NextCure(NXTC) - 2021 Q4 - Annual Report

PART I Item 1. Business NextCure, Inc. is a clinical-stage biopharmaceutical company focused on discovering and developing first-in-class immunomedicines for cancer and immune-related diseases using its proprietary FIND-IO platform Overview NextCure is a clinical-stage biopharmaceutical company developing novel immunomedicines for cancer and immune-related diseases, leveraging its FIND-IO platform - NC318, a first-in-class immunomedicine targeting Siglec-15 (S15), is in Phase 1/2 clinical trials for advanced/metastatic solid tumors, with a Phase 2 combination trial with pembrolizumab initiated by Yale University[33][35][36] - NC410, designed to block LAIR-1 mediated immune suppression, is in Phase 1/2 clinical trials for advanced/metastatic solid tumors, showing safety, tolerability, and immune modulation[37] - NC762, an immunomedicine targeting B7-H4, initiated a Phase 1/2 clinical trial in July 2021 for lung, breast, ovarian, and other tumor types[38][39] - NC525, a novel LAIR-1 antibody, is in preclinical development for Acute Myeloid Leukemia (AML), demonstrating inhibition of AML blast and leukemic stem cells, with an IND submission planned for Q4 2022[40][41] Our Strategy NextCure's strategy focuses on building a sustainable pipeline of immunomedicines for cancer patients underserved by current therapies - The company aims to advance clinical development of NC318, NC410, and NC762, including a Phase 2 combination trial for NC318 with pembrolizumab[44][46] - NextCure is building an oncology pipeline of novel targets for non-responders by leveraging its FIND-IO platform and immunological expertise[49] - The company utilizes its fully integrated development, quality systems, and cGMP manufacturing facility (2,000 liters capacity) to support its pipeline, offering better quality assurance, control, and capital efficiency compared to third-party manufacturers[49] - Beyond oncology, NextCure plans to expand its FIND-IO platform to discover novel targets in other inflammatory and neuro-inflammatory diseases[49] - The strategy includes extending the reach of product candidates through strategic partnerships and collaborations for global development and commercialization, particularly in key markets and regions like Asia[49] Immuno-Oncology Background Immuno-oncology focuses on leveraging the immune system to fight cancer, particularly by overcoming tumor-induced immunosuppression in the tumor microenvironment (TME) - The immune system provides surveillance against cancers, but complex interactions in the tumor microenvironment (TME) can lead to immunosuppression and immune evasion, allowing tumors to grow[47] - Despite the success of checkpoint inhibitors (e.g., PD-L1, PD-1, CTLA-4), an estimated 60% to 70% of cancer patients do not respond to single-agent therapy, underscoring the need for novel targets and molecular pathways[48][50] Our Approach to Developing Immunomedicines for Cancer NextCure's approach combines its FIND-IO platform with immunological expertise to identify novel immune modulators that restore normal immune function in the tumor microenvironment (TME) - NextCure's FIND-IO platform uses a function-based screening approach to identify novel cell surface and secretory molecules that drive functional immune responses, aiming to restore normal immune function in the TME[52][53] - The platform broadly and quantitatively evaluates interactions between protein components and different T-cellular types, expanding beyond its predecessor (TCAA) with different gene libraries, biological pathways, reporters, and immune cell types[52][53] - Product candidates like NC318 and NC410 target various immune cells (macrophages, tumor cells, dendritic cells, T-cells) to prevent suppression and promote anti-tumor immunity[55] Our Programs NextCure's pipeline includes NC318 (anti-S15 monoclonal antibody in Phase 1/2 for solid tumors, with a combination trial), NC410 (LAIR-2 fusion protein in Phase 1/2 for solid tumors), NC762 (anti-B7-H4 monoclonal antibody in Phase 1/2 for various cancers), and NC525 (LAIR-1 antibody in preclinical development for AML) NC318 NC318 is a first-in-class monoclonal antibody targeting Siglec-15 (S15), an immunosuppressive protein, with early clinical benefit in HNSCC, lung, and breast cancers, and a Phase 2 combination trial with pembrolizumab underway - NC318 is a monoclonal antibody that binds to human S15, a highly immunosuppressive protein expressed on tumor cells and M2 macrophages, to promote anti-tumor immune response[58][62][63][65] - The Phase 1 portion of the NC318 trial (49 patients across 7 dose cohorts) showed NC318 was well-tolerated, with primarily mild/moderate TRAEs, and evidence of immune modulation (e.g., vitiligo, pneumonitis)[68][69] - Preliminary Phase 1 data indicated activity in multiple tumor types, including durable stable disease and complete/partial responses in NSCLC patients[70][71][72] - The Phase 2 portion of the trial was modified for S15-positive patient selection via CLIA-certified screening biopsies and a revised dosing regimen of 800 mg weekly to increase drug exposure[75] - Yale University initiated a Phase 2 investigator-initiated clinical trial of NC318 in combination with pembrolizumab for NSCLC in April 2021, with initial data expected in H2 2022[76] NC410 NC410 is a LAIR-2 fusion protein designed to block LAIR-1 mediated immune suppression, with ongoing Phase 1/2 clinical trials showing safety and immune modulation - NC410 is a LAIR-2 fusion protein designed to block immune suppression mediated by LAIR-1, a co-inhibitory receptor expressed on immune cells, which binds to collagen and C1q overexpressed in the TME[77][78][79][80][81][82] - Preclinical data indicate NC410 promotes T-cell mediated anti-tumor immunity, enhances infiltration, and increases localized T-cell activity in the TME[87] - A Phase 1/2 clinical trial for NC410 in advanced/metastatic solid tumors is ongoing, with interim data showing safety, tolerability, and evidence of immune modulation[87] - Genomic and protein analyses suggest LAIR-1 expression negatively correlates with survival in several cancers, guiding potential primary indications for NC410, and a CLIA-certified assay is planned for Phase 2 patient selection[84][85][86] NC762 NC762 is a monoclonal antibody targeting B7-H4, with a Phase 1/2 clinical trial initiated in July 2021 for various cancers, and initial data expected in H2 2022 - NC762 is a monoclonal antibody targeting B7-H4, a cell surface protein expressed on multiple tumor types (e.g., NSCLC, ovarian, breast, hepatocellular carcinoma) and tumor-associated macrophages, with limited expression in normal tissues[88][89][95] - Preclinical data indicate NC762 inhibits tumor cell growth, potentially by enhancing immune response through NK cells, and has an anti-tumor impact even without peripheral blood mononuclear cells, suggesting an ADCC-independent primary mechanism[88][90] - Preclinical safety studies showed no significant concerns, with no adverse effects in cynomolgus monkeys and no off-target binding in human tissue cross-reactivity studies[93] - A Phase 1/2 clinical trial for NC762 was initiated in July 2021, and an IHC assay has been developed and validated to select B7-H4 positive patients for treatment[88][94][96] NC525 NC525 is a novel LAIR-1 antibody designed to selectively target and kill Acute Myeloid Leukemia (AML) blast cells and leukemic stem cells (LSCs), with an IND submission planned for Q4 2022 - NC525 is a novel LAIR-1 antibody that selectively targets and kills Acute Myeloid Leukemia (AML) blast cells and leukemic stem cells (LSCs) while sparing hematopoietic stem and progenitor cells (HSPCs)[97] - Preclinical data showed NC525 inhibits colony formation of AML LSCs in vitro, inhibits AML growth in MV4-11 derived xenografts (CDX) in vivo, and restricts AML progression in patient-derived xenografts (PDX) in vivo[41][97] - An Investigational New Drug (IND) submission for NC525 is planned for the fourth quarter of 2022[41] Our Research Programs In addition to its lead product candidates, NextCure is actively pursuing preclinical evaluation of other potential novel immunomodulatory molecules, leveraging its FIND-IO platform for ongoing discovery efforts - NextCure is pursuing preclinical evaluation of other potential novel immunomodulatory molecules in addition to its lead product candidates[98] Our FIND-IO Platform NextCure's proprietary FIND-IO platform uses functional screening to assess immune pathways in various primary immune cells and cell lines, identifying proteins for novel immunomedicines - The FIND-IO platform uses proprietary approaches to functionally assess immune pathways in primary immune cells and established cell lines, enabling the identification of proteins for novel immunomedicines to repair and maintain anti-tumor immunity[100] - The platform aims to sustain a pipeline of novel immunomedicines for cancer and other immune-related diseases, with plans to expand functional screening to identify targets in autoimmunity, inflammation, and neuro-inflammatory diseases[101] Our Collaboration Agreements NextCure has a license agreement with Yale University for intellectual property related to certain product candidates, including NC318, involving low single-digit royalties and milestone payments - NextCure holds an exclusive, royalty-bearing, sublicensable worldwide license from Yale University for intellectual property related to certain product candidates, including S15 (NC318's target), with aggregate milestone payments up to $2,975,000[102] - A corporate sponsored research agreement with Yale, which funded research for new immunomedicine targets, expired on December 31, 2021, and will not be renewed[103] - Eli Lilly and Company terminated its multi-year research and development collaboration agreement with NextCure, focused on the FIND-IO platform, effective March 3, 2020, without cause[104] Manufacturing NextCure operates a purpose-built, state-of-the-art cGMP manufacturing facility with 2,000 liters production capacity, utilizing single-use technology - NextCure has a purpose-built, state-of-the-art cGMP manufacturing facility with 2,000 liters production capacity, utilizing single-use technology to support its pipeline[106] - The company manufactures all drug supply for its preclinical studies and Phase 1/2 clinical trials of NC318, NC410, and NC762 internally, and intends to do so for future trials of NC525[106] - Internal manufacturing provides better quality assurance, greater control in scheduling and prioritizing activities, and enhanced capital efficiency compared to third-party manufacturers[106] Competition NextCure operates in a highly competitive biotechnology and pharmaceutical industry, facing competition from large, well-funded companies and smaller entities - NextCure faces significant competition from larger, better-funded biopharmaceutical companies (e.g., Amgen, AstraZeneca, Bristol-Myers Squibb, Merck, Pfizer, Roche) and smaller entities in the immuno-oncology sector[107] - Competition factors include product efficacy, safety, convenience, speed of regulatory approval, and the availability of reimbursement from third-party payors[108][109] - Currently marketed oncology drugs include traditional therapies, antibody-drug conjugates, immune checkpoint inhibitors (CTLA-4, PD-1/PD-L1), and T-cell-engager immunotherapies[108] Intellectual Property NextCure relies on patent applications, trade secrets, and contractual protections to safeguard its intellectual property - NextCure's intellectual property strategy relies on patent applications, trade secrets, and contractual protections for its products, methods, and manufacturing processes[110][114] - As of December 31, 2021, the company had 20 pending foreign and 6 pending U.S. patent applications for NC318, NC410, NC762, and NC525, with potential expiration dates between 2037 and 2039[110][111] - NextCure holds an exclusive, royalty-bearing, sublicensable worldwide license from Yale University for intellectual property, including patent applications related to S15 methods of use and one allowed patent for FIND-IO, expected to expire no earlier than 2036[112] Government Regulation The development, approval, and commercialization of NextCure's biological products are extensively regulated by the FDA and other authorities - NextCure's biological products are extensively regulated by the FDA and other authorities, covering research, development, testing, manufacturing, quality control, approval, and post-approval monitoring[115][117] - The approval process involves preclinical studies (GLP), IND application, human clinical trials (cGCP) across Phase 1, 2, and 3, followed by a Biologics License Application (BLA) submission and review[121][123][124][127][132][136][138] - Post-approval, products are subject to ongoing regulation, including cGMP compliance, adverse event reporting, and potential Risk Evaluation and Mitigation Strategies (REMS), with strict rules on marketing and promotion[148][152][153][156] - The Biologics Price Competition and Innovation Act (BPCIA) provides an abbreviated approval pathway for biosimilars and grants 12 years of exclusivity for reference biologics, with additional exclusivities for orphan indications and pediatric studies[164][165][166][167] - Companion diagnostics are regulated as medical devices (often Class III requiring PMA approval) and typically need contemporaneous approval with their therapeutic products, while laboratory developed tests (LDTs) are regulated by CMS under CLIA, with FDA historically exercising enforcement discretion[170][171][172][173][174][176] Healthcare Regulation Healthcare regulation significantly impacts NextCure's commercialization prospects, particularly regarding coverage and reimbursement from third-party payors - Commercial success depends on obtaining coverage and adequate reimbursement from third-party payors (governmental and private), which is a time-consuming and costly process with no uniform policy[179][180][181] - NextCure's business is subject to federal and state healthcare fraud and abuse laws, including the Anti-Kickback Statute, False Claims Act (FCA), and HIPAA, which prohibit various forms of improper remuneration, false claims, and privacy violations[182][183][184][185] - Violations of healthcare laws can lead to significant civil, criminal, and administrative penalties, including fines, imprisonment, exclusion from federal healthcare programs, and reputational harm[157][189][336] - Healthcare reform initiatives, such as the ACA and subsequent amendments (e.g., American Rescue Plan Act of 2021), have significantly impacted the pharmaceutical industry, including biosimilar competition, Medicaid rebate calculations, and drug pricing pressures[190][192][193][195][196] Human Capital Resources NextCure's success relies on attracting and retaining highly qualified management and technical personnel - As of December 31, 2021, NextCure had 87 full-time employees, with a diverse workforce (61% male, 39% female; 46% White, 25% Asian, 20% Black/African American, 9% Hispanic/Latino)[199] - The company's success is highly dependent on attracting, motivating, and retaining qualified personnel, facing intense competition in the industry[200] - NextCure addresses turnover and growth by monitoring compensation programs and providing a competitive mix of compensation, benefits, and equity participation[200] Corporate Information and Access to SEC Reports NextCure, Inc. was incorporated in Delaware in September 2015, with its executive offices in Beltsville, Maryland, and makes its SEC filings available free of charge on its website - NextCure, Inc. was incorporated in Delaware in September 2015 and provides its SEC filings (10-K, 10-Q, 8-K) on its website[201] Item 1A. Risk Factors Investing in NextCure's common stock is highly speculative due to significant risks across its financial position, product development, regulatory approval, manufacturing, intellectual property, reliance on third parties, business operations, and common stock volatility - NextCure has a limited operating history, a history of significant losses ($69.4 million in 2021, $36.6 million in 2020), and expects to incur substantial losses for the foreseeable future, with no guarantee of profitability or product sales revenue[204][208] - The company will require substantial additional financing to pursue its business objectives, which may not be available on acceptable terms, potentially forcing delays or termination of product development and commercialization efforts[210][218] - Clinical development is lengthy, expensive, and uncertain, with high failure rates. Delays or failures in trials (e.g., due to patient enrollment, design flaws, or adverse side effects) could prevent regulatory approval and commercialization[236][250][257][260] - The regulatory approval process is lengthy and unpredictable, and NextCure's product candidates may fail to receive approval due to insufficient safety/efficacy data, disagreements with regulatory authorities, or changes in policies[228][229][233][235] - Manufacturing risks include limited experience, challenges in scaling up production, dependence on third-party CMOs and suppliers, and the complexity of biologic manufacturing, all of which could increase costs and limit supply[343][344][346][347][348][349][353][354] - The company's success depends on obtaining and maintaining robust patent protection, which is uncertain due to complex legal questions, potential challenges to validity/enforceability, and the high cost of prosecution and enforcement globally[359][361][362][363][368][370][371][375] - Reliance on third parties (CROs, collaborators) for preclinical studies, clinical trials, and potential commercialization exposes NextCure to risks if these parties fail to perform, comply with regulations, or meet deadlines, potentially delaying or terminating development[392][393][394][396][399] - The price of NextCure's common stock is volatile and influenced by clinical trial results, regulatory decisions, competition, financing efforts, and general market conditions, potentially leading to significant fluctuations[434][437] Item 1B. Unresolved Staff Comments NextCure, Inc. has no unresolved comments from the SEC staff regarding its filed reports - There are no unresolved staff comments[460] Item 2. Properties NextCure's corporate headquarters in Beltsville, Maryland, comprise approximately 28,500 sq ft of office, 20,600 sq ft of laboratory and manufacturing, and 4,400 sq ft of warehouse space - NextCure's corporate headquarters in Beltsville, Maryland, include 28,500 sq ft of office, 20,600 sq ft of laboratory and manufacturing, and 4,400 sq ft of warehouse space[462] - An additional 15,800 sq ft is available for future office and laboratory space, with lease terms expiring in March 2030[462] Item 3. Legal Proceedings NextCure is involved in several legal proceedings, including a putative stockholder class action, a shareholder derivative lawsuit, and a trade secrets misappropriation lawsuit - NextCure is a defendant in a putative stockholder class action (Ye Zhou v. NextCure, Inc., et. al.) alleging violations of the Exchange Act and Securities Act related to statements about NC318 and the FIND-IO platform[445][651] - A shareholder derivative lawsuit (Zach Liu v. Richman et. al.) was filed, alleging breaches of fiduciary duty, unjust enrichment, and other claims against officers and directors, currently stayed pending the Ye Zhou action[446][652][655] - Immunaccel, LLC filed a lawsuit alleging misappropriation of trade secrets related to a drug discovery platform named IMMUNE 3D[447][656] - The company intends to vigorously defend these actions but cannot estimate the reasonably possible loss or range of loss due to the preliminary stage and uncertainties of litigation[448][657] Item 4. Mine Safety Disclosures NextCure, Inc. has no disclosures to report regarding mine safety - Not Applicable[464] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities NextCure's common stock trades on the Nasdaq Global Select Market under the symbol "NXTC", with 27,724,303 shares outstanding as of March 2, 2022 - NextCure's common stock trades on the Nasdaq Global Select Market under the symbol "NXTC"[466] - As of March 2, 2022, the company had 27,724,303 shares of common stock issued and outstanding[5][466] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for business development[456][467] - The 2019 IPO generated $86.3 million in gross proceeds ($76.9 million net), with $0.5 million used for a payment to Yale University and the remainder invested in temporary investments[468] Item 6. Selected Financial Data This item is reserved and no selected financial data is provided - Item 6 is reserved, and no selected financial data is provided[469] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights NextCure's significant net losses, reliance on R&D, and need for additional capital to fund its clinical-stage immunomedicine pipeline Overview NextCure is a clinical-stage biopharmaceutical company developing first-in-class immunomedicines for cancer and immune-related diseases, with data updates and IND submissions anticipated in 2022 - NextCure is a clinical-stage biopharmaceutical company focused on discovering and developing novel, first-in-class immunomedicines to treat cancer and other immune-related diseases[472] - NC318 is in Phase 1/2 clinical trials for advanced/metastatic solid tumors, with a revised dosing regimen (800 mg weekly) and a Phase 2 combination trial with pembrolizumab initiated by Yale University[473][475][476] - NC410 is in Phase 1/2 clinical trials for advanced/metastatic solid tumors, showing safety, tolerability, and immune modulation, with further data expected in H2 2022[477] - NC762 initiated a Phase 1/2 clinical trial in July 2021 for lung, breast, ovarian, and other tumor types, with initial data expected in H2 2022[478] - NC525 is in preclinical development for Acute Myeloid Leukemia (AML), demonstrating efficacy in killing AML blast and leukemic stem cells, with an IND submission planned for Q4 2022[479] Financial Overview NextCure has incurred significant net losses since its 2015 inception, with an accumulated deficit of $187.0 million as of December 31, 2021, primarily due to R&D and G&A expenses - NextCure has incurred net losses since inception, with an accumulated deficit of $187.0 million as of December 31, 2021, primarily from R&D and G&A expenses[481] Net Losses | Year Ended December 31, | Net Loss (in millions) | | :---------------------- | :--------------------- | | 2021 | $(69.4) | | 2020 | $(36.6) | - Funding sources include $164.4 million from private placements of preferred stock, $86.3 million gross from a May 2019 IPO, $172.2 million gross from a November 2019 public offering, and a $25.0 million upfront payment from the terminated Lilly Agreement[482][483][484][485] - As of December 31, 2021, cash, cash equivalents, and marketable securities (excluding restricted cash) totaled $219.6 million, projected to fund operations into Q1 2024[486][487][510] - The company expects substantial future expenditures for clinical development, regulatory approval, commercialization, and pipeline expansion, necessitating additional funding[488][489] Components of Our Results of Operations NextCure's revenue for 2020 was solely from the terminated Lilly Agreement, with no product sales, and operating expenses are primarily driven by R&D - Revenue for 2020 was $22.4 million, exclusively from the recognition of deferred revenue related to the terminated Lilly Agreement; no product sales revenue has been generated[490][502] - Research and development expenses are expensed as incurred and include salaries, third-party agreements (e.g., Yale license), consultants, laboratory supplies, manufacturing materials, and facility-related costs[491][492] - General and administrative expenses cover personnel, professional fees (legal, IP, accounting), rent, and other operating costs, including patent-related costs[497] - Other income, net, primarily comprises interest income from marketable securities[500] Results of Operations NextCure reported a net loss of $69.4 million in 2021, an increase from $36.6 million in 2020, driven by a lack of revenue and increased R&D and G&A expenses Summary of Results of Operations (in thousands) | Item | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | Change | | :--------------------------------------- | :---------------------- | :---------------------- | :---------- | | Revenue from former R&D arrangement | $0 | $22,378 | $(22,378) | | Research and development | $50,192 | $46,554 | $3,638 | | General and administrative | $20,573 | $17,049 | $3,524 | | Loss from operations | $(70,765) | $(41,225) | $(29,540) | | Other income, net | $1,376 | $4,622 | $(3,246) | | Net loss | $(69,389) | $(36,603) | $(32,786) | - Revenue from the former Lilly Agreement was $0 in 2021, down from $22.4 million in 2020 due to the agreement's termination[502] - Research and development expenses increased by $3.6 million to $50.2 million in 2021, driven by clinical-related ($2.3 million) and personnel-related ($2.1 million) expenses, partially offset by a decrease in contract manufacturing ($1.6 million)[503][504] - General and administrative expenses increased by $3.5 million to $20.5 million in 2021, primarily due to $2.7 million in personnel-related costs[506] - Other income, net, decreased by $3.2 million to $1.4 million in 2021, attributed to lower investment balances and reduced interest rates[507] Liquidity and Capital Resources NextCure's operations are financed through public equity offerings, private placements, and past collaboration fees, with existing capital projected to fund operations into Q1 2024 - NextCure's operations are financed by public offerings ($77.0 million net from 2019 IPO, $160.9 million net from 2019 public offering), private placements ($164.4 million gross), and a $25.0 million upfront payment from the former Lilly Agreement[508] - As of December 31, 2021, cash, cash equivalents, and marketable securities (excluding restricted cash) totaled $219.6 million, expected to fund operations into Q1 2024[510] - The company has an 'at the market offering' sales agreement to sell up to $75 million of common stock, but no shares have been sold yet[509] - Additional capital will be required for product development and commercialization, with funding potentially sought through equity, debt, or strategic alliances, but availability on acceptable terms is not assured[512][515] Cash Flows NextCure's net cash used in operating activities increased to $57.2 million in 2021 from $45.0 million in 2020, primarily due to increased net losses and the absence of deferred revenue recognition Cash Flow Summary (in thousands) | Cash Flows From | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--------------------------- | :---------------------- | :---------------------- | | Operating activities | $(57,244) | $(44,954) | | Investing activities | $36,601 | $43,523 | | Financing activities | $(3,265) | $(1,415) | | Net decrease in cash | $(23,908) | $(2,846) | - Net cash used in operating activities increased to $57.2 million in 2021 from $45.0 million in 2020, driven by a higher net loss and the absence of deferred revenue recognition from the Lilly Agreement[517][518] - Cash provided by investing activities was $36.6 million in 2021 (vs. $43.5 million in 2020), primarily from net proceeds of marketable securities ($39.0 million) offset by property and equipment purchases ($2.4 million)[519] - Cash used in financing activities was $3.3 million in 2021 (vs. $1.4 million in 2020), mainly due to payments for the Term Loan, which was fully paid in August 2021[520][523] Contractual Obligations and Commitments NextCure's primary contractual obligations include operating leases for its headquarters, expiring in March 2030, with total future minimum payments of $11.4 million as of December 31, 2021 Operating Lease Minimum Obligations (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2022 | $1,172 | | 2023 | $1,171 | | 2024 | $1,231 | | 2025 | $1,316 | | Thereafter | $6,537 | | Total future minimum payments | $11,427 | - The Term Loan, which had a borrowing capacity of $5.0 million, was fully paid off in August 2021, with no outstanding payments due[523][658] - NextCure has potential contingent payment obligations (milestones, royalties) under license agreements, such as with Yale, but the timing and amount are not reasonably estimable[524] Critical Accounting Policies, Significant Judgments and Use of Estimates NextCure's financial statements rely on significant estimates and assumptions, particularly for valuing share-based compensation and common stock before its IPO - The preparation of financial statements requires significant estimates and assumptions, especially for valuing share-based compensation and common stock prior to the IPO[526][527][532] - Research and development expenses, including clinical trial costs, are expensed as incurred, with accruals based on contracted work and progress of studies[529][598] - Revenue recognition follows ASC Topic 606, involving a five-step model to identify performance obligations, measure transaction price (including variable consideration constraints), allocate price, and recognize revenue upon transfer of control[530][612][615][620][621] - Stock-based compensation is expensed based on grant date fair value (Black-Scholes model for options), recognized over the vesting period, with forfeitures recognized as they occur[531][604][605][607] - Income taxes are accounted for using the asset and liability method, with a full valuation allowance recorded against deferred tax assets due to the company's history of losses and uncertainty of realization[608][610] Off-Balance Sheet Arrangements NextCure, Inc. has not engaged in any off-balance sheet arrangements since its inception - NextCure has not engaged in any off-balance sheet arrangements since its inception[536] JOBS Act Accounting Election As an 'emerging growth company' (EGC) under the JOBS Act, NextCure has elected to use the extended transition period for complying with new or revised accounting standards - As an 'emerging growth company' (EGC), NextCure has elected to use the extended transition period for complying with new or revised accounting standards, which may result in non-comparable financial statements with non-EGCs[537] - The company will remain an EGC until the earliest of December 31, 2024, achieving $1.07 billion in annual gross revenues, having a non-affiliate market value exceeding $700.0 million, or issuing over $1.0 billion in non-convertible debt[538] Recent Accounting Pronouncements NextCure adopted ASU 2016-13 (Credit Losses) early, effective January 1, 2021, with no material impact, and plans to adopt ASC 842 (Leases) on January 1, 2022 - NextCure adopted ASU 2016-13 (Credit Losses) early, effective January 1, 2021, which did not have a material impact on its financial statements[629] - The company will adopt ASC 842 (Leases) on January 1, 2022, which is estimated to result in approximately $5.8 million of right-of-use assets and $7.2 million of lease liabilities for operating leases, with no material impact on its statements of operations[628] Item 7A. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, NextCure, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, NextCure, Inc. is not required to provide quantitative and qualitative disclosures about market risk[540] Item 8. Financial Statements and Supplementary Data This section presents NextCure's audited financial statements for the years ended December 31, 2021 and 2020, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows, accompanied by detailed notes Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on NextCure's financial statements for 2021 and 2020, affirming fair presentation in conformity with U.S. GAAP - Ernst & Young LLP provided an unqualified opinion on NextCure's financial statements for 2021 and 2020, stating they present fairly the financial position, operations, and cash flows in accordance with U.S. GAAP[544] - The audit assessed risks of material misstatement and evaluated accounting principles and estimates, but did not include an audit of internal control over financial reporting[546][547] Balance Sheets NextCure's balance sheets show total assets decreased from $306.6 million in 2020 to $242.4 million in 2021, primarily due to a reduction in marketable securities and cash Balance Sheet Summary (in thousands) | Asset/Liability/Equity | December 31, 2021 | December 31, 2020 | | :--------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $12,337 | $32,772 | | Marketable securities | $207,254 | $250,676 | | Total current assets | $227,817 | $287,978 | | Total assets | $242,386 | $306,644 | | Total current liabilities | $6,608 | $10,325 | | Total liabilities | $9,000 | $12,923 | | Total stockholders' equity | $233,386 | $293,721 | - The decrease in total assets was primarily driven by a reduction in marketable securities and cash and cash equivalents[550] - The decrease in total liabilities was mainly due to the full payment of the Term Loan[550] Statements of Operations and Comprehensive Loss NextCure reported a net loss of $69.4 million in 2021, significantly higher than the $36.6 million loss in 2020, primarily due to the absence of revenue and increased operating expenses Statements of Operations and Comprehensive Loss (in thousands) | Item | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--------------------------------------- | :---------------------- | :---------------------- | | Revenue from former R&D arrangement | $0 | $22,378 | | Research and development | $50,192 | $46,554 | | General and administrative | $20,573 | $17,049 | | Total operating expenses | $70,765 | $63,603 | | Loss from operations | $(70,765) | $(41,225) | | Other income, net | $1,376 | $4,622 | | Net loss | $(69,389) | $(36,603) | | Net loss per common share - basic and diluted | $(2.51) | $(1.33) | | Unrealized (loss) gain on marketable securities | $(1,442) | $779 | | Total comprehensive loss | $(70,831) | $(35,824) | - The increase in net loss was primarily due to the absence of revenue from the former Lilly Agreement in 2021 and increased operating expenses[552] - Total comprehensive loss for 2021 included an unrealized loss of $1.4 million on marketable securities, compared to an unrealized gain of $0.8 million in 2020[552] Statements of Stockholders' Equity NextCure's total stockholders' equity decreased from $293.7 million in 2020 to $233.4 million in 2021, driven by the net loss and unrealized losses on marketable securities Stockholders' Equity Summary (in thousands, except share data) | Item | December 31, 2021 | December 31, 2020 | | :--------------------------------------- | :---------------- | :---------------- | | Common Stock (shares) | 27,680,997 | 27,568,802 | | Common Stock (amount) | $28 | $28 | | Additional Paid-in Capital | $421,047 | $410,551 | | Accumulated Other Comprehensive (Loss) Income | $(663) | $779 | | Accumulated Deficit | $(187,026) | $(117,637) | | Total Stockholders' Equity | $233,386 | $293,721 | - The decrease in total stockholders' equity was primarily due to the net loss of $69.4 million and an unrealized loss on marketable securities of $1.4 million[555] - Increases in additional paid-in capital were due to $10.3 million in stock-based compensation and $0.2 million from stock option exercises[555] Statements of Cash Flows NextCure's cash flows from operating activities resulted in a net use of $57.2 million in 2021, an increase from $45.0 million in 2020, driven by the net loss and absence of deferred revenue Cash Flow Summary (in thousands) | Cash Flows From | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--------------------------- | :---------------------- | :---------------------- | | Operating activities | $(57,244) | $(44,954) | | Investing activities | $36,601 | $43,523 | | Financing activities | $(3,265) | $(1,415) | | Net decrease in cash | $(23,908) | $(2,846) | - Net cash used in operating activities increased due to the net loss and the absence of deferred revenue recognition from the Lilly Agreement[517][518] - Cash provided by investing activities was primarily from maturities of marketable securities ($195.4 million in 2021) offset by purchases ($156.5 million in 2021) and property/equipment purchases ($2.4 million in 2021)[519][558] - Cash used in financing activities mainly consisted of payments on the Term Loan ($3.5 million in 2021)[520][558] Notes to Financial Statements The Notes to Financial Statements provide detailed disclosures on NextCure's business, accounting policies, financial instruments, property, liabilities, collaboration agreements, legal proceedings, and equity - NextCure is a clinical-stage biopharmaceutical company with a limited operating history, no product sales revenue, and a history of significant losses, relying on public offerings and private placements for funding[561][566] - The company's financial statements are prepared in accordance with U.S. GAAP, requiring significant estimates and assumptions, particularly for stock-based compensation and fair value measurements[576][579] - Key accounting policies include classifying highly liquid investments with original maturities of three months or less as cash equivalents, marketable securities as available-for-sale, and expensing R&D costs as incurred[580][583][598] - NextCure has recorded a full valuation allowance against its deferred tax assets due to its history of losses and uncertainty of realization, with federal and state net operating loss carryforwards of $160.9 million and $163.4 million, respectively, as of December 31, 2021[610][681] - The company is subject to risks common to early-stage biotechnology companies, including the need for additional financing, uncertainties in clinical development, and intense competition[572] - The impact of the COVID-19 pandemic on clinical trials (e.g., patient enrollment, safety monitoring) and overall business is uncertain[573] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure NextCure, Inc. reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - There are no changes in or disagreements with accountants on accounting and financial disclosure[692] Item 9A. Controls and Procedures NextCure's management concluded that its disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021[693] - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[695] - As an emerging growth company, NextCure is exempt from the requirement for its independent registered public accounting firm to provide an attestation report on internal control over financial reporting[696] Item 9B. Other Information NextCure, Inc. has no other information to report under this item - No other information is reported under this item[696] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections NextCure, Inc. has no disclosures regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[697] PART III Item 10. Directors, Executive Officers and Corporate Governance Information for this item, covering directors, executive officers, and corporate governance, is incorporated by reference from NextCure's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement[699] Item 11. Executive Compensation Information for this item, pertaining to executive compensation, is incorporated by reference from NextCure's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement[701] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item, concerning security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from NextCure's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the 2022 Proxy Statement[702] Item 13. Certain Relationships and Related Transactions and Director Independence Information for this item, covering certain relationships and related transactions, and director independence, is incorporated by reference from NextCure's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information regarding certain relationships and related transactions and director independence is incorporated by reference from the 2022 Proxy Statement[703] Item 14. Principal Accounting Fees and Services Information for this item, detailing principal accounting fees and services, is incorporated by reference from NextCure's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information regarding principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement[704] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the 10-K report, with all financial statement schedules omitted as they are not applicable or the information is presented in the financial statements or notes - The financial statements are included as part of this report, and all financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes[706] - The exhibit index lists various corporate documents, including the Amended and Restated Certificate of Incorporation and Bylaws, license agreements with Yale University, incentive plans, employment agreements, and certifications[708][709][710][713][715] - Portions of certain exhibits, such as the license agreement with Yale and employment agreements, have been omitted in compliance with Item 601 of Regulation S-K[713][716] Item 16. Form 10-K Summary NextCure, Inc. has not included a Form 10-K Summary in this report - No Form 10-K Summary is included[717] SIGNATURES This section contains the required signatures for the Annual Report on Form 10-K, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Michael Richman (President and CEO, Principal Executive Officer) and Steven P. Cobourn (CFO, Principal Financial and Accounting Officer) on March 3, 2022[722][724] - Signatures from the Chair of the Board and other Directors are also included, affirming compliance with the Securities Exchange Act of 1934[723][724]