MeiraGTx Holdings plc — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. MeiraGTx is a clinical-stage gene therapy company focused on ocular, salivary gland and neurodegenerative disorders. The June 2018 IPO and corporate reorganization mean the period includes significant financing and share-based compensation activity. The company has no approved products and has generated no product revenue.
Financial highlights
| Metric | Q2 2018 | Six months 2018 | Prior-year comparable |
|---|---|---|---|
| Revenue | None | None | None |
| Operating expenses | $25.2 million | $43.2 million | $7.6 million and $14.6 million |
| Net loss | $30.0 million | $46.4 million | $7.2 million and $14.0 million |
| Basic and diluted loss per share | $2.29 | $4.27 | $0.85 and $1.64 |
| Operating cash used | Not stated separately | $36.4 million | $10.5 million |
| Cash and cash equivalents at period end | $102.1 million | $102.1 million | $8.5 million at Dec. 31, 2017 |
| Total liabilities at period end | $9.2 million | $9.2 million | $21.9 million at Dec. 31, 2017 |
Operating margins are not meaningful because the company had no revenue. Net loss includes non-cash and other unusual charges, including share-based compensation and foreign-exchange and warrant remeasurement losses.
- Q2 general and administrative expense was $17.4 million, up $15.2 million year over year; management attributed most of the increase to payroll and stock-based compensation. Six-month G&A was $28.5 million versus $4.4 million.
- Q2 research and development expense was $7.8 million, up $2.4 million year over year, mainly reflecting manufacturing-facility preparation and stock-based compensation. Six-month R&D was $14.7 million versus $10.2 million.
- Six-month financing cash flow was $131.5 million, primarily from $65.9 million net IPO proceeds, $56.2 million from preferred-share sales and $9.7 million from warrant exercises; the company also repaid a $1.4 million note. Investing cash use was $1.3 million.
- The company reported no debt outstanding at June 30; remaining capitalized lease obligations totaled about $49,000. Restricted cash of $123,376 was held as lease collateral.
Material changes and unusual items
- Net loss rose substantially versus 2017, alongside higher operating costs as the company expanded clinical development, manufacturing preparation and public-company activities.
- Share-based compensation was $8.4 million in Q2 and $12.6 million for the first half, versus $0.7 million and $1.5 million, respectively, a year earlier. Management said Q2 G&A included $13.6 million of compensation related to senior-management restricted shares, including associated tax costs.
- Foreign-currency results shifted to a $2.7 million Q2 loss from a $0.45 million gain in Q2 2017; management attributed the change primarily to U.S. dollar strength against sterling. The six-month foreign-currency loss was $1.7 million.
- Warrant fair-value remeasurement produced a $2.2 million Q2 expense and $1.5 million expense for the first half. Warrants were exercised in June, and the related liability was reclassified to equity.
- All 11.5 million preferred shares converted into ordinary shares at the IPO. The company sold 5 million ordinary shares at $15 per share, for approximately $65.9 million net proceeds.
Outlook, developments and risks
- Management estimated that June 30 cash would fund operating expenses and capital requirements into Q2 2020. It cautioned that this estimate depends on assumptions and cash could be used sooner. No formal revenue or earnings guidance was provided; management expects substantial losses and rising expenses, with product revenue not expected for several years, if ever.
- Clinical updates: CNGB3 dose escalation was complete, with three pediatric patients treated and up to eight pediatric patients expected to be dosed in the second half of 2018. RPGR dosing had reached seven patients; the company anticipated the final adult dose cohort in Q3 and pediatric dosing in Q4 2018. RPE65 Phase 1/2 dosing was complete, with nine adults and six pediatric patients treated. CNGA3 manufacturing was ongoing, with release expected by year-end 2018 and a study anticipated to begin in early 2019.
- Regulatory and manufacturing milestones included FDA Fast Track designation for RPGR, a positive EMA orphan-drug opinion for CNGA3, release of the FDA clinical hold on CNGB3 in May, and a UK investigational-medicinal-product manufacturing authorization in June.
- Key risks include clinical efficacy and safety uncertainty, trial enrollment and regulatory delays, manufacturing scale-up and supply constraints, competition, foreign-exchange exposure, and the need for additional capital. If financing is unavailable on acceptable terms, the company may have to delay, reduce or discontinue development programs. Management reported no material legal proceedings and no off-balance-sheet arrangements.
- Subsequent event: two London facility leases were replaced in July 2018; the new leases run to May 2027, with aggregate annual base rent of approximately $363,000 through May 2022, then subject to market-rate revaluation.
Investor verification priorities
- Track cash burn against management’s Q2 2020 runway estimate, including the effect of rising clinical, manufacturing and public-company costs.
- Verify clinical enrollment, safety, efficacy and timing against the stated CNGB3, RPGR, RPE65 and CNGA3 milestones; confirm subsequent regulatory updates.
- Separate recurring operating costs from IPO-related, share-based compensation, foreign-exchange and warrant remeasurement effects when assessing loss trends.
- Review future financing needs and dilution risk, as well as the company’s reliance on UCL-related licenses and research arrangements and its manufacturing capacity.
- Assess sterling exposure: the filing reports no currency hedging and identifies exchange-rate movements as a source of earnings volatility.