Replimune Group, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended September 30, 2018; filed November 14, 2018. The company is a clinical-stage biotechnology business developing oncolytic immunotherapies. It had no approved products and generated no product revenue.
Financial performance and position
| Metric | Three months ended Sept. 30, 2018 | Six months ended Sept. 30, 2018 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.962 million | $8.898 million |
| General and administrative expense | $2.142 million | $4.085 million |
| Total operating expenses | $7.104 million | $12.983 million |
| Net loss | $6.461 million | $16.505 million |
| Basic and diluted net loss per share | $0.26 | $1.11 |
- At September 30, cash and cash equivalents were $23.282 million and short-term investments were $124.612 million, totaling approximately $147.9 million. Restricted cash was an additional $1.186 million.
- Six-month operating cash use was $13.242 million. Investing cash use was $80.219 million, largely reflecting purchases of short-term investments; financing provided $101.196 million, primarily from the IPO.
- Total assets were $153.816 million; total liabilities were $3.780 million. The company reported no debt outstanding and an accumulated deficit of $45.437 million.
- Margins are not meaningful because the company had no revenue.
Changes versus the prior comparable periods
- Quarterly net loss increased from $4.660 million to $6.461 million; six-month net loss increased from $8.212 million to $16.505 million.
- Quarterly operating expenses rose $2.848 million, including increases of $1.813 million in R&D and $1.035 million in G&A. For six months, operating expenses increased $5.551 million.
- Management attributed higher R&D costs mainly to RP1 clinical-trial activity, added R&D personnel, and supplies used across programs. Higher G&A reflected staffing, public-company preparation and facility costs.
- The six-month results included a $5.452 million noncash loss from remeasurement of the preferred-stock warrant liability. At the July IPO, the warrant converted to a common-stock warrant and the liability was reclassified to equity; the company will no longer record its fair-value changes as expense.
Outlook, developments and risks
- The July 2018 IPO raised approximately $111.1 million gross. The company reported $103.3 million of net IPO proceeds in financing cash flows. Preferred stock converted into common stock at the IPO.
- Management expected available cash and short-term investments to fund operating and capital requirements for at least 12 months from the financial statements’ issuance. Elsewhere, it estimated funding for planned operating expenses and capital expenditures into the second half of 2021; that estimate depends on assumptions and could prove wrong.
- RP1 was in a Phase 1/2 trial. The FDA accepted the U.S. IND on September 6, 2018, following a clinical hold that required additional toxicology and biodistribution data. Management planned a randomized Phase 2 study in about 240 patients with cutaneous squamous cell carcinoma, comparing RP1 plus cemiplimab with cemiplimab alone, in the first half of 2019. It also planned to initiate an RP2 trial in the first half of 2019.
- The company planned to establish an in-house manufacturing facility in Framingham, Massachusetts; estimated capital expenditures to commence operations were approximately $28 million. It had also signed a lease for about 63,000 square feet, with the lease term expected to commence in November 2018, subject to landlord improvements.
- Key risks include clinical efficacy and safety uncertainty, regulatory delays, reliance on a single clinical-stage candidate and third-party manufacturers, access to combination drugs, future funding needs, and foreign-exchange exposure. The company had $3.283 million in minimum manufacturing commitments through September 2019.
- Disclosure controls were reported ineffective at the reasonable-assurance level due to material weaknesses in the control environment, accounting staffing and formal controls for complex transactions. Management said it was implementing remediation measures. The filing reported no material legal proceedings.
Important facts for investors to verify
- Whether the RP1 trial advances on schedule and produces adequate safety and efficacy data, including progress of the U.S. study and planned CSCC Phase 2 trial.
- Whether cash-use trends, the estimated manufacturing-facility investment and other trial costs remain consistent with management’s stated funding runway.
- Progress in remediating the disclosed internal-control material weaknesses and improving financial-reporting controls.
- Manufacturing capacity and supply dependability, including the timing and cost of the Framingham facility and reliance on third-party suppliers.
- Potential dilution and trading pressure: lock-up agreements were due to expire January 15, 2019, after which the filing indicated approximately 24.1 million additional shares could become eligible for public sale.