XBiotech Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 10, 2023. Financial amounts below are in U.S. dollars; statement amounts are in thousands unless noted. XBiotech is a pre-market biopharmaceutical company developing naturally occurring “True Human” monoclonal antibodies. Its pipeline includes candidates targeting IL-1α, including a candidate in an oncology clinical study.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0 | $500 |
| Gross profit | $0 | $287 |
| Research and development | $6,230 | $6,818 |
| General and administrative | $915 | $1,314 |
| Operating loss | $(7,145) | $(7,845) |
| Net loss | $(3,816) | $(5,395) |
| Net loss per share | $(0.13) | $(0.18) |
| Cash used in operating activities | $(4,808) | $(5,123) |
Higher interest income ($2,779 versus $101) contributed to the smaller net loss; total other income was $3,292, including a $383 foreign-exchange gain. The 2023 income-tax benefit was $37, versus $1,059 in Q1 2022. The filing reports no revenue in Q1 2023, so a current-period gross margin is not meaningful.
At March 31, 2023, cash and cash equivalents were $152,484, and an interest-bearing time deposit was $60,178; total current assets were $216,284. Total assets were $242,121, total liabilities $5,216, and shareholders’ equity $236,905. The balance sheet shows no borrowings or debt. Cash and cash equivalents decreased $4,822 during the quarter. Property and equipment, net, was $25,837. Common shares outstanding were 30,439,275, unchanged from year-end.
Material changes and management commentary
- Revenue fell to zero after the Janssen manufacturing agreement, which generated $500 in Q1 2022, was terminated in November 2022. The company says it does not expect further revenue under that agreement.
- R&D expense declined 9% year over year, mainly due to lower laboratory and manufacturing supplies; G&A declined 30%, primarily due to lower salaries and share-based compensation following the termination of the VP of Finance and HR in February 2023. Professional fees increased, mainly from additional tax services.
- Interest income rose substantially, principally from bank balances and the time deposit. The foreign-exchange gain in Q1 2023 was mainly related to liquidation of XBiotech Germany GmbH, dissolved in February 2023.
- Management expects no revenue during the next year and expects significant, increasing operating losses as it advances candidates through preclinical and clinical development. It also anticipates higher G&A costs, citing inflationary trends.
Outlook, risks, and unusual items
Management said $152.5 million of cash and cash equivalents at March 31, 2023 was expected to fund operations through 12 months from the report date and support several potential clinical-development milestones. Management cautions that funding needs may change with R&D progress and other corporate developments; profitability may never be achieved. The filing identifies clinical and regulatory execution, commercialization, financing, competition, intellectual property, and recruiting as risks. It reports no material changes to the risk factors in the 2022 Form 10-K.
The company reported no material market risk from financial instruments, interest rates, commodities, or foreign currencies and said it does not hedge. It reported no off-balance-sheet arrangements, no material change in internal control over financial reporting, and effective disclosure controls. The interim financial statements are unaudited.
Key facts for investors to verify
- Whether the clinical pipeline advances and delivers the anticipated study milestones, and the associated timing and costs.
- Cash runway assumptions, including the availability and maturity terms of the $60.2 million time deposit and expected quarterly cash burn.
- That Janssen-related manufacturing revenue has ended and no replacement revenue is expected in the near term.
- The effects of foreign-exchange movements and interest income on reported results, given the company’s operating loss and multi-currency cash holdings.
- Potential dilution from 5,169,102 outstanding stock options and the company’s future financing needs.