Voyager Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Dollar amounts below are in millions unless otherwise stated. Voyager is a clinical-stage gene therapy company and had no approved products or product-sale revenue.
Financial performance and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Collaboration revenue | $2.6 | $1.2 | $3.5 | $2.6 |
| Research and development expense | $16.5 | $15.3 | $31.4 | $29.4 |
| General and administrative expense | $11.8 | $4.5 | $18.9 | $9.4 |
| Total operating expenses | $28.3 | $19.8 | $50.3 | $38.8 |
| Net loss | $25.5 | $18.9 | $45.5 | $35.5 |
| Basic and diluted loss per share | $0.80 | $0.73 | $1.43 | $1.37 |
- Q2 operating loss was $25.7 million; six-month operating loss was $46.8 million. No product gross margin is reported because the company had no product sales.
- Six-month operating cash flow was positive $26.1 million, versus cash use of $30.6 million a year earlier. This reflected the $69.0 million AbbVie upfront payment and a $65.5 million increase in deferred revenue; it should not be viewed as evidence of operating profitability. Investing cash flow was negative $1.0 million and financing cash flow was positive $2.9 million. Cash, cash equivalents and restricted cash increased $28.1 million.
- At June 30, cash and cash equivalents were $59.6 million, current marketable securities $136.5 million, and non-current marketable securities $0.9 million. Management reported cash, cash equivalents and marketable debt securities of $197.0 million and expected these resources to fund its current operating plan into early 2020.
- Total assets were $214.7 million, total liabilities $132.7 million, and stockholders’ equity $82.0 million. Liabilities included $117.1 million of deferred revenue. The filing reports no debt financing; operating lease commitments totaled $43.0 million through 2026.
Material changes and unusual items
- Compared with Q2 2017, revenue rose $1.4 million, primarily from $1.9 million of AbbVie research revenue, partly offset by the accounting change described below. Operating expenses increased $8.5 million, and net loss widened $6.7 million.
- For the first half, revenue increased $0.9 million, while operating expenses rose $11.5 million and net loss widened $9.9 million. The company attributed higher G&A mainly to increased headcount and stock compensation, including a one-time $5.4 million charge related to former CEO Steven Paul’s retirement agreement. Six-month stock-based compensation was $10.4 million, up from $3.7 million.
- Adoption of ASC 606 on January 1, 2018 increased deferred revenue by approximately $20.0 million and accumulated deficit by the corresponding cumulative adjustment. Under ASC 606, first-half 2018 collaboration revenue was $0.7 million lower than under the prior standard; the transition changed revenue timing, not cash received.
- Sanofi Genzyme revenue recognized was $0.7 million for Q2 and $1.2 million for the first half; related deferred revenue was $50.5 million at quarter-end. AbbVie revenue recognized was $1.9 million for Q2 and $2.3 million for the first half; related deferred revenue was $66.7 million.
Outlook, operations and risks
- Management expected expenses and operating losses to continue, with R&D spending increasing as Voyager advanced VY-AADC and its other programs and performed AbbVie collaboration work. The company expected to need substantial additional funding over time; financing may be dilutive or unavailable on acceptable terms.
- VY-AADC for Parkinson’s disease was the lead clinical program. Voyager had completed dosing in its open-label Phase 1b trial and was monitoring patients. It planned a randomized, placebo-surgery-controlled Phase 2 trial of up to 42 patients, with a 12-month primary endpoint and enrollment expected to take approximately one year. Site activation was underway. The filing describes preliminary early-stage findings, not confirmatory pivotal-trial results.
- The FDA granted VY-AADC Regenerative Medicine Advanced Therapy designation in June 2018. Following July 2018 FDA feedback, Voyager said it planned a BLA based on safety and efficacy data from the pivotal program, including the Phase 2 trial alone or, if needed, a planned Phase 3 trial. In July, the FDA also cleared Voyager’s trajectory array guide device through the 510(k) pathway.
- Voyager planned to file INDs for its ALS and Huntington’s disease programs in 2019. Other programs remained preclinical. Potential collaboration option, milestone and royalty payments are contingent and are not assured revenue.
- Principal risks include clinical efficacy and safety uncertainty, trial enrollment and regulatory delays, manufacturing scale-up and comparability, dependence on collaborators and third-party manufacturers, delivery-device availability, competition, intellectual-property challenges and the need for additional capital. One patient in the VY-AADC Phase 1b trial experienced pulmonary embolism and related arrhythmia; investigators considered these likely related to immobility during administration, and thrombosis prophylaxis was added to the protocol. Voyager reported no vector-related serious adverse events among the 15 patients treated in the reported Phase 1b cohorts.
- Effective July 16, 2018, G. Andre Turenne became President and CEO, succeeding Steven Paul, who entered a consulting arrangement in August. These are subsequent-period developments.
Key facts for investors to verify
- Whether the Phase 2 VY-AADC trial enrolls on schedule and confirms efficacy and safety in a blinded, placebo-controlled setting.
- Whether the posterior delivery approach and baculovirus/Sf9 manufacturing process produce results comparable to earlier clinical material and trials.
- Whether reported cash runway into early 2020 remains reasonable as trial, manufacturing, facility and collaboration costs evolve, and whether additional financing will be needed.
- How ASC 606 affects future collaboration revenue recognition and the timing of deferred-revenue conversion; distinguish recognized revenue from cash receipts and contingent milestones.
- Whether AbbVie and Sanofi Genzyme exercise program options, and the conditions and economics attached to any future payments.
- The impact of the one-time CEO retirement-related stock compensation, ongoing equity compensation and lease commitments on future expenses and dilution.