REGENXBIO Inc. — Q3 2021 Form 10-Q
Business context and reporting period. Clinical-stage gene therapy company with a proprietary AAV/NAV platform, internal clinical and preclinical programs, and licensing revenue. This unaudited report covers the quarter and nine months ended September 30, 2021; comparisons are with the same periods in 2020. Zolgensma was the platform’s only commercially available licensed product, alongside 20 partnered products in development.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $30.8 | $98.9 | $71.7 | $133.1 |
| Cost of revenue | $14.1 | $17.4 | $28.8 | $25.5 |
| Gross profit / approximate gross margin | $16.7 / 54% | $81.5 / 82% | $42.9 / 60% | $107.7 / 81% |
| Research and development | $47.9 | $44.0 | $133.5 | $119.1 |
| General and administrative | $21.0 | $15.9 | $57.3 | $46.2 |
| Operating income (loss) | $(57.3) | $14.0 | $(153.6) | $(65.6) |
| Net income (loss) | $(58.4) | $8.8 | $(166.2) | $(65.0) |
| Basic loss per share | $(1.37) | $0.24 | $(3.93) | $(1.75) |
At September 30, cash and cash equivalents were $228.4 million and marketable securities were $305.1 million, for total cash, cash equivalents and marketable securities of $533.5 million. Management said these resources were expected to fund operations for at least 12 months from issuance of the financial statements, based on its current plan. Nine-month operating cash use was $107.4 million, versus $93.5 million in 2020; investing cash use was $190.3 million, including $69.6 million of property and equipment purchases. Financing provided $187.6 million, including $216.1 million of net proceeds from a January stock offering, partly offset by $33.3 million of royalty payments to HCR.
The filing reports no conventional borrowings in the presented balance-sheet liabilities. It does report a $179.8 million liability related to the sale of future Zolgensma royalties to HCR, including $19.8 million of non-cash interest expense in the first nine months. Total liabilities were $339.0 million; current liabilities were $106.8 million.
Material changes versus the prior comparable period
- Q3 revenue fell $68.1 million year over year, mainly because Q3 2020 included an $80.0 million Zolgensma sales milestone. Zolgensma royalties nevertheless increased to $30.3 million from $18.8 million in Q3; nine-month royalties rose to $66.9 million from $40.7 million.
- Q3 moved from operating income and net income to losses. Nine-month net loss widened by $101.2 million, reflecting the prior-year milestone revenue, higher operating expenses, and non-cash HCR interest expense.
- R&D expense increased 12% for the nine-month period, while G&A increased 24%, driven chiefly by personnel, clinical and regulatory work, facilities, and professional services.
- Cash, cash equivalents and marketable securities declined from $522.5 million at December 31, 2020 to $533.5 million at September 30, 2021, despite $216.1 million raised in the January offering; cash and cash equivalents alone declined to $228.4 million from $338.4 million. The company also substantially increased property and equipment investment for its Rockville facility.
Outlook, commentary, risks and unusual items
- AbbVie collaboration: The September 2021 RGX-314 agreement remained subject to customary closing conditions, including antitrust clearance. The company expected closing by year-end 2021. At closing, REGENXBIO would receive $370 million upfront and could earn up to $1.38 billion in development, regulatory and commercial milestones, plus ex-U.S. royalties. The upfront payment was not yet reflected in the September 30 financial statements. U.S. net profits and losses are to be shared equally; AbbVie is expected to bear most development costs beginning in 2023.
- Development plans: The company reported enrollment in the first RGX-314 pivotal wet AMD trial and planned to initiate a second pivotal trial in Q4 2021, with the program expected to support a BLA filing in 2024. Management also reported encouraging interim observations from RGX-314 studies; these are clinical updates, not proof of efficacy or approval. RGX-202’s IND submission was expected by year-end 2021. Additional RGX-121 and RGX-111 data were expected in the first half of 2022. RGX-181 was on clinical hold, with a program update planned for 2022.
- Liquidity and spending: The company expected ongoing operating losses and rising R&D, G&A and capital expenditures. Remaining costs to complete the Rockville facility buildout, net of expected landlord reimbursements, were estimated in the low-to-mid double-digit millions; actual timing and amount could differ. Management said additional capital may be needed over time and may not be available on acceptable terms.
- Abeona receivable and legal matter: Abeona had not paid $28.0 million in license fees. An arbitration award, as amended, ordered payment of $33.6 million including interest; no payment had been received as of October 28, 2021. REGENXBIO recorded $30.1 million gross receivable and a $13.2 million allowance for credit losses. Enforcement and recovery timing and amount remain uncertain, and Abeona separately sought to enforce a purported settlement that REGENXBIO disputes.
- Other contingent items: The company could receive up to $194.8 million in unachieved license milestones, but some or all may never be realized. It was also eligible for up to €37.1 million of contingent uniQure development and regulatory milestone proceeds tied to Corlieve; none had been recognized, and realization was uncertain.
- Operating risks: Clinical success, regulatory approval, manufacturing, intellectual property, partner performance and commercialization remain uncertain. COVID-19 had not significantly affected reported results, but could delay trials, manufacturing and facility construction or affect licensee revenues. The filing reported no material change in previously disclosed risk factors other than expanded collaboration-related risks.
Most important facts for investors to verify
- Whether the AbbVie agreement closed, the timing and receipt of the $370 million upfront payment, and any changes to expected cost sharing or development plans.
- RGX-314 trial enrollment, safety and efficacy results, pivotal-trial timing, and whether the anticipated 2024 BLA-supporting timeline remains achievable.
- Actual cash burn, capital expenditures and facility completion costs relative to management’s stated 12-month runway estimate.
- Collections or further allowance changes for the Abeona receivable, and progress enforcing the arbitration award.
- Zolgensma sales and royalty trends, amounts paid to HCR, and the assumptions underlying the royalty-liability interest rate and repayment schedule.
- Whether contingent license and uniQure milestones are achieved; these amounts are not assured revenue.