NextCure, Inc 10-Q for FY2022 Q1
NextCure, Inc. (NXTC)
About this 10-Q
NextCure, Inc filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $20.6M
- compared with a net loss of $16.53M a year earlier
- Diluted EPS
- -$0.74
- compared with -$0.60 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered: |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 4, 2022, the registrant had
NextCure, Inc.
Form 10-Q
For the Quarter Ended March 31, 2022
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEXTCURE, INC.
CONDENSED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)
| | March 31, |
| December 31, | | ||
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| 2022 |
| 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents | | $ | | | $ | | |
Marketable securities | | | | | | | |
Restricted cash | |
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Prepaid expenses and other current assets | |
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Total current assets | |
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Property and equipment, net | |
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Other assets | |
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Total assets | | $ | | | $ | | |
Liabilities and Stockholders’ Equity | |
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Current liabilities: | |
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Accounts payable | | $ | | | $ | | |
Accrued liabilities | |
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Deferred rent, current portion | |
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Total current liabilities | |
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Deferred rent, net of current portion | |
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Total liabilities | |
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Stockholders’ equity: | |
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Preferred stock, par value of $ | | | | | | ||
Common stock, par value of $ | |
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Additional paid-in capital | |
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Accumulated other comprehensive loss | | | ( | | | ( | |
Accumulated deficit | |
| ( | |
| ( | |
Total stockholders’ equity | |
| | |
| | |
Total liabilities and stockholders’ equity | | $ | | | $ | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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NEXTCURE, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except share and per share amounts)
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Operating expenses: | | | | | | |
Research and development | | $ | | | $ | |
General and administrative | | | | | | |
Total operating expenses | |
| | |
| |
Loss from operations | |
| ( | |
| ( |
Other income, net | |
| | |
| |
Net loss | | $ | ( | | $ | ( |
Net loss per common share - basic and diluted | | ( | | ( | ||
Weighted-average shares outstanding - basic and diluted | | | | | | |
Comprehensive loss: | | | | | | |
Net loss | | $ | ( | | $ | ( |
Unrealized loss on marketable securities | | | ( | | | ( |
Total comprehensive loss | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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NEXTCURE, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands, except share data)
| | Three Months Ended March 31, 2022 | |||||||||||||||
| | | | | | | | | | | | | | | | | |
| | Stockholders’ Equity | |||||||||||||||
| | | | | | | Additional | | Accumulated Other | | | | | |
| ||
| | Common Stock | | Paid-in | | Comprehensive | | Accumulated | | Stockholders’ | |||||||
| | Shares | | Amount | | Capital | | (Loss) Income | | Deficit | | Equity | |||||
Balance as of December 31, 2021 |
| | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | — | | | |
Exercise of stock options | | | | | — | | | | | | — | | | — | | | |
Unrealized loss on marketable securities, net of tax $ | | — | | | — | | | — | | | ( | | | — | | | ( |
Net loss | | — | | | — | | | — | | | — | | | ( | | | ( |
Balance as of March 31, 2022 | | | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 | |||||||||||||||
| | | | | | | | | | | | | | | | | |
| | Stockholders’ Equity | |||||||||||||||
| | | | | | | Additional | | Accumulated Other | | | | | |
| ||
| | Common Stock | | Paid-in | | Comprehensive | | Accumulated | | Stockholders’ | |||||||
| | Shares | | Amount | | Capital | | (Loss) Income | | Deficit | | Equity | |||||
Balance as of December 31, 2020 |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | — | | | |
Exercise of stock options | | | | | — | | | | | | — | | | — | | | |
Unrealized loss on marketable securities, net of tax $ | | — | | | — | | | — | | | ( | | | — | | | ( |
Net loss |
| — | | | — | | | — | | | — | | | ( | | | ( |
Balance as of March 31, 2021 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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NEXTCURE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: |
| |
| | |
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Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | | |
Depreciation, amortization and other | |
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Stock-based compensation | |
| | | | |
Changes in operating assets and liabilities: | |
| | | | |
Prepaid expenses and other assets | |
| | | | ( |
Accounts payable | |
| | | | ( |
Accrued liabilities | |
| ( | | | ( |
Deferred rent | | | ( | | | |
Net cash used in operating activities | |
| ( | | | ( |
Cash flows from investing activities: | |
| | | | |
Maturities of marketable securities | |
| | | | |
Purchases of marketable securities | | | — | | | ( |
Purchase of property and equipment | | | ( | | | ( |
Net cash provided by investing activities | |
| | | | |
Cash flows from financing activities: | |
| | | | |
Proceeds from exercise of stock options | | | | | | |
Payments of the term loan | |
| — | | | ( |
Net cash provided by (used in) financing activities | |
| | | | ( |
Net (decrease) increase in cash, cash equivalents and restricted cash | |
| ( | | | |
Cash, cash equivalents and restricted cash – beginning of period | |
| | | | |
Cash, cash equivalents and restricted cash – end of period | | $ | | | $ | |
Supplemental disclosures of cash flow information: | |
| | | | |
Cash paid for interest | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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1. Nature of the Business
Organization
NextCure, Inc. (“NextCure” or the “Company”) was incorporated in Delaware in September 2015 and is headquartered in Beltsville, Maryland. The Company is a clinical-stage biopharmaceutical company committed to discovering and developing novel, first-in-class immunomedicines to treat cancer and other immune-related diseases by restoring normal immune function. Through its proprietary Functional, Integrated, NextCure Discovery in Immuno-Oncology (“FIND-IO”) platform, the Company studies various immune cells in order to discover and understand targets and structural components of immune cells and their functional impact in order to develop immunomedicines. Since inception, the Company has devoted substantially all its efforts and financial resources to organizing and staffing the Company, identifying business development opportunities, raising capital, securing intellectual property rights related to the Company’s product candidates, building and optimizing the Company’s manufacturing capabilities and conducting discovery, research and development activities for the Company’s product candidates, discovery programs and its FIND-IO platform.
Liquidity
The Company has not generated any revenue to date from product sales and does not expect to generate any revenues from product sales in the foreseeable future. Through March 31, 2022, the Company has funded its operations primarily with proceeds from public offerings of its common stock, private placements of its preferred stock and upfront fees received under the Company’s former agreement with Eli Lilly and Company, which was terminated in March 2020. The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.
Risks and Uncertainties
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic. In order to mitigate the spread of COVID-19, governments have imposed unprecedented restrictions on business operations, travel, and gatherings, resulting in a global economic downturn and other adverse economic and societal impacts. The COVID-19 pandemic has also overwhelmed or otherwise led to changes in the operations of many healthcare facilities, including clinical trial sites. However, the Company’s laboratories have continued operations throughout the pandemic mostly without interruption.
The impact of the COVID-19 pandemic (including the impact of emerging variant strains of the COVID-19 virus) on the Company’s business and financial performance is uncertain and depends on various factors, including the scope and duration of the pandemic, the efficacy and global distribution of vaccines, government restrictions and other actions, including relief measures, implemented to address the impact of the pandemic, and resulting impacts on the financial markets and overall economy. The imposition of “lockdown,” “social distancing” and “shelter in place” directives and other restrictions on business operations, travel and gatherings by state and federal governments in the United States, as well as governments in other regions of the world in response to the COVID-19 pandemic, initially placed significant strain on the Company’s clinical trial sites, raised concerns around monitoring patient safety, slowed patient enrollment and caused delays in the Company’s clinical trials and issuance of results. Any rise of COVID-19 infection rates, especially in the United States, could continue to negatively affect enrollment going forward. The Company continues to closely monitor the COVID-19 situation and any potential impact to the Company’s planned activities.
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2. Summary of Significant Accounting Policies
There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”).
Basis of Presentation
The unaudited condensed financial statements include the accounts of NextCure and have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto in the Annual Report.
Unaudited Financial Information
In the opinion of management, the information furnished reflects certain adjustments, all which are of a normal and recurring nature and are necessary for a fair presentation of the Company’s financial position as of the reported balance sheet date and of the Company’s results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities as of the date of the condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Although actual results could differ from those estimates, management does not believe that such differences would be material.
Recently Issued Accounting Pronouncements
The Company qualifies as an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”). Using exemptions provided under the JOBS Act provided to EGCs, the Company has elected to defer compliance with new or revised financial accounting standards until it is required to comply with such standards, which is generally consistent with required adoption dates of private companies.
The Company considers the applicability and impact of all ASUs issued by the FASB. All other ASUs issued subsequent to the filing of the Company’s Annual Report were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s financial position or results of operations.
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3. Restricted Cash
The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the condensed statement of cash flows:
| | March 31, | | December 31, | | ||
(in thousands) |
| 2022 |
| 2021 |
| ||
Cash and cash equivalents | | $ | | | $ | | |
Restricted cash | |
| | |
| | |
Total | | $ | | | $ | | |
4. Marketable Securities
Marketable securities consist of the following:
| | March 31, 2022 | ||||||||||
| | | | | Gross | | Gross | | | | ||
| | Amortized | | Unrealized | | Unrealized | | Estimated | ||||
(in thousands) |
| Cost |
| Gain |
| Loss |
| Fair Value | ||||
Corporate bonds | | $ | | | $ | | | $ | ( | | $ | |
Total | | $ | | | $ | | | $ | ( | | $ | |
| | December 31, 2021 | ||||||||||
| | | | | Gross | | Gross | | | | ||
| | Amortized | | Unrealized | | Unrealized | | Estimated | ||||
(in thousands) |
| Cost |
| Gain |
| Loss |
| Fair Value | ||||
Corporate bonds | | $ | | | $ | | | $ | ( | | $ | |
Total | | $ | | | $ | | | $ | ( | | $ | |
The Company uses the specific identification method when calculating realized gains and losses. For the three months ended March 31, 2022 and 2021, the Company recorded $
The Company reviewed all investments which were in a loss position at the respective balance sheet dates, as well as the remainder of the portfolio. As of March 31, 2022, the Company had investments with a total fair market value of $
7
The following table summarizes maturities of the Company’s investments available-for-sale as of March 31, 2022:
| | | | | | |
| | March 31, 2022 | ||||
| | | | | Fair | |
(in thousands) |
| Cost |
| Value | ||
Maturities: | | | | | | |
Within 1 year | | $ | | | $ | |
Between 1 to 2 years | |
| | |
| |
Total investments available for sale | | $ | | | $ | |
The Company has classified all its investments available-for-sale, including those with maturities beyond one year, as current assets on the accompanying condensed balance sheets based on the highly liquid nature of these investment securities and because these investment securities are considered available for use in current operations.
5. Fair Value Measurements
The Company has certain financial assets recorded at fair value, which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
Level 1—Quoted market prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.
Level 3—Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
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The following tables set forth the fair value of the Company’s financial assets by level within the fair value hierarchy as of March 31, 2022 and December 31, 2021:
| | March 31, 2022 | ||||||||||
| | | | | | | | Significant | | | | |
| | | | | Quoted Prices in | | Other | | | | ||
| | | | | Active Markets or | | Observable | | Significant | |||
| | | | | Identical Assets | | Inputs | | Unobservable | |||
(in thousands) |
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Cash equivalents: | | | | | | | | | | | | |
Money market funds | | $ | | | $ | | | $ | — | | $ | — |
Marketable securities: | | | | | | | | | | | | |
Corporate bonds | | | | | | — | | | | | | — |
Total | | $ | | | $ | | | $ | | | $ | — |
| | December 31, 2021 | ||||||||||
| | | | | | | | Significant | | | | |
| | | | | Quoted Prices in | | Other | | | | ||
| | | | | Active Markets or | | Observable | | Significant | |||
| | | | | Identical Assets | | Inputs | | Unobservable | |||
(in thousands) |
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Cash equivalents: | | | | | | | | | | | | |
Money market funds | | $ | | | $ | | | $ | — | | $ | — |
Marketable securities: | | | | | | | | | | | | |
Corporate bonds | | | | | | — | | | | | | — |
Total | | $ | | | $ | | | $ | | | $ | — |
The Company did
6. Stock-Based Compensation
Employee Equity Plans
The NextCure, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”) became effective on May 8, 2019, the date on which the Company’s Registration Statement on Form S-1 filed in connection with the IPO was declared effective (the “Effective Date”). The Company’s board of directors (the “Board”) determined not to make additional awards under the 2015 Plan following the effectiveness of the 2019 Plan. The 2019 Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards to the Company’s officers, employees, non-employee directors and other key persons (including consultants).
The number of shares reserved for issuance under the 2019 Plan automatically increase each January 1st during the term of the 2019 Plan by
As of March 31, 2022,
Stock options granted under the 2015 Plan and 2019 Plan (together, the “Plans”) to employees generally vest over
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A summary of stock option activity for awards under the Plans is presented below:
| | Options Outstanding and Exercisable | ||||||||
| | | | | | | Weighted | | | |
| | | | Weighted | | Average | | Aggregate | ||
| | | | Average | | Remaining | | Intrinsic | ||
| | Number of | | Exercise | | Contractual | | Value(1) | ||
|
| Shares |
| Price |
| Life (Years) |
| (in thousands) | ||
Outstanding as of December 31, 2021 | | | | $ | | | | $ | | |
Granted |
| | | $ | |
| — | |
| — |
Exercised | | ( | | $ | | | — | | | — |
Forfeitures | | ( | | $ | | | — | | | — |
Outstanding as of March 31, 2022 |
| | | $ | |
| | $ | | |
Exercisable as of March 31, 2022 |
| | | $ | |
| | $ | | |
| (1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at March 31, 2022 and December 31, 2021. |
The weighted average grant date fair value of stock options granted to employees for the three months ended March 31, 2022 was $
The aggregate grant date fair value of stock options vested during the three months ended March 31, 2022 and 2021 was approximately $
Stock-based compensation expense was classified on the statements of operations as follows for the three months ended March 31, 2022 and 2021:
| | Three Months Ended | | ||||
| | March 31, | | ||||
(in thousands) |
| 2022 |
| 2021 | | ||
Research and development | | $ | | | $ | | |
General and administrative | |
| | |
| | |
Total stock-based compensation expense | | $ | | | $ | | |
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the following table for options issued during the period indicated:
| | | | | | | |
| | Three Months Ended | | ||||
| | March 31, | | ||||
|
| 2022 |
| 2021 | | ||
Expected term |
| years | | | years | | |
Expected volatility |
| | % | | | % | |
Risk free interest rate |
| % | | % | | ||
Expected dividend yield |
| — | % | | — | % | |
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Employee Stock Purchase Plan
The NextCure, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) was approved in May 2019 and provides for certain employees of the Company to purchase shares of Company stock at a discounted price. As of March 31, 2022,
7. Net Loss Per Share Attributable to Common Stockholders
Loss per share
The computation of basic loss per share is based on the weighted-average number of common shares outstanding, without consideration for dilutive common stock equivalents. The computation of diluted loss per share is based on the weighted-average number of common shares outstanding and dilutive potential common shares, which include shares that may be issued under the stock option plan, as determined using the treasury stock method.
The computation for basic and diluted loss per share were as follows (in thousands, except share and per share data):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Net loss (Numerator): |
| |
| | |
|
Net loss - basic and diluted | | $ | ( | | $ | ( |
Shares (Denominator): | |
|
| |
|
|
Weighted-average shares outstanding - basic and diluted | |
| | |
| |
Loss per share - basic and diluted | | ( | | ( | ||
For the three months ended March 31, 2022 and 2021, all shares of options to purchase shares of the Company’s common stock were excluded from the computation of diluted net loss per share as the effect would have been anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders for the period indicated because including them would have had an anti-dilutive effect:
| | March 31, | |||
|
| 2022 |
| 2021 | |
Outstanding options to purchase common stock |
| | | | |
Total |
| | | | |
8. Income Taxes
The Company did
The Company has evaluated the positive and negative evidence involving its ability to realize its deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack
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of any commercially ready products. It has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period.
Under the provisions of Sections 382 and 383 of the Internal Revenue Code (“IRC”), certain substantial changes in the Company’s ownership may have limited, or may limit in the future, the amount of net operating loss and research and development credit carryforwards that can be used to reduce future income taxes. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of losses and credits attributable to periods before the change and could result in a reduction in the total losses and credits available.
9. Commitments and Contingencies
Legal Proceedings
On September 21, 2020, a putative stockholder class action was filed in the U.S. District Court for the Southern District of New York styled Ye Zhou v. NextCure, Inc., et. al., Case 1:20-cv-0772 (S.D.N.Y.) (the “Ye Zhou action”). On February 26, 2021, the Lead Plaintiff filed a consolidated amended complaint that asserts claims against us, certain of our officers and members of our board of directors, and the underwriters in our May 2019 initial public offering and November 2019 underwritten secondary public offering. The complaint alleges that the defendants violated provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended, with respect to statements made regarding our lead product candidate, NC318, and the FIND-IO platform. The complaint seeks unspecified damages on behalf of a purported class of purchasers of our securities between May 8, 2019 and July 14, 2020. Defendants filed a motion to dismiss the consolidated amended complaint on April 27, 2021, and discovery is stayed pending resolution of that motion.
On March 24, 2021, a purported shareholder derivative lawsuit was filed in the U.S. District Court for the District of Maryland, Southern Division, styled Zach Liu v. Richman et. al., Case:21-cv-00754 (the “Liu action”), alleging breaches of fiduciary duty by officers and/or directors, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of the Exchange Act and the Securities Act of 1933. The Complaint seeks unspecified damages, attorneys’ fees and costs, declaratory relief, corporate governance changes, and restitution. On May 17, 2021, the Court granted the parties’ joint motion to stay the derivative lawsuit pending resolution of the defendants’ motion to dismiss filed in respect of the Ye Zhou action.
On December 14, 2021, a purported misappropriation of certain trade secrets lawsuit was filed in Federal District Court for the District of Delaware, styled Immunaccel, LLC v. NextCure, Inc., Case No. 1:21-cv-01755-UNA (the “Immunaccel action”). The lawsuit alleges that the Company misappropriated certain trade secrets belonging to Immunaccel related to a drug discovery and screening platform named IMMUNE 3D. The complaint alleges two causes of action, one under the Delaware Uniform Trade Secrets Act and another under the Federal Defend Trade Secrets Act, and seeks unspecified monetary damages, a permanent injunction and other miscellaneous relief. The Company filed a motion to dismiss the complaint on April 22, 2022.
The Company intends to vigorously defend the Ye Zhou, Liu and Immunaccel actions. Based on the Company’s assessment of the facts underlying these claims, the uncertainty of litigation, and the preliminary stage of these cases, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Quarterly Report and the audited financial information and related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or our “2021 Annual Report”. Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “should,” “due,” “estimate,” “expect,” “intend,” “hope,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “target,” “towards,” “forward,” “later,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or similar language. Forward-looking statements include, but are not limited to, statements about:
| ● | our expectations regarding the timing, progress and results of preclinical studies and clinical trials for NC318, NC410, NC762, NC525 and any other product candidates we develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs; |
| ● | the impact of the COVID-19 pandemic (including the emergence of variant strains) on the initiation, progress or expected timing of our clinical trials and the timing of related data, our efforts to adjust trial-related activities to address the impact of the COVID-19 pandemic, and other future impacts of the COVID-19 pandemic on the economy, our industry and our financial condition and results of operations; |
| ● | the timing or likelihood of regulatory filings for NC318, NC410, NC762, NC525 and any other product candidates we develop and our ability to obtain and maintain regulatory approvals for such product candidates for any indication; |
| ● | the identification, analysis and use of biomarkers and biomarker data; |
| ● | development of patient selection assays and companion or complementary diagnostics for NC318, NC410, NC762, NC525 or any other product candidates we develop; |
| ● | our manufacturing capabilities and strategy, including the scalability of our manufacturing methods and processes; |
| ● | our expectations regarding the potential benefits, activity, effectiveness and safety of NC318, NC410, NC762, NC525 and any other product candidates we develop; |
| ● | our intentions and ability to successfully commercialize our product candidates; |
| ● | our expectations regarding the nature of the biological pathways we are targeting; |
| ● | our expectations for our FIND-IO platform, including our ability to discover and advance product candidates using our FIND-IO platform; |
| ● | the potential benefits of and our ability to maintain our relationship and collaboration with Yale University; |
| ● | our estimates regarding our expenses, future revenues, capital requirements, our needs for or ability to obtain additional financing and the period over which we expect our current cash, cash equivalents and marketable securities to be sufficient to fund our operations; |
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| ● | our intended reliance on and the performance of third parties, including collaborators, contract research organizations and third-party manufacturers; |
| ● | our ability to protect and enforce our intellectual property protection and the scope and duration of such protection; |
| ● | any failure of our information technology systems such as security breaches, loss of data and other disruptions; |
| ● | developments and projections relating to our competitors and our industry, including competing therapies; and |
| ● | the impact of current and future laws and regulations. |
Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those projected in any forward-looking statement. Such risks and uncertainties include, among others: the impacts of the COVID-19 pandemic (including the emergence of variant strains) on our business, including our clinical trials, third parties on which we rely and our operations; positive results in preclinical studies may not be predictive of the results of clinical trials; our limited operating history and no products approved for commercial sale; our history of significant losses; our need to obtain additional financing; risks related to clinical development, marketing approval and commercialization; the unproven approach to the discovery and development of product candidates based on our FIND-IO platform; and dependence on key personnel. More detailed information on these and additional factors that could affect our actual results are described under the heading “Risk Factors” in our 2021 Annual Report and in our other filings with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date of this report, and we assume no obligation to update any forward-looking statements, even if expectations change.
Overview
We are a clinical-stage biopharmaceutical company committed to discovering and developing novel, first-in-class immunomedicines to treat cancer and other immune-related diseases by restoring normal immune function. We view the immune system holistically and, rather than target one specific immune cell type, we focus on understanding biological pathways, the interactions of cells and the role each interaction plays in an immune response. Through our proprietary Functional, Integrated, NextCure Discovery in Immuno-Oncology, or “FIND-IO”, platform, we study various immune cells to discover and understand targets and structural components of immune cells and their functional impact in order to develop immunomedicines. We are focused on patients who do not respond to current therapies, patients whose cancer progresses despite treatment and patients with cancer types not adequately addressed by available therapies. We are committed to discovering and developing first-in-class immunomedicines, which are immunomedicines that use new or unique mechanisms of action to treat a medical condition, for these patients.
Our lead product candidate NC318 is a first-in-class immunomedicine against a novel immunomodulatory receptor called Siglec-15, or “S15”. In October 2018, we initiated a Phase 1/2 clinical trial of NC318 in patients with advanced or metastatic solid tumors. We completed enrollment of the Phase 1 portion of this trial in August 2019, and preliminary data from the Phase 1 portion were presented at the Society for Immunotherapy of Cancer annual meeting, or the “SITC Meeting”, in November 2019.
We began enrolling patients in the Phase 2 portion of the Phase 1/2 clinical trial of NC318 trial in October 2019. In this portion, we planned to enroll up to 100 patients with tumor types that have been shown to have elevated S15 expression, including non-small cell lung cancer, or “NSCLC”, ovarian cancer, head and neck squamous cell carcinoma, or “HNSCC”, and triple-negative breast cancer. We provided data updates from our ongoing monotherapy trial of NC318 at the SITC Meetings in December 2020 and November 2021. Based on combined Phase 1 and Phase 2 data from the NC318 study, NC318 continued to show early evidence of possible clinical benefit in patients with HNSCC, lung and breast cancer and other advanced/metastatic solid tumors, with dosing once every two weeks during dose escalation and a dose of 400 mg selected for the Phase 2 studies. NC318 continued to be well-tolerated in the Phase 2 portion of the trial, with primarily mild or moderate treatment-related adverse events, or “TRAE”. We have modified the Phase 2 portion of the trial for S15 selection, whereby clinical sites can select for S15-positive patients through screening biopsies in a Clinical
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Laboratory Improvement Amendments (“CLIA”)-certified laboratory. In the second quarter of 2021, we revised the dosing regimen to 800 mg weekly to increase overall drug exposure to NC318. We expect to provide further data from the Phase 2 portion of this trial in the fourth quarter of 2022.
In April 2021, Yale University commenced a Phase 2 investigator-initiated clinical trial of NC318 in combination with pembrolizumab in patients with NSCLC. Initial data are anticipated in the second half of 2022.
Our second product candidate, NC410, is a novel immunomedicine designed to block immune suppression mediated by an immune modulator called Leukocyte-Associated Immunoglobulin-like Receptor, or “LAIR”, -1. In June 2020, we initiated a Phase 1/2 clinical trial of NC410 in patients with advanced or metastatic solid tumors after a temporary delay due to the COVID-19 pandemic. The Phase 1 dose-escalation portion of this open-label trial is designed to evaluate the safety and tolerability of NC410 in patients with advanced or metastatic solid tumors and determine its pharmacologically active and/or maximum tolerated dose. After a recommended dose for the Phase 2 portion of the trial is determined, the efficacy of NC410 will be evaluated in select tumor types. In May 2021, at the 2021 Virtual American Society of Clinical Oncology annual meeting, or the “ASCO Meeting”, we reported preclinical data demonstrating that NC410 promoted T-cell mediated anti-tumor immunity, enhanced infiltration and increased localized activity of T-cells in the tumor microenvironment. We provided a data update from the Phase 1 portion of this trial at the SITC Meeting in November 2021. Interim data presented from the Phase 1 dose-escalation study show that NC410 appears to be safe and well-tolerated in patients with advanced tumors and show evidence of immune modulation. Safety, tolerability, efficacy and biomarker analyses are ongoing in higher-dose cohort patients. We expect to provide further data from the Phase 1 portion of this trial in the second half of 2022
Our third product candidate, NC762, is an immunomedicine targeting an immunomodulatory molecule called human B7 homolog 4 protein, or “B7-H4”. In July 2021, we initiated a Phase 1/2 clinical trial of NC762 in patients with lung cancer, breast cancer, ovarian cancer, or potentially other tumor types. The Phase 1 dose-escalation portion of this open-label trial is being designed to evaluate the safety and tolerability of NC762 and determine its pharmacologically active and/or maximum tolerated dose. After a recommended dose for the Phase 2 portion of the trial is determined, the efficacy of NC762 will be evaluated in select tumor types. We expect to announce initial data from the Phase 1 portion of this trial in the second half of 2022.
Our fourth product candidate, NC525, is a novel LAIR-1 antibody that selectively targets Acute Myeloid Leukemia, or “AML”, blast cells and leukemic stem cells, or “LSCs”. Preclinical data show that NC525 kills AML blast cells and LSCs while sparing hematopoietic stem and progenitor cells, or “HSPCs”. Preclinical data were presented at the American Society for Hematology annual meeting in December 2021. The data showed that NC525 (i) inhibits colony formation of AML LSCs in vitro, (ii) inhibits AML growth in the MV4-11 derived xenografts animal model in vivo and (iii) restricts AML progression in patient-derived xenografts in vivo. An IND submission is planned for the fourth quarter of 2022.
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic. In order to mitigate the spread of COVID-19, governments have imposed unprecedented restrictions on business operations, travel, and gatherings, resulting in a global economic downturn and other adverse economic and societal impacts. The COVID-19 pandemic has also overwhelmed or otherwise led to changes in the operations of many healthcare facilities, including clinical trial sites. However, our laboratories have continued operations throughout the pandemic mostly without interruption.
The impact of the COVID-19 pandemic (including the impact of emerging variant strains of the COVID-19 virus) on our business and financial performance is uncertain and depends on various factors, including the scope and duration of the pandemic, the efficacy and global distribution of vaccines, government restrictions and other actions, including relief measures, implemented to address the impact of the pandemic, and resulting impacts on the financial markets and overall economy. The imposition of “lockdown,” “social distancing” and “shelter in place” directives and other restrictions on business operations, travel and gatherings by state and federal governments in the United States as well as governments in other regions of the world in response to the COVID-19 pandemic initially placed significant
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strain on our clinical trial sites, raised concerns around monitoring patient safety, and slowed patient enrollment and caused delays in the Company’s clinical trials and issuance of results. Any rise of COVID-19 infection rates, especially in the United States, could continue to negatively affect enrollment going forward. We continue to closely monitor the COVID-19 situation and any potential impact to our planned activities.
Financial Overview
Since commencing operations in 2015, we have devoted substantially all our efforts and financial resources to organizing and staffing our company, identifying business development opportunities, raising capital, securing intellectual property rights related to our product candidates, building and optimizing our manufacturing capabilities, and conducting discovery, research and development activities for our product candidates, discovery programs and FIND-IO platform.
We have not generated any revenue from product sales and only limited revenue from other sources. As a result, with the exception of the three months ended March 31, 2020, for which we reported a profit due to recognition of deferred revenue in connection with the termination of our former research and development collaboration agreement with Eli Lilly and Company, or “Lilly”, we have never been profitable and have incurred net losses since the commencement of our operations. Our net loss for the three months ended March 31, 2022 and 2021, was $20.6 million and $16.5 million, respectively. As of March 31, 2022, we had an accumulated deficit of $207.6 million, primarily as a result of research and development and general and administrative expenses. We do not expect to generate product revenue unless and until we obtain marketing approval and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits.
We have funded our operations to date primarily with proceeds from public offerings of our common stock, with private placements of our preferred stock and with upfront fees received under our former research and development collaboration agreement with Lilly, or the “Lilly Agreement,” which was terminated in March 2020. From our inception through March 31, 2022, we received gross proceeds of $164.4 million through private placements of preferred stock.
In November 2018, we entered into the Lilly Agreement to use our FIND-IO platform to identify novel oncology targets for additional collaborative research and drug discovery by us and Lilly. We received an upfront payment of $25.0 million in cash and an equity investment of $15.0 million from Lilly upon entering into the Lilly Agreement. We were also eligible for quarterly research and development support payments during a portion of the term of the Lilly Agreement. Effective March 3, 2020, Lilly terminated the Lilly Agreement without cause.
On May 13, 2019, we closed our initial public offering, or “IPO”, in which we sold 5,750,000 shares of common stock at a public offering price of $15.00 per share, for aggregate gross proceeds of $86.3 million. The net offering proceeds to us were approximately $77.0 million after deducting underwriting discounts and commissions of $6.0 million and offering expenses of $3.4 million.
On November 19, 2019, we completed an underwritten public offering, in which we issued and sold 4,077,192 shares of common stock at a public offering price of $36.75 per share. On December 2, 2019, the underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at the public offering price of $36.75, for total net proceeds to us of approximately $160.9 million, after deducting underwriting discounts and commissions of approximately $10.3 million and offering expenses of approximately $1.0 million.
As of March 31, 2022, we had cash, cash equivalents and marketable securities, excluding restricted cash, of $201.3 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the first quarter of 2024. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect.
We expect to incur substantial expenditures in the foreseeable future as we advance our product candidates through clinical development, the regulatory approval process and, if approved, commercialization, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 1/2 clinical trial and planned Phase 2 clinical trial of NC318, our ongoing Phase 1/2 clinical trial of NC410, and our ongoing Phase 1/2 clinical
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trial for NC762, and other research and development activities. We expect to continue to incur significantly increased costs as a result of operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.
We will need substantial additional funding to support our continuing operations and to pursue our development strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of public and private equity offerings, debt financings, marketing and distribution arrangements, other collaborations, strategic alliances, and licensing arrangements. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials, or other research and development activities or one or more of our development programs.
Components of Our Results of Operations
Revenue
Through March 31, 2022, we have not generated any revenue from product sales.
For additional information about our revenue recognition policy, see Note 2 of the Notes to Financial Statements in our 2021 Annual Report.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our discovery efforts, research activities, development and testing of our product candidates as well as for clinical trials, including:
| ● | salaries, benefits, and other related costs, including stock-based compensation, for personnel engaged in research and development functions; |
| ● | expenses incurred under agreements with third parties, including agreements with third parties that conduct research, preclinical activities or clinical trials on our behalf, such as our license agreement with Yale University, or “Yale”; |
| ● | costs of outside consultants, including their fees, stock-based compensation and related travel expenses; |
| ● | the costs of laboratory supplies and acquiring, developing, and manufacturing preclinical study and clinical trial materials; and |
| ● | facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. |
We expense research and development costs as incurred. Our expenses related to clinical trials are based on actual costs incurred and estimates of other incurred costs. These estimated costs are based on several factors, including patient enrollment and related expenses at clinical investigator sites, contract services received, consulting agreement costs and efforts expended under contracts with research institutions and third-party contract research organizations that conduct and manage clinical trials on our behalf. We generally accrue estimated costs related to clinical trials based on contracted amounts applied to the level of patient enrollment and other activity according to the protocol. If future timelines or contracts are modified based on changes in the clinical trial protocol or scope of work to be performed, we would modify our estimates of accrued expenses accordingly on a prospective basis. Historically, any such modifications have not been material.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we advance our product
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candidates through development and expand the number of trials we are conducting and the patients enrolled in those trials, as we utilize our current good manufacturing practice, or “cGMP”, manufacturing capacity, including to provide drug supply of NC318, NC410 and NC762 for future clinical trials, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs.
We cannot determine with certainty the duration and costs of future clinical trials of NC318, NC410, NC762 or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we may obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of NC318, NC410, NC762, NC525 and any other product candidate we may develop will depend on a variety of factors, including:
| ● | the scope, progress, results, and costs of clinical trials of NC318 and NC410 and NC762, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct; |
| ● | the impact of the COVID-19 pandemic, including delays and slowdowns as a result of strain on our clinical trial sites and concerns about patient safety; |
| ● | uncertainties in selection of indications, clinical trial design and patient enrollment rates; |
| ● | the probability of success for our product candidates, including safety and efficacy, early clinical data, competition, ease, and ability of manufacturing and commercial viability; |
| ● | significant and changing government regulation and regulatory guidance; |
| ● | the timing and receipt of any development or marketing approvals; and |
| ● | the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. |
A change in the outcome of any of these variables with respect to the development of a product candidate could lead to a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time to complete clinical development for any such product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel related costs, including payroll and stock-based compensation, for personnel in executive, finance, human resources, business and corporate development and other administrative functions, professional fees for legal, intellectual property, consulting, and accounting services, rent and other facility-related costs, depreciation and other general operating expenses not otherwise classified as research and development expenses. General and administrative expenses also include all patent-related costs incurred in connection with filing and prosecuting patent applications, which are expensed as incurred.
We anticipate that our general and administrative expenses will increase substantially during the next few years as a result of staff expansion and additional occupancy costs, higher legal and accounting fees, investor relations costs, higher insurance premiums and other compliance costs.
Other Income, Net
Other income, net consists primarily of interest income earned on marketable securities.
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Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the periods indicated (in thousands):
| | Three Months Ended | | | | | ||||
| | March 31, | | | | | ||||
|
| 2022 |
| 2021 |
| Change | | |||
Operating expenses: |
| |
|
| |
|
| |
|
|
Research and development | | $ | 15,024 | | $ | 12,386 | | $ | 2,638 | |
General and administrative | |
| 5,747 | |
| 4,848 | |
| 899 | |
Loss from operations | |
| (20,771) | |
| (17,234) | |
| (3,537) | |
Other income, net | |
| 169 | |
| 701 | |
| (532) | |
Net loss | | $ | (20,602) | | $ | (16,533) | | $ | (4,069) | |
Research and Development Expenses
The following table summarizes our research and development expenses by product candidate for the periods indicated (in thousands):
| | Three Months Ended | | | | ||||
| | March 31, | | | | ||||
|
| 2022 |
| 2021 |
| Change | |||
External research and development expenses: | | | | | | | | | |
NC318 |
| $ | 1,358 | | $ | 1,441 | | $ | (83) |
NC410 | | | 1,772 | | | 1,228 | | | 544 |
NC762 | | | 985 | | | 375 | | | 610 |
Programs in discovery and preclinical development | | | 5,068 | | | 3,501 | | | 1,567 |
Total external research and development expenses | | | 9,183 | | | 6,545 | | | 2,638 |
Total internal research and development expenses | | | 5,841 | | | 5,841 | | | — |
Total research and development expenses |
| $ | 15,024 | | $ | 12,386 | | $ | 2,638 |
We do not allocate personnel-related costs, including stock-based compensation costs, or other indirect costs to specific programs, as they are deployed across multiple projects under development and discovery and, as such are separately classified as internal research and development expenses in the table above.
Research and development expenses for the three months ended March 31, 2022 increased by $2.6 million to $15.0 million compared to $12.4 million for the three months ended March 31, 2021. The increase was driven by $1.6 million in clinical-related costs and $1.6 million in lab-related costs, partially offset by other reduced spending.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2022 increased by $0.9 million to $5.8 million as compared to $4.9 million for the three months ended March 31, 2021. The increase was primarily due to personnel-related costs.
Other Income, Net
Other income, net for the three months ended March 31, 2022 decreased by $0.5 million to $0.2 million from $0.7 million for the three months ended March 31, 2021 due to lower investment balances and a reduction in interest rates.
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Liquidity and Capital Resources
We have financed our operations primarily with proceeds from public offerings of our common stock, private placements of our preferred stock and upfront fees received under the Lilly Agreement. On May 13, 2019, we closed our IPO, in which we sold 5,750,000 shares of common stock at a public offering price of $15.00 per share, for net offering proceeds to us of approximately $77.0 million after deducting underwriting discounts and commissions and offering expenses. On November 19, 2019, we completed an underwritten public offering in which we sold 4,077,192 shares of common stock at a public offering price of $36.75 per share. On December 2, 2019, the underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at a public offering price of $36.75. Net offering proceeds to us were approximately $160.9 million after deducting underwriting discounts and commissions and offering expenses. Since inception, we have received aggregate gross proceeds of $164.4 million from the sale and issuance of shares of our preferred stock. In addition, in November 2018, we received an upfront payment of $25.0 million in cash from Lilly pursuant to the Lilly Agreement. Our cash and cash equivalents are held in money market funds.
On May 6, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with SVB Leerink LLC (the “Agent”), pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $75 million of its common stock through the Agent in negotiated transactions that are deemed to be an “at the market offering.” The Agent will be entitled to compensation equal to 3.0% of the gross proceeds from the sale of all shares of common stock sold through it as Agent under the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. We have not yet sold any shares of our common stock pursuant to the Sales Agreement.
As of March 31, 2022, we had cash, cash equivalents, and marketable securities, excluding restricted cash, of $201.3 million. We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our planned operations into the first quarter of 2024.
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through sale of equity, debt financings, strategic alliances, and licensing arrangements. Adequate additional funding may not be available to us on acceptable terms or at all, including as a result of the impact of the COVID-19 pandemic. If we fail to raise capital or enter into such arrangements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates or delay our efforts to expand our pipeline of product candidates.
Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Net cash (used in) provided by: |
| |
|
| |
|
Operating activities | | $ | (15,447) | | $ | (13,911) |
Investing activities | |
| 13,702 | |
| 17,600 |
Financing activities | |
| 60 | |
| (354) |
Net (decrease) increase in cash, cash equivalents, and restricted cash | | $ | (1,685) | | $ | 3,335 |
Net Cash Used in Operating Activities
Net cash used in operating activities was $15.5 million for the three months ended March 31, 2022, which was primarily due to our net loss of $20.6 million. Net cash used in operating activities was $13.9 million for the three months ended March 31, 2021, which was primarily due to our net loss of $16.5 million.
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Net Cash Provided by Investing Activities
Net cash provided by investing activities for the three months ended March 31, 2022 was $13.7 million, which was primarily due to net proceeds from marketable securities of $14.0 million, partially offset by purchases of property and equipment of $0.3 million. Net cash provided by investing activities for the three months ended March 31, 2021 was $17.6 million, which was primarily due to net proceeds from marketable securities of $18.4 million, partially offset by purchases of property and equipment of $0.8 million.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities was $60 thousand for the three months ended March 31, 2022, which was due to the exercise of stock options. Net cash used in financing activities was $0.4 million for the three months ended March 31, 2021, which consisted primarily of payments related to the Term Loan.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations during the three months ended March 31, 2022, as compared to those disclosed in our 2021 Annual Report.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or “GAAP”. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. The most significant assumptions used in the financial statements are the underlying assumptions used in revenue recognition and valuing share-based compensation, including the fair value of our common stock in periods before our IPO. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.
During the three months ended March 31, 2022, there were no material changes to our critical accounting policies reported in our 2021 Annual Report.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements that may impact our financial position and results of operations.
Emerging Growth Company Status
As an emerging growth company, or “EGC”, under the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act”, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information requested by this Item.
Item 4. Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”, as of March 31, 2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth under the heading “Legal Proceedings” in Note 10, Commitments and Contingencies, in Notes to Condensed Financial Statements in Item 1 of Part I of this Quarterly Report, is incorporated herein by reference. In addition, from time to time, we are involved in litigation or other legal proceedings as part of our ordinary course of business. In the opinion of our management, the ultimate disposition of these legal proceedings in the ordinary course of business is not likely to have a material adverse effect on our business.
Item 1A. Risk Factors.
There have been no material updates to the risk factors set forth in our 2021 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The exhibits filed or furnished as part of this Quarterly Report are set forth on the Exhibit Index, below.
Exhibit No. |
| Exhibit Description |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32.1 | | |
| | |
EX-101.INS | | Inline XBRL Instance Document |
| | |
EX-101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
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EX-101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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EX-101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
EX-101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
EX-101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | | Coverage Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEXTCURE, INC. | |
| ||
Date: May 5, 2022 | By: | /s/ Michael Richman |
| Name: | Michael Richman |
| President and Chief Executive Officer | |
| | |
Date: May 5, 2022 | By: | /s/ Steven P. Cobourn |
| Name: | Steven P. Cobourn |
| Chief Financial Officer | |
25
EXHIBIT 31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Richman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NextCure, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2022 | | |
| | |
| | |
/s/ Michael Richman | | |
Name: | Michael Richman | |
Title: | President and Chief Executive Officer | |
EXHIBIT 31.2
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Steven P. Cobourn, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NextCure, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2022 | | |
| | |
| | |
/s/ Steven P. Cobourn | | |
Name: | Steven P. Cobourn | |
Title: | Chief Financial Officer | |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of NextCure, Inc. (the “Company”) for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge, on the date hereof:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| | |
Dated: May 5, 2022 | | |
| | |
| /s/ Michael Richman | |
| Name: | Michael Richman |
| Title: | President and Chief Executive Officer |
| | |
| | |
| | |
Dated: May 5, 2022 | | |
| | |
| /s/ Steven P. Cobourn | |
| Name: | Steven P. Cobourn |
| Title: | Chief Financial Officer |
| | |