REGENXBIO Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing was signed March 1, 2021. REGENXBIO is a clinical-stage gene-therapy company whose revenue comes from licensing its NAV AAV vector platform and royalties on partnered products; it had no revenue from sales of its own products.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $154.6 million | $35.2 million |
| Operating expenses | $273.8 million | $184.2 million |
| Operating loss | $119.2 million | $149.0 million |
| Net loss | $111.3 million | $94.7 million |
| Net loss per share, basic and diluted | $2.98 | $2.58 |
| Net cash used in operating activities | $54.1 million | $107.7 million |
| Cash, cash equivalents and marketable securities at year-end | $522.5 million | $400.0 million |
Revenue increased 339% year over year, mainly from Zolgensma royalties of $61.6 million (up from $20.8 million) and an $80.0 million sales milestone recognized after cumulative Zolgensma sales reached $1.0 billion. The milestone was the last development or sales-based milestone under that license. One licensee, Novartis Gene Therapies, accounted for approximately 94% of 2020 revenue.
Research and development expense rose 34% to $166.3 million; general and administrative expense rose 23% to $63.8 million. Cost of revenue was $35.7 million, implying a 76.9% revenue contribution after that cost; this is not a conventional product gross margin. The company reported a $7.7 million provision for credit losses related to Abeona receivables.
In the fourth quarter, revenue was $21.4 million versus $11.8 million in Q4 2019, while net loss was $46.2 million versus $26.5 million. Quarterly revenue and earnings were uneven; Q3 2020 included the $80.0 million Zolgensma milestone.
Year-end current assets were $531.2 million and current liabilities $81.4 million. The balance sheet included a $193.3 million liability from the sale of future royalties to HCR ($18.8 million current and $174.5 million non-current), as well as $72.7 million of operating lease liabilities. The filing does not report conventional bank borrowings. Operating cash outflow improved year over year, while financing cash flow included approximately $192.8 million net proceeds from the royalty transaction. The company said year-end cash and securities were expected to fund its plan for at least 12 months from the report date; it also completed a January 2021 equity offering with $216.1 million net proceeds.
Material changes and business developments
- R&D spending increased by $42.1 million, reflecting higher staffing, manufacturing and process-development costs, and clinical and regulatory activity.
- In December 2020, REGENXBIO received $200.0 million gross from HCR for capped Zolgensma royalty rights; net proceeds were $192.5 million. The company continues to recognize Zolgensma royalty revenue and records payments to HCR against the liability. Future royalty payments to HCR are capped at $260 million through November 7, 2024, with a higher cap thereafter.
- Capital investment increased: property and equipment purchases were $26.9 million in 2020, primarily for the new Rockville headquarters and manufacturing facility. Remaining facility capital expenditures were estimated in the middle-to-upper double-digit millions, net of landlord reimbursements, and expected to extend into 2022.
- The January 2021 public offering generated $216.1 million net proceeds, after year-end; it issued 4,899,000 shares at $47 per share.
Outlook, commentary and key risks
- Management expected continued operating losses and rising R&D, G&A and capital spending. The company’s path to profitability depends on product development, regulatory approval and commercialization, as well as licensee performance.
- RGX-314’s wet-AMD pivotal program was active and enrolling; the company planned two controlled trials totaling approximately 700 patients and anticipated a BLA filing in 2024. The second pivotal trial was planned for the second half of 2021. Suprachoroidal RGX-314 trials for wet AMD and diabetic retinopathy were also underway.
- Other stated development plans included RGX-121 and RGX-111 trials for MPS II and MPS I; IND submissions for RGX-181 and RGX-381 for CLN2 disease; and a mid-2021 IND submission for RGX-202 for Duchenne muscular dystrophy. These are forward-looking plans, not achieved outcomes.
- The new cGMP facility was expected to support production at scales up to 2,000 liters and become operational starting in the first half of 2022. Construction and trial timelines faced COVID-19-related delay risk; management said 2020 results were not significantly affected by the pandemic.
- REGENXBIO was pursuing arbitration with Abeona over $28.0 million of unpaid license fees, plus contractual interest. It recorded a $7.7 million credit-loss allowance against the receivable; collection, timing and arbitration outcome were uncertain.
- Other central risks include clinical safety and efficacy uncertainty, regulatory delays, manufacturing capacity and quality, reliance on third-party manufacturers and licensees, concentrated royalty revenue, competition, reimbursement and pricing uncertainty, and intellectual-property disputes. The company also disclosed correspondence from Penn and GSK questioning sublicense fees and the applicable Zolgensma royalty category; an adverse interpretation could increase payments owed.
Most important facts for investors to verify
- Whether Zolgensma royalties remain durable and whether the HCR royalty purchase and its repayment cap materially limit future cash receipts.
- Whether Abeona arbitration supports collection of the $28.0 million unpaid fees and interest, and the ultimate recoverable amount.
- Progress, safety, efficacy and enrollment for RGX-314 pivotal trials and other clinical programs, compared with the company’s stated timelines.
- Actual timing, cost and regulatory readiness of the Rockville manufacturing facility and remaining capital expenditures.
- Cash burn, financing needs and the degree to which revenue remains dependent on a small number of licensees.
- Resolution of the Penn/GSK royalty and sublicense-fee questions, and any resulting financial or contractual impact.