NextCure(NXTC) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited financial statements for June 30, 2019, show increased cash and assets from the May 2019 IPO, higher Eli Lilly revenue, and a larger net loss due to rising R&D and G&A expenses Condensed Balance Sheets Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $192,689 | $135,173 | | Total current assets | $196,521 | $135,785 | | Total assets | $213,050 | $147,628 | | Liabilities & Equity | | | | Total liabilities | $34,455 | $32,349 | | Total redeemable preferred stock | $0 | $162,223 | | Total stockholders' equity (deficit) | $178,595 | $(46,944) | - The significant increase in cash and cash equivalents and the shift from a stockholders' deficit to a positive equity position were primarily driven by the net proceeds from the company's IPO in May 2019[23][16] - All redeemable preferred stock was converted into common stock upon the closing of the IPO, resulting in a zero balance for preferred stock as of June 30, 2019[25][16] Condensed Statements of Operations Condensed Statements of Operations Highlights (in thousands) | Account | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue from research and development arrangement | $1,402 | $0 | $2,759 | $0 | | Research and development expense | $7,643 | $4,434 | $14,156 | $8,644 | | General and administrative expense | $2,714 | $866 | $4,373 | $1,665 | | Loss from operations | $(8,955) | $(5,300) | $(15,770) | $(10,309) | | Net loss | $(8,221) | $(5,231) | $(14,376) | $(10,227) | | Net loss per share | $(0.61) | $(3.82) | $(1.92) | $(7.47) | - Revenue in 2019 was generated from the research and development arrangement with Eli Lilly, which commenced in January 2019[63] - Operating expenses increased significantly year-over-year, driven by higher R&D costs for advancing product candidates and increased G&A expenses related to operating as a public company[12][112][115] Condensed Statements of Cash Flows Condensed Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,685) | $(9,760) | | Net cash used in investing activities | $(2,067) | $(853) | | Net cash provided by financing activities | $81,847 | $30,800 | | Net increase in cash, cash equivalents and restricted cash | $62,095 | $20,187 | - The primary source of cash in the first six months of 2019 was $77.3 million in net proceeds from the IPO[20] - Cash used in operating activities increased due to a higher net loss, reflecting expanded research and development activities[20][123] Notes to Unaudited Condensed Financial Statements - The company is a clinical-stage biopharmaceutical firm focused on discovering and developing immunomedicines for cancer and other immune-related diseases using its proprietary FIND-IO platform[22] - On May 13, 2019, the company closed its IPO, selling 5,750,000 shares of common stock at $15.00 per share for net proceeds of approximately $77.0 million[23] - The company recognizes revenue from its collaboration agreement with Eli Lilly using an input method based on R&D costs incurred. For the six months ended June 30, 2019, $2.8 million in revenue was recognized under this agreement[62][63] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage status, lead product candidates, historical losses, and funding sources, noting increased revenue and expenses, with current cash sufficient to fund operations into the second half of 2022 Overview - NextCure is a clinical-stage biopharmaceutical company developing first-in-class immunomedicines for cancer and other immune-related diseases using its proprietary FIND-IO discovery platform[86] - The lead product candidate, NC318, is in a Phase 1/2 clinical trial for advanced or metastatic solid tumors, with Phase 1 completion expected in Q4 2019[87] - The second product candidate, NC410, is designed to block immune suppression mediated by LAIR-1, with an IND submission planned for Q1 2020[87] Results of Operations Comparison of Results of Operations (in thousands) | Account | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,402 | $0 | $2,759 | $0 | | R&D Expenses | $7,643 | $4,434 | $14,156 | $8,644 | | G&A Expenses | $2,714 | $866 | $4,373 | $1,665 | | Net Loss | $(8,221) | $(5,231) | $(14,376) | $(10,227) | - Revenue for 2019 is attributed to the recognition of upfront consideration from the Lilly Agreement[111] - The increase in R&D expenses for the six months ended June 30, 2019 was driven by a $1.6 million increase in personnel costs, $1.5 million in clinical research costs for NC318, and $1.3 million in lab supplies[114] - The increase in G&A expenses for the six months ended June 30, 2019 was primarily due to a $1.3 million rise in professional fees (legal, finance, audit) related to the IPO[116] Liquidity and Capital Resources - As of June 30, 2019, the company had cash and cash equivalents of $192.7 million[120] - The company believes its existing cash, including net proceeds from the IPO, will be sufficient to fund planned operations into the second half of 2022[120] - In January 2019, the company amended its Term Loan to increase borrowing capacity from $1.0 million to $5.0 million, with the full amount outstanding as of June 30, 2019[120][121] Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in Operating activities | $(17,685) | $(9,760) | | Net cash used in Investing activities | $(2,067) | $(853) | | Net cash provided by Financing activities | $81,847 | $30,800 | Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, NextCure is not required to provide the information requested by this item - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[132] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2019, and concluded they were effective at a reasonable assurance level. There were no material changes in internal control over financial reporting during the quarter - Management concluded that as of June 30, 2019, the company's disclosure controls and procedures were effective at the reasonable assurance level[133] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2019, that materially affected, or are reasonably likely to materially affect, internal controls[134] Part II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently a party to any litigation or legal proceedings that are likely to have a material adverse effect on its business - As of the report date, the company is not involved in any legal proceedings that management believes would have a material adverse effect on the business[135] Item 1A. Risk Factors This section outlines key investment risks, including limited operating history, significant losses, dependence on early-stage product candidates and an unproven platform, regulatory uncertainties, manufacturing complexities, and reliance on third parties - The company has a history of significant losses ($14.4 million for the six months ended June 30, 2019) and expects to incur substantial losses for the foreseeable future, with no products approved for commercial sale[137][138] - The business is highly dependent on advancing its lead product candidates, NC318 and NC410, through clinical trials and obtaining regulatory approval, which is a lengthy, expensive, and uncertain process[153][158] - The company's FIND-IO platform for discovering and developing product candidates is unproven and may not result in marketable products[175] - The company has limited manufacturing experience and relies on third-party CMOs for certain elements, posing risks related to cGMP compliance, supply chain disruptions, and scalability[260][265] - The company relies on third parties like CROs to conduct clinical trials and on collaborators like Eli Lilly for the development and commercialization of certain candidates, which limits control and introduces dependency risks[303][306] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the use of proceeds from the company's Initial Public Offering (IPO) on May 13, 2019. The IPO generated net proceeds of approximately $77.0 million. As of June 30, 2019, $0.5 million was used for a payment to Yale University, with the remainder held in temporary investments pending other uses. There has been no material change in the planned use of proceeds - On May 13, 2019, the company closed its IPO, raising net proceeds of approximately $77.0 million after deducting underwriting discounts and offering expenses[363] - As of June 30, 2019, $0.5 million of the IPO proceeds were used for a payment to Yale University, with the rest invested temporarily. The planned use of proceeds has not materially changed[363][364] Item 3. Defaults Upon Senior Securities None - There were no defaults upon senior securities during the period[365] Item 4. Mine Safety Disclosures Not applicable - This item is not applicable to the company[366] Item 5. Other Information None - There is no other information to report for this item[367] Item 6. Exhibits This section provides an index of the exhibits filed as part of the Quarterly Report, including corporate governance documents, incentive plans, and required certifications - The report includes an index of exhibits, such as the Amended and Restated Certificate of Incorporation, Bylaws, 2019 Omnibus Incentive Plan, and CEO/CFO certifications[371] Signatures - The report was duly signed on August 12, 2019, by Michael Richman, President and Chief Executive Officer, and Steven P. Cobourn, Chief Financial Officer[376][378]