REGENXBIO Inc. — Q3 2017 Form 10-Q
Business context and reporting period. Unaudited results cover the three and nine months ended September 30, 2017, compared with the same 2016 periods. REGENXBIO is a clinical-stage gene-therapy company developing its NAV AAV vector platform and product candidates; it had no approved products or product-sales revenue.
Key financial metrics
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Total revenue | $1.34 | $0.13 | $8.35 | $2.89 |
| Research and development | $12.52 | $12.56 | $43.05 | $29.42 |
| General and administrative | $9.44 | $6.20 | $22.42 | $17.85 |
| Operating loss | $(21.31) | $(18.67) | $(59.29) | $(44.87) |
| Net loss | $(20.71) | $(18.15) | $(57.17) | $(43.36) |
| Basic and diluted loss per share | $(0.67) | $(0.69) | $(1.94) | $(1.64) |
| Operating cash used | — | — | $(44.17) | $(28.14) |
At September 30, 2017, cash and cash equivalents were $59.9 million and marketable securities totaled $131.3 million, or $191.1 million combined. Current assets were $172.2 million and current liabilities $13.4 million. Total liabilities were $14.6 million; the filing reports no debt balance. Stockholders’ equity was $194.7 million. No profit margin is meaningful given the operating losses and limited license-based revenue.
Material changes and operating performance
- Nine-month revenue rose $5.5 million year over year, primarily from commercial license fees, including AveXis’s $6.0 million upfront payment, and $0.9 million of license milestones. Q3 revenue included $0.9 million of license milestones and $0.4 million of license revenue for a Prevail license paid in stock.
- Nine-month R&D expense increased $13.6 million, mainly from higher personnel costs, clinical-trial material and manufacturing work, and facilities and equipment. Q3 R&D expense was approximately unchanged year over year.
- Nine-month G&A increased $4.6 million; Q3 G&A increased $3.2 million. The company attributed much of the increase to professional services, including costs related to the proposed Dimension merger.
- Nine-month operating cash use increased $16.0 million. Financing cash flow was $82.9 million, primarily reflecting $81.5 million in net proceeds from the 2017 follow-on offering. Capital expenditures were $5.1 million.
Outlook, commentary, and risks
- Management expected cash, cash equivalents, and marketable securities at September 30 to fund operating expenses and capital requirements for at least 12 months from the report date. The company expected continuing losses and rising R&D and G&A expenses, and anticipated needing substantial additional capital. This is a runway estimate, not earnings guidance.
- RGX-314: Phase I began enrolling in May 2017; the first two cohorts, totaling 12 patients, had been dosed. RGX-501: first cohort of three patients in its Phase I/II trial had been dosed. Management expected trial updates in its year-end 2017 corporate update. RGX-111 enrollment was expected in the first half of 2018; an IND filing for RGX-121 was expected in Q4 2017.
- After quarter-end, Dimension terminated its merger agreement with REGENXBIO on October 2, 2017, after pursuing a competing proposal. REGENXBIO received a $2.9 million termination fee in October, to be recorded as a Q4 reduction of G&A.
- Key risks include early-stage clinical and regulatory uncertainty, patient enrollment and safety, manufacturing scale-up, reliance on licensees and third parties, future financing and potential dilution, and dependence on licensed intellectual property. A third party challenged the validity of a Penn-owned, REGENXBIO-licensed AAV8 patent before the European Patent Office; the matter was at an early stage and no liability was recorded.
- Revenue was concentrated: one customer represented approximately 72% of nine-month 2017 revenue. License revenue is contingent and may fluctuate; the company said it did not expect significant recurring revenue absent product approvals and commercialization.
Important facts for investors to verify
- Whether clinical enrollment, safety, tolerability, and development timelines for RGX-314, RGX-501, RGX-111, and RGX-121 progressed as anticipated.
- Whether the stated cash runway remains adequate as trial, manufacturing, and operating costs rise, and what financing may be required.
- The timing and amount of future license milestones, royalties, and revenue concentration, including the dependence on licensee development and commercialization.
- The outcome and potential intellectual-property implications of the AAV8 patent opposition, and the Q4 accounting for the Dimension termination fee.