REGENXBIO Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing was signed March 7, 2017. This is an annual report, not a standalone fourth-quarter filing; quarterly figures are also disclosed below. REGENXBIO is a clinical-stage gene-therapy company whose NAV Technology Platform is used in internal programs and licensed to third parties. It had no approved products and generated no product-sales revenue.
Financial results and position
| Metric | FY2016 | FY2015 |
|---|---|---|
| Total revenue | $4.6 million | $7.6 million |
| Research and development expense | $45.5 million | $17.3 million |
| General and administrative expense | $23.6 million | $11.9 million |
| Operating loss | $65.3 million | $23.1 million |
| Net loss | $63.0 million | $22.8 million |
| Basic and diluted loss per share | $2.38 | $2.59 |
| Net cash used in operations | $48.6 million | $22.5 million |
Revenue comprised $4.3 million of license revenue, $0.2 million of reagent sales and $0.1 million of grant revenue. License revenue declined mainly because fewer commercial licenses were granted; grant revenue also fell, and the company was not pursuing new grant awards. Two customers represented approximately 68% of FY2016 revenue.
Quarterly FY2016 revenue was $0.4 million, $2.4 million, $0.1 million and $1.7 million, respectively; quarterly net losses were $10.8 million, $14.4 million, $18.2 million and $19.6 million. Quarterly results are not necessarily indicative of future performance.
At year-end, cash and cash equivalents were $24.8 million and marketable securities were $134.1 million, totaling $159.0 million in cash, cash equivalents and marketable securities. Working capital was $83.7 million; total assets were $172.7 million and total liabilities were $11.0 million. The balance sheet listed no borrowings at December 31, 2016. Management estimated available funds would support operating expenses and capital requirements through mid-to-late 2018 under its then-current plan. Operating cash use rose as development and staffing expanded. Capital expenditures were $8.1 million, mainly associated with facilities and laboratory build-out. A 100-basis-point increase in interest rates was estimated to reduce the fair value of interest-sensitive securities by $1.4 million.
Material changes and business developments
- Research and development spending increased substantially as the company expanded its workforce, preclinical work, clinical-trial manufacturing and trial-related activities. General and administrative costs also rose with hiring, public-company costs and professional services.
- Net loss increased to $63.0 million from $22.8 million. The loss per share was lower than in 2015 despite the larger net loss, principally in the context of a larger weighted-average share count following the 2015 IPO and conversion of preferred stock.
- The company invested in internal manufacturing and analytics capabilities; property and equipment increased to $9.3 million from $0.5 million. It reported no material change in the planned use of its $145.2 million net IPO proceeds.
- At December 31, 2016, nine NAV Technology Licensees were developing more than 20 candidates, including five clinical-stage programs. Licensee development and commercial progress is important to contingent milestones and potential royalties.
Outlook, risks and unusual items
- Pipeline outlook disclosed after year-end: RGX-314’s U.S. IND became active in February 2017, with Phase I enrollment expected by mid-2017. RGX-501 enrollment in a Phase I/II trial began in March 2017, with an interim update expected in late 2017. The company expected to file an IND for RGX-111 in the first half of 2017 and begin a Phase I/II trial in the second half; an RGX-121 IND filing was expected in mid-2017. These are forward-looking plans, not FY2016 achievements.
- The company expected losses and rising development costs to continue, and anticipated needing additional capital. Its cash-runway estimate depends on business-plan assumptions; financing may be unavailable or dilutive, or require unfavorable terms.
- Key risks include early-stage clinical uncertainty, gene-therapy safety and immune-response risks, regulatory and trial delays, patient recruitment, manufacturing scale-up and third-party dependence, reimbursement and market acceptance, competition, and reliance on licensed intellectual property and collaborators. No gene-therapy product had been approved in the U.S. at the time described.
- Revenue is contingent and potentially volatile: future license fees, milestones and royalties depend on licensee progress, while grant revenue was expected to decline. Two customers’ concentration in 2016 heightens revenue variability risk.
- Unusual financial items included $1.9 million of investment income, up from $0.3 million, reflecting the larger invested cash balance, and a $0.4 million income-tax benefit. The company maintained a full valuation allowance against deferred tax assets. Available-for-sale securities generated a $0.7 million net unrealized gain in other comprehensive income in 2016.
- The company reported no pending or threatened litigation, no off-balance-sheet arrangements, effective disclosure controls and effective internal control over financial reporting as of year-end. Its independent auditor issued an unqualified opinion; auditor attestation of internal controls was not included because of the emerging-growth-company exemption.
Most important facts for investors to verify
- Whether the clinical programs meet the stated trial, enrollment and regulatory timelines, and whether safety, efficacy and durability data support further development.
- Whether the $159.0 million year-end liquidity and mid-to-late-2018 runway estimate remain adequate as cash burn and trial/manufacturing spending evolve.
- How much future revenue depends on a small number of licensees and customers, and whether licensees achieve milestones that generate fees or royalties.
- Whether manufacturing capacity, supply arrangements and licensed patent rights can support clinical progress and eventual commercialization.
- Whether the company can obtain acceptable reimbursement and financing without material dilution, given the absence of product revenue and continuing operating losses.