REGENXBIO Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. REGENXBIO is a clinical-stage gene-therapy company that licenses its NAV AAV-vector platform and develops its own product candidates. Zolgensma, marketed by a licensee, was its only commercially approved NAV-platform product. Figures below are in millions of dollars unless otherwise noted.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $16.6 | $7.9 | $34.2 | $8.8 |
| Operating expenses | $58.4 | $44.8 | $113.7 | $81.5 |
| Operating loss | $(41.8) | $(36.9) | $(79.5) | $(72.8) |
| Net loss | $(33.8) | $(1.5) | $(73.8) | $(33.7) |
| Net loss per share | $(0.91) | $(0.04) | $(1.98) | $(0.92) |
- Q2 gross profit was approximately $11.9 million, or 71.7% of revenue; six-month gross profit was approximately $26.1 million, or 76.3%. These are calculated as revenue less cost of revenues.
- At June 30, cash and cash equivalents were $94.2 million and marketable securities were $245.0 million, totaling $339.2 million. Current assets were $329.1 million versus current liabilities of $40.2 million. Management said available cash, cash equivalents and marketable securities should fund operations for at least 12 months from issuance of the statements.
- Six-month operating cash use was $57.1 million, compared with $53.0 million in 2019. Investing activities provided $77.2 million, primarily reflecting security maturities and sales; financing activities provided $4.6 million. Cash, cash equivalents and restricted cash increased $24.7 million to $95.6 million.
- The filing reports no material changes in market-risk exposure and no off-balance-sheet arrangements. It does not disclose conventional borrowings; reported liabilities include operating lease liabilities of $10.1 million in total.
Material changes versus comparable periods
- Revenue rose $8.7 million in Q2 and $25.4 million for the first half, mainly because of Zolgensma royalties: $11.9 million in Q2 and $21.9 million for six months. The company also recorded $3.5 million of quarterly license revenue under the AveXis license.
- Research and development expense increased 29% in Q2 to $38.1 million and 37% for six months to $75.1 million, reflecting higher personnel, clinical, manufacturing and platform costs. General and administrative expense increased to $15.6 million in Q2 and $30.4 million for six months.
- Net loss widened substantially in Q2 versus 2019, when investment income included a $31.7 million unrealized gain on Prevail Therapeutics shares. In Q2 2020, Prevail-related realized and unrealized gains were $4.4 million; the shares were valued at $24.3 million at June 30. For the first half, investment income fell to $2.5 million from $37.5 million in 2019.
- Accumulated deficit reached $251.6 million, up from $177.8 million at year-end 2019. Outstanding common shares were 37.291 million at June 30, compared with 36.992 million at December 31.
Outlook, commentary and risks
- Management expects research and development, general and administrative expense, and capital spending to rise. Remaining net capital expenditures for the new Rockville headquarters, manufacturing and research facility were estimated in the upper double-digit millions through 2022; COVID-19-related restrictions were expected to delay construction.
- Management described RGX-314’s Phase I/IIa wet-AMD results as showing generally good tolerability, with one possibly drug-related serious adverse event involving a significant vision decrease in the highest-dose cohort. At one year, Cohorts 4 and 5 showed reduced anti-VEGF injection burden; management planned a pivotal subretinal program in the second half of 2020 and suprachoroidal Phase II studies.
- Other stated development plans included RGX-121 interim data in the second half of 2020; RGX-111 and RGX-181 updates or IND plans by year-end; and an RGX-381 IND submission in the second half of 2020. The company discontinued internal clinical development of RGX-501 and planned to evaluate strategic alternatives.
- COVID-19 had not significantly affected reported results through June 30, but could disrupt clinical trials, research, manufacturing, collaborators, licensee revenue and construction, and could increase costs or affect liquidity. Management said the full impact was uncertain.
- Abeona had not paid $28.0 million in license fees; the recorded receivable, including accrued interest, was $28.8 million at June 30. The license was terminated after nonpayment, and the parties were in arbitration: REGENXBIO sought payment while Abeona alleged patent-communication breaches. The company recorded no credit allowance and expected collection, but acknowledged that timing and outcome were unpredictable and recovery could be less than the amount claimed.
- REGENXBIO was eligible for an $80 million Zolgensma sales milestone upon $1.0 billion in cumulative net sales; cumulative sales exceeded $735 million through June 30. Achievement was not assured. The filing also identified up to $293.4 million of unachieved milestones across license agreements, contingent on licensee development and sales outcomes.
- The company continued to report operating losses and expected losses for at least several years. It said additional capital may be needed and may not be available on acceptable terms. License revenue is concentrated among a limited number of partners, whose agreements may be terminated and whose development and commercialization decisions are outside the company’s control.
Important facts for investors to verify
- Whether and when the Abeona arbitration results in collection of the $28 million fees and accrued interest, and whether any allowance or liability is subsequently recorded.
- Zolgensma sales, royalty receipts and progress toward the $1.0 billion cumulative-sales milestone.
- RGX-314 trial safety, durability and efficacy data, along with the timing and execution of planned pivotal and Phase II studies.
- Actual cash burn, funding runway and the timing and cost of the delayed facility buildout relative to management’s estimates.
- Whether COVID-19 or partner decisions affect trial timelines, license revenues, milestone prospects or manufacturing capacity.