Neurogene(NGNE) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION (Unaudited) Presents unaudited financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' equity, along with explanatory notes Condensed Consolidated Balance Sheets Presents the company's financial position at specific dates Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $129,596 | $143,093 | $(13,497) | | Total current assets | $130,997 | $143,596 | $(12,599) | | Operating lease right-of-use assets | $9,646 | $770 | $8,876 | | Total assets | $145,324 | $147,023 | $(1,699) | | Total current liabilities | $6,320 | $4,743 | $1,577 | | Total liabilities | $16,625 | $5,336 | $11,289 | | Total stockholders' equity | $128,699 | $141,687 | $(12,988) | | Accumulated deficit | $(317,917) | $(299,529) | $(18,388) | Condensed Consolidated Statements of Operations Details revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights | Operating Expense | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :------------------ | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Research and development | $4,843 | $(1,995) | $10,341 | $(1,891) | | General and administrative | $4,926 | $2,423 | $8,499 | $4,978 | | Total operating expenses | $9,769 | $428 | $18,840 | $3,087 | | Net loss | $(9,746) | $(1) | $(18,388) | $(2,209) | | Net loss per common stock – basic and diluted | $(0.20) | $- | $(0.37) | $(0.09) | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :----------------- | :------------------------------------ | :------------------------------------ | | Operating activities | $(15,234) | $(4,226) | | Investing activities | $(1,079) | $- | | Financing activities | $3,691 | $(4) | | Net change in cash, cash equivalents and restricted cash | $(12,619) | $(4,228) | Condensed Consolidated Statements of Stockholders' Equity Shows changes in equity accounts over specific periods Notes to Condensed Consolidated Financial Statements Provides additional details and explanations for the financial statements - The Company entered into a new lease agreement for approximately 33,300 square feet of office space in Seattle, Washington, for its future principal executive offices and a laboratory, commencing January 15, 2020, and expiring December 1, 2028. This lease includes a tenant improvement allowance of $8.0 million[36] - The Company terminated its Vancouver, Canada office lease on June 30, 2020, incurring an early termination fee of $0.5 million and recognizing a loss of $0.3 million in general and administrative expenses, along with a $0.2 million loss on disposal of associated leasehold improvements[38] - Total stock-based compensation expense for the six months ended June 30, 2020, was $1.705 million, with $0.629 million allocated to R&D and $1.076 million to G&A[40] - On July 7, 2020, the Company completed a public offering of common stock and pre-funded warrants, generating aggregate net proceeds of $71.4 million[54] - On July 31, 2020, the Company sold its Canadian subsidiary, Aquinox Pharmaceuticals (Canada) Inc., for $8.2 million in cash consideration[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Neoleukin Therapeutics, Inc.'s business, including its de novo protein design technology and lead product candidate NL-201, and discusses the financial condition and results of operations for the periods ended June 30, 2020 - Neoleukin Therapeutics is a biopharmaceutical company creating next-generation immunotherapies for cancer, inflammation, and autoimmunity using de novo protein design technology[59] - The lead product candidate, NL-201, is an IL-2/IL-15 immunotherapy designed to selectively stimulate CD8+ T cells and NK cells while avoiding regulatory T cells, showing significant tumor growth inhibition in preclinical models[62] - The company expects to administer NL-201 as monotherapy by intravenous injection in patients with relapsed and refractory solid tumors for initial clinical development[63] - Research and development expenses increased significantly to $4.8 million for the three months and $10.3 million for the six months ended June 30, 2020, compared to credits in the prior year, primarily due to IND-enabling activities for NL-201 and other Neoleukin technologies[74] - General and administrative expenses rose to $4.9 million for the three months and $8.5 million for the six months ended June 30, 2020, driven by increased personnel costs, professional service fees post-merger, and one-time costs related to the Vancouver office lease termination[77] - As of June 30, 2020, the company had an accumulated deficit of $317.9 million and cash and cash equivalents of $129.6 million. Following a July 2020 public offering, net proceeds of $71.4 million are expected to fund operations into 2023[69][79] - Net cash used in operating activities increased to $15.2 million for the six months ended June 30, 2020, from $4.2 million in the prior year, mainly due to higher operating expenses for NL-201 development[81] - The COVID-19 pandemic has led to a work-from-home policy and discontinued travel, but business-critical R&D work continues. No delay in development plans is currently expected, but the potential for impact is acknowledged[64][70][71] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section assesses the company's exposure to market risks, specifically interest rate risk and foreign currency risk - The company's exposure to market risk for changes in interest rates primarily relates to its investment portfolio, with $110.1 million in U.S. government money market funds as of June 30, 2020. A hypothetical 1% increase in interest rates would have an immaterial impact on the fair value of this portfolio[91] - Foreign currency risk relates to Canadian operations and bank balances in foreign currencies. Foreign exchange gains/losses were insignificant for the three and six months ended June 30, 2020 and 2019, as the impact of exchange rate changes on the foreign currency portfolio was offset by its impact on foreign currency liabilities[92] Item 4. Controls and Procedures Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, providing reasonable assurance for timely and accurate financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[95] - The company completed the transition of accounting and financial reporting operations from its Vancouver, British Columbia office to its new headquarters in Seattle, Washington. No other material changes in internal control over financial reporting were identified during the period[96] PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company may be subject to legal claims, actions, and complaints from time to time, including those involving employment or intellectual property - The company may from time to time be named as a party to legal claims, actions and complaints, including matters involving employment, intellectual property or others[98] Item 1A. Risk Factors This section details significant risks that could materially harm the company's business, operating results, and financial condition Risks Related to Our Financial Position and Capital Needs Discusses risks associated with funding operations and capital requirements - The company will require substantial additional capital to finance operations and product development, with existing cash and recent offering proceeds expected to fund operations into 2023. Failure to obtain financing could delay or terminate development[100][101][103] - The company has incurred significant losses since inception, with a net loss of $18.4 million for the six months ended June 30, 2020, and an accumulated deficit of $317.9 million. It expects to continue incurring losses for the foreseeable future[105] Risks Related to Discovery, Development and Commercialization Covers risks inherent in drug discovery, development, and market introduction - All product candidates, including NL-201, are in preclinical or drug discovery stages, with no products yet approved. The success of the business is heavily dependent on the Neoleukin platform and NL-201, which are unproven technologies in humans[118][122][132][135] - Clinical trials are lengthy, expensive, and uncertain, with high failure rates. Delays in patient enrollment, regulatory approvals, or unforeseen adverse events could significantly increase costs and delay commercialization[137][140][144] - The biopharmaceutical market is highly competitive, with many companies having greater resources. NL-201, if approved, will face competition from existing treatments and other IL-2/IL-15 agonists in development[169][171] Risks Related to Our Reliance on Third Parties Addresses risks stemming from dependence on external partners for key operations - The company relies on third-party manufacturers and CROs for preclinical studies, clinical trials, and product supply. Loss of these partners or their failure to comply with regulations could delay development and adversely affect the business[176][181][182] Risks Related to Our Business and Operations Outlines general business and operational challenges - The COVID-19 pandemic could adversely impact preclinical development, clinical trials, manufacturing, and overall business operations due to potential disruptions in supply chains, regulatory processes, and clinical site activities[204][205] Risks Related to Intellectual Property Focuses on risks related to patents and proprietary rights - The company's success depends on obtaining and maintaining patent protection for its product candidates and technology. The patent process is expensive, time-consuming, and uncertain, with risks of invalidation, unenforceability, or insufficient breadth of protection[230][234][237] Risks Related to Ownership of Our Common Stock Details risks pertinent to holding the company's common stock - The company's stock price is volatile and may decline due to various factors, including clinical trial results, regulatory actions, competition, and general market conditions. Principal stockholders and management exert significant control over matters subject to stockholder approval[250][252][255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[277] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - None[278] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Not applicable[279] Item 5. Other Information There is no other information to report for the period - Not applicable[280] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including lease agreements, restricted stock unit agreements, and certifications from the Chief Executive Officer and Chief Financial Officer, along with XBRL taxonomy documents Exhibits List | Number | Description | | :----- | :---------- | | 10.1 | First Amendment, dated June 18, 2020, to Lease Agreement, dated September 23, 2019, by and between Neoleukin Therapeutics, Inc. and ARE-Eastlake Avenue No. 3, LLC. | | 10.2 | Forms of Restricted Stock Unit Agreement and Restricted Stock Unit Grant Notice for Registrant's 2014 Equity Incentive Plan. | | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a). | | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a). | | 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | | 101.INS| XBRL Instance Document | | 101.SCH| XBRL Taxonomy Extension Schema Document. | | 101.CAL| XBRL Taxonomy Extension Calculation Linkbase Document. | | 101.DEF| XBRL Taxonomy Extension Definition Linkbase Document. | | 101.LAB| XBRL Taxonomy Extension Labels Linkbase Document. | | 101.PRE| XBRL Taxonomy Extension Presentation Linkbase Document. | SIGNATURES Contains the required signatures for the filing