Exicure, Inc. (NASDAQ:XCUR) is an early-stage biotechnology company that has historically focused on developing nucleic acid therapies targeting ribonucleic acid against validated targets. However, the company is now in the midst of a significant transition, having announced in September 2022 that it was suspending preclinical activities, halting all research and development, and exploring strategic alternatives to maximize stockholder value.

Financials

The company's financial performance has been challenging, to say the least. For the full year 2023, Exicure reported an annual net loss of $16.9 million, with no revenue generated. The company's annual operating cash flow and free cash flow were both negative $10.4 million. This trend has continued into 2024, with the company reporting a net loss of $0.8 million and no revenue for the first quarter.

Liquidity

Exicure's liquidity position is also a major concern. As of March 31, 2024, the company had just $0.4 million in cash and cash equivalents, down from $0.8 million at the end of 2023. The company's current liabilities of $2.7 million significantly exceed its current assets of $1.5 million, indicating a tight cash position. Exicure has stated that its existing cash and cash equivalents are not sufficient to enable it to fund its operating expenses, and that substantial additional funding will be needed in the very near term.

Recent Developments

The company's exploration of strategic alternatives is a critical focus, as it seeks to identify potential partners or transactions that could generate value for stockholders. However, Exicure has acknowledged that it does not expect its efforts to out-license or sell its historical assets to generate significant value. The company is therefore pursuing a broader exploration of strategic alternatives, which may involve transactions in industries unrelated to its historical operations.

Exicure's transition has been further complicated by significant changes in its leadership and governance. In September 2022, the company announced a major reduction in force and the departure of several key executives. The company's board of directors has also undergone significant changes, with new members appointed by the company's controlling stockholders, CBI USA, Inc. and DGP Co., Ltd.

Risks and Challenges

This change in control has raised concerns about the board and management's experience in operating a U.S. public company. Neither the new board members nor the company's current CEO and CFO have prior experience serving in these roles for a publicly traded company in the United States. This lack of experience, combined with the company's limited resources following the recent workforce reductions, could make it challenging for Exicure to ensure compliance with applicable laws and regulations, maintain adequate internal controls, and effectively manage the risks associated with its transitional state and exploration of strategic alternatives.

Adding to the company's woes, Exicure has received numerous deficiency notices from Nasdaq related to its failure to comply with various listing requirements. These include issues with the company's minimum bid price, stockholders' equity, corporate governance, and timely filing of financial reports. The company has requested a hearing with Nasdaq's hearings panel to appeal the most recent delisting determination, but there is no assurance that it will be successful in regaining compliance and maintaining its Nasdaq listing.

Exicure's ability to raise additional capital to fund its operations and exploration of strategic alternatives is also a significant concern. The company's limited resources, transitional state, and the uncertainty surrounding its future direction may make it difficult to attract new investors or secure financing on favorable terms. If the company is unable to obtain the necessary funding, it may be forced to seek bankruptcy protection or cease operations altogether, which could result in little to no value for its stockholders.

The company's investment in convertible notes receivable also presents a potential risk. In March 2024, Exicure notified the issuer of the notes that it was exercising its redemption right, but the issuer has disputed the timing of the redemption. If the company is unable to redeem the notes or otherwise recognize value from them, it could further exacerbate its financial challenges.

Outlook

Despite the significant challenges facing Exicure, the company remains committed to exploring strategic alternatives that could potentially generate value for its stockholders. However, the path forward is fraught with uncertainty, and the company's ability to successfully navigate this transition and secure its long-term viability remains in question.

Conclusion

Investors should closely monitor Exicure's progress in its exploration of strategic alternatives, its ability to raise additional capital, and its efforts to regain compliance with Nasdaq's listing requirements. The company's financial performance, liquidity position, and the outcome of its strategic review will be critical factors in determining the future of Exicure and the potential value, if any, for its shareholders.