Voyager Therapeutics, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. Voyager is a clinical-stage gene therapy company developing AAV-based treatments for severe neurological diseases. It has no approved products and reported no product-sales revenue; collaboration revenue came exclusively from Sanofi-Genzyme.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Collaboration revenue | $1.2 | $3.7 | $2.6 | $8.6 |
| Research and development expense | $15.3 | $10.5 | $29.4 | $19.2 |
| General and administrative expense | $4.5 | $2.9 | $9.4 | $6.4 |
| Operating loss | $(18.6) | $(9.6) | $(36.2) | $(17.1) |
| Net loss | $(18.9) | $(9.3) | $(35.5) | $(16.5) |
| Basic and diluted net loss per share | $(0.73) | $(0.37) | $(1.37) | $(0.66) |
- Cash flow: Six-month operating cash use was $30.6 million, versus $19.2 million a year earlier. Investing activities provided $59.2 million, principally from $62.6 million of marketable-security maturities, partly offset by property and equipment purchases. Financing provided $1.1 million, mainly from stock-option exercises.
- Liquidity: At June 30, cash and cash equivalents were $66.3 million; marketable securities were $76.5 million, including $75.0 million of current U.S. Treasury notes and $1.5 million of non-current equity securities. The company cited $141.3 million of cash, cash equivalents and marketable debt securities and estimated these resources would fund its current operating plan into 2019.
- Balance sheet: Total assets were $158.4 million, total liabilities $53.1 million and stockholders’ equity $105.3 million. No borrowings or conventional debt balance was reported. Liabilities included $39.1 million of deferred collaboration revenue and $5.4 million of deferred rent. Accumulated deficit was $125.5 million.
- Margins: The filing does not present a meaningful product gross margin; revenue was collaboration revenue and operating expenses substantially exceeded it.
Changes versus the prior comparable period
- Q2 collaboration revenue fell $2.5 million year over year; six-month revenue fell $5.9 million. The company attributed lower recognition primarily to revised estimates that extended service periods under the Sanofi-Genzyme agreement, including prior changes associated with deprioritizing the SMA program.
- Q2 R&D expense rose $4.8 million and six-month R&D expense rose $10.2 million, driven chiefly by third-party research, preclinical/clinical and manufacturing-preparation activity, higher headcount, and facility costs.
- Q2 G&A expense increased $1.7 million; the six-month increase was $3.0 million, mainly reflecting headcount, facilities and professional costs.
- Six-month net loss more than doubled year over year, from $16.5 million to $35.5 million, as expenses increased while collaboration revenue declined.
- Cash and cash equivalents increased from $36.6 million at year-end 2016 to $66.3 million, while current marketable securities declined from $137.8 million to $75.0 million, reflecting the investment portfolio’s maturities and liquidity mix.
Outlook, management commentary and material matters
- Management expects significant future spending and operating losses as it advances VY-AADC01 in a Phase 1b Parkinson’s disease trial, advances VY-AADC02, progresses other preclinical programs, and builds manufacturing and delivery capabilities. The filing gives no specific revenue or earnings guidance.
- Management said it expects existing resources to fund the current operating plan into 2019, but cautioned that operating-plan timing may vary and additional funding may be needed or unavailable on acceptable terms. Potential funding routes include equity, debt, collaborations and licensing; equity financing could dilute shareholders.
- The company’s six-program pipeline includes advanced Parkinson’s disease, a monogenic form of ALS, Huntington’s disease, Friedreich’s ataxia, frontotemporal dementia/Alzheimer’s disease and severe chronic pain. VY-SMN101 for SMA had been deprioritized in 2016 because of progress in other programs and the competitive landscape.
- Under the Sanofi-Genzyme collaboration, potential payments include option-exercise payments for certain programs, up to $645 million of regulatory and commercial milestones across programs, and contingent royalties. These amounts depend on options, development, approvals and sales; they are not assured revenue. Sanofi-Genzyme holds termination rights, including termination for convenience.
- The company revised estimated service periods again in Q2, reducing future collaboration revenue recognition by approximately $0.1 million per quarter. This is a prospective accounting estimate change, not a reduction in cash already received.
- A nonprofit research and development funding arrangement provided a $1.0 million milestone payment in Q1, recorded as a long-term liability because repayment is considered probable. Repayment may be required in specified circumstances, and successful development/commercialization may trigger payments of up to 2.6 times funding received.
- Operating lease commitments totaled $28.2 million through 2024. No litigation or off-balance-sheet arrangements were reported. Management said disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting.
- Key risks include clinical and regulatory failure, manufacturing scale-up and delivery challenges, competition, intellectual-property protection, dependence on collaboration partners, and the need for additional capital. The company reported no material inflation impact for the periods presented.
Important facts for investors to verify
- Whether the Parkinson’s clinical program and VY-AADC02 progress on the timing and evidence investors expect, and whether safety, efficacy and delivery results support further development.
- Whether the stated runway into 2019 remains credible as R&D spending rises, and what additional financing or dilution may be required.
- How Sanofi-Genzyme option decisions, collaboration priorities and revised service-period estimates affect future revenue, funding and program control.
- Whether manufacturing capacity, cGMP readiness and delivery-device access can support clinical advancement and eventual commercialization.
- How the contingent nonprofit financing repayment terms, lease obligations and other commitments affect future cash needs.