uniQure N.V. — Q2 2017 Form 10-Q
Business context and reporting period
Gene-therapy developer uniQure reported unaudited U.S. GAAP results for the quarter and six months ended June 30, 2017. The company’s principal programs included hemophilia B (AMT-060), Huntington’s disease (AMT-130), and a cardiovascular collaboration with Bristol Myers Squibb (BMS). All reported collaboration and license revenue came from BMS and Chiesi. Figures below are in U.S. dollars; millions are rounded.
Financial highlights
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $4.9 million | $4.5 million | $8.3 million | $8.7 million |
| Research and development expense | $16.9 million | $19.2 million | $33.9 million | $35.9 million |
| Selling, general and administrative expense | $5.4 million | $7.8 million | $11.8 million | $15.1 million |
| Operating loss | $19.7 million | $22.1 million | $39.4 million | $41.4 million |
| Net loss | $21.3 million | $21.1 million | $41.5 million | $43.4 million |
| Net loss per share | $0.83 | $0.84 | $1.63 | $1.74 |
| Operating cash used | Not separately provided | Not separately provided | $30.8 million | $38.5 million |
- Q2 revenue rose about 11% year over year, largely as Chiesi hemophilia B collaboration revenue increased; six-month revenue declined about 6%, mainly due to lower BMS collaboration revenue and lower license revenue.
- Lower R&D expense reflected reduced drug-substance manufacturing costs and restructuring effects, partly offset by increased facility costs. SG&A fell, including because there were no 2016 Extera arbitration costs. No gross margin is separately reported.
- Q2 net loss was slightly higher year over year despite a smaller operating loss, reflecting foreign-currency losses and other non-operating changes. The six-month net loss improved by $1.8 million.
- Cash and cash equivalents were $104.1 million at June 30, 2017, down from $132.5 million at December 31, 2016. Six-month investing cash use was $3.4 million; financing generated $0.9 million. Foreign-exchange effects increased cash by $4.9 million.
- Total assets were $158.0 million and shareholders’ equity was $27.3 million at June 30, 2017. Accumulated deficit was $437.6 million. The company reported $20.0 million of Hercules borrowings outstanding; principal repayments were scheduled to begin in December 2017 and run through May 2020. The balance sheet classified $4.3 million as current debt and $16.2 million as long-term debt, net of the current portion.
- Revenue and collaboration economics remain partner-dependent; the filing reports no product-sales revenue. A conventional gross margin is not presented.
Material changes, outlook and unusual items
- Hemophilia B: AMT-060 received FDA Breakthrough Therapy designation in January 2017 and EMA PRIME designation in April. On July 26, 2017, uniQure and Chiesi terminated their co-development agreement, returning the relevant rights to uniQure. uniQure will fund future development costs, including approximately $3.0 million in the second half of 2017 that Chiesi otherwise would have shared. The company expected to receive about $2.3 million from Chiesi to settle outstanding and future amounts.
- Expected subsequent-period accounting: uniQure expected to recognize $13.6 million of other income in Q3 2017 from releasing deferred revenue following the Chiesi hemophilia B termination. This is an expectation disclosed in the filing, not Q2 revenue.
- Glybera: The company decided not to renew the European marketing authorization, which was due to expire in October 2017, and agreed to repay €2.0 million (about $2.3 million) of prior Chiesi upfront payments in installments through January 2019. It accrued €1.5 million (about $1.7 million) at June 30, including €0.6 million current. It may owe up to a further €1.8 million (about $2.0 million), depending on patient treatments; no additional amount was accrued. It also accrued $0.9 million for terminating the Phase IV study and $0.8 million to exit a vacated Amsterdam lease.
- Restructuring: The plan targeted elimination of 50–55 net positions and consolidation of manufacturing in Lexington, Massachusetts. Management expected annual operating-expense savings of $5–$6 million from 2018 onward; additional Glybera-related reductions and about $0.3 million of 2017 termination costs were expected.
- Liquidity outlook: Management said the $104.1 million cash balance was expected to fund operations into 2019 and to cover expenses and debt repayments for at least the next twelve months. This is a company estimate, not a guarantee. The company expects losses and negative operating cash flows to continue and stated that additional financing may be needed.
- Other development: Management reported preclinical Huntington’s disease data and progress preparing commercial-scale hemophilia B manufacturing batches. The Lexington facility’s certification, manufacturing consistency and comparability with product made in Amsterdam remain important development and regulatory risks. Three serious adverse events were reported in the AMT-060 Phase I/II study: one short, self-limiting fever and two mild, asymptomatic liver-transaminase elevations.
- Debt and other obligations: The Hercules facility carries an initial 8.25% interest rate, a 4.85% back-end fee and restrictive covenants, including a U.S. cash-location requirement. The filing lists $40.1 million of minimum operating-lease payments and $16.6 million nominal contingent consideration, although the latter was recorded at a fair value of $2.4 million.
- No formal revenue or earnings guidance was provided. Management cautioned that forward-looking estimates and development plans depend on clinical, regulatory, manufacturing and financing outcomes.
Most important facts for investors to verify
- Whether the expected $2.3 million Chiesi settlement was received and whether the anticipated $13.6 million deferred-revenue release was recorded in Q3.
- Actual cash burn and runway after uniQure assumed all future hemophilia B development costs, including the expected second-half 2017 spending.
- Progress, regulatory feedback and comparability requirements for Lexington manufacturing, and the timing and cost of a pivotal hemophilia B study.
- Clinical follow-up for AMT-060 and subsequent evidence supporting AMT-130; designations and preclinical results do not ensure approval or efficacy.
- Final Glybera repayment and Phase IV termination costs, including whether any additional patient-dependent payment becomes payable.
- Delivery of restructuring savings and the company’s ability to manage its long-term Amsterdam lease, debt covenants and potential financing needs.