Exicure, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Exicure is a clinical-stage biotechnology company developing therapeutics using its spherical nucleic acid (SNA) platform. It has no approved products and no product-sale revenue.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $4.847m | $0.434m | $14.030m | $0.459m |
| Research and development expense | $7.008m | $3.433m | $13.083m | $6.828m |
| General and administrative expense | $2.229m | $1.985m | $4.803m | $4.193m |
| Operating loss | $(4.390)m | $(4.984)m | $(3.856)m | $(10.562)m |
| Net loss | $(4.311)m | $(5.220)m | $(3.161)m | $(10.506)m |
| Basic and diluted loss per share | $(0.05) | $(0.12) | $(0.04) | $(0.24) |
At June 30, cash and cash equivalents were $17.2m, short-term investments were $68.6m and restricted cash was $1.2m, totaling approximately $87.0m. Management said this was expected to fund operations into early 2022, subject to operating-plan changes and other uncertainties. Six-month operating cash use was $18.8m, versus $9.0m a year earlier. Investing cash use was $9.0m, mainly reflecting securities purchases net of maturities and $3.0m of capital expenditures.
Total assets were $96.1m and total liabilities $14.4m. The company repaid its remaining Hercules debt, approximately $5.0m principal plus a $0.1m end-of-term fee, on March 2, 2020; no debt remained at quarter-end. Current liabilities included $10.9m of deferred revenue. No gross margin was reported; revenue was collaboration-based.
Changes versus the prior comparable periods
- Revenue rose substantially, primarily because of the Allergan collaboration: $4.833m in Q2 and $13.949m for the first half of 2020. Allergan was acquired by AbbVie in May 2020.
- R&D expense increased 104% in Q2 and 92% in the first half, reflecting increased staffing and research activity, collaboration work, and cavrotolimod clinical development. R&D headcount rose from 23 to 41 year over year.
- Despite higher expenses, reported net loss narrowed year over year, largely alongside recognition of Allergan collaboration revenue. Revenue recognition is not equivalent to new cash receipts: the $25m Allergan upfront payment was received in November 2019, and $10.9m remained deferred at June 30.
- Cash, cash equivalents and restricted cash declined by $30.1m from year-end. The company also completed the underwriters’ partial purchase of 1.08m additional shares for $3.0m gross proceeds in January.
Outlook, developments and risks
- Management expected R&D spending to increase in 2020 as it advanced cavrotolimod, expanded neurological research and developed the SNA platform. It expected to begin IND-enabling studies for Friedreich’s ataxia candidate XCUR-FXN in late 2020.
- Cavrotolimod (AST-008): Phase 1b enrollment was complete, with 20 patients dosed. The company reported no treatment-related serious adverse events or dose-limiting toxicities to date; the most common adverse events were injection-site reactions and flu-like symptoms. The Phase 2 portion had begun, with the first Merkel cell carcinoma patient dosed in June. These are company-reported early findings, not evidence of established efficacy.
- COVID-19 had caused minor delays in receipt of some research materials and could disrupt clinical enrollment, trial operations, supply, development timelines and access to financing. The company reported that it generally had all R&D staff on-site under safety guidelines after moving to its new Chicago facility on July 1; administrative staff worked predominantly from home.
- The Chicago headquarters lease is a 10-year commitment beginning July 1, 2020, with initial annual base rent of approximately $1.1m and a $1.2m letter of credit secured by restricted cash. Lease payments and operating expenses are additional considerations.
- The company expects no product revenue for the foreseeable future and may need additional financing. Equity financing could dilute shareholders; debt or collaboration arrangements could restrict operations or require relinquishing rights. Management cited no assurance that future financing would be available on acceptable terms.
- The filing reported no material legal proceedings, no off-balance-sheet arrangements and no material changes to contractual obligations other than the new headquarters lease. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether the approximately $87m of cash, investments and restricted cash, and management’s early-2022 runway estimate, remain consistent with actual spending and updated plans.
- Progress, enrollment, safety and efficacy evidence from the cavrotolimod Phase 2 cohorts, and whether COVID-19 or supply issues affect trial timelines.
- The pace of Allergan/AbbVie collaboration work, remaining deferred revenue recognition, and whether any options or milestone payments are triggered; future milestone and royalty amounts are contingent, not assured.
- Future R&D spending, capital needs and potential dilution, including use of the remaining shelf-registration capacity disclosed in the filing.
- The filing gives different accumulated-deficit figures in different sections: $84.458m on the June 30 balance sheet and approximately $103.3m in narrative disclosures. Investors should check the original filing and related context for reconciliation.