nxtc_Current_Folio_10Q

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2020

 

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: 001-38905


NextCure, Inc.

(Exact name of registrant as specified in its charter)


Delaware

04-5231247

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

9000 Virginia Manor Road, Suite 200
Beltsville, Maryland

20705

(Address of principal executive offices)

(Zip Code)

 

(240) 399-4900

(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:

Common Stock, $0.001 par value per share

NXTC

Nasdaq Global Select Market

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐

Non-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 ☐ No ☒

 

As of May 6, 2020,  the registrant had 27,517,371 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 

 

 

 

Table of Contents

 

NextCure, Inc.

Form 10-Q

For the Quarter Ended March 31, 2020

 

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION 

1

Item 1. 

Financial Statements

1

 

Condensed Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019

1

 

Unaudited Condensed Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019

2

 

Unaudited Condensed Statements of Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019

3

 

Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

4

 

Notes to Unaudited Condensed Financial Statements

5

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

21

Item 4. 

Controls and Procedures

21

Part II. OTHER INFORMATION 

22

Item 1. 

Legal Proceedings

22

Item 1A. 

Risk Factors

22

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds 

23

Item 3. 

Defaults Upon Senior Securities

23

Item 4. 

Mine Safety Disclosures

23

Item 5. 

Other Information

23

Item 6. 

Exhibits

23

SIGNATURES 

25

 

 

 

 

 

 

 

 

 

 

 

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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, 

 

    

2020

    

2019

Assets

 

 

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

28,907

 

$

34,091

Marketable securities

 

 

293,191

 

 

300,514

Restricted cash

 

 

1,706

 

 

1,706

Prepaid expenses and other current assets

 

 

2,860

 

 

3,684

Total current assets

 

 

326,664

 

 

339,995

Property and equipment, net

 

 

12,784

 

 

12,090

Other assets

 

 

4,024

 

 

4,083

Total assets

 

$

343,472

 

$

356,168

Liabilities, Preferred Stock and Stockholders’ Equity

 

 

  

 

 

  

Current liabilities:

 

 

  

 

 

  

Accounts payable

 

$

2,263

 

$

1,861

Accrued liabilities

 

 

4,059

 

 

4,871

Deferred rent, current portion

 

 

163

 

 

215

Term loan, current portion

 

 

1,667

 

 

1,667

Deferred revenue, current portion

 

 

 —

 

 

6,428

Total current liabilities

 

 

8,152

 

 

15,042

Deferred rent, net of current portion

 

 

507

 

 

359

Term loan, net of current portion

 

 

3,056

 

 

3,333

Deferred revenue, net of current portion

 

 

 —

 

 

15,950

Total liabilities

 

 

11,715

 

 

34,684

Stockholders’ equity:

 

 

  

 

 

  

Preferred stock, par value of $0.001 per share; 10,000,000 shares authorized at March 31, 2020 and December 31, 2019, respectively. No shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

 —

 

 

 —

Common stock, par value of $0.001 per share; 100,000,000 shares authorized at March 31, 2020 and December 31, 2019, respectively, 27,516,402 and 27,499,260 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

28

 

 

27

Additional paid-in capital

 

 

403,573

 

 

402,529

Accumulated other comprehensive loss

 

 

(543)

 

 

(38)

Accumulated deficit

 

 

(71,301)

 

 

(81,034)

Total stockholders’ equity

 

 

331,757

 

 

321,484

Total liabilities, preferred stock and stockholders’ equity

 

$

343,472

 

$

356,168

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1

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NEXTCURE, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

(unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

    

2020

    

2019

 

Revenue:

 

 

 

 

 

 

 

Revenue from research and development arrangement

 

$

22,378

 

$

1,357

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

10,578

 

 

6,513

 

General and administrative

 

 

3,588

 

 

1,659

 

Total operating expenses

 

 

14,166

 

 

8,172

 

Income (loss) from operations

 

 

8,212

 

 

(6,815)

 

Other income, net

 

 

1,521

 

 

660

 

Net income (loss)

 

$

9,733

 

$

(6,155)

 

Earnings (loss) per share

 

 

 

 

 

 

 

Basic

 

$

0.35

 

$

(4.46)

 

Diluted

 

$

0.33

 

$

(4.46)

 

Shares used in the calculation of earnings (loss) per share

 

 

 

 

 

 

 

Basic

 

 

27,506,927

 

 

1,379,444

 

Diluted

 

 

29,348,615

 

 

1,379,444

 

Comprehensive income (loss):

 

 

 

 

 

 

 

Net income (loss)

 

$

9,733

 

$

(6,155)

 

Unrealized loss on marketable securities

 

 

(543)

 

 

 —

 

Comprehensive income (loss)

 

$

9,190

 

$

(6,155)

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2

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NEXTCURE, INC.

CONDENSED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)  

(unaudited, in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Series A

 

Series B

 

 

Common Stock

 

Paid-in

 

Accumulated Other

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Comprehensive Loss

    

Deficit

    

Equity

Balance as of December 31, 2019

 

 —

 

$

 —

 

 —

 

$

 —

 

 

27,499,260

 

$

27

 

$

402,529

 

$

(38)

 

$

(81,034)

 

$

321,484

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,008

 

 

 —

 

 

 —

 

 

1,008

Issuance of common stock

 

 —

 

 

 —

 

 —

 

 

 —

 

 

17,142

 

 

 1

 

 

36

 

 

 —

 

 

 —

 

 

37

Unrealized loss on marketable securities, net of tax $0

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(505)

 

 

 —

 

 

(505)

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

9,733

 

 

9,733

Balance as of March 31, 2020

 

 —

 

$

 —

 

 —

 

$

 —

 

 

27,516,402

 

$

28

 

$

403,573

 

$

(543)

 

$

(71,301)

 

$

331,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Series A

 

Series B

 

 

Common Stock

 

Paid-in

 

Accumulated Other

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

 

Comprehensive Loss

    

Deficit

    

Deficit

Balance as of December 31, 2018

 

68,181,819

 

$

71,000

 

56,828,851

 

$

91,223

 

 

1,374,812

 

$

 1

 

$

352

 

$

 —

 

$

(47,297)

 

$

(46,944)

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

383

 

 

 —

 

 

 —

 

 

383

Issuance of common stock

 

 —

 

 

 —

 

 —

 

 

 —

 

 

4,697

 

 

 —

 

 

 4

 

 

 —

 

 

 —

 

 

 4

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(6,155)

 

 

(6,155)

Balance as of March 31, 2019

 

68,181,819

 

$

71,000

 

56,828,851

 

$

91,223

 

 

1,379,509

 

$

 1

 

$

739

 

$

 —

 

$

(53,452)

 

$

(52,712)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3

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NEXTCURE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Cash flows from operating activities:

 

 

  

 

 

  

Net income (loss)

 

$

9,733

 

$

(6,155)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

  

 

 

  

Depreciation and amortization

 

 

751

 

 

563

Stock-based compensation

 

 

1,008

 

 

383

Changes in operating assets and liabilities:

 

 

  

 

 

  

Prepaid expenses and other assets

 

 

606

 

 

(897)

Accounts payable

 

 

402

 

 

455

Accrued liabilities

 

 

(812)

 

 

(565)

Deferred rent

 

 

96

 

 

(7)

Deferred revenue

 

 

(22,378)

 

 

(857)

Net cash used in operating activities

 

 

(10,594)

 

 

(7,080)

Cash flows from investing activities:

 

 

  

 

 

  

Maturities of  marketable securities

 

 

30,349

 

 

 —

Purchases of marketable securities

 

 

(23,531)

 

 

 —

Purchase of property and equipment

 

 

(1,445)

 

 

(935)

Net cash provided by (used in) investing activities

 

 

5,373

 

 

(935)

Cash flows from financing activities:

 

 

  

 

 

  

Proceeds from issuances of common stock

 

 

37

 

 

 4

Proceeds from the term loan

 

 

 —

 

 

4,649

Deferred financing costs

 

 

 —

 

 

(1,574)

Payments of the term loan

 

 

(277)

 

 

(109)

Net cash used in (provided by) financing activities

 

 

(240)

 

 

2,970

Net decrease in cash, cash equivalents and restricted cash

 

 

(5,461)

 

 

(5,045)

Cash, cash equivalents and restricted cash — beginning of period

 

 

39,130

 

 

135,633

Cash, cash equivalents and restricted cash — end of period

 

$

33,669

 

$

130,588

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

  

 

 

  

Cash paid for interest

 

$

35

 

$

23

Cash paid for income taxes

 

$

 —

 

$

 —

 

 

 

 

 

 

 

Supplemental disclosures of noncash investing and financing activities:

 

 

  

 

 

  

Purchase of property and equipment included in accrued liabilities

 

$

156

 

$

75

Deferred financing costs included in accrued liabilities

 

$

 —

 

$

290

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

4

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NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

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 of 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 2020, 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 (Note 6). The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.

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, 2019.

 

Basis of Presentation

The accompanying unaudited condensed financial statements include the accounts of NextCure, Inc. 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”).

Unaudited Financial Information

The unaudited condensed financial statements include the accounts of NextCure, Inc. In the opinion of management, the information furnished reflects certain adjustments, all of 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

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Table of Contents

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

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.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). The new guidance will require lessees to record most leases on their balance sheets and recognize the related expenses on their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for the Company for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, assuming the Company remains an emerging growth company. The Company continues to determine if it will elect to use the practical expedients permitted by the guidance and continues to gather data required to comply with the guidance. Based on the work completed to date, the Company is considering the implications of adopting the new standard, including the discount rate to be used in valuing new and existing leases and all applicable financial statement disclosures required by the new guidance. The Company is continuing to evaluate the effect of adoption and anticipates that it will result in the recognition of additional assets and corresponding liabilities related to the existing leases on its balance sheet. The Company is assessing potential impacts on its internal controls, business processes, and accounting policies related to both the implementation of, and ongoing compliance with, the new guidance.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 will require credit losses to be reported using an expected losses model rather than the incurred losses model that is currently used, and will require additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard will require allowances to be recorded instead of reducing the amortized cost of the investment. ASU 2016-13 will be effective for non-emerging growth companies for fiscal years beginning December 15, 2019 and interim periods within those fiscal years, and will be effective for the Company for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, assuming the Company remains an emerging growth company. Early adoption is permitted. The Company is currently evaluating the effects the adoption of ASU 2016-13 may have on its financial statements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-13, Fair Value Measurement—Disclosure Framework-Changes to the Disclosure Requirement for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in ASC 820, Fair Value Measurement, based on the concepts in the FASB Concepts Statement, including the consideration of costs and benefits. ASU 2018-13 is effective for all companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s financial statements.   

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NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

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.

3. Restricted Cash

The Company is required, as a condition of its $5.0 million term loan (the “ Term Loan”), to maintain cash collateral on deposit in a segregated money market bank account equal to the principal portion of the Term Loan, as determined on a quarterly basis. The bank may restrict withdrawals or transfers by or on behalf of the Company that would violate this requirement. The required Term Loan reserve totaled $4.7 million as of March 31, 2020. This amount is presented in part as restricted cash and in part as other assets on the accompanying balance sheet.

The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the statement of cash flows:

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

(in thousands)

    

2020

    

2019

Cash and cash equivalents

 

$

28,907

 

$

34,091

Restricted cash (including $3,056 and $3,333 in other assets as of March 31, 2020 and  December 31, 2019, respectively)

 

 

4,762

 

 

5,039

Total

 

$

33,669

 

$

39,130

 

 

4.  Marketable Securities

Marketable securities consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Estimated

(in thousands)

    

Cost

    

Gain

    

Loss

    

Fair Value

Agency bonds

 

$

35,643

 

$

157

 

$

 —

 

$

35,800

Corporate bonds

 

 

258,091

 

 

186

 

 

(886)

 

 

257,391

Total

 

$

293,734

 

$

343

 

$

(886)

 

$

293,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Estimated

(in thousands)

    

Cost

    

Gain

    

Loss

    

Fair Value

U.S. treasury securities

 

$

4,991

 

$

 —

 

$

 —

 

$

4,991

Agency bonds

 

 

24,437

 

 

15

 

 

(1)

 

 

24,451

Corporate bonds

 

 

271,124

 

 

103

 

 

(155)

 

 

271,072

Total

 

$

300,552

 

$

118

 

$

(156)

 

$

300,514

 

As of March 31, 2020, no marketable securities are considered to be other-than-temporarily impaired. The Company uses the specific identification method when calculating realized gains and losses. For the three months ended March 31, 2020, the Company recorded approximately $64,000 in realized gains on available-for-sale securities.

7

Table of Contents

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

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.

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, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

$

15,158

 

$

15,158

 

$

 —

 

$

 —

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency bonds

 

 

 

 

 

35,800

 

 

 —

 

 

35,800

 

 

 —

Corporate bonds

 

 

 

 

 

257,391

 

 

 —

 

 

257,391

 

 

 —

Total

 

 

 

 

$

308,349

 

$

15,158

 

$

293,191

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

$

19,341

 

$

19,341

 

$

 —

 

$

 —

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

 

 

 

 

4,991

 

 

 —

 

 

4,991

 

 

 —

Agency bonds

 

 

 

 

 

24,451

 

 

 —

 

 

24,451

 

 

 —

Corporate bonds

 

 

 

 

 

271,072

 

 

 —

 

 

271,072

 

 

 —

Total

 

 

 

 

$

319,855

 

$

19,341

 

$

300,514

 

$

 —

 

The Company did not transfer any assets measured at fair value on a recurring basis between levels during the three months ended March 31, 2020 and 2019, respectively.

8

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NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

6.  Agreement with Eli Lilly and Company 

On November 2, 2018, the Company entered into a multi-year research and development collaboration agreement (the “Lilly Agreement”) with Eli Lilly and Company (“Lilly”), pursuant to which the Company agreed to use its proprietary FIND-IO platform to identify novel oncology targets for additional collaborative research and drug discovery by the Company and Lilly. Effective March 3, 2020, Lilly, terminated the Lilly Agreement without cause. 

The Company recognized revenue under the Lilly Agreement of $22.4 million for the three months ended March 31, 2020 and $1.4 million for the three months ended March 31, 2019. Effective as of March 3, 2020, both parties have been relieved of all obligations under the agreement, including future quarterly research and development support payments to be paid by Lilly to the Company. 

 

 

7. Stock‑Based Compensation

Employee Equity Plans

The  NextCure, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”) was adopted in December 2015 and provides for the grant of awards of stock options, restricted stock awards, unrestricted stock awards and restricted stock units to employees, consultants and directors of the Company.

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 Company’s initial public offering (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 of common stock reserved for issuance under the 2019 Plan is 2,900,000 plus the number of shares of stock related to awards outstanding under the 2015 Plan that subsequently terminate by expiration or forfeiture, cancellation or otherwise without the issuance of such shares. The number of shares reserved for issuance under the 2019 Plan automatically increase each January 1st during the term of the 2019 Plan by 4% of the number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or such lesser number of shares determined by the Board.

As of March 31, 2020,  2,899,011  shares were reserved for future grant under the 2019 Plan.

Stock options granted under the 2015 Plan and 2019 Plan (together, the “Plans”) to employees generally vest over four years and expire after ten years.

9

Table of Contents

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

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, 2019

 

2,170,212

 

$

6.51

 

8.6

 

$

113,295

Granted

 

884,525

 

$

41.65

 

9.9

 

 

 —

Exercised

 

(17,142)

 

$

2.08

 

7.5

 

 

 —

Forfeitures

 

(22,000)

 

$

15.57

 

9.2

 

 

 —

Outstanding as of March 31, 2020

 

3,015,595

 

$

16.77

 

9.0

 

$

65,322

Vested and expected to vest as of March 31, 2020

 

3,015,595

 

$

16.77

 

 —

 

$

65,322

Exercisable as of March 31, 2020

 

828,250

 

$

3.97

 

 —

 

$

27,417


(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, 2020 and December 31, 2019.

The weighted average grant date fair value of stock options granted to employees for the three months ended March 31, 2020 was $25.90.  The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2020 was $0.6 million. As of March 31, 2020, there was $28.6 million of total unrecognized compensation expense related to unvested options under the  Plans that will be recognized over a weighted-average period of approximately three years.

The aggregate grant date fair value of stock options and restricted stock vested during the three months ended March 31, 2020 and December 31, 2019  was approximately $30.3 million and $7.6 million, respectively.

Stock-based compensation expense was classified on the statements of operations as follows for the three months ended March 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

(in thousands)

    

2020

    

2019

 

Research and development

 

$

452

 

$

149

 

General and administrative

 

 

556

 

 

234

 

Total stock-based compensation expense

 

$

1,008

 

$

383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 

 

 

    

2020

    

2019

 

Expected term

 

6.08

years 

 —

years 

Expected volatility

 

69.7

%

 —

%

Risk free interest rate

 

0.6 - 1.0

%

 —

%

Expected dividend yield

 

 —

%

 —

%

 

 

 

 

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Table of Contents

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

8. Net Income (Loss) Per Share Attributable to Common Stockholders

Earnings (Loss) per share

The computation of basic earnings (loss) per share ("EPS") is based on the weighted-average number of common shares outstanding, without consideration for dilutive common stock equivalents. The computation of diluted EPS 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 EPS were as follows (in millions, except share and per share data):

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31, 

 

 

    

2020

    

2019

 

Income (loss) (Numerator):

 

 

  

 

 

  

 

Net income (loss) for basic and diluted EPS

 

$

9,733

 

$

(6,155)

 

Shares (Denominator):

 

 

  

 

 

  

 

Weighted-average number of common shares outstanding

 

 

27,506,927

 

 

1,379,444

 

Effect of dilutive common stock equivalents

 

 

1,841,688

 

 

 —

 

Weighted-average shares for diluted EPS

 

 

29,348,615

 

 

1,379,444

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.35

 

$

(4.46)

 

Diluted EPS

 

$

0.33

 

$

(4.46)

 

 

For the quarter ended March 31, 2020, options to purchase 3,000 shares of the Company's common stock were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive.

For the quarter ended March 31, 2019, all shares of preferred stock and 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, 

 

    

2019

Preferred stock convertible into common stock

 

 

15,560,569

Outstanding options to purchase common stock

 

 

2,052,194

Total

 

 

17,612,763

 

 

9.  Income Taxes

The Company did not record a provision or benefit for income taxes during the three months ended March 31, 2020 and 2019. The Company continues to maintain a full valuation allowance against its deferred tax assets.          

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 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.

11

Table of Contents

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

Under the provisions of Sections 382 and 383 of the 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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes various income and payroll tax provisions. The Company has analyzed the tax provisions of the CARES Act and determined they have no significant financial impact to our condensed financial statements.

10.  Subsequent Events

In March 2020, the World Health Organization declared the novel coronavirus disease 2019, or 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.

The impact of the COVID-19 pandemic on the Company’s business and financial performance is uncertain and depends on various factors, including the scope and duration of the pandemic, 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 Company is unable to determine the extent of the impact of the pandemic on its operations and financial condition going forward. These developments are highly uncertain and unpredictable, and may materially adversely affect the Company’s financial position and results of operations

 

The impacts of the COVID-19 pandemic have put significant strain on clinical trial sites used by the Company, raised concerns around monitoring patient safety, and caused enrollment to slow in the Phase 2 portion of the ongoing Phase 1/2 monotherapy clinical trial of the Company's lead product candidate, NC318. The Company is working closely with its clinical partners and taking the necessary steps to adjust its protocols and timelines due to the impact of the pandemic. On April 13, 2020, the Company announced that initial data from the Phase 2 portion of the ongoing Phase 1/2 clinical trial of NC318 is expected to be temporarily delayed, and the Company has temporarily delayed the initiation of a Phase 2 clinical trial to evaluate NC318 in combination with standard of care chemotherapies and a Phase 1/2 clinical trial of the Company’s second product candidate, NC410.

 

 

 

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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, 2019, or our 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, including with respect to our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts 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,” “due,” “estimate,” “expect,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “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 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 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;