REGENXBIO Inc. — FY2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. The filing also provides unaudited fourth-quarter results. Amounts below are in U.S. dollars; financial statement amounts are generally shown in millions unless noted.
Business context and reporting period
REGENXBIO is a clinical-stage gene therapy company developing treatments using its NAV AAV vector platform. Its internal pipeline targets retinal, neurodegenerative and metabolic diseases; it also licenses the platform to third parties. It had no approved products or product-sale revenue in 2018. License fees were its principal source of revenue.
Key financial metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $218.5 million | $10.4 million |
| Operating income (loss) | $88.1 million | $(75.9) million |
| Net income (loss) | $99.9 million | $(73.2) million |
| Basic / diluted EPS | $2.99 / $2.73 | $(2.45) / $(2.45) |
| Research and development | $83.9 million | $57.2 million |
| General and administrative | $36.9 million | $27.2 million |
| Operating cash flow | $104.6 million provided | $58.0 million used |
| Cash, cash equivalents and marketable securities at year-end | $470.6 million | $176.4 million |
| Working capital | $315.7 million | $153.6 million |
| Total liabilities | $35.0 million | $15.6 million |
FY2018 revenue included $176.1 million recognized under the amended AveXis license and $35.6 million under the Abeona license. Those two customers represented approximately 97% of revenue (81% and 16%, respectively). No approved-product royalties or sales-based milestone revenue had been recognized by year-end.
Reported operating and net profits reflect large, largely non-recurring license revenue rather than product sales. Operating margin was approximately 40%; net margin was approximately 46%, but neither is a reliable indicator of recurring performance. Gross margin is not a meaningful measure for this license-driven business model. FY2018 included $8.9 million of imputed licensing interest income and $7.1 million of investment income.
Operating cash flow benefited chiefly from $180 million in AveXis license payments received in 2018. Investing activities used $279.4 million, primarily reflecting purchases of marketable securities; financing provided $204.4 million, including $189.1 million of net proceeds from an August equity offering. The company reported no conventional borrowing balance; liabilities included a $5.9 million financing lease obligation. Future minimum lease payments totaled $96.5 million, including the long-term facility lease.
Material changes versus prior period
- Revenue rose by $208.1 million year over year, chiefly due to the AveXis amendment and Abeona agreement. Management said 2019 revenue was expected to be substantially lower because these receipts were non-recurring.
- Net income shifted from a $73.2 million loss to $99.9 million income, while R&D expense rose 47% to $83.9 million and G&A rose 35% to $36.9 million.
- Cash, cash equivalents and marketable securities increased $294.2 million to $470.6 million, supported by license receipts and equity issuance.
- Adoption of ASC 606 changed the timing and classification of license consideration: it increased opening accumulated equity by $4.8 million and affected FY2018 reported revenue, interest income and deferred revenue. Prior-year figures were not restated, so comparisons are not fully comparable. The filing’s pro forma comparison indicates FY2018 revenue would have been $235.2 million under the prior standard, versus $218.5 million reported under ASC 606.
Outlook, commentary, risks and unusual items
- Management expected year-end 2018 cash, cash equivalents and marketable securities to fund operations and capital expenditures for at least 12 months from the filing date, based on its business plan. It also expects continuing losses over the next several years and anticipates rising R&D, G&A and facility investment; additional capital may be needed.
- RGX-314: 30 subjects had been dosed in a Phase I/IIa wet AMD trial. In the third dose cohort, 3 of 6 remained free of rescue anti-VEGF injections at nine months; those subjects had mean BCVA improvement of 13 ETDRS letters and mean retinal thickness reduction of 37 microns. The company planned top-line data and a Phase IIb trial by late 2019. These are early, small-cohort results, not evidence of established efficacy.
- RGX-121: first MPS II subject dosed in late 2018; management planned continued enrollment and an interim update in 2019. RGX-111’s IND was active, with a Phase I start expected mid-2019. RGX-181’s IND filing was planned for the second half of 2019.
- RGX-501: six HoFH subjects had been dosed. All three subjects at the second dose experienced post-dose liver-enzyme elevations and received corticosteroids; two drug-related serious adverse events were reported overall. The company planned additional second-cohort enrollment with steroid prophylaxis and an interim update in the second half of 2019.
- Key risks include uncertain clinical and regulatory outcomes, potential gene-therapy safety issues, manufacturing scale and supply, reliance on licensees and a concentrated customer base, intellectual-property challenges, and possible need for further financing. Management disclosed no material pending legal proceeding and reported effective disclosure controls and internal control over financial reporting.
Most important facts for investors to verify
- Whether 2018 license revenue, especially the AveXis and Abeona amounts, is non-recurring and how much consideration remains contingent or unpaid.
- Current clinical-trial status and safety follow-up for RGX-314, RGX-121, RGX-111, RGX-181 and RGX-501, including the HoFH liver-enzyme events.
- Cash burn, operating runway, future capital needs and spending commitments, including the $96.5 million minimum lease payments and planned headquarters facility.
- Revenue recognition under ASC 606, including financing-component interest, option-related deferred revenue and the collectability and timing of receivables.
- Progress toward any approved partner product and resulting royalties or milestones; the filing noted Novartis expected a 2019 ZOLGENSMA launch, subject to regulatory approval.