Replimune Group, Inc. quarterly report, Q3 FY2022

Business context and reporting period

Replimune Group, Inc. is a clinical-stage biotechnology company developing oncolytic immunotherapies RP1, RP2 and RP3. This Form 10-Q covers the three and nine months ended December 31, 2021, the third quarter of the company’s fiscal 2022. The company had no approved products and generated no product revenue.

Financial results and liquidity

Amounts below are in millions of dollars, except per-share data.

• Operating expenses rose 46% in the quarter to $29.7 million and 49% for the nine-month period to $86.3 million. The company has no product revenue, so operating margins are not meaningful.
• At December 31, cash and cash equivalents were $132.3 million and short-term investments were $287.9 million, totaling $420.2 million. Current assets were $427.8 million versus current liabilities of $18.3 million.
• Operating cash use was $59.6 million for the nine months, compared with $45.3 million a year earlier. Investing activities provided $2.5 million, while financing activities provided $6.2 million, mainly from stock-option exercises. Cash, cash equivalents and restricted cash declined $50.2 million to $133.9 million.
• No debt was outstanding. Total liabilities were $47.8 million, including $33.1 million in operating and finance lease liabilities.
• Management said available cash and investments were expected to fund planned operations into the second half of 2024, excluding any FDA- or regulator-required confirmatory trial. The financial-statement note separately states funding is sufficient for at least 12 months from issuance.

Material changes versus prior comparable periods

• Quarterly net loss increased $7.9 million; nine-month net loss increased $27.0 million. Higher research and development and general and administrative costs were the main drivers.
• Quarterly R&D increased $5.0 million, reflecting personnel growth and RP2/RP3 development and manufacturing technology transfers; direct RP1 costs declined. Nine-month R&D increased $17.3 million, largely due to higher unallocated personnel and other costs.
• Quarterly G&A increased $4.4 million and nine-month G&A increased $11.3 million, including higher stock-based compensation, expanded staffing and pre-launch commercial planning.
• Stock-based compensation rose to $5.9 million in the quarter and $18.5 million for nine months, versus $3.0 million and $8.3 million, respectively, in the prior periods.
• Prior-year periods included Hercules debt interest and a $0.9 million extinguishment loss; the loan was repaid and terminated in December 2020. These costs did not recur in 2021.

Outlook, management commentary and risks

• Management expects continued substantial operating losses and higher expenses as clinical programs, manufacturing operations and commercial-readiness activities expand. Additional financing may be needed; no committed external funding source was disclosed.
• CERPASS, a Phase 2 RP1 combination trial in cutaneous squamous cell carcinoma, was expected to complete enrollment in mid-2022, with primary analysis triggered six months later. The trial is being conducted with Regeneron, which supplies cemiplimab and shares trial costs.
• For the RP1 anti-PD-1-failed melanoma cohort in IGNYTE, initial directional data were expected in late 2022. The company said the FDA indicated compelling data could be considered for accelerated approval, while noting a randomized confirmatory trial would be required.
• Management revised expected initial data timing for the RP1 anti-PD(L)-1-failed NSCLC cohort from first-quarter 2022 to late 2022 after protocol changes intended to facilitate enrollment. Initial RP2 expansion-cohort data were also expected in late 2022.
• COVID-19 had slowed enrollment in the ARTACUS transplant-recipient skin-cancer trial; initial data were expected late in the first quarter of 2022. The company also expected initial RP3 single-agent data late in that quarter and planned a combination expansion cohort.
• Key risks include clinical-trial enrollment, safety and efficacy outcomes, regulatory requirements, dependence on third-party trial and drug suppliers, manufacturing scale-up and validation, and potential delays or supply disruption from COVID-19. Management reported no prolonged material business disruption to date.
• The company reported no material legal proceedings and said disclosure controls were effective as of December 31, 2021. It also stated previously identified material weaknesses in internal control had been remediated.

Important facts for investors to verify

• Whether cash burn and program spending remain consistent with management’s runway estimate, particularly given that the estimate excludes a possible confirmatory trial.
• Actual enrollment and data-readout timing for CERPASS, IGNYTE, ARTACUS, RP2 and RP3, including the revised NSCLC timeline.
• Whether clinical results support the company’s registration plans and whether regulators require additional or randomized trials.
• Manufacturing-facility readiness, clinical supply availability and any continuing reliance on contract manufacturers and collaborators.
• Potential dilution: 5.284 million pre-funded warrants remained unexercised at quarter-end; 6.695 million stock options and 0.497 million other warrants were excluded from diluted loss per share as anti-dilutive.