REGENXBIO Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; filed May 7, 2019. REGENXBIO is a clinical-stage gene-therapy company that also licenses its NAV AAV platform. It reported no revenue from commercial product sales.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $0.9 million | $132.4 million |
| Operating expenses | $36.8 million | $30.4 million |
| Operating loss | $35.9 million | Operating income of $102.0 million |
| Net income (loss) | $(32.2) million; $(0.89) per share | $104.2 million; $3.30 basic EPS |
| Operating cash flow | $(29.3) million | $58.1 million provided |
| Cash, cash equivalents and marketable securities | $444.3 million at March 31, 2019 | $470.6 million at December 31, 2018 |
| Total assets / liabilities | $519.0 million / $32.0 million | $543.8 million / $35.0 million at December 31, 2018 |
Research and development expense rose 29% to $25.2 million, and general and administrative expense rose 38% to $11.6 million. The filing does not present a meaningful conventional operating margin; revenue was small relative to expenses in 2019. No conventional borrowings are reported. Current and non-current operating lease liabilities totaled $7.9 million; the company also disclosed substantial future lease commitments for its planned facility.
Material changes and notable items
- Revenue fell by $131.5 million year over year, principally because Q1 2018 included $132.1 million of one-time license revenue from the AveXis amendment. The 2019 quarter included $0.9 million of license revenue.
- Operating cash flow swung from positive $58.1 million to negative $29.3 million. The prior-year period included an $80 million AveXis license payment; 2019 cash use also reflected higher operating expenses.
- Investment income increased to $3.0 million from $0.9 million. Cash and marketable securities declined by $26.3 million from year-end.
- Accumulated deficit was $115.3 million. Shares outstanding were 36.6 million at March 31, versus 36.1 million at December 31, 2018.
Outlook, programs and risks
- Management said available cash and marketable securities were expected to fund operations and capital expenditures for at least 12 months from the filing date. It also expects continued losses for at least several years, rising R&D and administrative costs, and a need for substantial additional funding over time.
- Management expected to initiate an RGX-314 Phase IIb wet AMD trial in late 2019 and file an IND for a diabetic-retinopathy trial in the second half of 2019. Enrollment and site activation were ongoing for RGX-121 and RGX-111; RGX-501 screening had restarted after a protocol amendment; an IND or foreign equivalent for RGX-181 was planned by year-end 2019.
- RGX-314 preliminary data as of April 18, 2019: 33 subjects had been dosed across five cohorts. The company reported no drug-related serious adverse events. In Cohort 3, three of six subjects remained injection-free through one year; the company reported mean visual-acuity improvement of five letters and mean retinal-thickness reduction of 39 micrometers across the cohort. These are interim company-reported results, not approval or proof of efficacy.
- Novartis had announced an expected 2019 launch of Zolgensma, subject to regulatory approval. Approval and commercial sales could lead to royalties for REGENXBIO; timing and revenue remain contingent.
- As of March 31, the NAV platform supported more than 20 partnered candidates across 11 licensees. Disclosed unachieved milestones included up to $29.6 million for clinical-trial stages, $47.5 million for regulatory submissions, $117.5 million for product approvals and $232.0 million tied to sales targets; achievement is uncertain.
- The 9800 Medical Center Drive facility was expected to be delivered in 2020. In April 2019, the company agreed to fund $4.0 million of requested construction changes and amended the lease to add space, increasing future rent by $4.0 million and the tenant-improvement allowance to $15.3 million. The long-term lease obligations had not yet been recognized as liabilities at March 31 because the lease had not commenced.
- In April 2019, REGENXBIO amended its University of Pennsylvania license to add CLN2-related rights, with an upfront fee, up to $20.5 million in milestones and additional royalties; the filing text does not provide a clear value for the upfront fee.
- Risks include clinical and regulatory failure, uncertain partner development and commercialization, dependence on license revenue, intellectual-property challenges, and the possibility that additional financing may not be available on acceptable terms. The company reported no material change in previously disclosed risk factors and no pending legal action it believed would have a material adverse effect. An appeal was pending in an EPO proceeding concerning a licensed AAV8 patent; the company did not believe it would materially adversely affect the business.
Investor verification points
- Track cash burn, clinical-development spending and financing needs against management’s stated 12-month funding runway.
- Verify RGX-314 trial progress and follow-up data, and distinguish interim findings from controlled evidence and regulatory outcomes.
- Confirm Zolgensma’s regulatory and commercial status and any resulting milestone or royalty receipts.
- Assess whether licensee milestones are achieved and how concentrated, contingent license revenue affects future results.
- Review the final cost, delivery timing and recognized lease commitments for the 9800 Medical Center Drive facility, including the April amendments.
- Monitor the AAV8 patent appeal and the terms and obligations under the amended Penn license.