Business context and reporting period
Replimune Group, Inc. is a clinical-stage biotechnology company developing tumor-directed oncolytic immunotherapies. This unaudited Form 10-Q covers the three months ended June 30, 2023, the first quarter of fiscal 2024; comparisons are with the three months ended June 30, 2022. The company had no approved products and generated no product revenue.
Key financial metrics
Amounts below are in millions of U.S. dollars unless otherwise noted.
| Metric | Q1 FY2024 | Q1 FY2023 | Change / context |
|---|---|---|---|
| Product revenue | $0 | $0 | No products approved for sale |
| Research and development expense | $40.4 | $29.5 | Increased $11.0 |
| Selling, general and administrative expense | $15.2 | $11.4 | Increased $3.8 |
| Total operating expenses / operating loss | $55.6 | $40.9 | Operating loss increased $14.8 |
| Other income, net | $6.3 | $(1.4) | Higher investment income and more favorable foreign exchange impact, partly offset by debt interest |
| Net loss | $(49.6) | $(42.3) | Loss increased $7.3 |
| Net loss per share, basic and diluted | $(0.75) | $(0.78) | Lower loss per share despite higher net loss; weighted-average shares rose to 66.4 million from 54.2 million |
| Net cash used in operating activities | $48.6 | $33.5 | Cash use increased $15.1 |
Margins are not meaningful because the company had no product revenue. At June 30, 2023, cash and cash equivalents were $106.5 million and short-term investments were $432.6 million, totaling $539.1 million, versus $583.4 million at March 31, 2023. Current assets were $550.0 million and current liabilities were $32.2 million. Long-term debt, net of discount, was $28.9 million; the principal balance was $30.3 million. Total finance and operating lease liabilities were $31.9 million.
Material changes versus the prior comparable period
- R&D expense rose primarily with higher RP1 clinical-trial activity, including more sites and enrollment, data-management and CRO costs, and preparation for primary data release and a potential BLA. Personnel-related R&D costs also increased.
- SG&A expense increased as the company hired personnel and expanded pre-launch planning and commercial infrastructure activities.
- Investment income increased to $6.2 million from $0.3 million, mainly reflecting higher interest rates. The company also recorded $1.1 million of interest expense on Hercules debt, which was not present in the prior-year quarter.
- Operating cash use increased; there were no ATM share sales in the quarter, compared with $31.0 million in net ATM proceeds in the prior-year quarter.
- During the quarter, holders exercised 1.9 million pre-funded warrants, and the company issued the corresponding common shares.
Outlook, management commentary, risks and unusual items
- Cash runway: Management stated that, based on its current operating plan, cash, cash equivalents and short-term investments should fund operations into the second half of calendar 2025. The financial-statement note separately says resources are sufficient for at least 12 months from issuance. Management cautioned that assumptions could prove incorrect and capital could be used sooner.
- Clinical milestones: CERPASS topline data for RP1 in cutaneous squamous cell carcinoma was expected in early Q4 2023, moved from Q3 because independent review was proceeding more slowly than projected. If results demonstrate overall clinical benefit, the company expected to submit a BLA in Q1/Q2 2024, potentially combining CERPASS and the IGNYTE melanoma cohort.
- Other programs: Snapshot data for all 141 patients in the IGNYTE anti-PD-1-failed melanoma cohort were expected in Q4 2023; the protocol primary analysis remained expected in March 2024. RP2 and RP3 Phase 1 programs were expected to materially complete enrollment in Q3 2023. The RP2/RP3 colorectal cancer signal-finding study had begun; the HCC study was expected to initiate during the quarter. The SCCHN study was on hold pending adequate supplies of cisplatin and carboplatin. Further Phase 2 programs were expected to be disclosed by year-end 2023.
- Financing: A June 2023 amendment to the Hercules facility shifted $30 million of potential borrowing availability from tranche 1 to tranche 2, increasing the amount drawable in tranche 2 by December 31, 2023 to $45 million. The total facility and outstanding balance were unchanged. The loan matures October 2027; interest includes a floating cash rate with a 7.25% floor plus 1.50% PIK interest. Cash and other financial covenants begin on specified future dates.
- Risks and contingencies: The company expects continued operating losses and needs additional capital to meet longer-term objectives. Key risks include clinical-trial results and timing, regulatory approval, manufacturing transfer and supply, competition, and potential dilution or restrictive financing terms. The company relies on collaborators for certain checkpoint-inhibitor supplies and cost sharing; it does not expect further Regeneron reimbursement under the initial CERPASS study plan. No material litigation was reported. The company disclosed a pending challenge to certain claims of an Amgen patent through an inter partes review petition.
- Other notable items: The company recorded a $0.2 million income-tax provision, primarily related to U.S. interest income, and a full valuation allowance against net deferred tax assets. The CFO notified the company of her resignation effective June 2, 2023. Management reported disclosure controls were effective as of June 30, 2023 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether CERPASS and IGNYTE data meet the FDA’s expectations for clinically meaningful benefit and support the stated BLA timing and pathway.
- Whether the projected cash runway remains achievable given the higher quarterly operating cash use, expanding trials and manufacturing costs, and potential need for additional financing.
- Availability and timing of any Hercules delayed-draw borrowing, together with the associated interest, repayment terms and future cash or performance covenants.
- Progress in qualifying and using the in-house manufacturing facility, and whether shortages of clinical supplies affect planned studies, particularly SCCHN.
- Potential dilution from outstanding pre-funded warrants, options, RSUs and the remaining ATM program; reported shares outstanding were 59.0 million at June 30, 2023, while the loss-per-share denominator also included pre-funded warrants.
- The outcome and potential business impact of the Amgen patent challenge and any other intellectual-property claims.