NextCure(NXTC) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed financial statements for Q1 2020 show a net income of $9.7 million, a significant improvement from a $6.2 million net loss in the prior year, primarily due to $22.4 million revenue from the terminated Eli Lilly agreement Condensed Balance Sheets Condensed Balance Sheets (in thousands) | Financial Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $28,907 | $34,091 | | Marketable securities | $293,191 | $300,514 | | Total current assets | $326,664 | $339,995 | | Total assets | $343,472 | $356,168 | | Liabilities & Equity | | | | Total current liabilities | $8,152 | $15,042 | | Total liabilities | $11,715 | $34,684 | | Total stockholders' equity | $331,757 | $321,484 | - Total assets decreased from $356.2 million at the end of 2019 to $343.5 million as of March 31, 2020, while total liabilities significantly reduced from $34.7 million to $11.7 million, primarily due to deferred revenue recognition[9] Condensed Statements of Operations and Comprehensive Income (Loss) Condensed Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Revenue | $22,378 | $1,357 | | Research and development | $10,578 | $6,513 | | General and administrative | $3,588 | $1,659 | | Income (loss) from operations | $8,212 | ($6,815) | | Net income (loss) | $9,733 | ($6,155) | | Diluted EPS | $0.33 | ($4.46) | - The company reported a net income of $9.7 million for Q1 2020, a significant turnaround from a net loss of $6.2 million in Q1 2019, driven by a substantial increase in revenue from a research and development arrangement[11] Condensed Statements of Cash Flows Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($10,594) | ($7,080) | | Net cash provided by (used in) investing activities | $5,373 | ($935) | | Net cash used in (provided by) financing activities | ($240) | $2,970 | | Net decrease in cash, cash equivalents and restricted cash | ($5,461) | ($5,045) | - Net cash used in operating activities increased to $10.6 million in Q1 2020 from $7.1 million in Q1 2019, resulting in a net decrease of $5.5 million in total cash, cash equivalents, and restricted cash for the quarter[16] Notes to Unaudited Condensed Financial Statements - The company is a clinical-stage biopharmaceutical entity focused on discovering and developing immunomedicines for cancer and other immune-related diseases utilizing its proprietary FIND-IO platform[17] - The research and development collaboration agreement with Eli Lilly and Company was terminated without cause, leading to the recognition of all remaining deferred revenue, totaling $22.4 million, in Q1 2020[36][37] - The COVID-19 pandemic has slowed enrollment in the Phase 2 portion of the NC318 clinical trial and temporarily delayed the initiation of a Phase 2 combination trial for NC318 and a Phase 1/2 trial for NC410[53] - Stock-based compensation expense for Q1 2020 was $1.008 million, an increase from $0.383 million in Q1 2019[44] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical-stage operations, highlighting COVID-19's impact on trial delays, a Q1 2020 net income of $9.7 million due to the Lilly Agreement termination, increased operating expenses, and a belief that $322.1 million in cash is sufficient for the next 12 months Overview - NextCure is a clinical-stage biopharmaceutical company developing first-in-class immunomedicines for cancer and other immune-related diseases utilizing its proprietary FIND-IO platform[58] - The COVID-19 pandemic has caused significant disruptions, slowing patient enrollment for the Phase 2 trial of NC318 and temporarily delaying other planned trials for NC318 and NC410[59][62][63] - The company's lead product candidate, NC318, targeting Siglec-15 (S15), is in a Phase 1/2 clinical trial, and its second candidate, NC410, received IND acceptance from the FDA in Q1 2020[62][63] Results of Operations Results of Operations (in thousands) | Metric (in thousands) | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue | $22,378 | $1,357 | $21,021 | | Research and development | $10,578 | $6,513 | $4,065 | | General and administrative | $3,588 | $1,659 | $1,929 | | Net income (loss) | $9,733 | ($6,155) | $15,888 | - Revenue increased by $21.0 million due to the recognition of all deferred revenue from the terminated Lilly Agreement[90] - R&D expenses rose by $4.1 million, primarily due to a $1.7 million increase in lab supplies and services for NC318, NC410, and other programs, and a $1.4 million increase in personnel costs[91] - G&A expenses increased by $1.9 million, driven by higher professional fees, insurance, and personnel costs associated with operating as a public company[92] Liquidity and Capital Resources - As of March 31, 2020, the company held $322.1 million in cash, cash equivalents, and marketable securities (excluding restricted cash)[72] - Management believes that existing cash, cash equivalents, and marketable securities are sufficient to fund planned operations for at least the next 12 months[72][95] - The company has primarily financed operations through public offerings, private placements of preferred stock, and the upfront payment from the Lilly Agreement[94] Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($10,594) | ($7,080) | | Net cash provided by (used in) investing activities | $5,373 | ($935) | | Net cash used in (provided by) financing activities | ($240) | $2,970 | Quantitative and Qualitative Disclosures about Market Risk The company is not required to provide this information as it qualifies as a smaller reporting company - As a smaller reporting company, NextCure is not required to provide the information requested by this item[111] Controls and Procedures Management, including the CEO and CFO, evaluated disclosure controls as of March 31, 2020, concluding their effectiveness, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[112] - No changes in internal control over financial reporting occurred during Q1 2020 that materially affected, or are reasonably likely to materially affect, internal controls[113] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business - The company is not currently involved in any litigation or legal proceedings that management believes would have a material adverse effect on the business[114] Risk Factors This section highlights significant business risks, emphasizing the ongoing and potential future impacts of the COVID-19 pandemic, including clinical trial delays, supply chain disruptions, and overall economic uncertainty - The COVID-19 pandemic has caused a slowdown in patient enrollment for the Phase 2 trial of NC318 and has delayed the initiation of other planned clinical trials for NC318 and NC410[116] - The pandemic could continue to adversely affect business operations, including interruptions to the supply chain, site closures, and difficulties in adhering to trial protocols, potentially impacting financial position and results[116][117] - The company depends on third-party suppliers for key materials, and any supply interruption, potentially exacerbated by COVID-19, could materially harm its ability to manufacture product candidates and delay development[119] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[120] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[121] Mine Safety Disclosures This item is not applicable to the company - Not applicable[122] Other Information There is no other information to report for the period - None[123] Exhibits This section provides an index of the exhibits filed as part of the Quarterly Report, including officer certifications and XBRL data files - The report includes an exhibit index listing certifications pursuant to the Sarbanes-Oxley Act and XBRL-related documents[124][126]