NextCure(NXTC) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed financial statements and management's discussion and analysis for NextCure, Inc Financial Statements This section presents the unaudited condensed financial statements for NextCure, Inc. as of September 30, 2020, and for the three and nine-month periods then ended Condensed Balance Sheets The balance sheet as of September 30, 2020, shows total assets of $316.1 million, a decrease from $356.2 million at year-end 2019, primarily due to reduced cash and marketable securities Condensed Balance Sheets (in thousands) | | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total current assets | $296,981 | $339,995 | | Total assets | $316,078 | $356,168 | | Total current liabilities | $5,741 | $15,042 | | Total liabilities | $8,739 | $34,684 | | Total stockholders' equity | $307,339 | $321,484 | Condensed Statements of Operations and Comprehensive Loss For Q3 2020, the company reported a net loss of $16.4 million, increasing from $8.4 million in Q3 2019, while the nine-month net loss improved slightly to $21.1 million due to recognized revenue Statements of Operations Highlights (in thousands, except per share data) | | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $0 | $1,583 | $22,378 | $4,342 | | Research and development | $12,740 | $8,663 | $34,448 | $22,819 | | General and administrative | $4,659 | $2,622 | $12,918 | $6,995 | | Loss from operations | $(17,399) | $(9,702) | $(24,988) | $(25,472) | | Net loss | $(16,367) | $(8,434) | $(21,142) | $(22,810) | | Net loss per share | $(0.59) | $(0.37) | $(0.77) | $(1.81) | Condensed Statements of Cash Flows Net cash used in operating activities for the nine months ended September 30, 2020, was $38.7 million, with investing activities providing $27.0 million and financing activities using $1.0 million Condensed Statements of Cash Flows (in thousands) | | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,676) | $(25,632) | | Net cash provided by (used in) investing activities | $27,025 | $(176,762) | | Net cash (used in) provided by financing activities | $(1,017) | $81,735 | | Net decrease in cash, cash equivalents and restricted cash | $(12,668) | $(120,659) | Notes to Unaudited Condensed Financial Statements The notes provide details on accounting policies, the impact of COVID-19, the terminated Lilly agreement, stock-based compensation, and a stockholder class action lawsuit - The company is a clinical-stage biopharmaceutical company focused on developing immunomedicines for cancer and other diseases using its proprietary FIND-IO platform[21] - The collaboration agreement with Eli Lilly and Company was terminated by Lilly effective March 3, 2020, leading to the recognition of the remaining deferred revenue of $22.4 million in the nine months ended September 30, 2020, with no further payments due[45][46] - A stockholder class action lawsuit was filed on September 21, 2020, against the company, certain officers, and underwriters, alleging violations of securities laws regarding statements made about the lead product candidate, NC318, which the company intends to vigorously defend[60] - The COVID-19 pandemic has caused enrollment to slow in the Phase 2 clinical trial of NC318 and has raised concerns about monitoring patient safety[29] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business overview, recent developments, and financial results, including progress of lead product candidates, impact of COVID-19, increased operating expenses, and liquidity sufficient into H2 2023 - The company's lead product candidate is NC318, for which a Phase 1/2 clinical trial is ongoing, with enrollment in the Phase 2 portion slowed due to COVID-19, and no current plans to advance the NSCLC and ovarian cancer cohorts[70][71] - The second product candidate, NC410, entered a Phase 1/2 clinical trial in June 2020 for patients with advanced or metastatic solid tumors, after a delay due to the COVID-19 pandemic[73] - As of September 30, 2020, the company had $291.2 million in cash, cash equivalents, and marketable securities, which is expected to fund planned operations into the second half of 2023[82][106] - The research and development collaboration agreement with Eli Lilly was terminated in March 2020, leading to the recognition of all remaining deferred revenue[79][85] Results of Operations Revenue for the nine months ended September 30, 2020, was $22.4 million from the terminated Lilly Agreement, while R&D and G&A expenses significantly increased due to expanded activities and public company costs Change in Operating Expenses (Nine Months Ended Sep 30, 2020 vs 2019) | Expense Category | 2020 (in millions) | 2019 (in millions) | Change (in millions) | Key Drivers | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $34.4 | $22.8 | +$11.6 | $6.3M in personnel costs, $2.8M in lab supplies/services, $1.0M in clinical research costs | | General & Administrative | $12.9 | $7.0 | +$5.9 | $1.9M in personnel costs, $1.3M in professional fees, $0.9M in insurance | - Revenue for the nine months ended September 30, 2020, increased to $22.4 million from $4.3 million in 2019, due to the recognition of all deferred revenue from the Lilly Agreement upon its termination[97] Liquidity and Capital Resources The company's operations are financed primarily through public offerings and the Lilly Agreement upfront payment, with $291.2 million in cash and equivalents as of September 30, 2020, sufficient to fund operations into H2 2023 - The company completed an IPO in May 2019, raising net proceeds of approximately $77.0 million, and a follow-on offering in November/December 2019, raising net proceeds of approximately $160.9 million[80][81][105] - The company will require additional capital to develop its product candidates and may seek it through equity or debt financings, strategic alliances, or licensing arrangements, as failure to raise capital could force delays or termination of development programs[108] 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[119] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2020, with no material changes in internal control over financial reporting - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[120] - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[121] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits Legal Proceedings This section references Note 9 of the financial statements, describing a stockholder class action lawsuit filed in September 2020, with no other material litigation expected - The company is subject to a stockholder class action lawsuit filed on September 21, 2020, related to statements made about its lead product candidate, NC318, which the company intends to defend vigorously[60][123] Risk Factors This section highlights significant risks including the adverse effects of the COVID-19 pandemic on clinical trials, difficulties in patient enrollment, dependence on third-party suppliers, potential negative impacts from NC318 trial interim results, and ongoing securities litigation - The COVID-19 pandemic has caused and could continue to cause significant disruptions to clinical trials, including slowed patient enrollment for NC318 and delayed trial initiation for NC410[125] - Interim results for the NC318 monotherapy trial, which showed a lack of response in NSCLC and ovarian cancer cohorts, may adversely impact product development, investor confidence, and the ability to raise capital[130][131] - The company is subject to a securities class action lawsuit which could be expensive and divert management's attention, regardless of the outcome[132] - The company depends on third-party suppliers for key manufacturing materials, and any supply interruption, potentially exacerbated by COVID-19, could harm its ability to produce product candidates for clinical trials[129] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[134] Exhibits This section lists the exhibits filed with the Quarterly Report, including employment and consulting agreements, the non-employee director compensation program, and certifications by the CEO and CFO