Other income was $1.3 million in Q3 and $2.7 million for nine months, primarily reflecting interest income, partly offset by term-loan interest.
At September 30, cash and cash equivalents were $9.9 million, marketable securities were $174.1 million, and restricted cash was $5.0 million (including $3.75 million classified in other assets). Management reported $184.1 million in cash, cash equivalents and marketable securities, excluding restricted cash, and estimated these resources would fund planned operations into the first half of 2022, subject to assumptions. Accumulated deficit was $70.1 million.
Outstanding term-loan borrowings were $5.0 million, secured by cash and investment assets. The loan bears interest at the greater of prime less 1% or 4.25%; interest-only payments run through January 2020, followed by principal and interest payments through January 2023. Nine-month capital expenditure purchases were $2.6 million. The company reported $8.9 million of future minimum operating-lease payments, including expanded laboratory and office space.
Material changes versus prior comparable periods
- Revenue began to be recognized under the Lilly research and development collaboration: $1.6 million for Q3 and $4.3 million year to date, versus none in 2018.
- Year-to-date R&D expense rose $9.3 million, primarily from increased personnel, laboratory supplies and services, NC318 clinical research, depreciation, and a Yale-related payment.
- Year-to-date G&A expense rose $4.4 million, largely from IPO-related professional fees, personnel, insurance and public-company costs.
- Net loss increased $2.7 million in Q3 and $6.9 million year to date. Operating cash use increased to $25.6 million from $14.5 million.
- The May 2019 IPO generated approximately $77 million of net proceeds. Preferred shares converted into common stock at the IPO, and stockholders’ equity was $170.6 million at quarter-end versus a $46.9 million deficit at year-end 2018.
- Much of the IPO proceeds was invested in marketable securities; the reported $120.7 million decline in cash, cash equivalents and restricted cash also reflects these purchases.
Outlook, commentary and risks
- Management expected increased R&D spending for NC318 and NC410 development, manufacturing capacity and discovery programs, alongside increased public-company and occupancy costs. The company expects continued operating losses and negative operating cash flows and will need substantial additional funding over time.
- NC318 Phase 1 enrollment was completed in August 2019; enrollment in Phase 2 began in October 2019. Management expected initial Phase 2 data by year-end 2020 and planned a combination Phase 2 trial in the first half of 2020. Preliminary Phase 1 findings announced in November 2019 included mostly manageable adverse events, but also one grade 3 episcleritis/uveitis case and two grade 3 pneumonitis cases.
- For NC410, management expected to submit an IND and initiate a Phase 1/2 trial in the first quarter of 2020. These are forward-looking expectations, not guarantees.
- The Lilly collaboration provides research support and potential option, milestone and royalty payments, but future payments depend on performance and option exercise. Lilly’s potential milestones are up to $1.4 billion; this is contingent potential, not committed revenue.
- Key risks include clinical and regulatory failure or delay, safety events, patient enrollment, manufacturing scale-up and supply, reliance on third parties, uncertain collaboration economics, intellectual-property protection, and the possibility of needing capital sooner than forecast. The company reported no legal proceedings considered likely to have a material adverse effect.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of September 30, 2019.
Investor verification checklist
- Track NC318 Phase 2 enrollment, trial design, data timing and safety updates; assess whether preliminary results hold as data mature.
- Verify NC410 IND and trial-start timing and progress toward the planned NC318 combination study.
- Monitor quarterly operating cash use, R&D and G&A growth, and whether the stated first-half-2022 runway remains supported by available liquid resources and updated plans.
- Review Lilly collaboration performance, support payments, option exercises and the timing and conditions for any milestones or royalties.
- Confirm term-loan repayment schedule, collateral restrictions, lease expansion costs and actual cash available for operations.