REGENXBIO Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2021. The company is a clinical-stage gene-therapy biotechnology business; revenue primarily comes from NAV platform licenses and royalties, not sales of its own products. Amounts below are in millions of dollars except per-share data.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $22.0 | $16.6 | $40.9 | $34.2 |
| Operating expenses | $74.3 | $58.4 | $137.2 | $113.7 |
| Operating loss | $(52.2) | $(41.8) | $(96.3) | $(79.5) |
| Net loss | $(57.6) | $(33.8) | $(107.8) | $(73.8) |
| Net loss per share, basic and diluted | $(1.36) | $(0.91) | $(2.56) | $(1.98) |
| Operating cash used | $(71.0) | $(57.1) |
- Zolgensma royalties were $18.4 million in Q2 and $36.7 million in the first half, versus $11.9 million and $21.9 million in the comparable 2020 periods. Management attributed growth to increased product sales and geographic expansion. The 2020 first-half comparison included $7.2 million of non-recurring Ultragenyx license revenue.
- Calculated gross margin (revenue less cost of revenues) was approximately 55% in Q2 2021 versus 72% in Q2 2020; for the first half, approximately 64% versus 76%. Cost of revenues rose to $9.8 million in Q2 and $14.7 million in the first half.
- Research and development expense rose 20% to $45.9 million in Q2 and 14% to $85.6 million in the first half. General and administrative expense rose to $18.4 million and $36.3 million, respectively.
- At June 30, cash and cash equivalents were $257.1 million and marketable securities were $335.9 million, totaling $593.0 million. Management said these resources were expected to fund operations for at least 12 months from the report date. Total assets were $836.4 million, total liabilities $329.2 million, and stockholders’ equity $507.2 million.
- The company used $206.4 million in investing activities, including $50.9 million of property and equipment purchases, primarily for its Rockville headquarters and manufacturing facility. Financing provided $196.0 million, including $216.1 million net proceeds from a January public offering, partly offset by $22.0 million of royalty payments to HCR. Cash, cash equivalents and restricted cash declined $81.4 million during the half.
- The HCR sale of future Zolgensma royalties is recorded as a liability, not conventional funded debt. The liability was $184.4 million at June 30, including $33.3 million current; the company recorded $13.1 million of non-cash interest expense in the first half. Its estimated effective interest rate was 13.7%.
Material changes and business developments
- Revenue growth was led by Zolgensma royalties, but increased operating expenses and the new non-cash HCR interest expense contributed to a larger net loss. First-half R&D spending increased with clinical, personnel, facilities and early research costs; manufacturing-related costs partly offset the increase.
- The January offering issued 4.899 million shares for $216.1 million net proceeds. Shares outstanding were 42.555 million at June 30, compared with 37.476 million at December 31, 2020.
- Property and equipment, net, increased to $106.7 million from $56.5 million at year-end, reflecting facility investment. Remaining facility capital expenditures, net of landlord reimbursements, were estimated in the mid-double-digit millions and expected to extend into 2022.
- At June 30, the NAV platform supported one marketed product, Zolgensma, and 20 other partnered programs. The company reported an accumulated deficit of $396.9 million and expects continued losses for at least several years.
Outlook, risks and unusual items
- Clinical outlook: RGX-314’s wet AMD pivotal trial ATMOSPHERE was enrolling; the company expected to start a second pivotal trial in Q4 2021 and projected a BLA filing in 2024, subject to trial outcomes. It expected 2021 updates for suprachoroidal RGX-314 studies AAVIATE and ALTITUDE. RGX-202 IND submission was planned by year-end 2021. RGX-121 and RGX-111 trials continued. RGX-181 was on FDA clinical hold pending requested information; an update was expected by year-end. These are management plans, not assurances.
- Funding and spending: Management expected R&D, G&A and capital expenditures to increase. Future funding needs depend on clinical results, regulatory review, facility costs and partner performance. Although management cited at least 12 months of liquidity, it also stated that additional capital will be needed to meet longer-term objectives and may not be available on acceptable terms.
- Abeona dispute: After quarter-end, in July 2021, an arbitration tribunal denied Abeona’s claim and awarded REGENXBIO $28.0 million in damages plus corrected accrued interest of $5.6 million, totaling $33.6 million. As of August 4, none had been collected; the company sought court confirmation and continued enforcement. The company had recorded a $30.1 million gross receivable and an $8.2 million credit-loss allowance at June 30, and had stopped accruing interest while the receivable remained on non-accrual status. Recovery timing and amount remain uncertain.
- Partner and revenue risks: Revenue depends on a limited number of licensees and on partners’ development, approvals and commercialization; licensees may terminate agreements or fail to pay. Up to $194.8 million in unachieved license milestones was disclosed, but some or all may never be received. COVID-19 could further delay trials, manufacturing and facility construction and affect licensee revenue.
- The company reported no material change to previously disclosed market-risk exposure, no off-balance-sheet arrangements, and effective disclosure controls as of June 30. The filing said there were no material changes to previously reported risk factors other than expanded discussion of third-party licensing and collaboration risks.
Important facts for investors to verify
- Whether Zolgensma sales and royalty receipts sustain revenue growth, and how concentrated revenue remains in this product and a small number of licensees.
- Clinical-trial enrollment, safety and efficacy data, FDA feedback, and whether stated program timelines are achieved, especially for RGX-314 and the RGX-181 hold.
- Whether Abeona pays the $33.6 million arbitration award and whether the receivable allowance or expected recovery changes.
- Operating cash burn, capital spending and facility completion costs against management’s liquidity runway and future financing needs.
- HCR royalty-payment trajectory and changes to the estimated effective interest rate and related liability.