NextCure, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. NextCure is a clinical-stage biopharmaceutical company developing immunomedicines for cancer and other immune-related diseases. It has no product sales and relies on capital markets and other funding to support operations.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Research and development revenue | $0 | $1.6 million | $22.4 million | $4.3 million |
| Research and development expense | $12.7 million | $8.7 million | $34.4 million | $22.8 million |
| General and administrative expense | $4.7 million | $2.6 million | $12.9 million | $7.0 million |
| Net loss | $16.4 million | $8.4 million | $21.1 million | $22.8 million |
| Basic and diluted loss per share | $0.59 | $0.37 | $0.77 | $1.81 |
- Cash flow: Nine-month operating cash outflow was $38.7 million, versus $25.6 million in 2019. Investing activities provided $27.0 million, primarily from net marketable-security maturities; financing activities used $1.0 million, mainly for term-loan payments.
- Balance sheet at September 30: Cash and cash equivalents were $22.5 million and marketable securities were $268.7 million; together, $291.2 million, excluding restricted cash. Total assets were $316.1 million, total liabilities $8.7 million, and stockholders’ equity $307.3 million.
- Debt: Term-loan borrowings were $3.9 million, with maturity in January 2023. The loan requires a cash reserve tied to its principal; $3.9 million was reserved at quarter-end, reported partly as restricted cash and partly as other assets.
- No meaningful product gross margin was reported because the company had no product sales. The filing does not provide a clear margin measure applicable to its business.
Material changes and unusual items
- Lilly terminated its research and development collaboration effective March 3, 2020. NextCure recognized $22.4 million of remaining deferred revenue in the first nine months of 2020, with none recognized in Q3; no further quarterly support payments are payable. This one-time recognition helped reduce the nine-month net loss year over year, despite higher operating expenses. The company reported a profit in Q1 2020 due to this recognition.
- Q3 net loss increased by $7.9 million year over year as operating expenses rose and collaboration revenue fell to zero. Nine-month R&D expense rose by $11.6 million, primarily due to personnel costs, laboratory supplies and services, and clinical research. G&A expense increased with headcount, professional fees and insurance.
- Accumulated deficit was $102.2 million. Nine-month stock-based compensation was $5.6 million, compared with $1.3 million in 2019.
Outlook, management commentary and risks
- Management estimated existing cash, cash equivalents and marketable securities would fund planned operations into the second half of 2023. The estimate depends on assumptions that may prove incorrect; the company expects continued operating losses and negative operating cash flows and may need additional financing.
- NC318 Phase 2 enrollment slowed amid COVID-19 disruptions, delaying initial data. In July, the company said it did not then plan to advance the non-small cell lung cancer and ovarian cancer cohorts to stage 2; further study depends on biomarker analysis. Enrollment continued in head-and-neck and triple-negative breast cancer cohorts; one confirmed partial response in head-and-neck cancer led to advancement to stage 2. Additional clinical and biomarker data were expected in Q4 2020.
- A planned NC318 combination trial was delayed and remained pending biomarker analysis and patient-selection assessment. The NC410 Phase 1/2 trial began in June 2020 after a COVID-related delay; management expected Phase 1 data in the second half of 2021.
- COVID-19 may continue to affect trial enrollment, site operations, patient monitoring, supply chains and development timelines. The company also cited dependence on third-party suppliers, clinical-trial uncertainty and the risk that additional financing may not be available on acceptable terms.
- A putative securities class action filed September 21, 2020 alleges violations related to statements about NC318. Damages are unspecified; the company said it intends to defend the case and could not estimate a potential loss or range.
Important facts for investors to verify
- Whether cash use and clinical-development spending remain consistent with the estimated runway into the second half of 2023, and whether additional financing will be needed.
- NC318 trial enrollment, biomarker findings and subsequent decisions on tumor cohorts; also the timing and results of NC410 development.
- The impact of Lilly’s termination and the absence of future collaboration support payments on recurring revenue and funding needs.
- Any material developments in the securities litigation and potential financial exposure.