REGENXBIO Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance-sheet comparisons are to December 31, 2016. REGENXBIO is a clinical-stage biotechnology company developing AAV gene therapies through its NAV Technology Platform and licensing vectors to third parties.
Financial highlights
Amounts below are in millions, except per-share data.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Total revenue | $0.455 | $0.393 |
| Research and development expense | $16.619 | $6.183 |
| General and administrative expense | $6.622 | $5.479 |
| Operating loss | $(22.922) | $(11.251) |
| Net loss | $(21.993) | $(10.768) |
| Basic and diluted loss per share | $(0.82) | $(0.41) |
| Operating cash used | $(17.481) | $(7.887) |
- Revenue was principally license revenue: $0.455 million, versus $0.328 million a year earlier. There were no reagent sales or grant revenue in Q1 2017. The filing reports no product-sale revenue.
- Operating expenses totaled $23.377 million, versus $11.644 million. Operating and net margins are not meaningful indicators for this loss-making development-stage business.
- At March 31, cash and cash equivalents were $82.045 million and marketable securities were $127.506 million, totaling $209.551 million. Current assets were $148.802 million and current liabilities $9.958 million.
- Total liabilities were $11.229 million, including deferred rent; the filing reports no debt balance. Stockholders’ equity was $212.898 million.
- Cash increased $57.205 million during the quarter, primarily reflecting $71.523 million in financing cash flow, including the follow-on offering. Investing activities provided $3.163 million; capital expenditures were $2.929 million.
Material changes and financing
- Net loss more than doubled year over year as R&D spending increased by $10.436 million. Management attributed the rise largely to $4.6 million more in external manufacturing and process development, higher personnel costs, preclinical work, and clinical-trial activity.
- G&A expense increased $1.143 million, primarily from personnel costs. Investment income rose to $0.929 million from $0.483 million, including $0.5 million of realized investment gains.
- On March 27, the company sold 3.7 million shares at $20.50 per share, reporting net proceeds of $70.8 million. The underwriters exercised their option for 555,000 additional shares on April 26, generating another $10.7 million in net proceeds after quarter-end. Common shares outstanding were 30.244 million at March 31 and 30.821 million as of May 5.
- License revenue is concentrated: five customers accounted for all Q1 2017 revenue, each contributing more than 10%.
Outlook, risks and other disclosures
- Management said March 31 cash, cash equivalents and marketable securities were expected to fund operations and capital expenditures for at least 12 months from the report date, based on the current plan. The company expects ongoing losses and rising R&D and G&A costs, and anticipates needing additional capital; actual cash needs may exceed estimates.
- Development milestones described by management included starting RGX-314 Phase I enrollment by mid-2017; an interim RGX-501 trial update in late 2017; filing INDs for RGX-111 and RGX-121 in mid-2017; and expected RGX-111 Phase I/II enrollment in the second half of 2017. These are expectations, not guarantees.
- Key risks include early-stage clinical programs and uncertain safety, efficacy and regulatory outcomes; patient enrollment and manufacturing delays; reliance on Penn, contract manufacturers and other third parties; dependence on licensed intellectual property; concentrated, contingent license revenue; and potential dilution or unfavorable terms if further financing is required.
- The company reported no material pending legal action, no off-balance-sheet arrangements, no material change in market-risk exposure, and effective disclosure controls as of March 31. Future contingent license milestones are possible but depend on licensee progress; no product commercialization revenue was reported.
Important facts for investors to verify
- Whether RGX-314 and RGX-501 trials and the RGX-111/RGX-121 IND plans progressed on the stated timelines, and what subsequent clinical data show.
- Cash runway against actual operating and manufacturing spending, including the effect of the April offering proceeds and future financing needs.
- How quickly R&D costs continue to rise and whether manufacturing capacity and clinical supply support planned trials.
- Licensee development progress, customer concentration, and the timing and likelihood of contingent milestone or royalty revenue.
- Potential share dilution from equity compensation, future capital raises and the completed underwriters’ option exercise.