NextCure(NXTC) - 2019 Q4 - Annual Report

Part I Business Overview NextCure is a clinical-stage biopharmaceutical company developing first-in-class immunomedicines for cancer and immune-related diseases, leveraging its FIND-IO platform and in-house manufacturing Company and Strategy NextCure is a clinical-stage biopharmaceutical company focused on developing novel immunomedicines for cancer and other diseases, advancing lead candidates and leveraging its FIND-IO platform - The company primarily focuses on developing first-in-class immunomedicines for cancer patients unresponsive to existing therapies[18] - Key strategic elements include advancing lead candidates NC318 and NC410, leveraging the FIND-IO platform, utilizing in-house cGMP manufacturing, and exploring non-oncology opportunities[33][38] Product Pipeline NextCure's pipeline features lead candidates NC318 (S15) and NC410 (LAIR-1) in clinical development, alongside preclinical programs from its FIND-IO platform Clinical Pipeline Status | Product Candidate | Target | Indication | Development Phase | | :--- | :--- | :--- | :--- | | NC318 | S15 | Advanced/Metastatic Solid Tumors | Phase 1/2 (Phase 2 enrolling) | | NC410 | LAIR-1 | Advanced/Metastatic Solid Tumors | Phase 1/2 (Planned Q2 2020) | - NC318 Phase 1 preliminary data demonstrated a complete response and a partial response in NSCLC patients, advancing to Phase 2 in October 2019[19][62] - The FDA accepted the IND for NC410 in Q1 2020, with a Phase 1/2 trial planned for Q2 2020 in advanced or metastatic solid tumors[20][76] - The company is pursuing preclinical antibodies targeting a novel B7-family member, another immune modulator, and additional LAIR-1 monoclonal antibodies[96][97][98] FIND-IO Discovery Platform The FIND-IO platform is NextCure's proprietary function-based screening engine for identifying novel immune-modulating targets, expanding into non-oncology areas like autoimmunity - FIND-IO is a function-based screening platform identifying novel cell surface molecular interactions that drive functional immune responses[42][99] - The platform integrates gene libraries, various immune and non-immune cell types, and functional outputs to identify new immune modulators[100] - The company is expanding the platform beyond oncology to discover targets in autoimmunity and inflammation via the new FIND-AI platform[108] Collaboration Agreements NextCure holds an exclusive license and sponsored research agreement with Yale University, while its collaboration with Eli Lilly was terminated in March 2020 - The company holds an exclusive, worldwide license from Yale University for S15 patents, requiring milestone payments up to $2.975 million per product and low single-digit royalties[109][110] - A Sponsored Research Agreement with Yale provides up to $12.4 million in funding for new immunomedicine target discovery, expiring December 31, 2020[111] - The collaboration agreement with Eli Lilly, including a $25.0 million upfront payment and $15.0 million equity investment, was terminated by Lilly effective March 3, 2020[112] Manufacturing NextCure operates its own cGMP-compliant manufacturing facility with 1,000-liter capacity, producing drug supply for preclinical and clinical trials, including NC318 - The company operates a dedicated, state-of-the-art cGMP manufacturing facility with an initial capacity of 1,000 liters[113] - This facility manufactures drug supply for all preclinical studies and the NC318 Phase 1/2 clinical trial[113] Intellectual Property NextCure protects its intellectual property through patent applications for NC318/NC410, an exclusive license from Yale for S15, and trade secret protection for FIND-IO - As of year-end 2019, the company has 18 pending foreign and 2 pending U.S. patent applications for NC318 and NC410, expected to expire starting in 2037 if issued[119] - The company holds an exclusive license from Yale for S15 patents, expected to expire no earlier than 2036 if issued[120] - The FIND-IO platform is protected as a trade secret via confidentiality and invention assignment agreements[122] Government Regulation NextCure's product candidates are regulated as biologics by the FDA and international authorities, requiring extensive preclinical and clinical development, ongoing post-approval compliance, and adherence to healthcare laws - Product candidates are regulated as biologics in the U.S., requiring extensive preclinical and clinical testing before BLA submission to the FDA[126][128] - Post-approval, the company must comply with ongoing FDA regulations, including cGMP, adverse event reporting, and potential REMS requirements[165][303] - The business is subject to healthcare laws including the federal Anti-Kickback Statute, False Claims Act, and HIPAA, regulating relationships with providers and payors[196][335] - Commercial success depends on coverage and reimbursement from third-party payors like Medicare, Medicaid, and private insurers, subject to pricing pressures and healthcare reform[193][317][325] Risk Factors The company faces significant financial, development, regulatory, commercial, operational, and global health risks, including a history of losses and reliance on unproven candidates - Financial Risks: The company has a history of significant net losses, including $33.7 million in 2019, and will require substantial additional financing to continue operations[211] - Development & Regulatory Risks: Clinical development is lengthy and uncertain, with the FIND-IO platform unproven and product candidates like NC318 and NC410 facing trial failure or non-approval risks[228][241][258] - Commercial & Competition Risks: Approved products may not achieve market acceptance, and the company faces intense competition from large, well-funded pharmaceutical companies[292][416] - Operational Risks: The company has limited manufacturing experience, relies on third parties for key services and collaborations, and is highly dependent on key personnel[344][396][412] - Global Health Risks: The novel coronavirus outbreak could disrupt business operations, including clinical trial recruitment and supply chains[437] Properties The company's headquarters, lab, and manufacturing facilities are located in Beltsville, Maryland, under leases expiring in 2025 and 2030 - The company's headquarters, lab, and manufacturing facilities are located in Beltsville, Maryland, under leases expiring in 2025 and 2030[464] Legal Proceedings As of the report date, NextCure is not a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[466] Part II Market for Common Equity and Related Matters NextCure's common stock trades on Nasdaq under "NXTC", the company has never paid dividends, and its May 2019 IPO raised approximately $76.9 million - Common stock is traded on the Nasdaq Global Select Market under the symbol "NXTC"[468] - The company has never declared dividends and does not plan to in the foreseeable future[469] - The May 2019 IPO generated net proceeds of approximately $76.9 million[470] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2019, NextCure reported a net loss of $33.7 million, with increased R&D and G&A expenses, holding $334.6 million in cash expected to fund operations into mid-2023, following the Lilly agreement termination Results of Operations In 2019, revenue was $6.3 million from the Lilly Agreement, while R&D expenses increased by $14.4 million and G&A expenses by $6.2 million, leading to a higher net loss Results of Operations (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue from research and development arrangement | $6,347 | $0 | $6,347 | | Research and development | $34,216 | $19,787 | $14,429 | | General and administrative | $9,613 | $3,409 | $6,204 | | Loss from operations | ($37,482) | ($23,196) | ($14,286) | | Other income, net | $3,745 | $397 | $3,348 | | Net loss | ($33,737) | ($22,799) | ($10,938) | - The $14.4 million increase in R&D expenses was driven by a $4.4 million increase in lab supplies, a $4.1 million increase in personnel costs, and a $3.0 million increase in NC318 clinical research costs[505] - The $6.2 million increase in G&A expenses was primarily due to a $2.8 million increase in professional fees and a $1.2 million increase in insurance expenses as a public company[507] Liquidity and Capital Resources As of December 31, 2019, NextCure held $334.6 million in cash and marketable securities, bolstered by 2019 offerings, expected to fund operations into mid-2023, with net cash used in operations at $35.6 million - As of December 31, 2019, the company held $334.6 million in cash, cash equivalents, and marketable securities[486][510] - The company raised approximately $237.8 million in net proceeds from its IPO and a follow-on public offering in 2019[509] - Management expects the current cash position to fund planned operations into the first half of 2023[486][510] Cash Flow Summary (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(35,623) | $7,992 | | Net cash used in investing activities | $(303,923) | $(3,063) | | Net cash provided by financing activities | $243,043 | $121,417 | Financial Statements and Supplementary Data The audited financial statements for 2019 and 2018 are presented, showing a 2019 net loss of $33.7 million, total assets of $356.2 million, and notes detailing key accounting policies and events Balance Sheet Highlights (in thousands) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $34,091 | $135,173 | | Marketable securities | $300,514 | $0 | | Total Assets | $356,168 | $147,628 | | Total current liabilities | $15,042 | $10,298 | | Deferred revenue, non-current | $15,950 | $21,736 | | Total Liabilities | $34,684 | $32,349 | | Total Stockholders' Equity (Deficit) | $321,484 | ($46,944) | - Upon the IPO closing in May 2019, all outstanding convertible preferred stock automatically converted into 15,560,569 shares of common stock[563] - Subsequent Event: Lilly terminated the Lilly Agreement effective March 3, 2020, with the remaining $22.4 million in deferred revenue to be recognized in Q1 2020[695][696] Part III Directors, Executive Compensation, and Corporate Governance Information on directors, executive compensation, security ownership, and corporate governance is incorporated by reference from the forthcoming 2020 Proxy Statement - Information regarding directors, executive compensation, security ownership, and other governance matters is incorporated by reference from the forthcoming 2020 Proxy Statement[703][704][705][706][707] Part IV Exhibits and Financial Statement Schedules This section provides an index of all exhibits filed with the 10-K, including financial statements, corporate governance documents, and material agreements - This section contains the index of all exhibits filed with the 10-K, including corporate governance documents, material agreements, and required certifications[711][713]