Business context and reporting period
UniQure N.V. is a gene-therapy company developing treatments for rare and other serious diseases. This unaudited Form 10-Q covers the three months ended March 31, 2019; financial statements are in U.S. dollars. The company had no approved products and no product-sale revenue.
Financial results and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $1.1 million | $3.5 million |
| Research and development expense | $20.5 million | $17.1 million |
| Selling, general and administrative expense | $8.1 million | $6.3 million |
| Operating loss | $27.5 million | $19.6 million |
| Net loss | $27.8 million | $18.8 million |
| Basic and diluted loss per share | $0.74 | $0.59 |
| Cash used in operating activities | $26.4 million | $21.4 million |
Revenue comprised $0.6 million of BMS license revenue and $0.6 million of BMS collaboration revenue. The company reported no product-sale revenue; a product gross margin is therefore not meaningful based on this filing. R&D spending increased mainly with staffing and ongoing AMT-061 studies. SG&A growth reflected personnel, professional fees and higher share-based compensation.
At March 31, cash and cash equivalents were $208.8 million, with restricted cash of $2.9 million (total cash, cash equivalents and restricted cash: $211.7 million), down from $237.3 million at year-end. Total assets were $269.0 million, total liabilities $111.9 million and shareholders’ equity $157.1 million. Accumulated deficit was $563.3 million.
Long-term debt was $35.6 million on the balance sheet; the company disclosed $35.0 million of outstanding principal. The Hercules facility carries an adjustable rate of at least 8.85%, with principal repayment scheduled to begin in January 2021 and maturity in June 2023. An additional $15 million may be drawn through June 2020, subject to facility terms. The company reported compliance with its debt covenants.
Management said existing cash and cash equivalents were expected to fund operations, debt obligations and capital expenditures into early 2021. The company expects continuing losses and negative operating cash flows. It reported no firm additional funding sources. Contractual obligations included $47.4 million of debt obligations, including interest, and $65.8 million of operating lease obligations.
Material changes and developments
- Revenue fell $2.3 million year over year, primarily because lower BMS license revenue was recognized as the estimated remaining service period increased. Operating expenses rose $5.2 million; net loss widened by $9.0 million.
- Operating cash use increased $5.0 million year over year, attributed primarily to higher operating expenses and working-capital changes, including prepaid expenses.
- Effective January 1, 2019, the company adopted the new lease standard, recognizing operating lease right-of-use assets and liabilities. At March 31, lease assets were $18.7 million and lease liabilities totaled $27.2 million. Prior-year comparisons were not recast.
- Share-based compensation expense was $4.3 million, compared with $2.5 million in Q1 2018. Shares issued and outstanding increased to 37.8 million from 37.4 million at year-end.
Outlook, commentary and risks
- AMT-061, hemophilia B: The pivotal Phase III HOPE-B trial dosed its first patient in February 2019. In the three-patient Phase IIb dose-confirmation study, mean FIX activity was 38% of normal at 12 weeks; no serious adverse events were reported in that study through the disclosed follow-up. These early, small-sample findings do not establish pivotal-trial outcomes.
- AMT-130, Huntington’s disease: The FDA cleared the IND in January 2019, enabling the planned Phase I/II study. FDA fast-track designation was announced after quarter-end, on April 8, 2019.
- BMS collaboration: The initial research term was scheduled to end May 21, 2019. BMS requested a one-year extension; after quarter-end, UniQure said it did not intend to extend and was discussing possible amendments. The outcome and any revised terms were uncertain. BMS designated a replacement cardiovascular target in April, after the reporting date. Future milestone and royalty revenue is contingent on development and commercial success.
- Management anticipates higher losses as it advances AMT-061 and AMT-130, develops other programs and invests in its technology and manufacturing platform. The filing provides no specific financial earnings guidance.
- Principal risks include clinical and regulatory failure or delay, manufacturing and scale-up challenges, dependence on collaborators, future financing needs, debt covenants, intellectual-property disputes, gene-therapy safety and acceptance, and uncertain pricing and reimbursement. All product candidates remained unapproved, and profitability was uncertain.
- Potential milestone payments to third parties are excluded from the contractual-obligations table because their achievement and timing are not fixed or determinable. The company reported no legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective as of March 31, 2019.
Investor verification priorities
- Track HOPE-B enrollment, safety and efficacy, and whether larger or longer follow-up confirms the early AMT-061 results.
- Verify progress and timing for the AMT-130 Phase I/II study and the implications of its post-quarter fast-track designation.
- Monitor the outcome of BMS discussions, the collaboration’s post-May 2019 terms, target designations and the assumptions driving deferred license revenue recognition.
- Assess cash burn against management’s early-2021 runway estimate, future capital needs, the optional Hercules draw and debt repayment schedule.
- Review the effect of rising development costs, share-based compensation and lease commitments on future cash use and dilution.