Business context and reporting period
Adicet Bio, Inc. is a clinical-stage biotechnology company developing “off-the-shelf” allogeneic gamma delta T-cell therapies. This unaudited Form 10-Q covers the three months ended March 31, 2021; balance-sheet figures are compared with December 31, 2020. Following the September 2020 merger, Former Adicet is the accounting acquirer, so the 2020 operating comparison reflects Former Adicet and may not be directly comparable with the combined company’s 2021 results.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue, all from Regeneron | $(4.0) million | $2.0 million |
| Research and development | $11.7 million | $7.0 million |
| General and administrative | $5.6 million | $2.5 million |
| Operating loss | $21.4 million | $7.6 million |
| Net loss | $21.3 million | $4.5 million |
| Net loss per share | $0.82 | $2.07 |
| Cash used in operating activities | $15.1 million | $8.4 million |
The negative Q1 2021 revenue reflects a $4.0 million cumulative revenue reversal under the Regeneron agreement, following a change in estimated costs and an extension of the time needed to fulfill the performance obligation. This was not product revenue. No product candidates are approved for sale, and the company has not generated product-sales revenue.
At March 31, 2021, cash and cash equivalents were $221.7 million and short-term marketable debt securities were $1.8 million, totaling $223.4 million; restricted cash was an additional $4.8 million. Total assets were $282.1 million, total liabilities $45.8 million, and stockholders’ equity $236.3 million. Accumulated deficit was $127.6 million. No term-loan balance was drawn; a Pacific Western Bank facility of up to $12.0 million remained available through October 28, 2021, subject to its terms. The company reported compliance with loan covenants.
February’s public offering and concurrent private placement generated approximately $143.7 million in net proceeds combined. Common shares outstanding rose from 19.7 million at year-end to 31.8 million at quarter-end. The company said available cash, cash equivalents and marketable securities were expected to fund forecast expenses, capital spending and debt service for at least 12 months from the May 17, 2021 filing date, and that the financing had resolved substantial doubt about going concern. No shares had been sold under the $75.0 million at-the-market program by March 31.
Material changes versus the prior comparable period
- Operating expenses increased 82% to $17.4 million. R&D rose 67%, mainly with increased personnel, clinical-development activity, and consultant and CRO costs; G&A rose 123%, including higher personnel, stock compensation, public-company and insurance costs.
- Net loss increased by $16.8 million. The revenue reversal, higher operating expenses, and a much smaller tax benefit than in Q1 2020 contributed; the 2020 tax benefit included a CARES Act NOL carryback.
- Operating cash use increased by $6.8 million year over year. Financing cash flow of $144.9 million, principally from the equity financing, drove the $137.6 million increase in cash, cash equivalents and restricted cash.
- The quarter included a $0.5 million impairment of acquired in-process R&D associated with RTB101 and a $0.4 million reduction in the fair value of the contingent value rights liability.
Outlook, commentary and risks
- The company initiated the first-in-human Phase 1 ADI-001 trial for non-Hodgkin lymphoma in March 2021, with interim data expected in 2021. It planned to file an IND for solid-tumor candidate ADI-002 in Q2 2022. Management expects significant losses and negative operating cash flows to continue, with R&D spending expected to rise.
- Key uncertainties include early-stage clinical safety and efficacy, trial enrollment and timing, manufacturing scale and third-party supply, regulatory review, competition, reliance on Regeneron and licensed intellectual property, and potential effects of COVID-19. Management reported no significant COVID-related operating disruption to date but warned of possible future trial, supply and regulatory delays.
- In February, the company terminated an RTB101 COVID-19 study following slow enrollment; it had previously terminated a nursing-home study and in February terminated an NIH study following poor enrollment. These developments reduced the estimated likelihood of a commercial partner and lowered the CVR liability.
- Material weaknesses in internal control over financial reporting remained, and management concluded disclosure controls were ineffective as of March 31. Remediation efforts included hiring finance and accounting personnel, training, enhanced review procedures and implementation of a new ERP system.
- A subsequent-events commitment provides for approximately $14 million of construction services for the Redwood City office and laboratory through March 2022. The filing reported no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- Clinical-trial progress, enrollment, safety findings and whether interim ADI-001 data arrive as expected; progress toward the ADI-002 IND timeline.
- Cash runway assumptions, actual quarterly cash burn, construction spending and any use of the available loan facility or ATM program.
- The assumptions behind the $4.0 million Regeneron revenue reversal and the remaining contract liability of $18.0 million; Regeneron represented 100% of reported revenue.
- Progress in remediating the material weaknesses and whether controls are ultimately judged effective.
- Manufacturing and supplier readiness, financing needs, and the status and economics of the Regeneron collaboration and RTB101-related CVR.