Voyager Therapeutics, Inc. annual report, FY2019

Voyager Therapeutics, Inc. — 2019 Form 10-K

Reporting period: Fiscal year ended December 31, 2019. The filing also presents unaudited quarterly results, including fourth-quarter 2019. Voyager is a clinical-stage AAV gene-therapy company and had no products approved for sale or product-sales revenue.

Financial and operating performance

Metric	FY 2019	FY 2018
Collaboration revenue	$104.4 million	$7.6 million
Research and development expense	$119.7 million	$64.9 million
General and administrative expense	$36.3 million	$33.8 million
Operating loss	$51.7 million	$91.1 million
Net loss	$43.6 million	$88.3 million
Net loss per share, basic and diluted	$1.21	$2.75
Net cash from (used in) operating activities	$48.7 million	$(15.9) million

FY 2019 revenue included $31.8 million from Sanofi Genzyme, $11.3 million from AbbVie’s tau collaboration, $1.3 million from AbbVie’s alpha-synuclein collaboration, and $60.0 million from Neurocrine. There was no product revenue. Collaboration revenue is not a product-sales margin measure; Voyager remained loss-making.

Fourth quarter 2019 (unaudited): collaboration revenue was $32.7 million, operating expenses were $46.4 million, operating loss was $13.8 million, and net loss was $12.6 million, or $0.34 per share. The second quarter reported net income of $11.2 million, reflecting collaboration revenue recognition rather than product sales.

Liquidity, cash flow and obligations

• At December 31, 2019, cash, cash equivalents and marketable debt securities were $281.5 million, versus $155.8 million a year earlier. Working capital was $228.6 million; total assets were $354.8 million and stockholders’ equity was $99.5 million.
• Operating cash flow was positive $48.7 million, while net loss was $43.6 million. Cash flow included substantial collaboration-related receipts and an $80.8 million increase in deferred revenue; it should not be viewed as recurring operating profitability.
• Management expected existing cash, cash equivalents and marketable debt securities, together with anticipated Neurocrine cost reimbursements, to fund operations into mid-2022. The company said it would need substantial additional funding to continue its plans and may seek equity, debt or business-development financing.
• The filing reports no conventional borrowings. Total liabilities were $255.2 million, including $194.5 million of deferred revenue and $34.2 million of operating-lease liabilities. Undiscounted future lease payments were $45.8 million. Lease liabilities are obligations, not reported debt.

Material changes and developments

• Revenue rose by $96.8 million year over year, mainly due to Neurocrine and AbbVie collaboration activity and recognition of deferred Sanofi Genzyme consideration after the collaboration ended. Operating expenses increased $57.4 million, with R&D up $54.8 million as clinical, manufacturing and preclinical activity expanded. Net loss narrowed by $44.7 million.
• In June 2019, Voyager terminated its Sanofi Genzyme collaboration, paid $10 million and regained worldwide Huntington’s rights and ex-U.S. Friedreich’s ataxia rights; the latter were transferred to Neurocrine. Voyager relinquished the spinal muscular atrophy program and future Sanofi collaboration milestone and royalty rights. Another $10 million is payable after filing an IND for a qualifying Huntington’s product.
• Voyager received $115 million upfront from Neurocrine, $50 million for an equity purchase, and a further $5 million related to the Friedreich’s ataxia rights transfer. Neurocrine funds agreed development activities. Voyager has options to co-develop and co-commercialize VY-AADC and Friedreich’s ataxia products, subject to contractual terms.
• Voyager received $65 million upfront from AbbVie’s alpha-synuclein collaboration in 2019; the separate tau collaboration had provided $69 million upfront in 2018. AbbVie may elect options to advance programs; further option, milestone and royalty payments are contingent, not assured revenue.
• Shares outstanding increased to 36.9 million at year-end 2019 from 32.4 million at year-end 2018, including the Neurocrine equity issuance. The company also reported $15.6 million of stock-based compensation expense.

Outlook, commentary and principal risks

• VY-AADC for Parkinson’s disease: RESTORE-1 was amended to target approximately 85 patients, randomized 2:1 to treatment or placebo surgery, following FDA feedback that two adequate and well-controlled trials are suggested for Parkinson’s disease. The change was expected to lengthen enrollment. Voyager and Neurocrine anticipated starting the RESTORE-2 Phase 3 trial in the second half of 2020; these were forward-looking plans, not achieved milestones.
• Earlier, small, open-label VY-AADC studies showed reported motor-function and quality-of-life improvements, but were not placebo-controlled and may not predict controlled-trial outcomes. RESTORE-1 uses a selected dose not previously evaluated in a clinical trial and a different manufacturing process from earlier studies. Surgery, delivery consistency, safety and efficacy remain key uncertainties.
• Voyager expected to update on VY-HTT01 and possible IND plans in the second quarter of 2020. It planned to seek a partner for VY-SOD102 (SOD1 ALS) and no longer expected to file an IND before partnering. Friedreich’s ataxia and AbbVie antibody programs remained preclinical.
• Management cited a cash runway into mid-2022, but the company had recurring losses, no product revenue and dependence on collaboration reimbursements and future financing. Collaboration option and milestone payments are conditional; partners can decline options or terminate agreements.
• Other material risks include clinical or regulatory delays or failure, gene-therapy and surgical-delivery adverse events, manufacturing scale and quality, dependence on third-party manufacturers and delivery devices, intellectual-property challenges, competition, reimbursement and commercialization uncertainty, and potential dilution from future capital raises. The filing also noted the emerging coronavirus situation as an uncertain potential business risk.
• Voyager recognized $28.7 million of Sanofi-related termination revenue upon transfer of specified rights, net of termination-related payments and an expected contingent payment. This recognition and collaboration revenue generally should not be interpreted as recurring product sales.

Investor verification priorities

1. Check subsequent filings for RESTORE-1 enrollment, trial results and the status and timing of RESTORE-2, including any FDA requests for additional evidence.
2. Reconcile reported collaboration revenue and operating cash flow to cash actually received, deferred revenue, reimbursable costs and any one-time termination accounting.
3. Confirm cash runway assumptions against spending, Neurocrine reimbursement collections, collaboration changes and any financing or share issuance after year-end.
4. Track the Huntington’s IND-related $10 million Sanofi payment and any other termination, sublicensing or royalty obligations.
5. Monitor partner option decisions, cost-sharing or co-commercialization elections, and development progress for Neurocrine and AbbVie programs.
6. Review clinical safety, manufacturing comparability, delivery-device supply and contract-manufacturer capacity as programs advance.