Business context and reporting period
REGENXBIO Inc. is a clinical-stage gene-therapy company whose revenue comes primarily from licensing and royalties, not sales of its own products. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023; comparisons are with the same 2022 periods. Zolgensma royalties were the principal revenue source.
Financial performance and liquidity
Amounts below are in millions, except per-share data. Gross margin is calculated as revenue less cost of revenue, divided by revenue.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $28.9 | $26.5 | $68.0 | $81.4 |
| Gross margin | 57.2% | 50.6% | 61.8% | 48.7% |
| Research and development expense | $58.2 | $63.3 | $176.6 | $179.9 |
| General and administrative expense | $23.1 | $20.9 | $69.4 | $64.1 |
| Operating loss | $(65.0) | $(71.0) | $(204.2) | $(205.1) |
| Net loss | $(61.9) | $(75.5) | $(200.6) | $(220.4) |
| Net loss per share | $(1.41) | $(1.75) | $(4.60) | $(5.11) |
- At September 30, cash and cash equivalents were $53.0 million and marketable securities totaled $311.5 million, for $364.5 million combined. Management said these resources were sufficient to fund operations for at least 12 months from the report date.
- Operating cash use was $177.6 million for the first nine months, versus $168.1 million in 2022. Cash, cash equivalents and restricted cash declined $43.7 million to $55.3 million; investing activities provided $157.0 million, mainly from security maturities.
- Total liabilities were $270.7 million and stockholders’ equity was $363.1 million. The filing reports no conventional borrowings; the liability from the sale of future Zolgensma royalties was $105.8 million, including $52.8 million current. Operating lease liabilities totaled $90.7 million.
- Current assets were $365.8 million and current liabilities $127.3 million. The company reported a $642.2 million accumulated deficit and expects continuing losses for at least several years.
Material changes versus prior comparable periods
- Q3 revenue increased $2.4 million year over year, with Zolgensma royalties up $3.2 million to $28.4 million. For the nine months, revenue fell $13.4 million; Zolgensma royalties declined $11.7 million to $63.5 million. Novartis reported Zolgensma sales down 13% in U.S. dollar terms for the nine-month period, citing fewer prevalent patients as established markets treated mainly incident patients.
- Nine-month cost of revenue fell $15.8 million, primarily reflecting a non-recurring $9.2 million Penn-related charge in 2022 and lower upstream Zolgensma royalties. Nine-month R&D declined $3.4 million, while G&A rose $5.3 million.
- Investment income increased to $9.0 million for the nine months, including a $2.2 million milestone gain related to uniQure’s acquisition of Corlieve and higher investment yields. Interest expense fell to $5.5 million from $18.9 million, mainly due to the lower royalty-sale liability and revised royalty estimates.
- AbbVie became responsible for the majority of ABBV-RGX-314 development costs starting January 2023; nine-month net cost reimbursements reduced R&D expense by $56.3 million.
Outlook, commentary, risks and unusual items
- In October 2023, the board approved a pipeline prioritization and restructuring, with the company subsequently announcing priorities of ABBV-RGX-314, RGX-202 and RGX-121. Plans include reducing the workforce by about 15%; estimated fourth-quarter restructuring costs are $3.6 million. The company expects the work to be substantially complete in Q4 2023, with related cash payments substantially complete by Q1 2024. Savings and timing are uncertain.
- Management described enrollment in the ATMOSPHERE and ASCENT pivotal trials of ABBV-RGX-314 as on track and anticipated regulatory submissions in late 2025 through the first half of 2026. It expected RGX-202 dose escalation by year-end 2023 and initial functional data in 2024. Topline pivotal-phase RGX-121 results were expected in Q1 2024, with a planned accelerated-approval BLA in 2024. These are forward-looking expectations, not guarantees.
- The company may receive up to $1.55 billion in unachieved milestones under license agreements, but realization depends on development and commercial success and is uncertain. The AbbVie agreement includes up to $1.38 billion in development and sales milestones, excluded from the recognized transaction price because conditions have not been met.
- Revenue is concentrated among a small number of licensees and depends substantially on Zolgensma; licenses may be terminated. The company expects ongoing operating losses and says additional capital may be needed; financing may be unavailable or require unfavorable terms. A $150 million at-the-market offering program was established, but no shares had been sold by September 30, 2023.
- The $5.0 million Abeona settlement payment due by November 2024 was fully reserved through an allowance for credit losses. The filing says remaining Corlieve milestone proceeds are uncertain. Management reported effective disclosure controls, no material changes in internal control, and no pending legal action expected to have a material adverse effect.
Most important facts for investors to verify
- Whether Zolgensma royalties stabilize or continue to decline, and the resulting effect on revenue and royalty payments to HCR.
- Whether cash burn, restructuring savings and the stated 12-month runway remain consistent with the company’s updated pipeline and spending plans.
- Clinical-trial enrollment, safety and efficacy data, and regulatory timing for ABBV-RGX-314, RGX-202 and RGX-121.
- Whether the company uses the $150 million ATM program or otherwise raises capital, and the resulting dilution or financing terms.
- Progress toward contingent license milestones and collection of the Abeona receivable; neither should be treated as assured cash inflow.