Exicure, Inc. — FY2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017. The filing was signed March 9, 2018. Exicure is a clinical-stage biotechnology company developing gene-regulatory and immuno-oncology therapeutics using its spherical nucleic acid (SNA) platform. It had no approved products or commercial product revenue.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $9.719 million | $1.036 million |
| Research and development expense | $14.108 million | $13.659 million |
| General and administrative expense | $7.046 million | $3.539 million |
| Operating loss | $11.435 million | $16.162 million |
| Net loss | $12.039 million | $16.941 million |
| Net cash used in operating activities | $19.789 million | $5.050 million |
- 2017 revenue was collaboration revenue, primarily recognition of the $10.0 million nonrefundable Purdue upfront fee; it also included $1.443 million of reimbursable R&D activities. No grant income was reported in 2017.
- At December 31, 2017, cash and cash equivalents were $25.764 million, total assets $28.055 million, total liabilities $9.108 million, and stockholders’ equity $18.947 million. Current assets were $26.706 million and current liabilities $3.452 million.
- Long-term debt had $4.999 million principal outstanding and a $4.855 million net carrying amount. The debt bears floating interest at a stated minimum of 9.95%; it is secured by substantially all tangible assets, with intellectual property subject to a negative pledge.
- Cash increased $6.141 million during 2017, supported by $26.856 million net financing cash inflows, principally the private placement. The company reported no off-balance-sheet arrangements.
- The reported net loss equates to basic and diluted loss per share of $1.19 in 2017 versus $149.37 in 2016. Share-count and merger-related conversion differences make the per-share comparison unusually non-comparable.
Changes versus 2016
- Revenue increased $8.683 million, reflecting Purdue collaboration revenue; the 2016 comparison included only $0.690 million of collaboration revenue and $0.346 million of grant income.
- Operating loss narrowed by $4.727 million and net loss by $4.902 million, despite operating expenses increasing 23%. R&D expense rose 3%, while general and administrative expense nearly doubled, largely due to legal and accounting costs related to an abandoned potential public offering, merger/resale registration work, stock compensation, and public-company costs.
- Operating cash use increased $14.739 million, in part due to expenses and payments including Northwestern University license costs and legal and accounting services, and the absence in 2017 of the prior-year timing benefit from the Purdue upfront payment.
- In September 2017, Exicure completed a reverse merger with Max-1 Acquisition Corporation and raised approximately $31.5 million gross in a private placement at $3.00 per share. The transaction was accounted for as a reverse merger, with Exicure OpCo as accounting acquirer.
Outlook, risks, and notable items
- Management said December 31, 2017 cash was expected to fund current operating plans for the next 12 months as of the report date. It expects continued losses and increasing R&D and public-company expenses, and may need additional financing; availability and terms are uncertain.
- Management expected Purdue’s AST-005 Phase 1b topline results in early 2018; patient dosing was complete with no serious adverse events reported. The earlier AST-005 Phase 1 showed dose-dependent TNF mRNA reduction and no drug-associated adverse events, but no antipsoriatic efficacy.
- XCUR17’s Phase 1 CTA was approved in Germany in February 2018; first dosing was expected in early 2018 and trial completion in mid-2018. AST-008 Phase 1 dosing began in the UK in Q4 2017, with completion expected in mid-2018. These are management expectations, not guarantees.
- Purdue may earn worldwide development and commercialization rights under its options. Exicure is eligible for up to $776.5 million in contingent research, regulatory, and commercial milestones and low-single-digit to 10% royalties, none of which is assured; no milestone revenue had been recognized through 2017.
- On January 15, 2018, Hercules agreed to defer 13 months of scheduled amortization payments, from December 2017 through December 2018; amortization was scheduled to resume in January 2019 over 18 months. The loan matures September 2019 and includes fees, covenants, and prepayment charges.
- Key risks include early-stage clinical and platform uncertainty, ongoing losses and financing needs, dependence on Purdue and other third parties, single-source clinical material supply, regulatory and reimbursement uncertainty, and intellectual-property challenges. The filing reported no material legal proceedings. The common stock had no exchange or OTC trading market as of the filing.
Investor facts to verify
- Confirm current cash runway and subsequent financing needs against actual spending and updated clinical plans.
- Review clinical readouts and trial status for AST-005, XCUR17, and AST-008; distinguish human evidence from preclinical findings.
- Check Purdue’s option decisions, collaboration performance, and whether any milestone or royalty conditions have been met.
- Reconcile Hercules debt principal, deferred-payment schedule, maturity, collateral, and covenants with subsequent filings.
- Assess dilution and potential selling pressure: 39,454,821 shares were outstanding as of February 28, 2018, and a resale registration covered 39,714,143 shares, including shares underlying warrants.