The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto included in this Quarterly Report and the
audited financial information and related notes, as well as Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other disclosures, included in our Annual Report on Form 10-K for the fiscal
year ended
· our expectations regarding the timing, progress and results of preclinical
studies and clinical trials for NC318, NC410 and any other product candidates we develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
· the impact of the COVID-19 pandemic on the initiation, progress or expected
timing of our clinical trials and the timing of related data, our efforts to adjust trial-related activities to address the impact of the COVID-19 pandemic, and other future impacts of the COVID-19 pandemic on the economy, our industry and our financial condition and results of operations;
· the timing or likelihood of regulatory filings for NC318, NC410 and any other
product candidates we develop and our ability to obtain and maintain regulatory
approvals for such product candidates for any indication;
· the development of a companion or complimentary diagnostic for NC318, NC410 or
any other product candidates we develop;
· our manufacturing capabilities and strategy, including the scalability of our
manufacturing methods and processes;
· our expectations regarding the potential benefits, activity, effectiveness and
safety of NC318, NC410 and any other product candidates we develop;
· our intentions and ability to successfully commercialize our product
candidates;
· our expectations regarding the nature of the biological pathways we are
targeting;
· our expectations for our FIND-IO platform, including our ability to discover
and advance product candidates using our FIND-IO platform;
· the potential benefits of and our ability to maintain our relationships and
collaborations with
· our estimates regarding our expenses, future revenues, capital requirements,
our needs for or ability to obtain additional financing and the period over
which we expect our current cash, cash equivalents and marketable securities to
be sufficient to fund our operations;
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· our intended reliance on and the performance of third parties, including
collaborators, contract research organizations and third-party manufacturers;
· our ability to protect and enforce our intellectual property protection and the
scope and duration of such protection;
· developments and projections relating to our competitors and our industry,
including competing therapies; and
· the impact of current and future laws and regulations.
These statements are based on management's current expectations, estimates,
forecasts and projections about our business and industry, are not guarantees of
future performance and involve known and unknown risks, uncertainties and other
factors that are in some cases beyond our control, such as the impacts of the
COVID-19 pandemic, and that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
those anticipated by the forward-looking statements. We discuss many of these
risks elsewhere in this report, including in the section entitled "Risk Factors"
included in Part II, Item 1A, in the "Risk Factors" section of our Annual
Report, and in our various filings with the
Overview
We are a clinical-stage biopharmaceutical company committed to discovering and developing novel, first-in-class immunomedicines to treat cancer and other immune-related diseases by restoring normal immune function. We view the immune system holistically and, rather than target one specific immune cell type, we focus on understanding biological pathways, the interactions of cells and the role each interaction plays in an immune response. Through our proprietary Functional, Integrated, NextCure Discovery in Immuno-Oncology, or FIND-IO, platform, we study various immune cells to discover and understand targets and structural components of immune cells and their functional impact in order to develop immunomedicines. We are focused on patients who do not respond to current therapies, patients whose cancer progresses despite treatment and patients with cancer types not adequately addressed by available therapies. We are committed to discovering and developing first-in-class immunomedicines, which are immunomedicines that use new or unique mechanisms of action to treat a medical condition, for these patients.
In
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actions, including relief measures, implemented to address the impact of the pandemic, and resulting impacts on the financial markets and overall economy. We are unable to determine the extent of the impact of the pandemic on our operations and financial condition going forward. These developments are highly uncertain and unpredictable, and may materially adversely affect our financial position and results of operation
Our lead product candidate NC318 is a first-in-class immunomedicine against a
novel immunomodulatory receptor called Siglec-15, or S15. In
Our second product candidate, NC410, is a novel immunomedicine designed to block
immune suppression mediated by an immune modulator called Leukocyte-Associated
Immunoglobulin-like Receptor 1. The
Financial Overview
Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to research and development activities for our product candidates, discovery programs and FIND-IO platform, organizing and staffing our company, identifying business development opportunities, raising capital, securing intellectual property rights related to our product candidates, building and optimizing our manufacturing capabilities and conducting discovery.
We have not generated any revenue from product sales and only limited revenue
from other sources. As a result, with the exception of the three months ended
We have funded our operations to date primarily with proceeds from public
offerings of our common stock, private placements our preferred stock and
upfront fees received under our former research and development collaboration
agreement with Lilly, or the Lilly Agreement. From our inception through
In
On
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to us were approximately
On
As of
We expect to incur substantial expenditures in the foreseeable future as we advance our product candidates through clinical development, the regulatory approval process and, if approved, commercialization, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 1/2 clinical trial and planned Phase 2 clinical trial of NC318, our planned Phase 1/2 clinical trial of NC410 and other research and development activities. We expect to continue to incur significantly increased costs as a result of operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.
We will need substantial additional funding to support our continuing operations and to pursue our development strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of public and private equity offerings, debt financings, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials, or other research and development activities or one or more of our development programs.
Components of Our Results of Operations
Revenue
For the three months ended
For additional information about our revenue recognition policy, see Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our discovery efforts, research activities, development and testing of our product candidates as well as for clinical trials, including:
· salaries, benefits and other related costs, including stockbased compensation,
for personnel engaged in research and development functions;
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· expenses incurred under agreements with third parties, including agreements
with third parties that conduct research, preclinical activities or clinical trials on our behalf, such as our corporate sponsored research agreement, or the SRA, and our license agreement withYale University , or Yale;
· costs of outside consultants, including their fees, stockbased compensation
and related travel expenses;
· the costs of laboratory supplies and acquiring, developing and manufacturing
preclinical study and clinical trial materials; and
· facilityrelated expenses, which include direct depreciation costs and
allocated expenses for rent and maintenance of facilities and other operating
costs.
We expense research and development costs as incurred. Our expenses related to clinical trials are based on actual costs incurred and estimates of other incurred costs. These estimated costs are based on several factors, including patient enrollment and related expenses at clinical investigator sites, contract services received, consulting agreement costs and efforts expended under contracts with research institutions and thirdparty contract research organizations that conduct and manage clinical trials on our behalf. We generally accrue estimated costs related to clinical trials based on contracted amounts applied to the level of patient enrollment and other activity according to the protocol. If future timelines or contracts are modified based on changes in the clinical trial protocol or scope of work to be performed, we would modify our estimates of accrued expenses accordingly on a prospective basis. Historically, any such modifications have not been material.
Due to the early-stage nature of our programs and the discovery-related nature of our efforts, we do not track costs on a program-by-program basis. As our current and future product candidates proceed along a development path further in clinical trials, we intend to track the costs of each program.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we advance our product candidates through development, including conducting our ongoing Phase 1/2 clinical trial of NC318, our planned Phase 2 clinical trial in combination with standard of care chemotherapies and preclinical studies and a Phase 1/2 clinical trial of NC410, as we develop a complementary diagnostic for NC318 if we determine it is advisable, as we expand our current good manufacturing practice, or cGMP, manufacturing capacity, including to provide drug supply of NC318 for future clinical trials, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs.
We cannot determine with certainty the duration and costs of future clinical trials of NC318, NC410 or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we may obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of NC318, NC410 and any other product candidate we may develop will depend on a variety of factors, including:
· the scope, progress, results and costs of clinical trials of NC318 and NC410,
as well as of any future clinical trials of other product candidates and other
research and development activities that we may conduct;
· the impact of the COVID-19 pandemic, including delays and slowdowns as a result
of strain on our clinical trial sites and concerns about patient safety;
· uncertainties in selection of indications, clinical trial design and patient
enrollment rates;
· the probability of success for our product candidates, including safety and
efficacy, early clinical data, competition, ease and ability of manufacturing
and commercial viability;
· significant and changing government regulation and regulatory guidance;
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· the timing and receipt of any development or marketing approvals; and
· the expense of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could lead to a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time to complete clinical development for any such product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnelrelated costs, including payroll and stockbased compensation, for personnel in executive, finance, human resources, business and corporate development and other administrative functions, professional fees for legal, intellectual property, consulting and accounting services, rent and other facilityrelated costs, depreciation and other general operating expenses not otherwise classified as research and development expenses. General and administrative expenses also include all patentrelated costs incurred in connection with filing and prosecuting patent applications, which are expensed as incurred.
We anticipate that our general and administrative expenses will increase substantially during the next few years as a result of staff expansion and additional occupancy costs, as well as costs associated with being a public company, including higher legal and accounting fees, investor relations costs, higher insurance premiums and other compliance costs associated with being a public company.
Other Income, Net
Other income, net consists primarily of interest income earned on
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods indicated (in thousands): Three Months Ended March 31, 2020 2019 Change Revenue:
Revenue from research and development arrangement
Operating expenses: Research and development 10,578 6,513 4,065 General and administrative 3,588 1,659 1,929 Income (loss) from operations 8,212 (6,815) 15,027 Other income, net 1,521 660 861 Net income (loss)$ 9,733 $ (6,155) $ 15,888 18 Table of Contents
Revenue from Research and Development Arrangement
Revenue was
Research and Development Expenses
Research and development expenses for the three months ended
General and Administrative Expenses
General and administrative expenses for the three months ended
Other Income, Net
Other income, net for the three months ended
Liquidity and Capital Resources
We have financed our operations primarily with proceeds from public offerings of
our common stock, private placements of our preferred stock and upfront fees
received under the Lilly Agreement. On
As of
In
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through sale of equity, debt financings, strategic alliances and licensing
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arrangements. Adequate additional funding may not be available to us on acceptable terms or at all, including as a result of the impact of the COVID-19 pandemic. If we fail to raise capital or enter into such arrangements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates or delay our efforts to expand our pipeline of product candidates.
Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):
Three Months Ended March 31, 2020 2019 Net cash (used in) provided by : Operating activities$ (10,594) $ (7,080) Investing activities 5,373 (935) Financing activities (240) 2,970 Net decrease in cash and cash equivalents$ (5,461) $ (5,045)
Cash Used in Operating Activities
Net cash used in operating activities was
Cash Used in Investing Activities
Cash provided by investing activities for the three months ended
Cash Provided by Financing Activities
Cash used in financing activities was
Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of business to
our contractual obligations during the three month period ended
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed financial statements have been prepared in accordance with
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historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.
During the three months ended
OffBalance Sheet Arrangements
Since our inception, we have not engaged in any offbalance sheet arrangements,
as defined in the rules and regulations of the
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements that may impact our financial position and results of operations.
Emerging Growth Company Status
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.
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