NextCure, Inc.: Form 10-Q for the period ended Mar 31, 2025

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, 2024, or our “2024 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,” “due,” “estimate,” “expect,” “intend,” “may,” “objective,” “plan,” “predict,” “project,” “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 LNCB74 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 timing or likelihood of regulatory filings for LCNB74 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;
• our drug product sourcing and manufacturing strategy, including the scalability of our methods and processes;
• our expectations regarding the potential benefits, activity, effectiveness and safety of LNCB74 and any other product candidates we develop;
• our intentions and ability to successfully commercialize, including through partnering, our product candidates;
• our expectations regarding the nature of the biological pathways we are targeting;
• our expectations regarding our ability to discover and advance product candidates using our technologies;
• the potential benefits of and our ability to maintain our relationship with LigaChem Biosciences, Inc., Yale University and other third parties;
• our ability to retain key personnel;
• our estimates regarding our expenses, future revenues, capital requirements, 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;
• 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;
• our ability to maintain listing of our common stock on the Nasdaq Global Select Market;
• 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 potential that positive results in preclinical studies may not be predictive of the results of clinical trials; our limited operating history and lack of any products approved for commercial sale; our history of significant losses; our need and ability to obtain additional financing on acceptable terms or at all; risks related to clinical development, marketing approval and commercialization; the unproven approach to the discovery and development of product candidates based on our technologies; risks related to our restructuring and reduction in force; and our 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 2024 Annual Report and in our other filings with the Securities and Exchange Commission (the “SEC”). 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.

We are a clinical-stage biopharmaceutical company that is focused on advancing innovative medicines that treat cancer patients that do not respond to, or that have disease progression on, current therapies, through the use of targeted therapies, including antibody-drug conjugates (“ADCs”), antibodies and proteins. We focus on advancing therapies that leverage our core strengths in understanding biological pathways and biomarkers, the interactions of cells, including in the tumor microenvironment, and the role each interaction plays in a biologic response.

Our product candidate LNCB74 is designed as a state-of-the-art B7-H4 targeted ADC to kill tumors. An ADC consists of a monoclonal antibody conjugated to a cytotoxic drug via a chemical linker. B7-H4, a clinically validated target, is a cell surface protein expressed on multiple tumor types including breast, ovarian and endometrial cancers, that we believe represents a large market opportunity. LNCB74 will be positioned as a promising B7-H4 ADC with both potential improved safety and efficacy compared to other ADCs targeting B7-H4. Preclinical studies demonstrated potent tumor killing in disease models and a favorable safety profile. LNCB74 is being advanced under a November 2022 Research Collaboration and Co-Development Agreement with LigaChem Biosciences, Inc. (formerly known as LegoChem Biosciences, Inc., or hereinafter “LigaChem”).

In December 2024, we announced that the U.S. Food and Drug Administration (the “FDA”) accepted an Investigational New Drug (“IND”) application for initiation of a Phase 1 clinical trial to evaluate LNCB74 for treating multiple cancers known to have high B7-H4 expression. Since announcing in January 2025 that the first patient in our Phase 1 trial of LNCB74 had been dosed, we have cleared cohort 2 in April 2025 and are currently within cohort 3 of the dose escalation portion of the Phase 1 trial, enrolling patients with various tumor types, including breast, ovarian and endometrial cancers. We plan to initiate backfill cohorts in the second half of 2025 and provide a proof of concept data readout in the first half of 2026.

In addition, we are seeking to partner our other clinical programs NC410 and NC525 and to pursue a partner or third-party financing to advance our preclinical non-oncology programs NC605 and NC181.

In March 2024, we announced a prioritization and restructuring of our operations to align with our focused pipeline (the “2024 Restructuring”). We paused our internal manufacturing operations and reduced our workforce. In part because of these actions, we expect to fund our operations into the second half of 2026 with our existing cash position of approximately $55.9 million as of March 31, 2025.

Financial Overview

Since commencing operations in 2015, we have devoted substantially all of 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.

To date, we have not generated any revenue from product sales and have financed our operations primarily through 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. Since inception through March 31, 2025, we raised approximately $423 million in gross proceeds from the sale of equity instruments and had received a $25 million upfront payment from our former collaboration partner. 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, 2025 and 2024, was $11.0 million and $17.1 million, respectively. As of March 31, 2025, we had an accumulated deficit of $391.1 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 for and commercialize a product candidate, and we cannot make assurances that we will ever generate significant revenue or profits.

As of March 31, 2025, we had cash, cash equivalents and marketable securities of $55.9 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the second half of 2026. We have based this estimate on assumptions that may prove to be incorrect, and we could exhaust our available capital resources sooner than we currently expect.

We expect to incur substantial expenditures in the foreseeable future as we advance LNCB74 through clinical development, the regulatory approval process and, if approved, commercialization. Specifically, in the near term, we expect to incur expenses relating to clinical development activities with respect to LNCB74, and other research and development activities.

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

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our clinical trials, discovery efforts, research activities, and development and testing of our product candidates and include:

• expenses incurred under agreements with third parties, including agreements with third parties that conduct research, preclinical activities or clinical trials on our behalf;
• the 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;
• salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in research and development functions; 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 increase substantially in the future as we advance our product candidates through development.

We cannot determine with certainty the duration and costs of future clinical trials of LNCB74 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 LNCB74 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 LNCB74 as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;
• our ability to obtain partnerships for our other programs;
• 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.

Other Income, Net

Other income, net consists primarily of interest income earned on marketable securities.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes our results of operations for the periods indicated (in thousands):

Research and Development Expenses

The following table summarizes our research and development expenses by product candidate for the periods indicated (in thousands):

(in thousands)

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, 2025 decreased by $3.5 million compared to the three months ended March 31, 2024 due to lower costs on programs other than LNCB74. In particular, costs for NC410 were reduced as compared to the first quarter of 2024 because patient enrollment was stopped in 2024 as the Company focused on finding a partner to further develop this program. Internal costs increased, as lower personnel-related costs due to the 2024 Restructuring were offset by the timing of reimbursement of costs subject to cost sharing under our collaboration with LigaChem. In the first quarter of 2024, we finalized cost sharing with LigaChem for the full year 2023 and recorded a cost reduction of $1.6 million.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2025 decreased by $0.6 million compared to the three months ended March 31, 2024. The decrease was driven primarily by $0.4 million lower personnel-related costs resulting from the 2024 Restructuring, and lower insurance costs.

Restructuring and Asset Impairment Charges

There were no restructuring and asset impairment charges for the three months ended March 31, 2025. Restructuring and asset impairment charges were $2.5 million for the three months ended March 31, 2024, consisting of $0.7 million of severance charges as a result of a reduction in force and $1.8 million of asset impairment charges associated with the write-down of certain manufacturing equipment, right of use assets and related improvements, each in connection with the 2024 Restructuring.

Other Income, Net

Other income, net for the three months ended March 31, 2025 decreased by $0.6 million compared to the three months ended March 31, 2024, due to lower interest income as a result of lower investable cash.

Liquidity and Capital Resources

Since inception through March 31, 2025, we have raised approximately $423 million in gross proceeds from the sale of equity instruments and had received a $25 million upfront payment from our former collaboration partner.

On August 4, 2023, the Company entered into a sales agreement (the “Sales Agreement”) with Leerink Partners 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. No shares of common stock were sold in the three months ended March 31,2025.

As of March 31, 2025, we had cash, cash equivalents and marketable securities of $55.9 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the second half of 2026.

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. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates. Our need to raise additional capital will depend on many factors, including:

• the scope, progress, results and costs of researching and developing LNCB74 and our other programs, and of conducting preclinical studies and clinical trials;
• the timing of, and the costs involved in, obtaining marketing approvals for LNCB74 and any future product candidates we develop, if clinical trials are successful;
• the costs of manufacturing LNCB74 and any future product candidates we develop for preclinical studies and clinical trials in preparation for marketing approval and commercialization;
• the costs of commercialization activities, including marketing, sales and distribution costs, for LNCB74 and any future product candidates we develop, whether alone or with a collaborator, if any such product candidates are approved for sale, including marketing, sales and distribution costs;
• our ability to establish and maintain additional collaborations, licenses or other arrangements on favorable terms, if at all;
• the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of any such litigation;
• our current collaboration and license agreements remaining in effect and our achievement of milestones and the timing and amount of milestone payments we are required to make, or that we may be eligible to receive, under those agreements;
• the timing, receipt and amount of sales of, or royalties on, our future products, if any; and
• the emergence of competing therapies and other developments in the oncology market.

Adequate additional financing may not be available to us on acceptable terms, or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through government or private grants, collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our future revenue streams, product candidates or research programs or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to retain for ourselves. See the section entitled “Risk Factors” for additional risks associated with our substantial capital requirements.

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):

Net Cash Used in Operating Activities

Net cash used in operating activities was $13.0 million for the three months ended March 31, 2025, which was primarily the result of our net loss of $11.0 million, and $3.9 million used by net changes in operating assets and liabilities. partially offset by non-cash charges for depreciation of $0.7 million and stock-based compensation of $1.4 million. Net cash used in operating activities was $12.6 million for the three months ended March 31, 2024, which was primarily the result of our net loss of $17.1 million, partially offset by non-cash charges for depreciation of $0.8 million, stock-based compensation of $1.7 million and impairment charges of $1.8 million, and $0.4 million provided by net changes in operating assets and liabilities.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2025 was $7.1 million, which was entirely due to net proceeds from sales and maturities of marketable securities. Net cash provided by investing activities for the three months ended March 31, 2024 was $17.9 million, which was due to net proceeds from sales and maturities of marketable securities.

Net Cash Provided by Financing Activities

There was no cash provided by financing activities for the three months ended March 31, 2025. Net cash provided by financing activities was $1,000 for the three months ended March 31, 2024 representing the exercise of stock options.

Contractual Obligations and Commitments

Operating Leases

We are party to several non-cancelable lease agreements for office and laboratory space that expire in March 2030. The monthly base rent for these leases totals $95,705 as of March 31, 2025 per month plus our prorated share of operating expenses. The monthly base rent is subject to annual 3% increases through the lease term.

We also have potential contingent payment obligations upon the achievement by us of clinical, regulatory, and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed intellectual property, including our license agreement with Yale. The timing and amount (if any) of any such payments cannot be reasonably estimated at this time.

We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, non-clinical studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.There have been no material changes to our contractual obligations during the three months ended March 31, 2025, as compared to those disclosed in our 2024 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 valuing share-based compensation, including the fair value of our common stock in periods before our initial public offering. 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, 2025, there were no material changes to our critical accounting policies as reported in our 2024 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 SEC.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, 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.

As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information requested by this Item.

Evaluation of Disclosure 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 Exchange Act as of March 31, 2025. 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, 2025, 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, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.