REGENXBIO INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the financial statements and the
notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with
our audited financial statements and the notes thereto included in our Annual
Report on Form 10-K for the year ended
Overview
We are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our gene therapy product candidates are designed to deliver genes to cells to address genetic defects or to enable cells in the body to produce therapeutic proteins that are intended to impact disease. Through a single administration, our gene therapy product candidates are designed to provide long-lasting effects, potentially significantly altering the course of disease and delivering improved patient outcomes.
Overview of Product Candidates
We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) to address genetic diseases through two modalities: AAV-mediated antibody delivery and monogenic gene replacement. The AAV-mediated antibody delivery modality is designed to treat serious and chronic diseases by delivering the genes necessary for the sustained production of therapeutic antibodies in vivo. Our monogenic gene replacement approach builds upon the well-understood mechanism of replacing a dysfunctional or missing gene with a functional copy of the gene in order to enable sustained production of necessary proteins.
Gene therapy using NAV Vectors for AAV-mediated antibody delivery
• RGX-314: We are developing RGX-314 as a novel, single-administration gene
therapy for the treatment of wet age-related macular degeneration (wet
AMD), diabetic retinopathy (DR), and other additional chronic retinal
conditions which cause total or partial vision loss. We are advancing two
separate routes of administration of RGX-314 to the eye, through a
standardized subretinal delivery procedure as well as by delivery to the
suprachoroidal space using the SCS Microinjector™ licensed from Clearside
Biomedical, Inc.
In
In
We are also conducting a Phase II trial of the suprachoroidal delivery of RGX-314 using the SCS Microinjector for the treatment of wet AMD known as AAVIATE®. We have completed enrollment in Cohort 1 of this trial, and we plan to report interim data from Cohort 1 in the third quarter of 2021. We have also completed enrollment in Cohort 2 and expect to report interim data from Cohort 2 in the second half of 2021. In addition, we have expanded AAVIATE and began dosing in a third cohort of patients. Cohort 3 will evaluate the efficacy, safety and tolerability of RGX-314 in up to 20 patients who are neutralizing antibody (NAb) positive. The same dose evaluated in Cohort 2, 5.0x1011 genomic copies per eye (GC/eye) of RGX-314, will be delivered to patients in Cohort 3 via a single injection. As with Cohorts 1 and 2, patients in Cohort 3 will not receive prophylactic immune suppressive corticosteroid therapy before or after administration of RGX-314.
In addition, we announced in
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• AAV-Mediated Antibody Expression for the Treatment of Hereditary
Angioedema (HAE): We are developing a novel, one-time treatment utilizing
a NAV Vector to deliver a gene encoding for a therapeutic antibody that
targets and binds to plasma kallikrein, a key protein left unregulated in
patients with HAE. HAE is a chronic and severe disease characterized by
recurring severe swelling (angioedema), most commonly in the face, airway,
intestines and limbs. We expect to provide a program update in 2021.
• AAV-Mediated Antibody Expression for the Treatment of Neurodegenerative
Diseases: We have established a research program in partnership with
Neurimmune AG (Neurimmune) to jointly develop and commercialize novel gene
therapies using NAV Vectors to deliver human antibodies for chronic
neurodegenerative diseases, with an initial focus on diseases associated
with the accumulation and deposition of the microtubule-associated protein
tau (tauopathies) and alpha-synuclein (alpha-synucleinopathies). We expect
to provide a program update in 2021.
Gene therapy programs for the potential treatment of rare monogenic diseases
• RGX-202: We are developing RGX-202 for the treatment of Duchenne Muscular
Dystrophy (DMD), a severe, progressive, degenerative muscle disease caused
by mutations in the gene which encodes dystrophin, a protein involved in
muscle cell structure and function. Without functional dystrophin protein,
muscles throughout the body degenerate and become weak. We expect to
submit an Investigational New Drug (IND) application for this program in
mid-2021.
• RGX-121: We are developing RGX-121 for the treatment of the neurological
symptoms of Mucopolysaccharidosis Type II (MPS II), a severe genetic
lysosomal storage disease caused by deficiency of iduronate-2-sulfatase
(I2S), an enzyme that is responsible for breakdown of cellular waste
products.
We are conducting a Phase I/II trial of RGX-121 in patients with MPS II up to
the age of 5 years old. As reported in
In addition, the first patient has been dosed in a second Phase I/II trial of RGX-121 for the treatment of pediatric patients with MPS II over the age of 5 years old.
• RGX-111: We are developing RGX-111 for the treatment of the neurological
symptoms of Mucopolysaccharidosis Type I (MPS I), a severe genetic
lysosomal storage disease caused by deficiency of ?-l-iduronidase (IDUA),
an enzyme required for breakdown of cellular waste products. We have
completed dosing of patients in the first cohort of a Phase I/II clinical
trial for RGX-111.
• RGX-181: We are developing RGX-181 for the treatment of late-infantile
neuronal ceroid lipofuscinosis type 2 (CLN2) disease, one of the most
common forms of Batten disease, caused by mutations in the tripeptidyl
peptidase 1 (TPP1) gene. An IND was submitted to the FDA, after which the
FDA notified REGENXBIO that its proposed trial had been placed on clinical
hold and the agency requested more information to support the initial dose
selection and certain study drug administration procedures. REGENXBIO is
evaluating the FDA's requests and plans to provide an update on the
program in the second half of 2021.
• RGX-381: We are developing RGX-381 for the treatment of ocular
manifestations of CLN2 disease. Based on communication with the FDA and
the update from the RGX-181 program, we now expect to provide a program
update in the second half of 2021.
In addition to our lead product candidates described above, we have also funded, and plan to continue to fund, preclinical research on potential product candidate programs that may become part of our internal product development pipeline. We have partnered with a number of leading academic institutions and will continue to seek partnerships with innovative institutions to develop novel NAV gene therapy product candidates.
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Overview of Our NAV Technology Platform
In addition to our internal product development efforts, we also selectively
license the NAV Technology Platform to other leading biotechnology and
pharmaceutical companies, which we refer to as NAV Technology Licensees. As of
Impact of COVID-19
We are actively monitoring the impact of the COVID-19 pandemic on our business, results of operations and financial condition. Our offices, laboratories, clinical trial sites, prospective clinical trial sites, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other collaborators and partners are located in jurisdictions where quarantines, executive orders, shelter-in-place orders, guidelines, and other similar orders and restrictions intended to control the spread of the disease have been put in place by governmental authorities. We have implemented a work-from-home policy for all employees who are not essential to be onsite, and we may take further actions that alter our operations, as may be required by federal, state or local authorities or which we determine are in the best interests of our employees.
The COVID-19 pandemic has caused delays to our clinical trials and may further delay or prevent us from proceeding with our clinical trials. Our other business initiatives, such as preclinical development and manufacturing operations, may also be affected by the COVID-19 pandemic. For example, the construction of our new headquarters, including our current good manufacturing practice production facility, has been delayed from our original estimates, and may be delayed further, due to various government orders and restrictions relating to the COVID-19 pandemic. In addition, if the business and operations of our licensees are adversely affected by the COVID-19 pandemic, our revenues could in turn be adversely affected. We are proactively taking measures to mitigate or reduce any adverse impact of the COVID-19 pandemic on the progress of our clinical trials and other business initiatives.
Our results of operations for the three months ended
Financial Overview
Revenues
Our revenues to date primarily consist of license and royalty revenue resulting from the licensing of our NAV Technology Platform. We have not generated any revenues from commercial sales of our own products. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval and adequate labeling, our ability to generate future revenues will be materially compromised.
We license our NAV Technology Platform to other biotechnology and pharmaceutical companies. The terms of the licenses vary, and licenses may be exclusive or non-exclusive and may be sublicensable by the licensee. Licenses may grant intellectual property rights for purposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drug therapies for specific diseases using the NAV Technology Platform. License agreements generally have a term at least equal to the life of the underlying patents, but are terminable at the option of the licensee. Consideration from licensees under our license agreements may include: (i) up-front and annual fees, (ii) option fees to acquire additional licenses, (iii) milestone payments based on the achievement of certain development and sales-based milestones by licensees, (iv) sublicense fees and (v) royalties on sales of licensed products.
Royalty revenue to date consists primarily of royalties on net sales of
Zolgensma, which is marketed by
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Future license and royalty revenues are dependent on the successful development and commercialization of licensed products by our licensees, which is uncertain, and revenues may fluctuate significantly from period to period. Additionally, we may never receive consideration in our license agreements that is contemplated on option fees, development and sales-based milestone payments, royalties on sales of licensed products or sublicense fees, given the contingent nature of these payments. Our revenues are concentrated among a low number of licensees and licenses are terminable at the option of the licensee. The termination of our licenses by licensees may materially impact the amount of revenue we recognize in future periods.
Operating Expenses
Our operating expenses consist primarily of cost of revenues, research and development expenses and general and administrative expenses. Personnel costs including salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general and administrative expenses. We allocate indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costs between research and development and general and administrative categories based on employee headcount and the nature of work performed by each employee.
Cost of Revenues
Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform, including sublicense fees, milestone payments and royalties on net sales of licensed products. Sublicense fees are based on a percentage of license fees received by us from NAV Technology Licensees and are recognized in the period that the underlying license revenue is recognized. Milestone payments are payable to licensors upon the achievement of specified milestones by NAV Technology Licensees and are recognized in the period the milestone is achieved or deemed probable of achievement. Royalties are based on a percentage of net sales of licensed products by NAV Technology Licensees and are recognized in the period that the underlying sales occur. Future costs of revenues are uncertain due to the nature of our license agreements and significant fluctuations in cost of revenues may occur from period to period.
Research and Development Expense
Our research and development expense primarily consists of:
• salaries and personnel-related costs, including benefits and stock-based
compensation, for our scientific personnel performing research and
development activities;
• costs related to executing preclinical studies and clinical trials;
• costs related to acquiring, developing and manufacturing materials for
preclinical studies and clinical trials;
• fees paid to consultants and other third-parties who support our product
candidate development;
• other costs in seeking regulatory approval of our product candidates; and
• allocated facility-related costs, depreciation expense and other overhead.
Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are expensed as incurred if the technology licensed has no alternative future use.
We plan to increase our research and development expenses for the foreseeable future as we continue development of our product candidates. Our current and planned research and development activities include the following:
• a Phase I/II clinical trial and associated long-term follow-up study to
evaluate the safety and efficacy of the subretinal delivery of RGX-314 for
the treatment of wet AMD;
• pivotal trials (ATMOSPHERE and one additional pivotal trial) to evaluate
the safety and efficacy of the subretinal delivery of RGX-314 for the
treatment of wet AMD;
• Phase II clinical trials to evaluate the safety and efficacy of the
suprachoroidal delivery of RGX-314 using the SCS Microinjector for the
treatment of wet AMD (AAVIATE) and DR (ALTITUDE);
• preclinical research and development and a planned clinical trial for
RGX-202 for the treatment of DMD;
• Phase I/II clinical trials to evaluate the safety and efficacy of RGX-121
for the treatment of MPS II;
• a Phase I/II clinical trial to evaluate the safety and efficacy of RGX-111
for the treatment of MPS I;
• preclinical research and development and a planned clinical trial for
RGX-181 for the treatment of CLN2 disease;
• preclinical research and development and a planned clinical trial for
RGX-381 for the treatment of ocular manifestations of CLN2 disease;
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• preclinical research and development for potential product candidates to
treat HAE;
• preclinical research and development for potential product candidates to
treat neurodegenerative diseases, including tauopathies and
alpha-synucleinopathies, under our collaboration with Neurimmune;
• preclinical research and development for potential product candidates
addressing other diseases across a range of therapeutics areas;
• continued investment in advanced manufacturing analytics and process
development activities; and
• continued acquisition and manufacture of clinical trial materials in
support of our anticipated clinical trials.
The following table summarizes our research and development expenses incurred
during the three months ended
Three Months Ended March 31,
2021 2020
Direct Expenses
RGX-314 $ 3,341 $ 6,133
RGX-202 1,918 1,252
RGX-121 1,596 2,340
RGX-181 and RGX-381 769 1,323
Other product candidates 664 958
Total direct expenses 8,288 12,006
Unallocated Expenses
Platform and new technologies 7,388 5,932
Personnel-related 19,661 15,859
Facilities and depreciation expense 4,129 2,652
Other unallocated 256 586
Total unallocated expenses 31,434 25,029
Total research and development
Platform and new technologies include direct costs not identifiable with a specific lead product candidate, including costs associated with our research and development platform, process development, manufacturing analytics and early research and development for prospective product candidates and new technologies. We typically utilize our employee and infrastructure resources across our development programs. We do not allocate personnel and other internal costs, such as facilities and other overhead costs, to specific product candidates or development programs.
General and Administrative Expense
Our general and administrative expense consists primarily of salaries and personnel-related costs, including benefits and stock-based compensation, for employees performing functions other than research and development. This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology and administrative support functions. Other general and administrative expenses include facility-related and overhead costs not otherwise allocated to research and development expense, professional fees for accounting, legal and advisory services, expenses associated with obtaining and maintaining patents, insurance costs, costs of our information systems and other commercial and general corporate activities. We expect that our general and administrative expense will continue to increase as we continue to develop, and potentially commercialize, our product candidates.
Other Income (Expense)
Interest Income from Licensing
In accordance with our revenue recognition policy, interest income from licensing consists of imputed interest recognized from significant financing components identified in our license agreements with NAV Technology Licensees as well as interest income accrued on unpaid balances due from licensees.
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Table of Contents Investment Income (Loss)
Investment income (loss) consists of interest income earned and gains and losses realized from our cash equivalents and marketable securities, as well as unrealized gains and losses on marketable equity securities. Cash equivalents are comprised of money market mutual funds and highly liquid debt securities with original maturities of 90 days or less at acquisition. Marketable securities are comprised of available-for-sale debt securities and equity securities.
Interest Expense
Interest expense consists of non-cash interest imputed on the liability related
to the sale of future Zolgensma royalties to entities managed by
Critical Accounting Policies and Significant Judgments and Estimates
This Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our consolidated financial statements, which we have
prepared in accordance with accounting principles generally accepted in
Our significant accounting policies are fully described in Note 2 to the
accompanying unaudited consolidated financial statements and in Note 2 to our
audited consolidated financial statements included in our Annual Report on Form
10-K for the year ended
Results of Operations
Our consolidated results of operations were as follows (in thousands):
Three Months Ended March 31,
2021 2020 Change
Revenues
License and royalty revenue $ 18,884 $ 17,644 $ 1,240
Total revenues 18,884 17,644 1,240
Operating Expenses
Cost of revenues 4,851 3,409 1,442
Research and development 39,722 37,035 2,687
General and administrative 17,838 14,833 3,005
Provision for credit losses and other 515 67 448
Total operating expenses 62,926 55,344 7,582
Loss from operations (44,042 ) (37,700 ) (6,342 )
Other Income (Expense)
Interest income from licensing 29 848 (819 )
Investment income (loss) 580 (3,186 ) 3,766
Interest expense (6,702 ) - (6,702 )
Total other income (expense) (6,093 ) (2,338 ) (3,755 )
Loss before income taxes (50,135 ) (40,038 ) (10,097 )
Income Tax Expense (4 ) - (4 )
Net loss $ (50,139 ) $ (40,038 ) $ (10,101 )
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Comparison of the Three Months Ended
License and Royalty Revenue. License and royalty revenue increased by
Research and Development Expense. Research and development expenses increased by
• an increase of $3.8 million for personnel-related costs as a result of
increased headcount of research and development personnel, including a
$1.0 million increase in stock-based compensation expense;
• an increase of $1.7 million for external costs associated with clinical
trial and regulatory activities for our lead product candidates; and
• an increase of $1.2 million for laboratory costs and facilities used by
research and development personnel, including depreciation expense
allocated to research and development functions.
The increase in research and development expenses was partially offset by a
General and Administrative Expense. General and administrative expenses
increased by
• an increase of $1.8 million for professional services, primarily related
to commercial consulting and legal services; and
• an increase of $1.2 million for personnel-related costs as a result of
increased headcount of general and administrative personnel, including a
$0.9 million increase in stock-based compensation expense.
Investment Income (Loss). Investment income was
Interest Expense. Interest expense increased by
Liquidity and Capital Resources
Sources of Liquidity
As of
In
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We intend to devote the majority of our current capital to clinical development,
seeking regulatory approval of our product candidates and capital expenditures
to build out additional office, laboratory and manufacturing capacity, including
the buildout of our future corporate, manufacturing and research headquarters at
Cash Flows
Our consolidated cash flows were as follows (in thousands):
Three Months Ended March 31,
2021 2020
Net cash used in operating activities $ (41,131 ) $ (35,573 )
Net cash provided by (used in) investing
activities (214,183 ) 32,709
Net cash provided by financing activities 208,370 2,761
Net decrease in cash and cash equivalents and
restricted cash $ (46,944 ) $ (103 )
Cash Flows from Operating Activities
Our net cash used in operating activities for the three months ended
For the three months ended
For the three months ended
Cash Flows from Investing Activities
For the three months ended
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For the three months ended
Cash Flows from Financing Activities
For the three months ended
For the three months ended
Future Funding Requirements
We have incurred cumulative losses since our inception and had an accumulated
deficit of
Our future capital requirements will depend on many factors, including:
• the timing of enrollment, commencement and completion of our clinical trials;
• the results of our clinical trials;
• the results of our preclinical studies for our product candidates and any
subsequent clinical trials;
• the scope, progress, results and costs of drug discovery, laboratory
testing, preclinical development and clinical trials for our product
candidates;
• the costs associated with building out additional laboratory and
manufacturing capacity;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs of future product sales, medical affairs, marketing,
manufacturing and distribution activities for any of our product
candidates for which we receive marketing approval;
• revenue, if any, received from commercial sales of our products, should
any of our product candidates receive marketing approval;
• revenue received from commercial sales of Zolgensma and other revenue, if
any, received in connection with commercial sales of our NAV Technology
Licensees' products, should any of their product candidates receive
marketing approval;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
any intellectual property-related claims;
• our current licensing agreements or collaborations remaining in effect;
• our ability to establish and maintain additional licensing agreements or
collaborations on favorable terms, if at all; and
• the extent to which we acquire or in-license other product candidates and
technologies.
Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the
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necessary data or results required to obtain regulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products, the majority of which may not be commercially available for many years, if at all. In addition, revenue from our NAV Technology Platform sublicensing is dependent in part on the clinical and commercial success of our licensing partners. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.
The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. Adequate additional financing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with partners or otherwise that may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us.
Contractual Obligations, Commitments and Contingencies
There have been no material changes to our contractual obligations, commitments
and contingencies as of
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during the periods presented,
and we do not currently have, any off-balance sheet arrangements, as defined in
the rules and regulations of the
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