MeiraGTx Holdings plc — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. MeiraGTx is a clinical-stage gene therapy company with no approved products and no product revenue. Its programs target inherited eye diseases, xerostomia and neurodegenerative diseases.
Financial performance and liquidity
| Metric | Q3 2018 | Nine months 2018 | Comparable 2017 |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $8.1 million | $22.8 million | $6.4 million / $16.6 million |
| General and administrative expense | $6.6 million | $35.1 million | $2.4 million / $6.7 million |
| Total operating expense | $14.7 million | $58.0 million | $8.8 million / $23.3 million |
| Net loss | $15.4 million | $61.8 million | $8.4 million / $22.4 million |
| Basic and diluted loss per share | $0.59 | $3.89 | $1.00 / $2.66 |
| Operating cash used | Not separately stated | $47.4 million | $14.3 million |
At September 30, cash and cash equivalents were $88.6 million; total current assets were $91.3 million and current liabilities were $8.5 million. Management estimated cash would fund operating and capital needs into Q2 2020, subject to assumptions that could prove inaccurate. Nine-month financing cash inflow was $130.0 million, largely from the IPO, preferred-share issuance and warrant exercises. Investing cash outflow was $2.4 million, mainly for property and equipment.
No product revenue means operating or gross margins are not meaningful. The company reported $8.9 million in total liabilities and no note payable at quarter-end; it stated that it had no debt outstanding apart from ordinary-course payables and accruals. Lease and other contractual commitments remain.
Changes from the prior comparable periods
- Q3 net loss increased by $7.0 million year over year; nine-month net loss increased by $39.4 million. Operating expenses rose substantially, particularly G&A, which increased by $28.4 million for the nine-month period.
- Nine-month G&A growth primarily reflected payroll and share-based compensation. Total share-based compensation was $15.6 million, versus $2.0 million in the prior-year cash-flow disclosure. R&D increased by $6.3 million for the nine months, mainly reflecting manufacturing-facility preparation, partly offset by lower clinical-trial material costs.
- Cash rose from $8.5 million at year-end 2017 to $88.6 million, principally following capital raises. The company completed its June IPO, receiving $65.3 million net, and converted all outstanding preferred shares into ordinary shares.
- Loss per share comparisons are affected by the substantially higher weighted-average share count following the IPO and reorganization.
Outlook, developments and risks
- Management expects losses and operating expenses to increase as clinical development, manufacturing capacity, research programs and public-company costs expand. The company expects to need additional capital; financing may dilute shareholders or require concessions on collaboration or licensing rights.
- Clinical updates included completion of AAV-RPE65 dosing, completion of AAV-RPGR dose escalation, continued AAV-CNGB3 enrollment, and planned AAV-CNGA3 study initiation in early 2019. FDA granted specified orphan, Fast Track and rare pediatric disease designations for achromatopsia programs. Designations do not assure approval or faster development.
- After quarter-end, MeiraGTx acquired Vector Neurosciences for ordinary shares, adding AAV-GAD for Parkinson’s disease. Consideration included approximately $3.0 million in initial shares, up to $21 million in additional shares tied to regulatory milestones, and share-based royalties. Further development of AAV-GAD remained subject to regulatory discussions. The company also entered a research collaboration with Janssen using its riboswitch technology; financial terms are not stated in the filing text.
- The company licensed NIH technology for additional AAV-AQP1 indications. The UCL Business license includes contingent sales milestones of approximately $51.9 million, royalties, patent costs and an annual maintenance fee.
- Key risks include clinical efficacy and safety uncertainty, trial enrollment and regulatory delays, gene-therapy and manufacturing risks, dependence on third-party suppliers and licensors, intellectual-property disputes, foreign-exchange exposure and the need for additional financing. The company reported no material legal proceedings, and management concluded disclosure controls were effective at the reasonable-assurance level.
- The filing’s discussion of the warrant revaluation appears inconsistent: the financial statements present a $1.5 million expense, while one MD&A passage describes a gain. The warrants were exercised in June and no warrant liability remained at September 30.
Important facts for investors to verify
- Whether spending and clinical-development assumptions support management’s estimated cash runway into Q2 2020, and when additional financing may be needed.
- Upcoming trial progress, safety and efficacy data, manufacturing readiness, and regulatory requirements for the principal programs.
- Full economic and dilution effects of the Vector acquisition’s milestone shares and royalties, and the Janssen collaboration terms.
- Potential future payments and royalties under licenses, including UCL-related commitments, and the scope of lease obligations.
- The warrant fair-value disclosure inconsistency and the drivers and cash/non-cash composition of elevated G&A and share-based compensation.