Neurocrine Biosciences, Inc. — Q1 2013 Form 10-Q
Business context and period: The filing covers the three months ended March 31, 2013. Neurocrine is a clinical-stage biopharmaceutical company developing treatments for neurological and endocrine disorders; it had no product-sale revenue. Its lead program, elagolix, is partnered with AbbVie. The company reported 11 programs in development, including six in clinical development.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | $0.7 million | $11.3 million |
| Research and development expense | $10.3 million | $9.4 million |
| General and administrative expense | $3.4 million | $3.7 million |
| Operating loss | $13.0 million | $1.8 million |
| Net loss / loss per share | $12.1 million / $0.18 | $0.9 million / $0.01 |
| Operating cash flow | $1.9 million provided | $11.2 million used |
- Revenue was almost entirely the $0.7 million recognized under the Dainippon Sumitomo Pharma collaboration. No revenue was recognized from AbbVie or Boehringer Ingelheim in Q1 2013.
- Cash, cash equivalents, and investments totaled $175.6 million at March 31, 2013, versus $173.5 million at December 31, 2012. Cash and cash equivalents alone were $31.6 million.
- Total assets were $183.9 million; total liabilities were $39.0 million; stockholders’ equity was $145.0 million. No interest-bearing debt is listed on the balance sheet.
- Operating cash flow benefited substantially from collection of $14.1 million in collaboration receivables outstanding at year-end. Investing activities used $35.1 million and financing activities provided $1.0 million, mainly from stock-option exercises.
- Net loss increased as prior-period AbbVie and Boehringer Ingelheim collaboration revenue ended, while R&D spending rose. VMAT2 external development expense increased to $3.2 million from $1.7 million, reflecting Phase IIb work.
- A conventional operating margin is not especially informative given the company’s very low, collaboration-dependent revenue and development-stage costs.
Outlook, commentary, and risks
- Management said existing capital resources, investment income, and expected strategic-alliance payments should fund current and projected requirements for at least the next 12 months. It cautioned that funding may not cover all programs as planned and that additional capital may be needed.
- The company expected operating cash-flow losses for the foreseeable future and had an accumulated deficit of $731.7 million. It had no approved products and no product-sale revenue.
- Management cited increased VMAT2 development activity and ongoing cost mitigation. No specific revenue, earnings, or clinical milestone guidance was provided.
- Potential financing sources include strategic alliances and equity issuance. Effective shelf registrations allowed for up to $187 million in aggregate offerings; approximately $37 million remained available under the older shelf at quarter-end. Additional equity could dilute shareholders; debt could impose restrictive covenants.
- Key risks include clinical-trial failure or delay, dependence on collaborators and milestone payments, regulatory uncertainty, competition, intellectual-property disputes, and the possibility of insufficient funding. AbbVie and Boehringer Ingelheim may terminate their collaborations under specified terms.
- Investment securities had $66,000 of unrealized losses at March 31, 2013, all in positions held for less than 12 months; the company reported no material interest-rate market-risk exposure. Management reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Progress, enrollment, and results in the VMAT2 Phase IIb program and the partnered elagolix clinical programs.
- Timing and likelihood of future collaboration milestones, royalty opportunities, or changes in partner funding and responsibilities.
- Cash burn excluding the one-time collection of year-end collaboration receivables, and the company’s updated runway assumptions.
- Availability and potential dilution from shelf offerings, and any material changes in funding needs or development spending.
- Lease-related liabilities and commitments, including the cease-use liability and deferred gain from the real-estate sale-leaseback.