XBiotech Inc. — Form 10-Q Summary
Period: Quarter and six months ended June 30, 2018. Financial statements are unaudited and presented in U.S. dollars. XBiotech is a pre-commercial biopharmaceutical company developing True Human monoclonal antibodies. It reported no revenue in either 2018 or the comparable 2017 periods.
Financial performance and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $3.949m | $7.399m | $6.941m | $15.587m |
| General and administrative expense | $1.672m | $2.289m | $2.829m | $4.372m |
| Operating loss | $(5.621)m | $(9.688)m | $(9.770)m | $(19.959)m |
| Net loss | $(5.907)m | $(9.133)m | $(9.976)m | $(19.696)m |
| Basic and diluted loss per share | $(0.16) | $(0.26) | $(0.28) | $(0.57) |
| Cash used in operating activities | Not separately reported by quarter | $(7.426)m | $(20.376)m |
For the six months, total operating expenses fell 51% to $9.770m. Management attributed lower R&D spending mainly to completion of the prior global clinical trial, reduced trial activity, and a smaller R&D workforce; lower G&A reflected reduced stock compensation and professional fees. Foreign-exchange losses were $0.393m in Q2 2018 versus a $0.441m gain in Q2 2017, and $0.376m for the first half versus a $0.099m gain.
At June 30, 2018, cash and cash equivalents were $24.849m, down from $31.768m at December 31, 2017. Total assets were $54.290m; total liabilities were $2.768m, including $2.756m of current liabilities. The company said it was debt-free. There is no meaningful revenue-based margin to assess. Cash provided by financing was $0.201m in the first half, mainly from option exercises; 2017 included $33.274m of financing proceeds, including an equity offering.
Business developments, outlook, and risks
- XBiotech launched open-label Phase 2 studies of bermekimab (MABp1) in atopic dermatitis and hidradenitis suppurativa, testing subcutaneous administration using pre-filled syringes. Further studies would be needed for marketing approval.
- A physician-sponsored pancreatic cancer/cachexia study of bermekimab was more than halfway enrolled; results were expected later in 2018. The company also planned further clinical development of 514G3, including a proposed hemodialysis prophylaxis study launch in 2019.
- Management reported research progress on candidate antibodies for shingles, C. difficile, and Ebola. It said Ebola candidate production was being prepared, with significant quantities expected later in 2018; these programs remained developmental.
- The company reported that consolidation into its Austin facility was nearly complete, with a new 33,000-square-foot site intended to reduce operating costs while housing manufacturing, research, and administrative operations.
- Management expected available cash to fund operating expenses and capital requirements through 2019, based on current plans and assumptions. It also warned that it could use cash sooner than expected and anticipated substantial operating losses for the foreseeable future; profitability is uncertain.
- A securities class action remained pending in Travis County, Texas, concerning alleged statements about the company’s Phase III Xilonix colorectal cancer trial. XBiotech said it believed the claims were without merit and intended to defend itself; the amount of potential damages was unspecified.
- Management reported no material changes to the risk factors in its 2017 annual report. The filing also identifies clinical, regulatory, financing, commercialization, competition, intellectual-property, and execution risks.
Key facts for investors to verify
- Progress, enrollment, safety, and results for the bermekimab studies and the timing and design of planned 514G3 development.
- Whether cash burn and spending remain consistent with management’s stated runway through 2019, and whether additional financing will be needed.
- Regulatory and clinical prospects for the pipeline, given the lack of product revenue and the company’s history of losses.
- Developments and potential financial exposure in the pending securities litigation.
- Execution and cost savings from the Austin facility consolidation and the company’s manufacturing plans.