uniQure N.V. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Financial statements are unaudited and prepared under U.S. GAAP. uniQure develops gene therapies, principally for rare and serious diseases.
Key financial results
- Q3 revenue: $2.3 million, down from $7.2 million in Q3 2016. Nine-month revenue was $10.5 million, down from $16.0 million.
- Q3 net loss: $10.2 million, versus $15.3 million in Q3 2016; nine-month net loss was $51.8 million, versus $58.7 million. Q3 basic and diluted loss per share was $0.40; nine-month loss per share was $2.03.
- Operating expenses: Q3 R&D was $20.1 million, up from $16.6 million; SG&A was $5.6 million, up from $5.1 million. Nine-month R&D was $54.0 million, compared with $52.5 million, while SG&A fell to $17.4 million from $20.2 million.
- One-time and other items: Q3 other income was $14.4 million, including $13.8 million recognized when Chiesi collaboration deferred revenue was released upon termination. The release materially reduced reported losses and is not recurring collaboration revenue. Nine-month other income was $15.0 million; other expense was $2.9 million.
- Cash flow: Cash used in operations was $46.2 million for the first nine months, compared with $56.5 million in 2016. Investing activities used $4.9 million, and financing provided $1.0 million. Cash and cash equivalents declined to $88.9 million at September 30 from $132.5 million at year-end 2016.
- Liquidity and debt: Current assets were $92.3 million and current liabilities $25.4 million. Total liabilities were $119.4 million. Hercules debt principal outstanding was $20.0 million; the facility matures May 2020, with principal repayments scheduled to begin in December 2018. Debt carries an initial 8.25% annual interest rate and is secured by substantial company assets.
- Equity: Shareholders’ equity was $19.6 million, down from $63.6 million at December 31, 2016, primarily reflecting the nine-month loss. The accumulated deficit was $447.8 million.
Material changes and business developments
- Revenue declined mainly because BMS collaboration revenue fell with the timing of research and preclinical work, and because the Chiesi hemophilia B collaboration ended in July 2017. Chiesi had previously reimbursed 50% of agreed development costs; uniQure now bears future costs.
- uniQure ended Glybera commercialization and did not seek renewal of its European marketing authorization. It recognized $13.8 million of deferred revenue on termination and recorded related termination and exit costs.
- R&D spending rose in Q3, including a $2.3 million increase in the fair value of contingent consideration related to the InoCard acquisition. The nine-month liability fair value was $3.6 million; a further $1.2 million was owed to former InoCard shareholders.
- A restructuring begun in 2016 reduced employees with indefinite contracts from 244 to 183 by September 30, 2017. Management expects annual operating expense savings of $5 million to $6 million from 2018 onward.
- After quarter-end, uniQure completed a public offering on October 27, 2017, selling 5.0 million shares at $18.25 each for approximately $85.4 million net proceeds. The underwriters also received an option to buy up to 750,000 additional shares. The proceeds are intended to support AMT-061, AMT-130, other pipeline programs, and working capital. The financing also extended the Hercules interest-only period to November 2018.
Outlook, management commentary and risks
- At September 30, management expected existing cash to fund operations into early 2020 and to cover at least the next 12 months. That estimate predates the October offering. The company expects continued losses and negative operating cash flows; it said operating losses may increase as programs advance.
- Management planned to advance AMT-061 for hemophilia B into a pivotal study in 2018, with a short dose-confirmation study expected to start in Q3 2018. Management reported general alignment with FDA and EMA on the proposed trial plan and expected clinical material release by Q1 2018, subject to manufacturing and comparability work.
- AMT-130 for Huntington’s disease remained preclinical. The company expected to complete a non-human-primate toxicology study and file an IND at the end of 2018. It received U.S. orphan drug designation in September 2017.
- Management’s efficacy expectations for AMT-061, including projected Factor IX activity, are based on nonclinical and existing clinical data and are not established clinical outcomes. The filing cautions that preclinical results may not predict human trial results.
- Key risks include clinical and regulatory uncertainty, ability to manufacture gene therapies consistently and at scale, AMT-061 comparability and dose confirmation, patient recruitment, dependence on BMS for collaboration progress and potential payments, financing needs, debt covenants and dilution, intellectual-property challenges, and uncertain pricing and reimbursement for one-time therapies.
- The company reported no legal proceedings and no material changes in market-risk exposure. Management concluded disclosure controls were effective as of September 30, 2017.
Important facts for investors to verify
- Whether AMT-061 manufacturing comparability, dose confirmation, and the planned pivotal-trial timeline were achieved, and whether clinical data support the program’s safety and efficacy assumptions.
- How the October 2017 offering proceeds changed cash runway, and whether subsequent spending, milestones, or financing needs differ from management’s estimates.
- How much BMS collaboration activity, reimbursement, target selection, and contingent milestone or royalty potential contribute to future funding and revenue.
- The nature and timing of InoCard contingent milestones, their valuation assumptions, and any resulting cash or share settlement.
- The recurring operating cost base after restructuring and the extent to which anticipated annual savings are realized.