Nurix Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended May 31, 2022 (fiscal Q2 and first half of fiscal 2022). Financial statement amounts below are in millions of dollars unless noted.
Business context and reporting period
Nurix is a clinical-stage biopharmaceutical company developing small-molecule and cell therapies using its DELigase platform. It had four lead candidates in Phase 1 development: NX-2127, NX-5948, NX-1607 and DeTIL-0255. The company had no approved products and generated no product-sales revenue; reported revenue came from collaborations with Gilead and Sanofi.
Financial performance and position
| Metric | Three months ended May 31, 2022 | Three months ended May 31, 2021 | Six months ended May 31, 2022 | Six months ended May 31, 2021 |
|---|---|---|---|---|
| Collaboration revenue | $11.4 | $7.1 | $21.1 | $12.1 |
| Research and development expense | $47.5 | $26.0 | $90.6 | $49.0 |
| General and administrative expense | $9.7 | $7.5 | $18.9 | $14.0 |
| Total operating expenses | $57.1 | $33.5 | $109.5 | $63.0 |
| Operating loss | $(45.7) | $(26.4) | $(88.5) | $(50.9) |
| Net loss | $(45.4) | $(26.4) | $(87.9) | $(50.7) |
| Basic and diluted loss per share | $(1.01) | $(0.60) | $(1.96) | $(1.23) |
- For the six months, operating cash outflow was $75.5, compared with $23.5 in the prior-year period. Investing activities provided $35.3, largely reflecting investment maturities net of purchases; financing activities provided $1.9, versus $151.8 in the prior year, which included the follow-on equity offering.
- At May 31, cash and cash equivalents were $41.5; short- and long-term investments totaled $307.3. Cash, cash equivalents and investments were $348.8. Total assets were $394.3 and stockholders’ equity was $266.7.
- Total liabilities were $127.6, including $14.5 of recorded operating lease liabilities and $87.2 of deferred revenue. The balance sheet reports no borrowings or other financial debt.
- Six-month comprehensive loss was $90.4, including $2.5 of unrealized investment losses in other comprehensive loss. Stock-based compensation expense was $12.8.
Material changes versus the prior comparable period
- Six-month collaboration revenue increased $9.0, primarily from greater completion of performance obligations under the Gilead and Sanofi agreements and transaction-price changes that also resulted in cumulative revenue catch-ups.
- Six-month R&D expense increased $41.6. Management attributed the rise to higher headcount and stock compensation, expanded discovery and preclinical work, and increased clinical-trial and contract-manufacturing activity.
- Six-month G&A expense increased $4.8, reflecting higher personnel and stock-based compensation costs and professional services, including legal and accounting costs.
- Net loss widened by $37.3 for the six months. Operating cash use rose as the company increased development spending and recognized collaboration revenue against previously received payments, reducing deferred revenue.
- Accumulated deficit increased from $220.9 at November 30, 2021 to $308.8 at May 31, 2022. The company had 45.0 million shares outstanding at May 31, versus 44.7 million at November 30.
Outlook, management commentary, risks and contingencies
- Management expected cash, cash equivalents and investments to fund operations for at least 12 months following issuance of the financial statements. It anticipates substantial additional losses and expenses as clinical programs, research, manufacturing, infrastructure and public-company costs grow; additional capital will be needed for the longer-term plan.
- In June 2022, after quarter-end, Nurix sold 2.0 million shares through its at-the-market facility for approximately $19.3 million net. The facility then had $130.0 million remaining available. This subsequent financing is not included in the May 31 balance sheet.
- Gilead recognized a $1.5 million research milestone in May, with payment anticipated in fiscal Q3 2022. Nurix reported eligibility for up to approximately $2.3 billion of additional Gilead payments and $2.5 billion of additional Sanofi payments, subject to contractual milestones and other conditions; these are contingent, not assured proceeds. Both collaborations also provide for potential royalties, subject to terms and any applicable U.S. profit-sharing options.
- Key risks include early-stage clinical and scientific uncertainty, safety or efficacy failures, patient-enrollment and regulatory delays, reliance on third-party and in some cases single-source manufacturers, collaboration-partner decisions, intellectual-property challenges, and the possibility of needing financing earlier than expected. Management said COVID-19 had minimally affected current operations to date but that future effects remained uncertain.
- A California tax authority audit resulted in proposed assessments concerning revenue sourcing and R&D credits. Nurix disagrees and intends to challenge them; it recorded no unrecognized tax benefit for the sourcing position and maintains one related to California R&D credits. The company reported no material legal proceedings and no material accrued indemnification liabilities.
- Management concluded disclosure controls and procedures were ineffective as of May 31, 2022 because previously reported material weaknesses in IT general controls and segregation of duties for account reconciliations and journal entries remained unremediated. The weaknesses had not caused a financial-statement misstatement; remediation and testing were ongoing, and management said additional review procedures supported the statements’ fair presentation.
- The company signed a lease for a planned Texas R&D laboratory expected to commence around August 2022. Total undiscounted future operating lease payments were $49.5, including $34.3 associated with the Woodlands lease, which was excluded from the recorded lease-liability calculation at May 31.
Most important facts for investors to verify
- Clinical-trial progress, enrollment, safety findings and any announced development milestones for NX-2127, NX-5948, NX-1607 and DeTIL-0255.
- Cash burn and runway against management’s 12-month estimate, including the effect of the June ATM proceeds and future R&D and lease spending.
- Timing and conditions for collaboration milestone payments, especially the anticipated $1.5 million Gilead payment, and the distinction between contingent milestone ceilings and committed funding.
- Progress in remediating the material weaknesses, including whether controls are validated and operating effectively over sustained reporting cycles.
- Potential exposure and developments in the California tax audit, as well as any material updates to manufacturing, intellectual-property or other disclosed risks.