XBiotech Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. XBiotech is a pre-revenue biopharmaceutical company developing True Human monoclonal antibodies. Financial amounts below are in U.S. dollars; statement amounts are in thousands unless noted.
Financial results
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $4,693 | $3,949 | $9,220 | $6,941 |
| General and administrative | $1,313 | $1,672 | $2,591 | $2,829 |
| Total operating expenses | $6,006 | $5,621 | $11,811 | $9,770 |
| Net loss | $5,852 | $5,907 | $11,716 | $9,976 |
| Net loss per share | $0.16 | $0.16 | $0.32 | $0.28 |
There is no revenue or profit, so operating margins are not meaningful. Q2 net loss was slightly lower year over year, while the six-month loss increased. Six-month operating cash use was $9.540 million, versus $7.426 million in 2018. Investing cash use was $37,000; financing provided $38.636 million, primarily from the June equity offering.
At June 30, 2019, cash and cash equivalents were $44.921 million, current assets $45.599 million, total assets $71.875 million, and total liabilities $2.462 million. The balance sheet reports no interest-bearing debt. Accumulated deficit was $249.416 million. Cash increased from $15.823 million at December 31, 2018.
Material changes and developments
- Six-month R&D expense rose 33%, mainly due to higher laboratory and manufacturing supplies for planned clinical studies and a larger R&D workforce. Q2 R&D increased 19%.
- Six-month G&A declined 8%; Q2 G&A declined 21%, principally reflecting lower share-based compensation and prior-year CEO bonus expense, partly offset by higher professional fees.
- In June, the company sold approximately 4.8 million shares at $8.25 per share, receiving $37.5 million net proceeds. Shares outstanding were 41,003,660 at June 30, compared with 35,899,772 at year-end.
- Management reported positive findings from completed open-label Phase 2 bermekimab studies in hidradenitis suppurativa and atopic dermatitis. It planned to enroll patients in new randomized, placebo-controlled Phase 2 studies in both indications by year-end 2019.
- An investigator-sponsored study in advanced pancreatic cancer and cachexia completed enrollment and reported positive interim findings; analysis and future development plans were ongoing. UK Medical Research Council funding was awarded for a Phase 2 study of bermekimab in advanced lung, pancreatic, and ovarian cancers.
Outlook, risks, and other matters
The company expects substantial and potentially increasing operating losses as it advances its pipeline; it has never been profitable and may never achieve profitability. Management estimated that June 30 cash would fund operating expenses and capital needs through June 30, 2020, while cautioning that actual cash use could be faster than projected. No revenue or earnings guidance was provided.
Key uncertainties include clinical and regulatory success, patient recruitment, commercialization, competition, intellectual property, and the timing and availability of future financing or collaboration proceeds. The company stated there were no material changes to the risk factors in its 2018 Form 10-K. It reported no off-balance-sheet arrangements and no material market risk or hedging activity. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Investor verification points
- Track enrollment, timing, and results of the planned randomized Phase 2 studies in hidradenitis suppurativa and atopic dermatitis.
- Verify the durability and scope of the reported positive findings, including the pancreatic cancer/cachexia interim results and next development steps.
- Monitor R&D spending, operating cash burn, and whether cash remains sufficient to meet management’s stated June 2020 funding horizon.
- Assess the effects of the June equity raise and outstanding stock options on future dilution.
- Review the company’s 2018 Form 10-K risk factors and subsequent regulatory, clinical, and financing disclosures.