NextCure, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing was signed March 4, 2021. NextCure is a clinical-stage biopharmaceutical company developing immunotherapies; it had no approved products and generated no product-sales revenue.
Financial results and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $22.4 million | $6.3 million |
| Research and development expense | $46.6 million | $34.2 million |
| General and administrative expense | $17.0 million | $9.6 million |
| Operating loss | $41.2 million | $37.5 million |
| Net loss | $36.6 million | $33.7 million |
| Basic and diluted loss per share | $1.33 | $2.15 |
| Net cash used in operating activities | $45.0 million | $35.6 million |
2020 revenue was recognized under the former Eli Lilly collaboration, including recognition of remaining deferred revenue when Lilly terminated the agreement; it was not product revenue. Other income, net, was $4.6 million, primarily interest income. The filing does not report meaningful product gross margins.
At year-end, cash and cash equivalents were $32.8 million and marketable securities were $250.7 million; together, these totaled $283.4 million, excluding restricted cash. Total current assets were $288.0 million and current liabilities were $10.3 million. Outstanding term-loan borrowings were $3.5 million, with $1.7 million current; the loan is secured by cash and investment accounts and matures in January 2023. Management expected available cash, equivalents and marketable securities to fund planned operations into the second half of 2023, subject to assumptions and potential changes in spending.
Material changes and business developments
- Revenue increased from 2019 because the Lilly agreement’s deferred revenue was recognized upon termination; the collaboration ended effective March 3, 2020, eliminating future support payments and potential collaboration proceeds.
- R&D expense increased $12.3 million, mainly from higher internal costs and discovery/preclinical program spending. G&A expense increased $7.4 million, primarily from personnel, professional fees and insurance.
- Operating cash use rose by $9.3 million. Investing activities provided $43.5 million, mainly from marketable-security maturities; financing activities used $1.4 million, primarily for term-loan repayments.
- NC318 Phase 2 screening based on PD-L1 did not identify enough S15-positive tumors to assess activity effectively: 13% of evaluable enrolled patients had S15-positive tumors. The company planned to modify selection and begin enrolling based on S15 expression in Q2 2021. It had reported a confirmed partial response in a head-and-neck cancer patient and would not advance NSCLC and ovarian cohorts to the next trial stage under the then-current design.
- NC410 entered Phase 1 in June 2020 after a COVID-related delay. NC762’s IND was submitted in Q1 2021, with a Phase 1/2 trial planned for Q2 2021.
Outlook, risks and contingencies
Management expected continued substantial operating losses and R&D investment, with no product revenue anticipated for several years, if ever. It expects to need additional capital; financing may be unavailable or come on unfavorable terms and could dilute shareholders or require surrendering valuable rights. No numerical revenue or earnings guidance was provided.
- COVID-19 slowed NC318 Phase 2 enrollment and delayed NC410 trial initiation; further effects on trial sites, enrollment, operations and supply chains remained uncertain.
- NC318’s revised biomarker-selection approach, clinical trial design, patient enrollment and preliminary results create development and timing uncertainty. Early-stage results may not predict later outcomes.
- All candidates remain investigational. Safety, efficacy, regulatory approval, manufacturing scale-up and commercialization are uncertain; NC318 had reported serious treatment-related events, including pneumonitis and infusion reactions.
- The Lilly collaboration termination removed future support and milestone or royalty opportunities. The Yale research and license relationships involve funding, milestones, royalties and potential termination risks.
- A putative securities class action alleges violations related to statements about NC318 and FIND-IO. The company intends to seek dismissal and defend the case; damages are unspecified and the potential loss could not be estimated.
- The company reported effective disclosure controls and management-assessed internal control over financial reporting as effective. Its auditor did not provide an internal-control attestation because of the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Whether the S15 assay and revised NC318 patient-selection strategy were validated and produced interpretable clinical response data.
- Subsequent safety, efficacy and timing updates for NC318, NC410 and NC762, including the status of planned trials and the Yale-led NC318 combination study.
- Actual cash burn, marketable-security balances, debt repayments and the assumptions behind the stated runway into the second half of 2023.
- Whether NextCure secured additional financing or new collaboration revenue following Lilly’s termination.
- Developments in the securities litigation, including any dismissal, settlement or estimated financial exposure.