MeiraGTx Holdings plc — Q1 2020 Form 10-Q
Business context and reporting period
MeiraGTx is a clinical-stage gene therapy company with six programs in clinical development, preclinical programs, and an operating viral-vector manufacturing facility in London. The unaudited quarter ended March 31, 2020; comparisons are with Q1 2019. The company has no approved products and has not generated product-sales revenue. Its reported license revenue is from the Janssen collaboration.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / prior date |
|---|---|---|
| License revenue | $4.21 million | $0.78 million |
| Operating expenses | $19.89 million | $21.48 million |
| Operating loss | $15.68 million | $20.69 million |
| Net loss | $15.68 million; $0.43 per share | $17.98 million; $0.62 per share |
| Net cash used in operating activities | $12.38 million | Net cash provided of $82.17 million |
| Cash, cash equivalents and restricted cash | $210.79 million | $227.36 million at Dec. 31, 2019 |
Q1 2020 total comprehensive loss was $11.74 million, including a $3.95 million foreign-currency translation gain. Cash and cash equivalents alone were $210.41 million. Total assets were $304.67 million and shareholders’ equity was $184.92 million at quarter end. Lease obligations were approximately $21.1 million; the balance sheet reports no conventional borrowings. The company reported no income tax provision and maintained a full valuation allowance on deferred tax assets. Profit margins are not meaningful for this loss-making, pre-commercial business.
Material changes versus the prior comparable period
- Revenue rose $3.42 million, reflecting greater amortization of Janssen’s $100 million upfront payment.
- General and administrative expense increased $3.31 million to $11.81 million, primarily from higher share-based compensation, payroll, insurance, and facilities costs.
- Research and development expense fell $4.89 million to $8.08 million, principally because Janssen research funding increased; the company recorded $14.03 million of Janssen R&D reimbursements as an offset to expense.
- Net loss narrowed by $2.30 million. The prior-year comparison included a $2.72 million foreign-currency gain, versus a $0.76 million loss in Q1 2020; Q1 2020 also included $0.79 million of interest income.
- Operating cash flow shifted from $82.17 million provided in Q1 2019 to $12.38 million used in Q1 2020. The prior-year period included the $100 million Janssen upfront payment; Q1 2020 cash use reflected operating losses and working-capital movements.
- Investing cash outflow increased to $4.04 million from $1.12 million, mainly for property and equipment. Q1 2019 financing included $77.57 million net proceeds from a private placement; Q1 2020 financing was $0.16 million, mainly option exercises.
Outlook, commentary, risks and unusual items
- Management estimated available cash and expected Janssen research funding would support operating expenses and capital expenditure requirements into 2022, while cautioning that assumptions could prove wrong. The filing also states cash on hand was expected to cover expenses for at least 12 months from issuance.
- Management expects substantial future losses and increased R&D and administrative spending, including for clinical development, manufacturing capacity, staffing, and facilities. Additional financing may be needed; it may not be available on acceptable terms, and equity financing could dilute shareholders.
- Clinical and operational plans included reporting AAV-RPGR Phase 1/2 data in 2020; resuming new-patient treatment in the AAV-AQP1 AQUAx trial in Q2 2020 and reporting preliminary data in the second half of 2020; and targeting an AAV-GAD IND filing in late 2020 or early 2021. The plasmid facility was expected to be operational by year-end 2020 and a second viral-vector facility in 2021. These are forward-looking expectations, not guarantees.
- COVID-19 had not materially affected Q1 financial results or operations, but the company warned of possible future disruption to trials, patient enrollment, staffing, manufacturing, supply chains, and access to capital. It reported no supply-chain disruption at the time and did not anticipate one affecting current activities.
- On April 9, 2020, after quarter end, the company acquired preclinical company Emrys Bio for consideration valued at $7.7 million, comprising ordinary shares and restricted shares, with some shares subject to later issuance and indemnification claims. The transaction also included waiver and termination of specified Vector merger milestone and royalty payments.
- The company terminated its ARE laboratory lease effective February 29, 2020, recognizing a $0.14 million gain. It disclosed no material legal proceedings and no new material commitments during the quarter.
- Foreign-exchange movements affected results: a $0.76 million Q1 2020 transaction loss and a $3.95 million translation gain. The company held forward contracts with $3.79 million notional value and $3.73 million net fair value; it said a 10% unfavorable exchange-rate movement would not significantly increase net loss.
- Key risks include clinical and regulatory failure or delay, gene-therapy safety and manufacturing risks, reliance on Janssen and other third parties, future financing needs, competition, intellectual-property challenges, and uncertainty from COVID-19. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether Janssen-funded research, reimbursements, and revenue recognition progress as expected, and how much of the collaboration’s deferred revenue remains.
- Whether stated clinical data, trial resumption, IND, and manufacturing-facility timelines remain achievable amid COVID-19 and regulatory requirements.
- Whether the estimated runway into 2022 remains supportable given cash burn, capital spending, and future financing needs.
- The final accounting and integration effects of the post-quarter Emrys acquisition, including the share consideration and Vector payment waivers.
- Whether foreign-exchange exposure, lease commitments, and collaboration dependence materially change the company’s financial outlook.