REGENXBIO Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. REGENXBIO is a clinical-stage gene therapy company; revenue comes primarily from NAV platform licenses and royalties, not sales of its own products. Zolgensma royalties were the largest revenue source.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $26.5 million | $30.8 million | $81.4 million | $71.7 million |
| Operating expenses | $97.6 million | $88.1 million | $286.5 million | $225.3 million |
| Net loss | $75.5 million | $58.4 million | $220.4 million | $166.2 million |
| Net loss per share | $1.75 | $1.37 | $5.11 | $3.93 |
| Operating cash used | — | $168.1 million | $122.6 million |
- Gross margin, calculated as revenue less cost of revenue, was approximately 50.6% in Q3 and 48.7% for the first nine months, compared with 54.2% and 59.9%, respectively, in 2021.
- At September 30, cash, cash equivalents and marketable securities totaled $617.0 million. Cash and cash equivalents were $118.5 million; marketable securities were $498.5 million.
- Cash, cash equivalents and restricted cash declined $226.7 million during the first nine months. Investing cash use was $38.6 million; financing cash use was $19.9 million.
- The company reported a $147.4 million liability from its sale of future Zolgensma royalties to HCR ($44.4 million current; $103.1 million non-current). It also reported $88.3 million of operating lease liabilities. The filing does not present conventional borrowings as a separate debt balance.
- Total assets were $883.8 million and stockholders’ equity was $563.8 million. Accumulated deficit was $381.6 million.
Changes versus the prior comparable period
- Q3 revenue fell $4.3 million, primarily because Zolgensma royalties declined $5.0 million; Novartis reported 15% lower Zolgensma sales in U.S. dollars year over year for the quarter. Nine-month revenue rose $9.7 million, with Zolgensma royalties up $8.2 million.
- Research and development expense increased $15.5 million in Q3 and $46.5 million year to date, driven principally by clinical trials, manufacturing and personnel; AbbVie cost reimbursements partly offset these increases.
- Nine-month cost of revenue rose $13.0 million, including a non-recurring $9.2 million charge associated with the Penn license amendment.
- Operating cash use increased $45.5 million year over year for the first nine months, largely reflecting higher operating expenses. Capital expenditures fell to $25.3 million from $69.6 million as the Rockville facility buildout was completed in the first half of 2022.
Outlook, risks and notable items
- Management said available cash and marketable securities were expected to fund operations and commitments for at least 12 months from issuance of the financial statements. The company expects continued losses for at least several years and anticipates increased R&D and G&A spending.
- Management expected RGX-314 pivotal wet AMD trials to support a BLA submission in 2024; the first RGX-202 Duchenne patient was anticipated in the first half of 2023. The RGX-121 CAMPSIITE program was also intended to support a 2024 BLA filing, potentially through accelerated approval. These are forward-looking expectations, not assurances.
- AbbVie paid a $370 million upfront fee in 2021 for RGX-314 rights. Under the collaboration, the parties share U.S. development costs and U.S. profits or losses; AbbVie was to assume the majority of development expenses beginning January 1, 2023. No AbbVie collaboration revenue was recognized in the 2022 periods shown.
- The HCR royalty arrangement carries an estimated effective interest rate of 15.4%; actual interest and repayment timing depend on future Zolgensma royalties. The company has no obligation to repay HCR if royalties do not reach the contractual cap.
- The Penn agreement requires $20 million in payments, including four annual $3 million installments after an initial $8 million payment. The company recorded a $9.2 million cost-of-revenue charge and had $9.9 million payable under the agreement at September 30, 2022.
- Revenue is concentrated in a limited number of licensees and is dependent on partner product development, approvals and sales. Clinical, regulatory, manufacturing, financing and COVID-19-related delays remain risks. Management said COVID-19 had not significantly affected results in the periods presented, but future effects were uncertain.
- Available-for-sale securities generated a $15.7 million unrealized loss in other comprehensive loss for the first nine months; management reported no identified credit losses on that portfolio. A prior-period cash-flow presentation error was revised: $15.3 million of 2021 royalty-payment interest was reclassified from financing to operating activities, with no effect on previously reported earnings or balance-sheet amounts.
- The company reported no pending legal action it believed could reasonably be expected to have a material adverse effect, and no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Whether Zolgensma sales and royalty receipts stabilize or recover, and how much revenue remains concentrated in that product and other licensees.
- Clinical-trial progress, safety and efficacy evidence, and timing for RGX-314, RGX-121 and RGX-202, including the stated 2023–2024 milestones.
- Quarterly cash burn, forecast runway, and the impact of higher development spending and AbbVie’s changing cost-sharing obligations.
- HCR royalty liability estimates, effective interest rate and payments, along with the Penn payment schedule.
- Collection of Abeona settlement receivables: $5.0 million was due in November 2022 and another $5.0 million by November 2024 or an earlier specified transaction; the non-current receivable carried a $4.0 million credit-loss allowance.
- Whether the unrealized investment losses, partner sales, clinical timelines or financing needs materially change after the reporting date.