NextCure, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines; it has no product-sales revenue and continues to fund research and development primarily with capital raised and collaboration proceeds.
Financial performance and position
Amounts below are in millions, except per-share data. Margins are not meaningful given the company’s development-stage operations and lack of product sales.
| Metric | Q2 2020 | Q2 2019 | First half 2020 | First half 2019 |
|---|---|---|---|---|
| Revenue | $0.0 | $1.4 | $22.4 | $2.8 |
| Research and development expense | $11.1 | $7.6 | $21.7 | $14.2 |
| General and administrative expense | $4.7 | $2.7 | $8.3 | $4.4 |
| Operating loss | $(15.8) | $(9.0) | $(7.6) | $(15.8) |
| Net loss | $(14.5) | $(8.2) | $(4.8) | $(14.4) |
| Basic and diluted loss per share | $(0.53) | $(0.61) | $(0.17) | $(1.92) |
- Q2 expenses rose year over year, primarily from higher personnel costs, program-related lab supplies and services, public-company costs and insurance.
- First-half 2020 revenue includes $22.4 million of deferred Lilly collaboration revenue recognized upon termination of the agreement. This accounting recognition drove the lower reported first-half net loss; it does not represent ongoing collaboration revenue.
- Cash, cash equivalents and marketable securities totaled $309.3 million at June 30, 2020, excluding restricted cash. Total current assets were $315.1 million; total assets were $333.5 million. Stockholders’ equity was $321.9 million.
- Cash and cash equivalents were $25.1 million and marketable securities were $284.3 million. The company reported $23.0 million of net cash used in operating activities for the first half; investing activities provided $13.9 million and financing activities used $0.7 million.
- Term-loan borrowings were $4.3 million, comprising $1.7 million current and $2.6 million long-term. The loan matures in January 2023; $4.3 million was required as collateral, held partly in restricted cash and partly in other assets.
Material changes and operating developments
- Lilly terminated its research and development collaboration effective March 3, 2020. No further quarterly support payments are due. The company recognized the remaining $22.4 million of deferred revenue in the first half.
- Compared with Q2 2019, Q2 2020 revenue fell to zero while operating expenses increased, and net loss widened by $6.3 million. First-half net loss improved year over year largely because of the Lilly revenue recognition.
- NC318 Phase 2 enrollment slowed amid COVID-19 disruptions, delaying expected initial data. In July 2020, the company said it did not plan to advance the NSCLC and ovarian cancer cohorts to the next stage at that time, pending analysis of delayed biomarker data. It continued enrollment in HNSCC and TNBC; one confirmed partial response in HNSCC supported advancing that cohort.
- The planned NC318 chemotherapy-combination trial was temporarily delayed. The NC410 Phase 1/2 trial began in June 2020 after a COVID-related delay; initial Phase 1 data were expected in the second half of 2021.
- COVID-19 may further affect trial enrollment, site operations, patient-safety monitoring, timelines, supply chains and the company’s financial condition. The filing does not quantify the ultimate impact.
Outlook, risks and other matters
- Management believed existing cash, cash equivalents and marketable securities would fund planned operations for at least the next 12 months, but said assumptions could prove incorrect and additional funding will be needed to support development. Financing may not be available on acceptable terms; shortfalls could require delaying, reducing or terminating programs.
- The company expected substantial research and development spending to continue increasing as NC318 and NC410 advance, alongside higher public-company and administrative costs. No specific revenue or earnings guidance was provided.
- Key risks include clinical-trial execution and efficacy, delayed or incomplete biomarker information and patient selection, regulatory and manufacturing challenges, reliance on third parties, and COVID-19-related disruption. The filing also disclosed that the former chief medical officer resigned effective August 4, 2020.
- No material litigation was reported. Management concluded disclosure controls were effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether management’s at-least-12-month liquidity estimate remains valid, and how operating cash use and clinical spending develop.
- Progress and timing of NC318 biomarker analysis, cohort decisions and future clinical data, including the HNSCC and TNBC cohorts.
- NC410 trial progress and whether expected data timing changes.
- Effects of Lilly’s termination and the absence of future collaboration support payments on funding needs.
- COVID-19 effects on enrollment, trial sites, supply availability and development timelines.