Exicure, Inc. is a company that has undergone a significant transformation in recent years, evolving from an early-stage biotechnology firm focused on developing nucleic acid therapies to a business exploring strategic alternatives to maximize shareholder value. This shift in focus was initiated in September 2022, when the company announced a major reduction in force, the suspension of preclinical activities, and the halting of all research and development efforts.

Business Overview and History

Exicure was founded in 2011 with the goal of developing innovative nucleic acid therapies targeting ribonucleic acid (RNA) against validated targets. The company made early strides in advancing its proprietary spherical nucleic acid (SNA) technology platform, which it believed held promise for treating a variety of diseases. Exicure became a publicly traded company in 2017, marking a significant milestone in its corporate history.

In its early years, Exicure dedicated substantial resources to the development of its SNA technology platform. The company successfully advanced several SNA-based drug candidates through preclinical studies and into clinical trials, demonstrating progress in its research and development efforts. However, Exicure faced ongoing challenges in raising sufficient capital to fund its R&D activities, which ultimately contributed to the company's decision to pivot its strategy.

Despite these efforts, Exicure struggled to translate its scientific progress into commercial success. By 2022, the company found itself at a crossroads, facing significant financial and operational challenges. In response to these headwinds, Exicure's leadership made the difficult decision to pivot the company's strategy. The September 2022 announcement of a major restructuring, including a significant reduction in its workforce and the suspension of all research and development activities, marked a turning point for the company.

Following the 2022 restructuring, Exicure's focus shifted towards out-licensing its historical intellectual property and assets. This new direction led to some initial success, with the company generating $500,000 in revenue from a licensing agreement for one of its drug candidates in early 2024. This milestone provided a glimmer of hope for Exicure's new strategy and demonstrated the potential value of its historical assets.

Financial Performance and Liquidity

Financials

Exicure's financial performance has been marked by consistent net losses, with the company reporting an annual net loss of $16.9 million in 2023 and a net loss of $2.6 million in 2022. The company's revenue has also been limited, with no revenue reported in 2023 and $28.8 million in revenue in 2022. Exicure's annual operating cash flow has been negative, with $10.4 million in outflows in 2023 and $35.7 million in outflows in 2022, while its annual free cash flow has also been negative, at $10.4 million in 2023 and $35.7 million in 2022.

In the most recent quarter (Q3 2024), Exicure reported no revenue, a net loss of $1,091,000, and negative operating and free cash flows of $449,000. The decrease in revenue, net income, operating cash flow, and free cash flow compared to the prior year quarter was primarily due to the company suspending all research and development activities and exploring strategic alternatives.

Exicure is a small-cap company that only operates in the United States, with no significant performance breakdown by geographic markets.

Liquidity

As of September 30, 2024, Exicure reported cash and cash equivalents of $343,000, which, combined with its limited revenue and ongoing losses, raises substantial doubt about the company's ability to continue as a going concern. The company's current liquidity is not sufficient to fund its operations and exploration of strategic alternatives, and it will require substantial additional financing in the very near term to continue its activities.

Exicure's liquidity position is further characterized by a debt-to-equity ratio of 0, indicating no long-term debt. The company has no available credit lines or facilities. Its current ratio and quick ratio are both 0.71, suggesting potential short-term liquidity challenges.

Nasdaq Listing Challenges

Exicure's financial struggles have been compounded by challenges in maintaining its listing on the Nasdaq stock exchange. The company has received numerous deficiency notices from Nasdaq related to various listing requirements, including compliance with the minimum bid price rule, the stockholders' equity requirement, and corporate governance standards. In May 2024, Exicure received a delisting determination from the Nasdaq staff, which the company subsequently appealed. While the Nasdaq Hearings Panel granted the company an extension to November 14, 2024 to demonstrate compliance with the listing requirements, there is no assurance that Exicure will be able to regain and maintain its Nasdaq listing.

Exploration of Strategic Alternatives

In light of its financial and operational challenges, Exicure is currently engaged in a broader exploration of strategic alternatives to maximize shareholder value. This effort involves evaluating potential growth opportunities through transactions with partners that may see value in joining the existing, publicly-traded organization. However, the success of this process is uncertain, and there can be no assurance that Exicure will be able to identify and consummate a strategic transaction that would be favorable to its shareholders.

Significant Events and Developments

Exicure's recent history has been shaped by several significant events and developments. In September 2022, the company announced a substantial reduction in force and the suspension of all research and development activities as it began exploring strategic alternatives. This was followed by the company's sale of its historical biotechnology intellectual property and other assets in September 2024, for which it received gross proceeds of $1.5 million.

In February 2024, the company received an upfront payment of $500,000 from a licensing agreement for patents related to one of its historical drug candidates. Additionally, Exicure recognized other income of $637,000 in the second quarter of 2024 from the sale of samples of its clinical products.

In November 2024, Exicure entered into an agreement to sell and issue 433,333 shares of common stock to HiTron Systems Inc. for $1.3 million, with the potential for an additional $8.7 million investment subject to shareholder approval. This financing is expected to provide the company with the necessary funds to continue its operations and exploration of strategic alternatives in the near term.

Risks and Uncertainties

Exicure faces a number of significant risks and uncertainties that could impact its future prospects. These include the company's ability to secure the additional financing it requires to continue operations, the successful execution of its strategic alternatives exploration, the potential delisting of its shares from the Nasdaq exchange, and the ability to attract and retain qualified management and personnel amid the ongoing turmoil.

Additionally, the company's limited revenue and ongoing losses, as well as the uncertainty surrounding any future royalties or license payments from its historical assets, present significant challenges to its long-term viability. Exicure's lack of a clear, long-term business strategy and the influence of its significant stockholders also introduce additional risks and complexities.

The company is also facing legal challenges, including accruing costs related to a proposed settlement of a securities class action lawsuit. Furthermore, there is uncertainty around the ability to redeem convertible notes receivable, which adds to the company's financial risks.

Conclusion

Exicure, Inc. is a company in the midst of a profound transformation, navigating a challenging landscape as it seeks to reinvent itself and identify a path forward that could maximize value for its shareholders. While the company's recent efforts to explore strategic alternatives and secure additional financing provide some hope, the road ahead remains uncertain, and Exicure faces significant hurdles in its quest to regain its footing and secure a sustainable future.

The company's financial performance has declined significantly as it has suspended its biotechnology operations, and it currently has no source of significant, ongoing revenue or committed financing. Any additional value the company may generate from its historical assets will be primarily through royalties and license fees that it may receive in the future under the purchase agreement, but the amounts and timing of any such payments are uncertain and out of the company's control.

Investors in Exicure will need to closely monitor the company's progress and the outcomes of its strategic initiatives in the months and years to come. The company's ability to secure additional funding, maintain its Nasdaq listing, and successfully identify and execute on strategic alternatives will be critical factors in determining its future viability and potential for shareholder value creation.