Adicet Bio, Inc. — Q3 2023 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2023. Adicet is a clinical-stage biotechnology company developing allogeneic gamma delta T-cell therapies. Its lead candidate, ADI-001, is in a Phase 1 study for relapsed or refractory aggressive B-cell non-Hodgkin lymphoma (NHL); ADI-270 is in preclinical development. The company has no approved products and no product-sales revenue.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $25.0 million |
| Research and development expense | $26.2 million | $16.6 million | $81.3 million | $46.2 million |
| General and administrative expense | $6.6 million | $6.4 million | $19.7 million | $19.7 million |
| Goodwill impairment | $19.5 million | $0 | $19.5 million | $0 |
| Net loss | $49.9 million | $22.0 million | $113.2 million | $39.9 million |
| Basic and diluted loss per share | $1.16 | $0.53 | $2.63 | $0.98 |
At September 30, 2023, cash and cash equivalents were $183.3 million, down $74.4 million from December 31, 2022. Nine-month operating cash use was $70.2 million, investing cash use was $4.3 million, and financing provided $0.2 million. Cash and cash equivalents included $134.3 million of Treasury securities.
Total assets were $233.3 million and stockholders’ equity was $194.7 million. Total liabilities were $38.6 million, including $21.8 million of operating lease liabilities. No term-loan debt was outstanding; $12.7 million remained available under the loan agreement. The company reported $185.9 million of current assets and $19.8 million of current liabilities. Interest income was $2.5 million in Q3 and $7.8 million for the nine-month period. Profit margins are not meaningful given the absence of revenue.
Material changes and unusual items
- Nine-month revenue fell by $25.0 million year over year because the Regeneron-related performance obligations had been completed and revenue recognized in 2022.
- R&D expense rose 58% in Q3 and 76% year to date. Management attributed the increases mainly to external CDMO/CRO and research costs, higher headcount, facility costs, and laboratory expenses.
- The company recorded a $19.5 million goodwill impairment in Q3, writing off all goodwill, after its share price had declined 44% from June 30 to September 30 and management concluded the decline indicated impairment.
- An August 2023 repricing lowered the exercise price of 6.43 million options to $2.14 per share. It created $4.6 million of incremental compensation cost; $0.4 million was recognized in Q3 and $4.2 million was to be recognized over remaining vesting periods.
- The Redwood City GMP cell-processing and vector-manufacturing suite was completed in February 2023. The company said it had not yet commenced manufacturing operations at its facility and continued to rely on third-party manufacturers.
Outlook, risks, and contingencies
Management stated that cash and cash equivalents were expected to fund forecast operating expenses, capital expenditures, and debt service for at least 12 months from issuance of the interim financial statements. Separately, the risk-factor discussion said the company believed its cash capitalized it into the first half of 2025 and that funding would be needed beyond that point. Management cautioned that assumptions could prove wrong and additional financing may not be available on acceptable terms.
In May 2023, Adicet discussed with the FDA the design of a potential pivotal Phase 2 study of ADI-001 in post-CAR-T large B-cell lymphoma (LBCL), including a possible accelerated-approval pathway; the filing notes there is no FDA agreement that the proposed plan will support approval. The company initiated the EXPAND expansion cohort in post-CAR-T LBCL in November 2023 and continued MCL enrollment. It expected to provide an additional Phase 1 clinical update in the second half of 2024, and said a potential Phase 2 transition would depend on data and regulatory feedback. ADI-270’s previously stated IND timing was the first half of 2024. Preclinical development of ADI-925 had been paused to prioritize ADI-270.
Key risks include clinical safety, efficacy and enrollment; regulatory uncertainty; dependence on third-party manufacturing and suppliers; substantial ongoing cash needs; competition; intellectual-property disputes; and potential supply disruption, including risks associated with geopolitical conflicts. The filing reported no legal proceedings expected to have a material adverse effect. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current cash runway and the assumptions behind the differing stated horizons: at least 12 months from filing versus into the first half of 2025.
- Upcoming ADI-001 enrollment, safety and efficacy results, and whether FDA feedback supports the proposed Phase 2 design and accelerated-approval strategy.
- Whether ADI-270 reaches IND-enabling and manufacturing milestones on the stated timeline.
- Cash burn and R&D spending trends, and whether the company can obtain additional financing without material dilution or program reductions.
- Third-party manufacturing capacity, transfer progress, and readiness to use the Redwood City facility.
- Compliance with PacWest cash-balance covenants and the terms and availability of the undrawn loan facility.