NextCure, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter ended September 30, 2023. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines; it has no approved products and has not generated revenue from product sales.
Financial performance and position
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | No product revenue | No product revenue to date |
| Research and development expense | $11.0 million for Q3; $36.1 million for nine months | $13.5 million and $41.4 million, respectively, in 2022 |
| General and administrative expense | $4.6 million for Q3; $15.7 million for nine months | $5.7 million and $16.8 million, respectively, in 2022 |
| Net loss | $14.3 million for Q3; $48.3 million for nine months | $18.9 million and $57.4 million, respectively, in 2022 |
| Net loss per share | $0.51 for Q3; $1.73 for nine months | $0.68 and $2.07, respectively, in 2022 |
| Cash, cash equivalents and marketable securities | $118.2 million | $159.9 million at December 31, 2022 |
| Operating cash flow | $(42.3) million for nine months | $(44.9) million for nine months in 2022 |
| Total liabilities | $13.5 million, including $6.1 million of long-term lease liabilities | $16.6 million at December 31, 2022 |
Operating margins are not meaningful because the company reported no product revenue. Other income was $1.3 million in Q3 and $3.6 million for the first nine months, primarily reflecting interest income. Investing activities provided $35.1 million for the nine months, mainly from net sales and maturities of marketable securities; financing activities provided $0.1 million.
Material changes versus prior periods
- Q3 operating expenses fell $3.6 million year over year, and nine-month expenses fell $6.3 million. R&D expense declined, principally due to discontinuing NC318 clinical development in Q4 2022 and lower spending on other programs and preclinical development; Q3 also reflected lower NC762 costs.
- Net losses narrowed by $4.6 million in Q3 and $9.2 million for the nine-month period versus 2022, aided by lower expenses and higher interest income.
- Cash and marketable securities decreased from $159.9 million at year-end 2022 to $118.2 million at September 30, 2023. The company reported $48.3 million of nine-month net loss and $42.3 million of operating cash use.
- In April 2023, NextCure and LegoChem designated their first co-development product, targeting B7-H4; costs are shared equally, and costs incurred were not material as of quarter-end.
Outlook, risks and contingencies
- Management expects ongoing operating losses and negative operating cash flows and says substantial additional funding will be needed. The filing gives differing runway descriptions: the financial-statement note says current resources should fund planned operations for at least 12 months from issuance, while MD&A estimates funding into mid-2025. Management cautions that assumptions may be wrong and funds could be used sooner.
- Near-term spending is expected on NC410 with pembrolizumab, NC762, NC525 and other R&D. At filing, management planned year-end updates on the NC410 and NC762 trials and an NC525 operational update.
- The company may raise funds through equity, debt, collaborations or licensing; availability and terms are uncertain. Its August 2023 at-the-market sales agreement permits up to $75 million of stock sales, but no shares had been sold under it by September 30.
- Key risks include clinical and regulatory uncertainty, financing needs, competition, manufacturing and reliance on third parties. The company reported no material updates to its 2022 annual-report risk factors.
- Available-for-sale securities had $603,000 of aggregate unrealized losses, which management attributed primarily to interest rates and considered temporary. The company stated it did not intend, and was not likely required, to sell them before maturity.
- The Ye Zhou securities class action was dismissed in July 2023, judgment was entered, and no appeal was filed. The related Liu derivative action was voluntarily dismissed in August 2023.
Most important facts for investors to verify
- Reconcile the stated cash runway: at least 12 months from issuance in the note versus into mid-2025 in MD&A, and assess the assumptions behind both estimates.
- Monitor cash burn, clinical-trial spending and whether the company uses its $75 million ATM facility or obtains other financing.
- Track clinical updates and development progress for NC410, NC762 and NC525, as well as the scope and costs of the LegoChem collaboration.
- Assess the effect of future trial results, regulatory requirements, enrollment, manufacturing needs and potential partnering on funding requirements and timelines.