Business context and reporting period
This is Rexahn Pharmaceuticals, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2019, filed May 10, 2019. The request identifies Opus Genetics, Inc., but the filing is for Rexahn Pharmaceuticals, Inc. The filing describes a clinical-stage oncology biopharmaceutical company with no commercial product revenue.
Key programs included RX-3117, in Phase 2a trials for pancreatic and bladder cancer; RX-5902, whose development strategy was under review after the company stopped enrollment in its TNBC monotherapy trial; and RX-0301, in preclinical development with a collaborator. Rexahn had discontinued internally funded development of RX-0201.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.242 million | $4.059 million |
| General and administrative expense | $1.696 million | $1.827 million |
| Operating loss | $3.938 million | $5.886 million |
| Net loss | $2.343 million | $2.075 million |
| Net loss per share | $0.62 | $0.79 |
| Cash used in operating activities | $4.380 million | $5.598 million |
At March 31, 2019, cash and cash equivalents were $6.123 million and marketable securities were $11.893 million, totaling $18.016 million. Current assets were $18.992 million and current liabilities were $2.510 million. Total liabilities were $3.485 million, including $794,000 of warrant liabilities and $295,000 of operating lease liabilities; the filing reports no conventional borrowings. Stockholders’ equity was $15.940 million. No meaningful revenue-based margin is available because revenue was zero.
Net cash from financing was $7.654 million, primarily from a January public offering. Investing activities used $5.895 million, including purchases of marketable securities. The company reported an accumulated deficit of $157.030 million.
Material changes versus the prior comparable period
- R&D expense fell 44.8%, primarily due to lower drug-manufacturing costs, the December 2018 restructuring, and reduced activity in certain programs. Manufacturing expense was approximately $218,000 versus $1.253 million.
- Operating loss narrowed, but net loss increased from $2.075 million to $2.343 million as the noncash gain from revaluing warrant liabilities was smaller: $1.513 million versus $3.366 million.
- Rexahn raised approximately $8.6 million gross in a January offering of 895,834 shares and warrants for up to 895,886 shares, at $9.60 per unit. Offering costs were approximately $1.046 million.
- Warrant liabilities declined to $794,000 from $2.308 million, generating the noncash Q1 gain. The company also reported 1.921 million total outstanding warrants at quarter-end.
Outlook, commentary, risks and unusual items
- Management said available cash, cash equivalents and marketable securities were expected to fund current activities for at least 12 months from issuance of the financial statements. The company also stated it would need additional capital to continue development; availability and terms are uncertain.
- Rexahn entered a February collaboration and license agreement with BioSense for RX-3117 in specified Asian markets. The $3.0 million upfront payment was payable in installments; $150,000 had been received and recorded as deferred revenue at quarter-end, so no related revenue was recognized. Rexahn was also eligible for up to $226 million in milestones and tiered royalties. It received a further $1.35 million installment on April 11, 2019.
- Management expected RX-3117 expense to remain approximately flat for the rest of 2019 versus Q1, while RX-5902 expense was expected to decline as its development strategy was evaluated. Future RX-0201 expense was expected to be insignificant. These are not company-wide earnings or revenue forecasts.
- RX-3117 pancreatic-trial enrollment reached 40 patients in February 2019. Preliminary January data reported a 38% overall response rate among 24 patients with at least one on-treatment scan; these were preliminary results, not definitive trial outcomes.
- Key risks include clinical and regulatory uncertainty, dependence on external CROs, manufacturers and collaborators, potential trial delays, intellectual-property risks, and the need for further financing. Vendor agreements had an estimated $4.790 million cost to complete at quarter-end.
- The company adopted the new lease accounting standard in January, recognizing right-of-use assets and liabilities without a material liquidity impact. It terminated its laboratory lease and sold lab equipment, recording a $9,594 loss. A 1-for-12 reverse stock split took effect April 12, 2019.
Most important facts for investors to verify
- Confirm the issuer identity: this filing is for Rexahn Pharmaceuticals, Inc., not Opus Genetics, Inc.
- Review the status and subsequent results of RX-3117 trials and the development decision for RX-5902; distinguish preliminary findings from final data.
- Verify BioSense installment receipts, remaining payment obligations, recognition of the upfront fee, and the conditions for potential milestones and royalties.
- Assess cash burn and financing needs against management’s stated 12-month liquidity expectation; note that warrant revaluation gains are noncash and volatile.
- Account for the April 2019 reverse split and the potential dilution from outstanding warrants, options and restricted stock units.