REGENXBIO Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Amounts are in thousands of dollars except per-share data and where noted. REGENXBIO is a gene-therapy biotechnology company developing and licensing its NAV AAV-vector platform; it had no approved products or product-sales revenue.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Total revenue | $1,140 | $483 | $3,140 | $4,972 |
| Operating expenses | $8,487 | $2,184 | $20,778 | $6,437 |
| Operating loss | $(7,347) | $(1,701) | $(17,638) | $(1,465) |
| Net loss | $(7,332) | $(1,793) | $(17,635) | $(1,667) |
| Basic and diluted loss per share | $(1.52) | $(0.73) | $(5.48) | $(0.85) |
| Cash used in operating activities | — | $(18,072) | $(2,537) |
- Q3 revenue included $1,000 of related-party license revenue from a Dimension option exercise; nine-month revenue also included $305 in grants and $200 in reagent sales.
- At September 30, cash and cash equivalents were $205.324 million and marketable securities were $19.038 million, totaling $224.362 million. Total assets were $227.314 million, current liabilities $5.308 million, and total liabilities $5.506 million. The company reported no debt outstanding at quarter-end.
- Management said available cash and securities were expected to fund operations and capital needs through 2017, including planned early clinical development and an RGX-314 IND filing. This estimate depends on assumptions and could prove inaccurate.
Changes versus the prior comparable period
- Q3 revenue increased $657 year over year, mainly due to the $1,000 Dimension license option fee; nine-month revenue declined $1.832 million, largely because the prior year included more commercial-license upfront and option fees. Grant and reagent revenue also declined.
- Spending accelerated: nine-month R&D rose to $12.471 million from $2.869 million, and G&A to $7.671 million from $2.732 million. Management attributed increases to development and manufacturing work, additional staff and stock compensation, and professional fees.
- Nine-month operating cash use increased to $18.072 million. Financing provided $241.734 million, principally from preferred-stock issuances and the September IPO; investing used $19.459 million, mostly for marketable securities.
Outlook, risks and unusual items
- The September 2015 IPO raised approximately $145.2 million net, and all preferred stock converted into common stock. The company reported 26.306 million common shares outstanding at September 30 and 26,313,471 at November 5.
- Management planned RGX-501 and RGX-111 Phase I/II trial starts and an RGX-314 IND filing. The filing reports that, after quarter-end in October, Penn filed an IND for RGX-501; the planned trial was expected to begin in the first half of 2016. RGX-111 IND filing was planned for the first half of 2016 and RGX-314 for the second half of 2016.
- The company expected losses and rising R&D and G&A costs for years, with no significant recurring product revenue expected unless candidates are approved and commercialized. Grant revenue was expected to decline; REGENXBIO was not seeking additional grant awards.
- Key risks include early-stage gene-therapy development and regulatory uncertainty, safety and manufacturing challenges, dependence on licensors and partners, intellectual-property protection, uncertain future financing needs, and potential dilution. Potential license milestones and royalties are contingent on licensee progress and commercial success.
- At September 30, disclosure controls were deemed ineffective because of two material weaknesses: contract-review controls and insufficient finance resources for review and segregation of duties. Remediation was ongoing, with no assurance as to timing. No material pending legal proceedings were reported.
- Future minimum operating lease payments totaled $4.273 million. No material indemnification claims were recorded, and the company reported no off-balance-sheet arrangements.
Investor facts to verify
- Whether trial and IND milestones were achieved on schedule, and what subsequent clinical, regulatory, or safety data show.
- Actual cash burn and runway versus management’s through-2017 estimate, including clinical, manufacturing, and public-company costs.
- Progress and independent validation of remediation of the disclosed material weaknesses.
- Timing and likelihood of partner-driven option fees, milestones, sublicensing revenue, and royalties; these are not assured recurring revenue.
- IPO proceeds are described as approximately $145.2 million net in the notes and MD&A, while the cash-flow statement shows $148.233 million of IPO proceeds net of underwriting discounts and commissions, plus separate IPO-cost payments. Reconcile the presentation and actual cash proceeds.