Aquinox(NLTX) - 2024 Q4 - Annual Report

Part I This section provides an overview of Neurogene Inc.'s business, including its genetic medicine pipeline, operational capabilities, competitive landscape, regulatory environment, and associated risks Item 1. Business Neurogene Inc. is a clinical-stage biotechnology company developing genetic medicines for rare neurological diseases using its proprietary EXACT technology, with lead program NGN-401 for Rett syndrome in Phase 1/2 clinical trials Overview Neurogene Inc. is a clinical-stage biotechnology company leveraging its EXACT technology for rare neurological diseases, with NGN-401 in clinical trials and NGN-101 under re-evaluation - Neurogene is a clinical-stage biotechnology company committed to treating complex devastating neurological diseases by leveraging its proprietary EXACT (Expression Attenuation via Construct Tuning) transgene regulation technology[28] - The company's first clinical-stage program, NGN-401, utilizes the EXACT platform for Rett syndrome and is currently in a Phase 1/2 clinical trial[28] - The NGN-101 conventional gene therapy program for CLN5 Batten disease will not be pursued at this time due to the denial of a streamlined registrational pathway (RMAT application) by the FDA, with options for the program being evaluated[29][39] - Neurogene has established a fully operational cGMP facility in Houston, Texas, for manufacturing products for research, toxicology, and clinical studies, aiming for better control over quality and timelines[30] Financial Summary (Millions USD) | Metric | 2024 (Millions USD) | 2023 (Millions USD) | | :----- | :------------------ | :------------------ | | Net Loss | $75.1 | $36.3 | | Accumulated Deficit | $262.3 | N/A | | Cash, Cash Equivalents & Short-term Investments | $312.4 | N/A | - The company has incurred significant recurring losses since inception, with a net loss of $75.1 million in 2024 and an accumulated deficit of $262.3 million as of December 31, 2024, requiring substantial additional capital[37] - Neurogene's operations are funded primarily by outside capital, having raised approximately $521.9 million in net proceeds from private placements[37] Our Approach Neurogene's approach combines proprietary EXACT technology for precise transgene regulation, optimal CNS drug delivery, and scalable in-house cGMP manufacturing to treat complex neurological diseases - Neurogene's strategy relies on three key capabilities: EXACT technology, optimal CNS drug delivery, and scalable in-house cGMP manufacturing[42] - The EXACT technology, developed with the University of Edinburgh, uses an embedded non-mammalian miRNA and complementary recognition sites to create a 'genetic thermostat' that attenuates transgene expression, aiming to prevent toxicity from overexpression[43][47][48] - The company prioritizes optimal routes of administration for CNS disorders to best target underlying pathophysiology and increase the probability of technical and regulatory success[44] - In-house cGMP manufacturing capabilities provide superior oversight of product quality, control over development timelines, strategic pipeline flexibility, and continuity from preclinical to commercial manufacturing[45] Our Pipeline Neurogene's pipeline features NGN-401 for Rett syndrome with positive clinical data, NGN-101 for CLN5 Batten disease under re-evaluation, and multiple EXACT technology discovery programs NGN-401 NGN-401, Neurogene's lead EXACT program for Rett syndrome, is in a Phase 1/2 clinical trial, showing positive interim efficacy and safety at 1E15 vg dose, despite a high-dose cohort participant death - NGN-401 is Neurogene's first clinical-stage program utilizing the EXACT platform, developed for Rett syndrome, an X-chromosome linked neurodevelopmental disorder caused by MECP2 gene mutation[51][52] - Preclinical studies in male knockout mice showed dose-dependent improvements in survival and Rett syndrome-like phenotypes (motor, gait, breathing) with NGN-401 treatment[61][65] - In female mouse models, NGN-401 was well tolerated with no negative effects on survival, unlike conventional gene therapy which caused rapid toxicity due to MeCP2 overexpression[62] - NHP studies demonstrated tight mRNA expression levels for NGN-401, broad biodistribution to key brain and spinal cord regions, and MECP2 mRNA levels below endogenous wild-type levels, supporting a potential safety profile[66][69] - A GLP toxicology study in NHPs at >4x the starting clinical dose showed no MeCP2 overexpression signs, with typical AAV9 findings (minimal DRG, spinal cord, brain, peripheral nerve findings) and transient aminotransferase elevations, establishing the high dose as NOAEL[70][71] - The Phase 1/2 clinical trial for NGN-401 is assessing safety, tolerability, and efficacy at a 1E15 vg dose in female patients (ages 4-10 and 11+ years) with classic Rett syndrome, delivered via one-time ICV procedure[72] - Interim efficacy data (n=4) as of October 17, 2024, showed consistent, concordant, and durable improvements across multiple Rett syndrome clinical assessments, including gains in hand function, gross motor, communication, and autonomic function[75][76] - NGN-401 has been generally well-tolerated at the 1E15 vg dose, with no signs of MeCP2 overexpression toxicity; however, a participant in the 3E15 vg (high dose) cohort died post-data cut-off due to a rare hyperinflammatory syndrome associated with high AAV doses, leading to the removal of this dose from the trial protocol[77][78][80] - NGN-401 received FDA's START Pilot Program selection (June 2024), RMAT designation (August 2024), and EMA's PRIME designation (March 2025), offering enhanced communication and potential for accelerated development[82][162] EXACT Discovery Pipeline Neurogene's scientific team is expanding its EXACT platform pipeline for complex neurological diseases beyond NGN-401, with multiple programs in discovery stage - Neurogene's skilled team, in collaboration with the University of Edinburgh, is expanding the transgene regulation pipeline using the EXACT platform[83] - The EXACT platform is believed to have broad applicability for complex neurological diseases not addressable by conventional gene therapy, with multiple programs currently in the discovery stage[83] NGN-101 NGN-101, a conventional gene therapy for CLN5 Batten disease, is being re-evaluated after the FDA denied its RMAT application, despite promising preclinical data - NGN-101 was a conventional gene therapy candidate for CLN5 Batten disease, designed to deliver the CLN5 gene via AAV9 capsid, with enrollment completed in a Phase 1/2 clinical trial using dual ICV and intravitreal (IVT) administrations[84] - In November 2024, Neurogene announced it does not expect to move forward with the NGN-101 program due to the FDA's denial of an RMAT application, which was critical for a streamlined registrational pathway, and is currently evaluating options[84] - CLN5 Batten disease is a rare, pediatric-onset neurodegenerative condition with no approved disease-specific treatments, characterized by vision loss, seizures, and progressive decline[86][87] - Preclinical studies in a CLN5 Batten sheep model showed AAV9/oCLN5 slowed or halted disease progression, with combined ICV and IVT administration providing the most robust survival and phenotypic benefits, including preservation of visual and motor function[90][91] - A bridging study confirmed similar phenotypic improvements between ovine and human CLN5 transgenes in the sheep model, supporting the clinical product candidate NGN-101[94] - A GLP toxicology study of NGN-101 in NHPs was generally well-tolerated, with transient aminotransferase elevations and a moderately severe intraocular inflammatory response in one high-dose animal, which subsided with treatment[95] Intellectual Property Neurogene protects its proprietary EXACT technology and gene sequences through patents and trade secrets, licensing 29 patent applications with key expirations in 2041 and 2043 - Neurogene protects its proprietary technology, including the EXACT platform and unique gene sequences, through patents, trade secrets, and confidentiality agreements[100][105] - As of December 31, 2024, Neurogene licenses 29 patent applications worldwide[101] - Patents related to the EXACT technology, in-licensed from the University of Edinburgh, are expected to expire in 2041[101] - Patents related to NGN-401 for Rett syndrome, also in-licensed from the University of Edinburgh, are expected to expire in 2043[103] Employees and Human Capital Resources Neurogene fosters an innovative culture with 107 employees as of March 2025, including 81 in R&D and technical operations, and 26 with advanced degrees - Neurogene's core values emphasize patient and family focus, collaboration, open-mindedness, and driving innovation with urgency[107][109] - As of March 20, 2025, Neurogene had 107 full-time employees, with 81 dedicated to research, development, and technical operations[108] - 26 of Neurogene's employees hold Ph.D. or M.D. degrees, reflecting a strong scientific and medical expertise[108] Commercial Neurogene plans to commercialize approved product candidates globally through internal or partnered infrastructure, currently holding worldwide rights but lacking established commercial capabilities - Neurogene intends to commercialize approved product candidates in the U.S. and other key markets through internal infrastructure and/or external partnerships[110] - The company currently holds worldwide development and commercialization rights to all its product candidates[110] - As a development-stage company, Neurogene has not yet established a commercial organization or distribution capabilities[110] Manufacturing Neurogene operates a 42,000 sq ft cGMP manufacturing facility in Houston, supporting clinical and future commercial production with flexibility, scalability, and multi-product capabilities - Neurogene's cGMP manufacturing facility in Houston, Texas, is 42,000 square feet, with 6,000 square feet of cleanroom space for clinical product and designed for future commercial-grade drug product[111] - The facility employs approximately 60 individuals across process development, analytical development, quality assurance, quality control, manufacturing, supply chain, and maintenance[111] - In-house manufacturing provides cost efficiency, greater control over development timelines, strategic pipeline flexibility, and continuity from preclinical to clinical to commercial manufacturing[111][112] - The facility is designed to be flexible, scalable, and multi-product, supporting two major scalable AAV production processes: transient transfection (mammalian cells) and insect cell (Sf9) baculovirus-based systems[113] Competition Neurogene operates in a highly competitive biotechnology and gene therapy market, facing established firms and academic institutions, with NGN-401 competing against emerging therapies and DAYBUE for Rett syndrome - The biotechnology and gene therapy industries are highly competitive, characterized by rapid technological evolution and strong intellectual property defense[114] - Neurogene competes with multinational biopharmaceutical companies, specialized biotechnology companies, emerging biotechnology companies, and academic institutions[114] - For Rett syndrome, while no disease-modifying gene therapies are on the market, Taysha Gene Therapies has a clinical-stage program, and Stoke Therapeutics, Acadia Pharmaceuticals, and Alcyone Therapeutics have preclinical/discovery-stage programs[116] - DAYBUE (trofinetide), approved by the FDA in March 2023, is a commercially available treatment for Rett syndrome, but Neurogene does not view it as directly competitive due to NGN-401's distinct mechanism of action targeting the root cause[117] - Key competitive factors include efficacy, safety, tolerability, dosing convenience, price, coverage, reimbursement, and public opinion[118] License Agreements Neurogene holds key license agreements, including an exclusive worldwide license with the University of Edinburgh for EXACT technology and MECP2 constructs, alongside non-exclusive licenses for manufacturing processes and materials - Neurogene has an exclusive, worldwide license with the University of Edinburgh for EXACT technology and optimized MECP2 cassettes, involving low single-digit percentage royalties on net sales and up to $30.25 million in regulatory and sales-related milestones[120][121][123] - A non-exclusive license with Virovek, Inc. grants rights to baculovirus process technology in exchange for low single-digit royalties on net sales, up to $0.2 million in development milestones, and an annual license fee[124] - A non-exclusive license with Sigma-Aldrich Co. LLC covers certain cell lines used in the baculovirus process, with a small annual fee and up to $2.5 million in development-related milestones[125] - A non-exclusive license with Leland Stanford Junior University provides access to certain biological materials for manufacturing product candidates, with up to $0.5 million in licensing fees over a 10-year term[126] Government Regulation Neurogene's product development is extensively regulated by global authorities, involving lengthy approval processes, compliance with healthcare and data privacy laws, and evolving reimbursement policies, with NGN-401 holding several expedited designations - Neurogene's products are subject to extensive regulation by the FDA and foreign authorities, covering research, development, testing, manufacturing, and commercialization[127] - The U.S. regulatory process for biologics involves preclinical studies (GLP), IND submission, IRB approval, cGMP manufacturing, human clinical trials (GCP), BLA submission and review, and potential FDA Advisory Committee review[130][131][132] - Gene therapy trials have additional considerations, including IBC evaluation and long-term observation recommendations for AAV-based vectors (e.g., minimum five-year follow-up for surviving subjects)[133][147] - NGN-401 has received Fast Track, START Pilot Program, RMAT, and Orphan Drug designations from the FDA, and PRIME designation from the EMA, which may expedite development and review but do not guarantee approval[82][151][154][156][159][260] - Post-approval, products are subject to continuous FDA regulation, including adverse event reporting, periodic reporting, product sampling, advertising/promotion rules, and cGMP compliance, with potential for sanctions for non-compliance[146][164][165] - The company is subject to various U.S. healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, Physician Payments Sunshine Act) and similar state/foreign laws, which regulate business practices and can lead to significant penalties for non-compliance[180][181][182][183][184][186][188] - Data privacy and security laws, such as GDPR and CCPA, impose strict obligations on processing personal and health-related information, with potential for significant fines and reputational harm for non-compliance[190][194][195][216][218] - Coverage and reimbursement from third-party payors are critical for product acceptance, with decisions based on medical necessity, cost-effectiveness, and safety/efficacy; the Inflation Reduction Act of 2022 introduces drug price negotiation and inflation rebates, impacting future drug costs[197][198][201] Corporate Information Neurogene Inc., incorporated in Delaware in 2007 and undergoing a December 2023 merger, maintains its corporate office in New York, NY, with SEC reports available online - Neurogene Inc. was originally incorporated in Delaware in May 2007 as Aquinox Pharmaceuticals (USA) Inc. and underwent a series of mergers and name changes, culminating in the December 2023 merger with Neurogene Inc. (Nevada corporation)[282] - The company's corporate office is located at 535 W 24th St. 5th Floor, New York, NY[282] - SEC reports, including annual, quarterly, and current reports, are available free of charge on the 'Investors' section of Neurogene's website[283] Item 1A. Risk Factors Investing in Neurogene's common stock carries significant risks due to its early development stage, substantial capital needs, regulatory uncertainties, manufacturing challenges, and intellectual property and cybersecurity vulnerabilities - Neurogene has a limited operating history, no completed clinical trials, and no approved products for commercial sale, leading to potential quarter-to-quarter result variability[288] - The company will require substantial additional capital to finance future operations, and inability to raise funds on acceptable terms could force delays or elimination of clinical trials and development programs[290][295] - Neurogene has incurred significant losses since inception ($262.3 million cumulative net loss as of December 31, 2024) and expects to continue incurring losses, with no guarantee of future profitability or product revenue[296][297] - NGN-401 and other programs are in early development stages and may fail or suffer delays, materially affecting commercial viability, especially given the dependence on NGN-401's success[304][305][328] - Participants in clinical trials may experience undesirable side effects, as seen with a death in the NGN-401 high-dose cohort, which could delay or prevent regulatory approval, limit commercial potential, or lead to product liability claims[310][317][345] - Manufacturing gene therapies is complex; delays in developing internal capabilities or failures to achieve operating efficiencies could divert resources and delay product development timelines[357][369] - Reliance on third parties, including academic collaborators like the University of Edinburgh and CROs, poses risks if they fail to perform satisfactorily, potentially harming business operations and development timelines[375][376][381][383] - The company's systems, or those of its third-party partners, are vulnerable to security or data privacy breaches, which could result in significant costs, liabilities, reputational harm, and operational disruptions[393][395][399] - Protecting patents and other proprietary rights is uncertain, exposing Neurogene to potential loss of competitive advantage, infringement claims, and challenges to inventorship or ownership[412][413][429][447] - The regulatory approval processes are lengthy, time-consuming, and unpredictable, with no guarantee that expedited designations (Fast Track, RMAT, PRIME) will lead to faster approval or that required resources will be available[453][456][492][496] - The market price of Neurogene's common stock may continue to be volatile due to clinical trial results, financial projections, regulatory actions, intellectual property disputes, and general market conditions[512][513] Item 1B. Unresolved Staff Comments Neurogene Inc. reports no unresolved staff comments from the SEC - There are no unresolved staff comments[537] Item 1C. Cybersecurity Neurogene Inc. maintains a robust cybersecurity program with system safeguards, third-party risk management, and incident response, overseen by the Audit Committee, despite past incidents - Neurogene's cybersecurity program focuses on vigilance, system safeguards (firewalls, anti-malware, access controls), third-party risk management, employee training, and incident response planning[539][540][542] - The cybersecurity program is managed and monitored by a hybrid IT team, led by the Vice President and Head of IT (28+ years experience), who reports to the President and CFO[541][543] - The Audit Committee of the Board of Directors oversees cybersecurity risks, receiving regular updates from management[544] - In August 2023, the company experienced a business email compromise attack resulting in the misappropriation of approximately $0.9 million, of which $0.8 million was recovered through insurance claims[393] - Despite ongoing efforts and advanced technology, the company acknowledges that cybersecurity attack techniques change frequently, and future successful attacks remain a risk[543] Item 2. Properties Neurogene Inc. leases a 42,000 sq ft manufacturing facility in Houston and a 6,000 sq ft corporate office in New York, alongside a partially subleased Seattle property - Neurogene leases a 42,000 square foot manufacturing facility in Houston, Texas, with the lease expiring on August 31, 2029[545] - The corporate headquarters is a 6,000 square foot office space in New York, New York, with the lease expiring on June 30, 2026[545] - The company also leases 39,572 square feet of former Neoleukin office and laboratory space in Seattle, Washington, with 6,272 square feet subleased until September 30, 2026, and is actively seeking a subtenant for the remaining 33,300 square feet[546] - Net proceeds from any sublease of the Seattle properties are payable to the holders of Contingent Value Rights (CVRs) issued in connection with the merger[546] Item 3. Legal Proceedings Neurogene Inc. is not currently involved in material legal proceedings, though acknowledges litigation's inherent unpredictability and potential costs - Neurogene is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, operating results, or cash flows[547] - Litigation, regardless of outcome, can have an adverse impact due to defense and settlement costs and diversion of management resources[547] Item 4. Mine Safety Disclosures This item is not applicable to Neurogene Inc.'s operations - This item is not applicable[548] Part II This section details Neurogene Inc.'s market for common equity, management's discussion and analysis of financial condition, and financial statements Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Neurogene Inc.'s common stock trades on Nasdaq under "NGNE," with 16 stockholders of record as of March 2025, and the company retains earnings, not paying dividends - Neurogene Inc.'s common stock is listed on The Nasdaq Global Market under the symbol "NGNE"[551] - As of March 18, 2025, there were approximately 16 stockholders of record[551] - The company intends to retain future earnings for business operations and growth and has never declared or paid cash dividends, nor does it anticipate doing so in the foreseeable future[552] - There were no purchases of equity securities by the issuer or affiliated purchasers[553] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved[554] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Neurogene Inc.'s financial condition and results of operations, detailing its clinical-stage gene therapy programs, the impact of recent financings, and its liquidity, capital requirements, and critical accounting policies Overview Neurogene is a clinical-stage biotechnology company leveraging EXACT technology for rare neurological diseases, with NGN-401 in clinical trials and NGN-101 under re-evaluation, funded by external capital into H2 2027 - Neurogene is a clinical-stage biotechnology company committed to overcoming limitations of conventional gene therapy for complex neurological diseases using its proprietary EXACT technology[557] - NGN-401, the first clinical-stage program using the EXACT platform, is in a Phase 1/2 clinical trial for Rett syndrome, with participants dosed in the US, UK, and Australia[557][558] - Positive interim clinical data for NGN-401 (1E15 vg dose) as of October 17, 2024, showed consistent, concordant, and durable improvements across multiple Rett syndrome clinical assessments and was generally well-tolerated[559][562][563][564] - A participant in the 3E15 vg (high dose) NGN-401 cohort died from a rare hyperinflammatory syndrome, leading to the removal of this dose from the trial protocol and implementation of additional monitoring[566][567] - NGN-401 received FDA's START Pilot Program selection (June 2024) and RMAT designation (August 2024), aiming to accelerate development[568] - The NGN-101 CLN5 Batten disease gene therapy program is not expected to move forward at this time due to the denial of a streamlined registrational pathway (RMAT application) by the FDA[570] - Neurogene completed a reverse merger on December 18, 2023, and a private placement on November 5, 2024, raising approximately $200.0 million in gross proceeds ($189.5 million net)[573][574][576] Financial Summary (Years Ended December 31) | Metric | 2024 (Millions USD) | 2023 (Millions USD) | | :----- | :------------------ | :------------------ | | Net Loss | $75.1 | $36.3 | | Accumulated Deficit | $262.3 | N/A | | Cash, Cash Equivalents & Short-term Investments | $312.4 | N/A | - The company expects its expenses and capital requirements to increase substantially as it advances NGN-401, expands discovery programs, seeks regulatory approvals, builds commercial infrastructure, and grows its team[579][582] - Neurogene's collaboration with the University of Edinburgh, extended through December 2026, supports pipeline development and scientific innovation[581] Components of Results of Operations This section details Neurogene's financial components, including licensing revenue, increasing R&D and G&A expenses, interest income, and income taxes, reflecting its clinical-stage operations - Neurogene has no approved products and has not generated revenue from product sales, but has generated licensing revenue from agreements related to legacy Neoleukin assets[584][585] - Research and development (R&D) expenses are expensed as incurred and include costs for discovery, preclinical studies, clinical trials, acquired licenses (if no alternative future use), personnel, third-party CROs/CDMOs, regulatory activities, and allocated facility costs[586][587] - R&D expenses are expected to increase significantly as programs advance through clinical development and additional product candidates are developed[590] - General and administrative (G&A) expenses primarily cover personnel, corporate facility costs, legal fees, and accounting/consulting services, and are expected to increase to support R&D, potential commercialization, and public company operations[591][592] - Interest income fluctuates based on interest rates and the amount of cash, cash equivalents, and short-term investments[593] - Neurogene has not recorded income tax benefits for net operating losses (NOLs) or R&D tax credits due to a full valuation allowance, with federal NOLs of $319.8 million and state NOLs of $39.6 million as of December 31, 2024[595][596] Results of Operations Neurogene's net loss increased to $75.1 million in 2024 from $36.3 million in 2023, driven by higher R&D and G&A expenses, partially offset by increased interest income and non-recurring other income Consolidated Statements of Operations (in thousands) | (in thousands) | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | Change | | :--------------- | :---------------------- | :---------------------- | :----- | | Revenue under licensing agreements | $925 | $0 | $925 | | Research and development expenses | $60,917 | $44,394 | $16,523 | | General and administrative expenses | $22,613 | $11,189 | $11,424 | | Total operating expenses | $83,530 | $55,583 | $27,947 | | Loss from operations | $(82,605) | $(55,583) | $(27,022) | | Interest income | $8,467 | $2,951 | $5,516 | | Other income | $574 | $16,355 | $(15,781) | | Other expense | $(1,568) | $(28) | $(1,540) | | Net loss | $(75,144) | $(36,317) | $(38,827) | - Net loss increased to $75.1 million in 2024 from $36.3 million in 2023, primarily due to increased operating expenses and a non-recurring bargain purchase gain in 2023[598] - Licensing revenue of $0.9 million was generated in 2024 from the December 2023 and April 2024 CVR Licensing Agreements[599] - Research and development expenses increased by $16.5 million (37.2%) in 2024, driven by higher clinical trial costs for NGN-401, increased chemistry, manufacturing and controls costs, and growth in early discovery programs[600][601] - General and administrative expenses increased by $11.4 million (102.1%) in 2024, mainly due to increased personnel-related expenses, stock-based compensation, professional fees for public company transition, and office-related expenses from assumed legacy leases[604] - Interest income increased by $5.5 million in 2024 due to a significant increase in cash, cash equivalents, and short-term investments[606] - Other income decreased by $15.8 million in 2024, primarily because a $16.4 million bargain purchase gain recognized in 2023 from the reverse merger did not recur[607] - Other expenses increased by $1.5 million in 2024, mainly due to accruals for contingent consideration liabilities related to the Intellectual Property CVR and Sales Tax CVR[608] Liquidity and Capital Resources Neurogene faces recurring losses and negative cash flows, relying on external capital, with $312.4 million in cash and investments as of December 2024 projected to fund operations into H2 2027 - Neurogene has incurred significant operating losses and negative cash flows since inception, with a net loss of $75.1 million in 2024 and an accumulated deficit of $262.3 million as of December 31, 2024[609] - The company has funded operations primarily through equity sales, raising approximately $521.9 million in net proceeds since inception[610] - As of December 31, 2024, cash, cash equivalents, and short-term investments totaled $312.4 million, expected to fund operations into the second half of 2027[610] - Substantial additional capital will be required to complete product development and build commercial infrastructure, with future funding dependent on R&D progress, regulatory outcomes, and market conditions[612][615] Cash Flows Summary (in thousands) | (in thousands) | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(70,603) | $(51,422) | | Net cash provided by (used) in investing activities | $(125,261) | $25,637 | | Net cash provided by financing activities | $184,071 | $92,482 | | Net increase (decrease) in cash and cash equivalents | $(11,793) | $66,697 | - Net cash used in operating activities was $70.6 million in 2024, reflecting the net loss and changes in operating assets/liabilities, partially offset by non-cash charges[618] - Net cash provided by financing activities was $184.1 million in 2024, primarily from $189.6 million in net proceeds from the November 2024 private financing[622] Contractual Obligations and Commitments (as of Dec 31, 2024, in thousands) | Maturity of operating lease liabilities | | :------------------------------------ | | 2025 | $3,987 | | 2026 | $3,695 | | 2027 | $3,239 | | 2028 | $3,294 | | 2029 | $614 | | Total lease payments | $14,829 | | Maturity of finance lease liabilities | | :------------------------------------ | | 2025 | $59 | | 2026 | $21 | | 2027 | $6 | | 2028 | $1 | | Total lease payments | $87 | Contingent Value Rights (CVR) Liability (as of Dec 31, 2024, in thousands) | | Dec 31, 2024 Current | Dec 31, 2024 Non-Current | Dec 31, 2023 Current | Dec 31, 2023 Non-Current | | :---------------------- | :--------------------- | :----------------------- | :------------------- | :----------------------- | | Lease CVR | $436 | $718 | $281 | $1,006 | | Intellectual Property CVR, net | $295 | $0 | $0 | $0 | | Sales Tax CVR | $360 | $0 | $0 | $0 | | Total CVR liability | $1,091 | $718 | $281 | $1,006 | Critical Accounting Policies and Significant Judgments and Estimates Neurogene's financial statements involve significant estimates and judgments, particularly for R&D expense accruals, stock-based compensation valuation, and common stock fair value determination - Key areas requiring significant estimates and judgments include recoverability of deferred tax assets, useful lives of property/equipment, lease liabilities, revenue recognition, clinical trial accruals, CVR accruals, stock option valuations, and common stock fair value[705] - Research and development expenses are expensed as incurred, with accruals for preclinical and clinical trial activities based on estimates of work completed, which are inherently judgmental and subject to change[645][648] - Stock-based compensation for employees and non-employees is measured at fair value using the Black-Scholes Option pricing model, incorporating assumptions for stock price volatility, expected life, risk-free interest rate, and expected dividend yield[651][654] - Prior to the reverse merger, the fair value of common stock for stock-based awards was estimated by the board with third-party valuations; post-merger, it is based on the closing stock price on Nasdaq[655] Recent Accounting Pronouncements Neurogene adopted ASU 2023-07 in 2024 and is evaluating ASU 2023-09 and ASU 2024-03, which will impact future segment, income tax, and expense disaggregation disclosures - Neurogene adopted ASU 2023-07, Segment Reporting, for the year ended December 31, 2024, which expands segment disclosure requirements[751] - ASU 2023-09, Improvements to Income Tax Disclosures, effective January 1, 2025, will require disaggregated tax rate reconciliation (percentage and dollar amounts) and income taxes paid by jurisdiction[749] - ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, effective October 1, 2027, mandates tabular disaggregation of income statement expenses (e.g., inventory purchases, employee compensation, depreciation)[750] Smaller Reporting Company Status Neurogene Inc. qualifies as a "smaller reporting company," benefiting from reduced disclosure obligations, maintained by meeting specific market value and revenue thresholds - Neurogene Inc. is a "smaller reporting company" under the Exchange Act[660] - This status allows for reduced disclosure obligations, including presenting only two most recent fiscal years of audited financial statements and reduced executive compensation disclosures[660] - The company maintains this status if its non-affiliate stock market value is less than $250 million, or if annual revenue is less than $100 million and non-affiliate stock market value is less than $700 million[660] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Neurogene Inc. is exempt from market risk disclosures - As a "smaller reporting company," Neurogene Inc. is exempt from providing quantitative and qualitative disclosures about market risk[661] Item 8. Financial Statements and Supplementary Data This section presents Neurogene Inc.'s audited consolidated financial statements for 2024 and 2023, including the independent auditor's report, balance sheets, statements of operations, equity changes, cash flows, and comprehensive notes - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit), and Consolidated Statements of Cash Flows[663] - The financial statements present fairly, in all material respects, the financial position as of December 31, 2024 and 2023, and results of operations and cash flows for the two years ended December 31, 2024, in conformity with U.S. GAAP[666] - A critical audit matter identified was accrued research and development expenses, due to the judgment required in estimating the extent of services performed by third-party contract research organizations[671][672] Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on Neurogene Inc.'s 2024 and 2023 consolidated financial statements, highlighting accrued R&D expenses as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion on Neurogene Inc.'s consolidated financial statements for the years ended December 31, 2024 and 2023[666] - The financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with U.S. GAAP[666] - A critical audit matter was identified regarding accrued research and development expenses, highlighting the high degree of management and auditor judgment required to estimate the extent of services performed by third-party contract research organizations[671][672] Consolidated Balance Sheets Neurogene Inc.'s consolidated balance sheet shows total assets increased to $335.7 million in 2024, with total liabilities decreasing and stockholders' equity rising to $310.4 million due to financings Consolidated Balance Sheets (in thousands) | (In Thousands) | Dec 31, 2024 | Dec 31, 2023 | | :------------- | :----------- | :----------- | | Assets | | | | Cash and cash equivalents | $136,586 | $148,210 | | Short-term investments | $175,819 | $48,947 | | Total current assets | $315,923 | $200,347 | | Property and equipment, net | $15,422 | $17,174 | | Total assets | $335,730 | $222,570 | | Liabilities | | | | Accounts payable | $1,336 | $2,591 | | Accrued expenses and other current liabilities | $9,731 | $17,495 | | Contingent value rights liability, current | $1,091 | $281 | | Total current liabilities | $15,157 | $22,973 | | Total liabilities | $25,355 | $36,544 | | Stockholders' Equity | | | | Additional paid-in capital | $572,673 | $373,178 | | Accumulated deficit | $(262,298) | $(187,154) | | Total stockholders' equity | $310,375 | $186,024 | | Total liabilities and stockholders' equity | $335,730 | $222,570 | - Total assets increased by $113.16 million from $222.57 million in 2023 to $335.73 million in 2024, primarily driven by an increase in short-term investments[678] - Total liabilities decreased by $11.19 million from $36.54 million in 2023 to $25.35 million in 2024, mainly due to a decrease in accrued expenses and other current liabilities[678] - Total stockholders' equity increased by $124.35 million from $186.02 million in 2023 to $310.37 million in 2024, reflecting significant additional paid-in capital from financings[678] Consolidated Statements of Operations Neurogene Inc. reported a net loss of $75.1 million in 2024, an increase from $36.3 million in 2023, driven by higher R&D and G&A expenses and a non-recurring gain in the prior year Consolidated Statements of Operations (in thousands) | (In Thousands) | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :------------- | :---------------------- | :---------------------- | | Revenue under licensing agreements | $925 | $0 | | Research and development expenses | $60,917 | $44,394 | | General and administrative expenses | $22,613 | $11,189 | | Total operating expenses | $83,530 | $55,583 | | Loss from operations | $(82,605) | $(55,583) | | Interest income | $8,467 | $2,951 | | Other income | $574 | $16,355 | | Other expense | $(1,568) | $(28) | | Net loss | $(75,144) | $(36,317) | | Net income (loss) per share, basic | $(4.28) | $(117.28) (Pre-Merger) / $27.76 (Post-Merger) | | Weighted-average shares outstanding, basic | 17,567,082 | 426,097 (Pre-Merger) / 491,867 (Post-Merger) | - Net loss increased from $36.3 million in 2023 to $75.1 million in 2024[681] - Research and development expenses rose by $16.5 million, and general and administrative expenses increased by $11.4 million year-over-year[681] - Other income significantly decreased in 2024 due to a non-recurring bargain purchase gain of $16.4 million in 2023[681] Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) Neurogene Inc.'s capital structure transformed post-December 2023 merger, converting preferred stock to common equity, with total stockholders' equity increasing to $310.4 million by December 2024 due to new equity issuances Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) (in thousands) | (In Thousands) | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2024 | | :------------- | :----------- | :----------- | :----------- | | Convertible Preferred Stock | | | | | Series A-1 Convertible Preferred Stock | $34,414 | $0 | $0 | | Series A-2 Convertible Preferred Stock | $28,675 | $0 | $0 | | Series B Convertible Preferred Stock | $181,277 | $0 | $0 | | Stockholders' Equity (Deficit) | | | | | Additional Paid-In Capital | $5,098 | $373,178 | $572,673 | | Accumulated Deficit | $(150,837) | $(187,154) | $(262,298) | | Total Stockholders' Deficit/Equity | $(145,739) | $186,024 | $310,375 | - All convertible preferred stock was converted into common stock and pre-funded warrants in connection with the reverse merger, resulting in zero preferred stock outstanding by December 31, 2023[687][695] - Total stockholders' equity shifted from a deficit of $(145.7) million at December 31, 2022, to positive equity of $186.0 million at December 31, 2023, and further to $310.4 million at December 31, 2024[687] - The increase in equity is primarily due to $88.1 million from the Pre-Closing Financing in 2023 and $189.5 million from the November 2024 private financing, despite an increase in accumulated deficit due to net losses[687] Consolidated Statements of Cash Flows Neurogene Inc.'s cash, cash equivalents, and restricted cash decreased by $11.8 million in 2024, with operating activities using $70.6 million and financing activities providing $184.1 million from private financing Consolidated Statements of Cash Flows (in thousands) | (In Thousands) | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(70,603) | $(51,422) | | Net cash provided by (used) in investing activities | $(125,261) | $25,637 | | Net cash provided by financing activities | $184,071 | $92,482 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(11,793) | $66,697 | | Cash, cash equivalents and restricted cash at end of period | $136,925 | $148,718 | - Net cash used in operating activities increased to $70.6 million in 2024 from $51.4 million in 2023, reflecting higher net losses[690][618][619] - Investing activities shifted from providing $25.6 million in 2023 (due to cash acquired from merger) to using $125.3 million in 2024, primarily for purchases of held-to-maturity investments[690][620][621] - Financing activities provided $184.1 million in 2024, mainly from $189.6 million in net proceeds from the November 2024 private financing[690][622] Notes to Consolidated Financial Statements The notes provide detailed disclosures on Neurogene Inc.'s operations, financial position, and accounting practices, covering the reverse merger, liquidity, key accounting policies, and commitments and contingencies - Neurogene Inc. is a clinical-stage biotechnology company formed in 2018, focused on gene therapy for neurological diseases, with NGN-401 for Rett syndrome as its lead program[692] - The December 2023 business combination was accounted for as a reverse asset acquisition, with Neurogene OpCo as the accounting acquirer, resulting in a $16.4 million bargain purchase gain for Neoleukin's net assets[697][753] - The company faces significant liquidity risks, having incurred substantial recurring losses ($75.1 million in 2024) and relying on outside capital, though current cash ($312.4 million) is expected to fund operations for at least one year[699][700] - Key accounting policies include revenue recognition (applying ASC 606), fair value measurements (Level 1 for investments), property and equipment depreciation, and lease accounting (ASC 2016-02)[714][717][720][723] - Contingent Value Rights (CVRs) were issued in connection with the reverse merger, covering legacy lease obligations, intellectual property proceeds, and sales tax refunds, with a total liability of $1.8 million as of December 31, 2024[696][728][781] - Neurogene has various license agreements, including an exclusive license with the University of Edinburgh for EXACT technology and MECP2 constructs, and non-exclusive licenses with Virovek, Sigma-Aldrich, and Stanford for manufacturing processes and materials[788][792][793][794] - Stock-based compensation expense was $8.3 million in 2024, with $18.7 million of unrecognized expense for stock options and $5.9 million for RSUs as of December 31, 2024[819][821][825] - The company maintains a full valuation allowance against its net deferred tax assets ($115.0 million as of December 31, 2024) due to uncertainty regarding future taxable income, despite having significant NOL and tax credit carryforwards[832][834] - Subsequent events include the vesting of RSUs and exercise of options, and the approval of new option and RSU grants by the Compensation Committee in March 2025[841] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Neurogene Inc. reports no changes in or disagreements with its accountants on accounting and financial disclosure - There have been no changes in or disagreements with accountants on accounting and financial disclosure[843] Item 9A. Controls and Procedures Neurogene Inc.'s management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, acknowledging inherent limitations - As of December 31, 2024, Neurogene's disclosure controls and procedures were effective at a reasonable assurance level[844] - Management concluded that the internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework[845] - The company acknowledges that internal controls have inherent limitations and can only provide reasonable, not absolute, assurance[846] - As a smaller reporting company and non-accelerated filer, Neurogene is exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[847] - There were no changes in internal control over financial reporting during the three months ended December 31, 2024, that materially affected or are reasonably likely to materially affect it[848] Item 9B. Other Information Neurogene Inc. reports no Rule 10b5-1 or non-Rule 10b5-1 trading arrangement adoptions or terminations by directors or executive officers during Q4 2024 - None of Neurogene's directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2024[849] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Neurogene Inc. reports no disclosures regarding foreign jurisdictions that prevent inspections - There are no disclosures regarding foreign jurisdictions that prevent inspections[851] Part III This section provides information on Neurogene Inc.'s directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees Item 10. Directors, Executive Officers and Corporate Governance Information on Neurogene Inc.'s directors, executive officers, and corporate governance, including the Code of Business Conduct and Ethics, is incorporated by reference from the 2025 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement[854] - Neurogene has adopted a Code of Business Conduct and Ethics, applicable to all directors, officers, and employees, which is posted on its website[854] Item 11. Executive Compensation Information on executive compensation, including director compensation and compensation committee interlocks, is incorporated by reference from Neurogene Inc.'s 2025 Proxy Statement - Information on executive compensation, including director compensation and compensation committee interlocks, is incorporated by reference from the 2025 Proxy Statement[855] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners, management, and equity compensation plans is incorporated by reference from Neurogene Inc.'s 2025 Proxy Statement - Information on security ownership of certain beneficial owners and management, and securities authorized for issuance under equity compensation plans, is incorporated by reference from the 2025 Proxy Statement[855] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related party transactions, and director independence is incorporated by reference from Neurogene Inc.'s 2025 Proxy Statement - Information on certain relationships and related party transactions, and director independence, is incorporated by reference from the 2025 Proxy Statement[856] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from Neurogene Inc.'s 2025 Proxy Statement under "Ratification of Independent Auditor Appointment" - Information on principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement, specifically the section "Ratification of Independent Auditor Appointment"[856] Part IV This section lists all exhibits and financial statement schedules filed as part of Neurogene Inc.'s Annual Report on Form 10-K Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules for Neurogene Inc.'s Annual Report on Form 10-K, including merger agreements, corporate governance, and various license and employment agreements - Financial statements are provided in Part II, Item 8 of this Annual Report on Form 10-K[858] - No separate financial statement schedules are provided as the information is either not required or included within the financial statements or notes[859] - A comprehensive list of exhibits is filed, including merger agreements, corporate governance documents, registration rights agreements, pre-funded warrants, various license agreements (e.g., with University of Edinburgh, Virovek, Sigma-Aldrich, Stanford), employment agreements, and certifications[860][861][862][863] - Many exhibits are incorporated by reference from previous SEC filings, indicating continuity in reporting[860][861][862] Item 16. Form 10-K Summary Neurogene Inc. reports no Form 10-K Summary is provided - No Form 10-K Summary is provided[866] Signatures This section contains the required signatures for Neurogene Inc.'s Annual Report on Form 10-K, affirming compliance with the Securities Exchange Act of 1934, dated March 24, 2025 - The Annual Report on Form 10-K is signed by Rachel McMinn, Ph.D. (Chief Executive Officer, Director), Christine Mikail, J.D. (President and Chief Financial Officer), and other directors[870][871] - All signatures are dated March 24, 2025[871] - The signatures affirm compliance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934[869]