NextCure (NXTC) 10-Q 2023 Q2 Quarterly report

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 June 30, 2023

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	47-5231247
(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 July 31, 2023, the registrant had 27,839,968 shares of common stock, par value $0.001 per share, issued and outstanding.

NextCure, Inc.

Form 10-Q

For the Quarter Ended June 30, 2023

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	1
	Unaudited Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022	2
	Unaudited Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	3
	Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURES		26

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEXTCURE, INC.

CONDENSED BALANCE SHEETS

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

	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	22,019	$	26,630
Marketable securities		108,604		133,281
Prepaid expenses and other current assets		4,676		4,072
Total current assets		135,299		163,983
Property and equipment, net		10,511		11,897
Right of use assets		4,712		5,016
Other assets		2,858		3,265
Total assets	$	153,380	$	184,161
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,813	$	4,270
Accrued liabilities and other liabilities		5,007		4,857
Total current liabilities		7,820		9,127
Lease liabilities, long term		6,287		6,605
Other long-term liabilities		843		899
Total liabilities		14,950		16,631
Stockholders’ equity:
Preferred stock, par value of $0.001 per share; 10,000,000 shares authorized at June 30, 2023 and December 31, 2022; No shares issued and outstanding at June 30, 2023 and December 31, 2022		—		—
Common stock, par value of $0.001 per share; 100,000,000 shares authorized at June 30, 2023 and December 31, 2022; 27,839,968 and 27,774,536 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		28		28
Additional paid-in capital		435,041		430,755
Accumulated other comprehensive loss		(925)		(1,494)
Accumulated deficit		(295,714)		(261,759)
Total stockholders’ equity		138,430		167,530
Total liabilities and stockholders’ equity	$	153,380	$	184,161

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

1

NEXTCURE, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	13,447	$	12,825	$	25,094	$	27,849
General and administrative		5,711		5,303		11,135		11,050
Total operating expenses		19,158		18,128		36,229		38,899
Loss from operations		(19,158)		(18,128)		(36,229)		(38,899)
Other income, net		1,299		208		2,274		377
Net loss	$	(17,859)	$	(17,920)	$	(33,955)	$	(38,522)
Net loss per common share - basic and diluted	$	(0.64)	$	(0.65)	$	(1.22)	$	(1.39)
Weighted-average shares outstanding - basic and diluted		27,828,741		27,744,762		27,801,788		27,726,864
Comprehensive loss:						.
Net loss	$	(17,859)	$	(17,920)	$	(33,955)	$	(38,522)
Unrealized gain (loss) on marketable securities		(122)		(141)		569		(1,677)
Total comprehensive loss	$	(17,981)	$	(18,061)	$	(33,386)	$	(40,199)

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

2

NEXTCURE, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except share data)

	Six Months Ended June 30, 2023
	Stockholders’ Equity
				Additional		Accumulated Other
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2022	27,774,536	$	28	$	430,755	$	(1,494)	$	(261,759)	$	167,530
Stock-based compensation	—		—		2,078		—		—		2,078
Unrealized gain on marketable securities, net of tax $0	—		—		—		691		—		691
Net loss	—		—		—		—		(16,096)		(16,096)
Balance as of March 31, 2023	27,774,536	$	28	$	432,833	$	(803)	$	(277,855)	$	154,203
Stock-based compensation	—		—		2,125		—		—		2,125
Exercise of stock options	5,057		—		5		—		—		5
Issuance of shares under ESPP	60,375		—		78		—		—		78
Unrealized loss on marketable securities, net of tax $0	—		—		—		(122)		—		(122)
Net loss	—		—		—		—		(17,859)		(17,859)
Balance as of June 30, 2023	27,839,968	$	28	$	435,041	$	(925)	$	(295,714)	$	138,430
	Six Months Ended June 30, 2022
	Stockholders’ Equity
				Additional		Accumulated Other
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2021	27,680,997	$	28	$	421,047	$	(663)	$	(187,026)	$	233,386
Stock-based compensation	—		—		2,628		—		—		2,628
Exercise of stock options	44,165		—		60		—		—		60
Unrealized loss on marketable securities, net of tax $0	—		—		—		(1,536)		—		(1,536)
Net loss	—		—		—		—		(20,602)		(20,602)
Balance as of March 31, 2022	27,725,162	$	28	$	423,735	$	(2,199)	$	(207,628)	$	213,936
Stock-based compensation	—		—		2,242		—		—		2,242
Exercise of stock options	6,255		—		6		—		—		6
Issuance of shares under ESPP	17,427		—		73		—		—		73
Unrealized loss on marketable securities, net of tax $0	—		—		—		(141)		—		(141)
Net loss	—		—		—		—		(17,920)		(17,920)
Balance as of June 30, 2022	27,748,844	$	28	$	426,056	$	(2,340)	$	(225,548)	$	198,196

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

3

NEXTCURE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six Months Ended
	June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(33,955)	$	(38,522)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,914		2,096
Amortization of premiums and discounts on marketable securities		(114)		1,906
Stock-based compensation		4,203		4,870
Noncash operating lease expense		282		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(175)		540
Accounts payable		(1,457)		330
Accrued liabilities and other liabilities		150		(1,156)
Lease liabilities		(318)		—
Other long-term liabilities		(56)		—
Net cash used in operating activities		(29,526)		(29,936)
Cash flows from investing activities:
Sales and maturities of marketable securities		87,048		54,231
Purchases of marketable securities		(61,688)		(7,889)
Purchases of property and equipment		(528)		(719)
Net cash provided by investing activities		24,832		45,623
Cash flows from financing activities:
Proceeds from exercise of stock options		5		66
Proceeds from shares issued under ESPP		78		73
Net cash provided by financing activities		83		139
Net increase (decrease) in cash and cash equivalents		(4,611)		15,826
Cash and cash equivalents – beginning of period		26,630		12,376
Cash and cash equivalents – end of period	$	22,019	$	28,202
Supplemental disclosures of cash flow information:
Cash paid for interest	$	42	$	46

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

4

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 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 June 30, 2023, 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, which was terminated in March 2020. The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.

As of June 30, 2023, the Company had cash, cash equivalents and marketable securities of $130.6 million. The Company believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least the next twelve months from the issuance of these financial statements. The Company intends to fund future operations through additional public or private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other sources, the securing of which cannot be assured.

2. Summary of Significant Accounting Policies

The following significant accounting policy is in addition to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”).

Collaboration Arrangements

The Company assesses whether collaboration agreements are subject to Accounting Standards Codification (“ASC”) 808, Collaborative Arrangements ("ASC 808"), based on whether they involve joint operating activities involving two or more parties that are active participants in the activity and are exposed to significant risks and rewards dependent on the commericla success of the activities.

A collaborative arrangement within the scope of ASC 808 may be partially (or entirely) within the scope of other guidance (including ASC 606). The Company evaluates the individual units of account (e.g., components) within a collaborative arrangement to assess the appropriate recognition and measurement. The Company accounts for components of a collaborative arrangement that are within the scope of other ASC guidance following the relevant provisions of that guidance rather than the guidance provided in ASC 808.

ASC 808 states that a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer for a distinct good or service (i.e., a unit of account). That is, the Company is required to apply the unit-of-

5

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

account guidance in ASC 606 to determine the distinct components of a collaborative arrangement. If the counterparty is a customer for that distinct good or service (or bundle of goods and/or services), it is accounted for under ASC 606. For units of account that are in the scope of ASC 606, all of the guidance in ASC 606 applies, including the guidance on recognition, measurement, presentation and disclosure.

The Company accounts for collaborative arrangements or components of collaborative arrangements that are outside the scope of other guidance by analogy to the authoritative accounting literature or, if there is no appropriate analogy, by using a reasonable, rational and consistently applied accounting policy election.  When evaluating an appropriate analogy to other accounting guidance or an accounting policy for a collaborative arrangement, the Company assesses the nature of the arrangement, the nature of its business operations and the contractual terms of the arrangement.  The Company recognizes the shared costs incurred that are not within the scope of other accounting literature as a component of the related expense in the period incurred by analogy to ASC 730, Research and Development, and records reimbursements from counterparties as an offset to the related research and development costs.

Basis of Presentation

The unaudited condensed financial statements include the accounts of the Company 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 in the Annual Report.

Unaudited Financial Information

In the opinion of management, the information furnished reflects certain adjustments, all 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 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, which is generally consistent with required adoption dates of private companies.

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“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.

6

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

3. Marketable Securities

Marketable securities consist of the following:

	June 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(in thousands)	Cost		Gain		Loss		Fair Value
Corporate bonds	$	79,560	$	—	$	(765)	$	78,795
U.S. Treasury and Government agencies		29,969		—		(160)		29,809
Total	$	109,529	$	—	$	(925)	$	108,604

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(in thousands)	Cost		Gain		Loss		Fair Value
Corporate bonds	$	133,163	$	—	$	(1,457)	$	131,706
U.S. Treasury and Government agencies		1,612		—		(37)		1,575
Total	$	134,775	$	—	$	(1,494)	$	133,281

The Company uses the specific identification method when calculating realized gains and losses. For the three months ended June 30, 2023 and 2022, respectively, the Company recorded $0 and $7,000 in realized gains on available-for-sale securities, which is included in other income, net on the condensed statements of operations.  For the six months ended June 30, 2023 and 2022, respectively, the Company recorded $0 and $9,000 in realized gains on available-for-sale securities, which is included in other income, net on the condensed statements of operations.

The Company reviewed all investments which were in a loss position at the respective balance sheet dates, as well as the remainder of the portfolio. As of June 30, 2023, the Company had investments with a total fair market value of $102.2 million in an unrealized loss position, of which $19.4 million were in a continuous unrealized loss position for more than twelve months. The Company analyzed the unrealized losses and determined that the prevailing high interest rates were the primary factor driving these changes, and such unrealized losses are temporary as the Company anticipates a full recovery of the amortized cost basis of these securities at maturity. After analyzing the securities in an unrealized loss position, the portion of these losses that relates to changes in credit quality is insignificant. The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell them prior to the end of their contractual terms. Furthermore, the Company does not believe that these securities expose the Company to undue market risk or counterparty credit risk.

The following table summarizes maturities of the Company’s investments available-for-sale as of June 30, 2023:

	June 30, 2023
			Fair
(in thousands)	Cost		Value
Maturities:
Within 1 year	$	87,681	$	86,986
Between 1 to 2 years		21,848		21,618
Total investments available-for-sale	$	109,529	$	108,604

7

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

The Company has classified all of its available-for-sale investments, including those with maturities beyond one year, as current assets on the accompanying condensed balance sheets based on the highly liquid nature of these investment securities and because these investment securities are considered available for use in current operations.

4. 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 June 30, 2023 and December 31, 2022:

	June 30, 2023
					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	$	13,310	$	13,310	$	—	$	—
Marketable securities:
Corporate bonds		78,795		—		78,795		—
U.S. Treasury and Government agencies		29,809		—		29,809		—
Total	$	121,914	$	13,310	$	108,604	$	—

	December 31, 2022
					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	$	6,782	$	6,782	$	—	$	—
Marketable securities:
Corporate bonds		131,706		—		131,706		—
U.S. Treasury and Government agencies		1,575		—		1,575		—
Total	$	140,063	$	6,782	$	133,281	$	—

8

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

The Company did not transfer any assets measured at fair value on a recurring basis between levels during the six months ended June 30, 2023.

5. Leases

The Company's lease portfolio consists of office space and laboratory facilities. All of the Company's leases are classified as operating leases. The terms of the Company's lease agreements currently extend through March 2030 and provide the Company with an option for a five-year extension. Under the terms of the leases, the Company pays base annual rent subject to fixed dollar increases each year and other normal operating expenses such as taxes, repairs, and maintenance. The Company evaluates renewal options at lease inception and on an ongoing basis and considers renewal options that the Company is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities in accordance with ASC 842. The leases do not require variable lease payments or residual value guarantees and do not contain restrictive covenants.

The leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate as the discount rate when measuring the operating lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Operating lease expense was $272,000 and $544,000 for the three and six months ended June 30, 2023, respectively. Operating cash flows used for operating leases during the three and six months ended June 30, 2023 were $266,000 and $512,000, respectively. As of June 30, 2023, the weighted-average remaining lease term was 6.75 years, and the weighted average discount rate was 7.47%.

Rent expense under operating leases was $243,000 and $491,000 for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, the maturities of the Company’s operating lease liabilities were as follows (in thousands), which are included in Accrued liabilities and other liabilities and Lease liabilities, long term in the accompanying balance sheet: 

2023	$	536
2024		1,127
2025		1,214
2026		1,355
2027		1,396
Thereafter		3,295
Total future minimum payments		8,923
Less: present value discount		(2,050)
Present value of lease liabilities	$	6,873

9

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

6. 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 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 June 30, 2023, 1,900,046 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.

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, 2022	5,262,179	$	11.44	7.6	$	115
Granted	2,059,250	$	1.55	—		—
Exercised	(5,057)	$	0.99	—		—
Forfeited	(194,448)	$	4.67	—		—
Outstanding as of June 30, 2023	7,121,924	$	8.77	7.8	$	720
Exercisable as of June 30, 2023	3,573,758	$	12.31	6.5	$	232

(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 June 30, 2023 and December 31, 2022.

The weighted average grant date fair value of stock options granted to employees for the six months ended June 30, 2023 was $1.12 using the Black-Scholes option pricing model. There were 5,057 stock options exercised during the six months ended June 30, 2023. As of June 30, 2023, there was $12.2 million of total unrecognized compensation expense

10

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

related to unvested options under the Plans that will be recognized over a weighted-average period of approximately 2.1 years.

The aggregate grant date fair value of stock options vested during the six months ended June 30, 2023 and 2022 was approximately $5.3 million and $6.9 million, respectively.

Stock-based compensation expense was classified on the statements of operations as follows for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	741	$	728	$	1,463	$	1,496
General and administrative		1,384		1,514		2,740		3,374
Total stock-based compensation expense	$	2,125	$	2,242	$	4,203	$	4,870

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:

	Six Months Ended
	June 30,
	2023		2022
Expected term	6.1	years	5.5 - 6.1	years
Expected volatility	81.4	%	79.7	%
Risk free interest rate	3.5 - 4.1	%	1.8 - 3.1	%
Expected dividend yield	—	%	—	%

Employee Stock Purchase Plan

The NextCure, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) was approved in May 2019 and provides for eligible employees of the Company to purchase shares of Company stock at a discounted price. As of June 30, 2023 109,958 shares of common stock had been issued pursuant to the ESPP and 680,722 shares were reserved for future issuance thereunder.

7. Collaboration Agreements

Collaboration Agreement with LegoChem Biosciences, Inc. (“LegoChem”)

In November 2022, the Company entered into a Research Collaboration and Co-Development Agreement (“Agreement”) with LegoChem to develop up to three antibody drug conjugates.  Under the terms of the Agreement, both parties equally share the costs of developing the molecules and profits on commercialized products.  The collaboration consists of up to three research programs for which a research plan will be developed.  With respect to a research plan, each party shall use reasonable efforts to execute and perform the activities assigned to it.  Each party shall be solely responsible for costs associated with its assigned activities as outlined in the research plan.  Upon successful completion of a research plan, or as otherwise agreed, the parties may designate a research product as a co-development product.  Upon designation of a co-development product, cost sharing on a 50-50 basis between the Company and LegoChem would begin.  The activities associated with the research plan and co-development products will be coordinated by a joint steering committee, which is comprised of an equal number of representatives from the Company and LegoChem.  If and when a co-development product becomes commercialized, the Company and LegoChem would equally share in the profits.  There are no implied licenses or other rights created under this Agreement after designation of a co-development product.  

11

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

Effective April 1, 2023, the parties designated the initial co-development product under the Agreement.  As such, cost sharing on a 50-50 basis commenced for the first co-development product under the Agreement.  

Given the involvement by both parties under this Agreement, management assessed the criteria under ASC 808 to determine if such agreement is within the scope of ASC 808. Based on the terms of the Agreement, the Company concluded that the Agreement meets the requirements of a collaboration within the guidance of ASC 808.  The Company and LegoChem are active participants in the activities associated with the Agreement and are exposed to significant risks and rewards dependent on the commercial success of the activity.  The Agreement is not reflective of a vendor-customer relationship and therefore not within the scope of ASC 606.  Accordingly, the net costs associated with the co-development are expensed as incurred and recognized within research and development expenses on the statement of operations.

As of June 30, 2023, there is only one co-development product that is in the early stages of development and costs incurred have not been material. .

8. Net Loss Per Share Attributable to Common Stockholders

The computation of basic loss per share is based on the weighted-average number of common shares outstanding, without consideration for dilutive common stock equivalents. The computation of diluted loss per share 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 2015 Plan and 2019 Plan, as determined using the treasury stock method.

The computation for basic and diluted loss per share were as follows (in thousands, except share and per share data):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net loss (Numerator):
Net loss - basic and diluted	$	(17,859)	$	(17,920)	$	(33,955)	$	(38,522)
Shares (Denominator):
Weighted-average shares outstanding - basic and diluted		27,828,741		27,744,762		27,801,788		27,726,864
Loss per share - basic and diluted	$	(0.64)	$	(0.65)	$	(1.22)	$	(1.39)

For the three and six months ended June 30, 2023 and 2022, all 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:

	June 30,
	2023	2022
Outstanding options to purchase common stock	7,121,924	5,381,280

12

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

9. Income Taxes

The Company did not record a provision or benefit for income taxes during the three and six month periods ended June 30, 2023 and 2022. 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.

Under the provisions of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (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. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of losses and credits attributable to periods before the change and could result in a reduction in the total losses and credits available.

10. Commitments and Contingencies

Legal Proceedings

On September 21, 2020, a putative stockholder class action was filed in the U.S. District Court for the Southern District of New York styled Ye Zhou v. NextCure, Inc., et. al., Case 1:20-cv-0772 (S.D.N.Y.) (the “Ye Zhou Action”). On February 26, 2021, the Lead Plaintiff filed a consolidated amended complaint that asserts claims against us, certain of our officers and members of our board of directors, and the underwriters in our May 2019 initial public offering and November 2019 underwritten secondary public offering. The complaint alleges that the defendants violated provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), with respect to statements made regarding the Company’s NC318 product candidate and the FIND-IO platform. The complaint seeks unspecified damages on behalf of a purported class of purchasers of our securities between May 8, 2019 and July 14, 2020. Defendants filed a motion to dismiss the consolidated amended complaint on April 27, 2021, and on July 12, 2023 the court issued a memorandum opinion and order granting defendants’ motion to dismiss against all counts of the consolidated amended complaint.  On July 13, 2023, judgement on behalf of Company and the other named defendants was entered, and the case for the Ye Zhou Action was closed by the court. Plaintiffs in the Ye Zhou Action have until August 11, 2023 to file a Notice of Appeal with the court should they desire to appeal the order granting defendant’s motion to dismiss.

On March 24, 2021, a purported shareholder derivative lawsuit was filed in the U.S. District Court for the District of Maryland, Southern Division, styled Zach Liu v. Richman et. al., Case:21-cv-00754 (the “Liu Action”), alleging breaches of fiduciary duty by officers and/or directors, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of the Exchange Act and the Securities Act. The complaint seeks unspecified damages, attorneys’ fees and costs, declaratory relief, corporate governance changes, and restitution. On May 17, 2021, the Court granted the parties’ joint motion to stay the Liu Action pending resolution of the defendants’ motion to dismiss filed in respect of the Ye Zhou Action. On August 1, 2023, Company filed a notice with the court in the Liu Action advising of the result of the motion to dismiss an entry of judgement in the Ye Zhou Action.  The parties will be meeting and conferring to establish jointly a litigation schedule for the Liu Action, and it is unknown at this time when substantive litigation activity will recommence in the Liu Action.

The Company intends to vigorously defend the Liu Action and any appeal of the Ye Zhou Action (if filed). Based on the Company’s assessment of the facts underlying these claims, the uncertainty of litigation, and the preliminary stage

13

NEXTCURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

of these cases, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

On December 14, 2021, a purported misappropriation of certain trade secrets lawsuit was filed in Federal District Court for the District of Delaware, styled Immunaccel, LLC v. NextCure, Inc., Case No. 1:21-cv-01755-UNA (the “Immunaccel Action”). The lawsuit’s original complaint alleged that the Company misappropriated certain trade secrets belonging to Immunaccel, LLC (“Immunaccel”) related to a drug discovery and screening platform named IMMUNE 3D. The complaint alleged two causes of action, one under the Delaware Uniform Trade Secrets Act and another under the Federal Defend Trade Secrets Act.  The Company filed a motion to dismiss the original complaint on April 22, 2022.  In response to the Company’s motion to dismiss, Immunaccel filed an amended complaint on June 21, 2022 (“Amended Complaint”). The Amended Complaint added as parties to the Immunaccel Action Screen Therapeutics LLC (“Screen”), an affiliate entity of Immunaccel, and the Company’s CEO, Michael Richman, in his capacity as an individual. The Amended Complaint alleged that Mr. Richman breached certain contractual and fiduciary duties owed to Screen due to Mr. Richman’s prior relationship as an investor in, and purported advisor to, Screen. The Amended Complaint alleged four causes of action for breach of contract against Mr. Richman and three related causes of action against Mr. Richman for breach of fiduciary duty, unjust enrichment, and fraudulent misrepresentation.  In addition to two trade secrets causes of action similar to those previously alleged in the original complaint against the Company, the Amended Complaint also alleged that the Company tortiously interfered with the contracts between Mr. Richman and Screen and that the Company aided and abetted the alleged breach of fiduciary duty by Mr. Richman. The Company and Mr. Richman each separately filed separate motions to dismiss the Amended Complaint on August 5, 2022, jointly seeking to dismiss all claims asserted against them by the plaintiffs.  The Immunaccel Action was dismissed with prejudice by the court on June 21, 2023 following the Company, Mr. Richman, Screen, and Immunaccel settling all claims, including any unpleaded claims and counterclaims, relating to the Immunaccel Action.  The settlement and any agreements entered into in connection therewith are not material to the Company.

14

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, 2022, or our “2022 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,” “should,” “due,” “estimate,” “expect,” “intend,” “hope,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “target,” “towards,” “forward,” “later,” “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 NC410, NC525, NC762 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 NC410, NC525, NC762 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;

● development of patient selection assays and companion or complementary diagnostics for NC410, NC525, NC762 or any other product candidates we develop;

● our manufacturing capabilities and strategy, including the scalability of our manufacturing methods and processes;

● our expectations regarding the potential benefits, activity, effectiveness and safety of NC410, NC525, NC762 and any other product candidates we develop;

● our intentions and ability to successfully commercialize our product candidates;

● our expectations regarding the nature of the biological pathways we are targeting;

● our expectations for our Functional, Integrated, NextCure Discovery in Immuno-Oncology (“FIND-IO”) platform, including our ability to discover and advance product candidates using our FIND-IO platform;

● the potential benefits of and our ability to maintain our relationship and collaboration with Yale University;

● our estimates regarding our expenses, future revenues, capital requirements, our 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;

15

● our ability to protect and enforce our intellectual property protection and the scope and duration of such protection;

● any failure of our information technology systems such as security breaches, loss of data and other disruptions;

● 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: positive results in preclinical studies may not be predictive of the results of clinical trials; our limited operating history and not having any products approved for commercial sale; our history of significant losses; our need to obtain additional financing; risks related to clinical development, marketing approval and commercialization; the unproven approach to the discovery and development of product candidates based on our FIND-IO platform; 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 2022 Annual Report and in our other filings with the Securities and Exchange Commission (“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.

Overview

We are 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. We view the immune system holistically and, rather than target one specific immune cell type, we focus on understanding biological pathways, the interactions of cells and the role each interaction plays in an immune response. Through our proprietary FIND-IO, platform, we study various immune cells to discover and understand targets and structural components of immune cells and their functional impact in order to develop immunomedicines. We are focused on patients who do not respond to current therapies, patients whose cancer progresses despite treatment and patients with cancer types not adequately addressed by available therapies. We are committed to discovering and developing first-in-class immunomedicines, which are immunomedicines that use new or unique mechanisms of action to treat a medical condition.

Our product candidate NC410 is a fusion protein of LAIR-2, a naturally occurring soluble version of and decoy protein for LAIR-1 and is designed to block immune suppression mediated by LAIR-1.  In June 2020, we initiated a Phase 1/2 clinical trial of NC410 in patients with advanced or metastatic solid tumors. The Phase 1 dose-escalation portion of this open-label trial was designed to evaluate the safety and tolerability of NC410 and determine its pharmacologically active and/or maximum tolerated dose. In October 2022, we announced the initiation of a Phase 1b/2 clinical trial to evaluate NC410 in combination with KEYTRUDA® (pembrolizumab), Merck’s anti-PD-1 therapy, in immune checkpoint refractory patients (colorectal, esophageal, endometrial and head and neck cancers) or immune checkpoint naïve solid tumor patients (colorectal and ovarian cancers).

Our product candidate NC762 is a monoclonal antibody that binds specifically to human B7 homolog 4 protein, or “B7-H4”, a protein expressed on multiple tumor types. In July 2021, we initiated a Phase 1/2 clinical trial of NC762 in patients with lung cancer, breast cancer, ovarian cancer or potentially other tumor types. The Phase 1 dose-escalation portion of this open-label trial was designed to evaluate the safety and tolerability of NC762 and determine its pharmacologically active and/or maximum tolerated dose. In November 2022, we announced initial data from the Phase 1 portion of this trial which indicate that NC762 appears to be well tolerated. Safety expansion studies are ongoing with the intent of selecting a recommended Phase 2 dose.

Our product candidate NC525 is a novel LAIR-1 antibody that selectively targets Acute Myeloid Leukemia, or “AML”, blast cells and leukemic stem cells, or “LSCs”. Preclinical data show that NC525 kills AML blast cells and LSCs while sparing hematopoietic stem and progenitor cells, or “HSPCs”. In February 2023 we initiated a Phase 1 trial for

16

NC525 to evaluate the safety and preliminary efficacy of NC525 in AML, high-risk myelodysplastic syndrome, and chronic myelomonocytic leukemia (CMML).  

Financial Overview

Since commencing operations in 2015, we have devoted substantially all 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, discovery programs and FIND-IO platform.

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 June 30, 2023, 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.  Our net loss for the three months ended June 30, 2023 and 2022, was $17.9 million and $17.9 million, respectively. Our net loss for the six months ended June 30, 2023 and 2022, was $34.0 million and $38.5 million, respectively. As of June 30, 2023, we had an accumulated deficit of $295.7 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 and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $130.6 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into mid-2025. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect.

We expect to incur substantial expenditures in the foreseeable future as we advance our product candidates through clinical development, the regulatory approval process and, if approved, commercialization. Specifically, in the near term, we expect to incur substantial expenses relating to our Phase 1b/2 clinical trial of NC410 in combination with pembrolizumab, our ongoing Phase 1/2 clinical trial for NC762, our ongoing Phase 1 clinical trial for NC525, and other research and development activities. We expect to continue to incur significantly increased costs as a result of operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

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:

● expenses incurred under agreements with third parties, including agreements with third parties that conduct research, preclinical activities or clinical trials on our behalf;

● costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

17

● 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 continue to increase substantially for the foreseeable future as we advance our product candidates through development and expand the number of trials we are conducting and the patients enrolled in those trials, as we utilize our current good manufacturing practice, or “cGMP”, manufacturing capacity, including to provide drug supply of NC410, NC762 and NC525 for future clinical trials.

We cannot determine with certainty the duration and costs of future clinical trials of NC410, NC762, NC525 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 NC410, NC762, NC525 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 NC410, NC762 and NC525, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;

● 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.

18

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.

We anticipate that our general and administrative expenses will increase during the next few years as a result of staff costs, additional occupancy costs, higher legal and accounting fees, investor relations costs, higher insurance premiums and other compliance costs.

Other Income, Net

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

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023		2022		Change		2023		2022		Change
Operating expenses:
Research and development	$	13,447	$	12,825	$	622	$	25,094	$	27,849	$	(2,755)
General and administrative		5,711		5,303		408		11,135		11,050		85
Loss from operations		(19,158)		(18,128)		(1,030)		(36,229)		(38,899)		2,670
Other income, net		1,299		208		1,091		2,274		377		1,897
Net loss	$	(17,859)	$	(17,920)	$	61	$	(33,955)	$	(38,522)	$	4,567

Research and Development Expenses

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2023		2022		Change		2023		2022		Change
External research and development expenses:
NC410	$	2,511	$	1,548	$	963	$	3,810	$	3,321	$	489
NC762		1,193		1,160		33		2,095		2,144		(49)
NC525		881		751		130		1,343		2,351		(1,008)
Other programs and preclinical development		2,734		3,745		(1,011)		5,577		8,572		(2,995)
Total external research and development expenses		7,319		7,204		115		12,825		16,388		(3,563)
Total internal research and development expenses		6,128		5,621		507		12,269		11,461		808
Total research and development expenses	$	13,447	$	12,825	$	622	$	25,094	$	27,849	$	(2,755)

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 June 30, 2023 increased $0.6 million, or 5% compared to the three months ended June 30, 2022, primarily due to higher costs associated with our ongoing Phase 1b/2 clinical trial to evaluate NC410 in combination with KEYTRUDA® (pembrolizumab), Merck’s anti-PD-1 therapy, in

19

immune checkpoint refractory patients (colorectal, esophageal, endometrial and head and neck cancers) or immune checkpoint naïve solid tumor patients (colorectal and ovarian cancers).

Research and development expenses for the six months ended June 30, 2023 decreased $2.8 million, or 10% compared to the six months ended June 30, 2022, primarily due to the decision to discontinue clinical development of NC318 announced in the fourth quarter of 2022 and lower costs associated with NC525, as this program initiated a phase 1 trial in February 2023.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2023 increased by $0.4 million compared to the three months ended June 30, 2022. The increase was primarily due to higher payroll and legal costs partially offset by lower stock compensation expense and lower insurance costs..

General and administrative expenses for the six months ended June 30, 2023 increased by $0.1 million compared to the six months ended June 30, 2022. The increase was primarily due to higher payroll and legal costs partially offset by lower insurance costs.

Other Income, Net

Other income, net for the three months ended June 30, 2023 increased by $1.1 million compared to the three months ended June 30, 2022, due to higher interest income as a result of higher interest rates and lower amortization on our investments.

Other income, net for the six months ended June 30, 2023 increased by $1.9 million compared to the six months ended June 30, 2022, due to higher interest income as a result of higher interest rates and lower amortization on our investments.

Liquidity and Capital Resources

We have financed our operations primarily with proceeds from public offerings of our common stock, private placements of our preferred stock and upfront fees received under the the Company’s former agreement with Eli Lilly and Company, which was terminated in March 2020 (the “Lilly Agreement”). On May 13, 2019, we closed our IPO, in which we sold 5,750,000 shares of common stock at a public offering price of $15.00 per share, for net offering proceeds to us of approximately $77.0 million after deducting underwriting discounts and commissions and offering expenses. On November 19, 2019, we completed an underwritten public offering in which we sold 4,077,192 shares of common stock at a public offering price of $36.75 per share. On December 2, 2019, the underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at a public offering price of $36.75. Net offering proceeds to us were approximately $160.9 million after deducting underwriting discounts and commissions and offering expenses. Since inception, we have received aggregate gross proceeds of $164.4 million from the sale and issuance of shares of our preferred stock. In addition, in November 2018, we received an upfront payment of $25.0 million in cash from Lilly pursuant to the Lilly Agreement. Our cash and cash equivalents are held in money market funds.

On May 6, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with SVB Leerink 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. We have not yet sold any shares of our common stock pursuant to the Sales Agreement.

20

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $130.6 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into mid-2025.

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 arrangements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates or delay our efforts to expand our pipeline of product candidates.

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):

	Six Months Ended
	June 30,
	2023		2022
Net cash (used in) provided by:
Operating activities	$	(29,526)	$	(29,936)
Investing activities		24,832		45,623
Financing activities		83		139
Net increase (decrease) in cash and cash equivalents	$	(4,611)	$	15,826

Net Cash Used in Operating Activities

Net cash used in operating activities was $29.5 million for the six months ended June 30, 2023, which was primarily the result of our net loss of $34.0 million and a $1.9 million net use of operating assets and liabilities, partially offset by non-cash charges for depreciation and amortization of $1.9 million and stock-based compensation of $4.2 million. Net cash used in operating activities was $29.9 million for the six months ended June 30, 2022, which was primarily due to our net loss of $38.5 million, partially offset by non-cash charges for depreciation and amortization of $2.1 million, amortization of premiums and discounts on marketable securities of $1.9 million, and stock-based compensation of $4.9 million.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2023 was $24.8 million, which was primarily due to net proceeds from sales and maturities of marketable securities of $25.4 million, partially offset by purchases of property and equipment of $0.5 million. Net cash provided by investing activities for the six months ended June 30, 2022 was $45.6 million, which was primarily due to net proceeds from marketable securities of $46.3 million, partially offset by purchases of property and equipment of $0.7 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2023 representing sales of our stock under the Employee Stock Purchase Plan (ESPP) and the exercise of stock options. Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2022, representing sales of our stock under the Employee Stock Purchase Plan (ESPP) and the exercise of stock options.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations during the six months ended June 30, 2023, as compared to those disclosed in our 2022 Annual Report.

21

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 revenue recognition and valuing share-based compensation, including the fair value of our common stock in periods before our IPO. 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 six months ended June 30, 2023, there were no material changes to our critical accounting policies reported in our 2022 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 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.

Emerging Growth Company Status

As an emerging growth company, or “EGC”, under the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act”, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

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 June 30, 2023. 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 June 30, 2023, 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.

22

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 June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

23

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth under the heading “Legal Proceedings” in Note 9, Commitments and Contingencies, in Notes to Condensed Financial Statements in Item 1 of Part I of this Quarterly Report, is incorporated herein by reference. In addition, from time to time, we are involved in litigation or other legal proceedings as part of our ordinary course of business. In the opinion of our management, the ultimate disposition of these legal proceedings in the ordinary course of business is not likely to have a material adverse effect on our business.

Item 1A. Risk Factors.

There have been no material updates to the risk factors set forth in our 2022 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1 or any non-Rule 10b5-1 trading arrangement.

24

Item 6. Exhibits.

The exhibits filed or furnished as part of this Quarterly Report are set forth on the Exhibit Index, below.

Exhibit No.	Exhibit Description
3.1	Second Amended and Restated Bylaws of NextCure, Inc. (incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed with the Commission on June 26, 2023).
31.1	Certification of Michael Richman pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Steven P. Cobourn pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Michael Richman and Steven P. Cobourn pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101.INS	Inline XBRL Instance Document
EX-101.SCH	Inline XBRL Taxonomy Extension Schema Document
EX-101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
EX-101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Coverage Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEXTCURE, INC.
Date: August 3, 2023	By:	/s/ Michael Richman
	Name:	Michael Richman
		President and Chief Executive Officer
Date: August 3, 2023	By:	/s/ Steven P. Cobourn
	Name:	Steven P. Cobourn
		Chief Financial Officer

26