On March 27, 2023 Exicure, Inc. (Nasdaq: XCUR), historically an early-stage biotechnology company focused on developing nucleic acid therapies targeting ribonucleic acid against validated targets, reported financial results for the year ended December 31, 2022 and provided an update on its business strategy and corporate progress (Press release, Exicure, MAR 27, 2023, View Source [SID1234629362]).
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Corporate Update
As previously reported, in September 2022, we announced a significant reduction in force, suspension of preclinical activities and halting of all research and development, and that we were exploring strategic alternatives to maximize stockholder value. With respect to our historical assets, this includes continuing to explore out-licensing opportunities for cavrotolimod, our clinical-stage asset in immuno-oncology, as well as for our preclinical candidate associated with the SCN9A program for neuropathic pain.
While the foregoing efforts with respect to our historical assets are continuing, we do not expect they will generate significant value for stockholders, at least in the near term. Therefore, we are engaging in a broader exploration of strategic alternatives. This effort involves exploring growth through transactions with potential partners that see an opportunity in joining an existing, publicly-traded organization. We are exploring transactions both within our historical biotechnology and life science industry, as well as in other industries unrelated to our historical operations.
On February 24, 2023, we closed our private placement (the "Private Placement") to CBI USA, Inc. Following the closing of the Private Placement, CBI USA is the beneficial owner of approximately 50.4% of the Company’s outstanding shares. At closing, CBI USA designated three members to the Company’s board of directors effective as of February 24, 2023. Additional directors were subsequently appointed by the board, and our board of directors currently includes 6 members, only one of which (Matthias Schroff, Exicure’s Chief Executive Officer) was a director prior to the closing of the Private Placement. The Company is currently relying on Nasdaq’s "controlled company" exemption from the requirements that a majority of its board be independent and that it has an independent compensation committee and an independent nominating committee or function.
The Company currently expects to focus its efforts on the following:
•Continue to implement its previously announced restructuring plan and efforts to maximize stockholder value that can be derived from historical biotechnology assets. The Company expects to evaluate on an ongoing basis whether the resources dedicated to these activities are sustainable and commensurate with the potential value that can be derived from them.
•Explore growth through transactions with potential partners that see opportunity in joining an existing, publicly-traded organization. The board of directors will consider any promising transactions that it believes can create value for stockholders. We are exploring transactions both within our historical biotechnology and life science industry and in other industries unrelated to our historical operations. The Company expects these efforts may be focused in Asia where CBI USA’s affiliates have relationships and business connections, although domestic transactions are also being considered. Transactions that may be explored could include reverse mergers or share
exchanges, as well as acquisitions of other businesses or investments. There can be no assurance that any agreement, arrangement or understanding with respect to such a transaction will be reached, or the potential structure or financial and other terms of any agreement, arrangement or understanding that may be reached.
•Seek additional financing for the Company as needed to support these activities. Without a current source of revenue or committed financing, the Company believes that it will be necessary to obtain substantial additional financing in the next few months in order to provide sufficient runway to continue operating and pursue these activities. There can be no assurance that such financing, or financing in sufficient amounts or on acceptable terms, will be received.
"On behalf of the board of directors, I look forward to working with Exicure and CBI USA, now the majority controlling shareholder, to continue to explore strategic transactions and alternatives to maximize stockholder value," said Seung Soo Shin, Chairman of the Board of Directors of Exicure.
2022 Financial Results
Cash Position: Cash, cash equivalents, and restricted cash were $9.8 million as of December 31, 2022. Subsequent to December 31, 2022, the Company raised gross proceeds of $5.4 million on the closing of the Private Placement (or net proceeds of approximately $4.6 million after transaction expenses) and the Company expects to use the net proceeds for general working capital purposes as it pursues strategic alternatives as well as for the payout for warrant put rights that were exercised as a result of the change of control. The Company believes that its existing cash and cash equivalents (including the proceeds received in February 2023 in connection with the closing of the Private Placement) could enable the Company to fund its operating expenses into the beginning of the fourth quarter of 2023. However, this estimate is based on assumptions about how the Company can limit spending that may prove to be wrong and it is very difficult to project the Company’s current cash burn rate given the transitional status of the Company as it explores strategic alternatives and this estimate may prove inaccurate and the Company may expend its limited resources sooner.
Revenue: Revenue was $28.8 million for the year ended December 31, 2022, reflecting an increase of $29.3 million from revenue of $(0.5) million for the year ended December 31, 2021. The increase in collaboration revenue of $29.3 million is due to the recognition of the remaining deferred revenue related to the AbbVie Collaboration Agreement of $13.9 million and the Ipsen Collaboration Agreement of $15.4 million in connection with the terminations of those collaboration agreements in December 2022. This revenue resulted from an accounting adjustment, did not reflect any new cash proceeds to the Company and will not recur. Following these terminations, the Company currently has no source of revenues.
Research and Development (R&D) Expense: Research and development expense was $19.8 million for the year ended December 31, 2022, reflecting a decrease of $29.2 million, or 60%, from research and development expense of $49.0 million for the year ended December 31, 2021. The decrease in research and development expense for the year ended December 31, 2022 of $29.2 million reflects fewer clinical, preclinical, and discovery program activities and a reduction in headcount resulting from the restructuring activities that were announced in December 2021 and September 2022.
General and Administrative (G&A) Expense: General and administrative expense was $10.9 million for the year ended December 31, 2022, representing a decrease of $2.2 million, or 17%, from $13.1 million for the year ended December 31, 2021. The decrease for the year ended December 31, 2022 is mostly due to lower compensation and related costs in connection with a lower headcount during the period resulting from the restructuring activities that were announced in December 2021, as well as lower costs for accounting, director fees, and investor relations. These lower costs in the current year period were partially offset by higher retention award expense, as well as higher consultant and advisory costs.
Net Loss: The Company had a net loss of $2.6 million for the year ended December 31, 2022, as compared to a net loss of $64.1 million for the year ended December 31, 2021. The decrease in net loss was primarily driven by higher non-cash revenue and lower R&D expense during the period.
Going Concern: Given the Company’s current cash position, operating plans and forecasted negative cash flows from operating activities over the next twelve months, management believes there is substantial doubt regarding the Company’s ability to continue as a going concern within one year after the date that its consolidated financial statements for the year ended December 31, 2022 are issued. As a result, substantial additional financing will be needed by the Company within the next few months to pay its expenses, fund its ongoing exploration of strategic alternatives and pursue any alternatives that it identifies.