uniQure N.V. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Unaudited interim results are presented in U.S. dollars and prepared under U.S. GAAP. uniQure develops gene therapies, with programs including hemophilia B, Huntington’s disease and cardiovascular disease. It began reporting as a U.S. domestic issuer on January 1, 2017.
Financial results and position
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $3.3 million | $4.3 million; down $1.0 million (23%) |
| Research and development expense | $17.0 million | $16.7 million; up $0.3 million |
| Selling, general and administrative expense | $6.4 million | $7.3 million; down $0.9 million |
| Operating loss | $19.7 million | $19.3 million loss |
| Net loss | $20.3 million; $0.80 per share | $22.3 million; $0.90 per share |
| Operating cash used | $11.7 million | $15.7 million |
| Cash and cash equivalents | $120.3 million at March 31 | $132.5 million at December 31, 2016 |
Revenue came entirely from BMS and Chiesi collaboration and license arrangements. BMS revenue was $1.5 million, down from $2.6 million; Chiesi revenue was $1.8 million, up from $1.7 million. Lower BMS collaboration revenue reflected timing of preclinical work and production activities. The company reported no product-sales revenue. Gross margin was not presented as a distinct metric.
Cash used in investing activities was $2.0 million, mainly for facility build-outs; financing activities provided $0.4 million. Cash declined by $12.2 million during the quarter, partly offset by a $1.0 million favorable currency effect. Current assets were $123.7 million and current liabilities $20.5 million, implying working capital of approximately $103.3 million. Total liabilities were $123.9 million and shareholders’ equity $45.7 million.
Long-term debt had a carrying amount of approximately $20.4 million under the Hercules facility, with a stated potential commitment of up to $40 million. The loan bears an initial 8.25% rate; principal repayments are scheduled to begin in December 2017 and continue through May 2020. Contractual debt obligations, including stated interest, were $24.4 million. Operating lease commitments totaled approximately $39.7 million.
Material changes and business developments
- Net loss improved by $2.0 million year over year, mainly because foreign-exchange losses were substantially lower; the operating loss nevertheless widened by $0.5 million as revenue fell and R&D expense increased.
- R&D expense rose modestly, reflecting personnel and restructuring-related costs and higher facility costs; SG&A decreased, including lower Glybera-related costs and prior-year CEO-transition costs.
- The FDA granted breakthrough therapy designation to AMT-060 for hemophilia B in January 2017, based on interim Phase I/II results. The company began FDA discussions about the data and a potential pivotal-study design.
- The company is consolidating manufacturing in Lexington, Massachusetts and restructuring its operations. It expects to eliminate 50–55 positions and estimates annual operating-expense savings of $5–$6 million from 2018 onward.
Outlook, risks and unusual items
- Management expected the $120.3 million cash balance to fund operations into 2019 and stated it should cover operating expenses, debt repayments and capital expenditures for at least 12 months. The company also expects continued losses and negative operating cash flows; additional financing may be needed, and availability or terms are uncertain.
- Management expects expenses to increase as clinical and preclinical programs advance, including hemophilia B and Huntington’s disease, and as manufacturing transfers to Lexington. The timing, costs and outcomes of development and regulatory work remain uncertain.
- On April 20, 2017, after quarter-end, uniQure announced it would not renew Glybera’s European marketing authorization, which expires October 25, 2017, and agreed to terminate the related Chiesi commercialization arrangement. Payments to Chiesi total $2.2 million through January 2019, with up to $1.8 million additional contingent on patients treated. The company expects approximately $10 million of expense reductions through 2021 from withdrawing Glybera, while also expecting $0.3 million of additional 2017 termination costs.
- Manufacturing transfer and facility qualification pose execution and regulatory risks, including potential comparability studies between Amsterdam- and Lexington-produced material. Other material risks include clinical efficacy and safety, patient recruitment, regulatory approval, dependence on BMS and Chiesi, intellectual-property rights, reimbursement, and access to future capital.
- InoCard acquisition milestone consideration had a $2.0 million recorded fair value but a $15.5 million nominal amount; timing and payment are uncertain and expected milestones fall between 2018 and 2021. The company reported no legal proceedings and no off-balance-sheet arrangements.
Investor verification priorities
- Track cash burn, cash runway assumptions, financing needs and the start of Hercules principal repayments.
- Verify progress and regulatory feedback on AMT-060’s pivotal-study path, and review subsequent clinical data and safety disclosures.
- Monitor Lexington facility qualification, manufacturing transfer, comparability requirements and associated costs.
- Confirm Glybera wind-down payments, contingent patient-related costs and the projected savings and restructuring milestones.
- Review collaboration activity and funding from BMS and Chiesi, including the concentration of revenue in these partners.
- Assess lease commitments, potential Amsterdam subleasing, and the uncertain timing and amount of InoCard milestone payments.