resTORbio, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. The filing is by resTORbio, a clinical-stage biotechnology company, not Adicet Bio; it reports a proposed merger with Adicet announced after quarter-end. Financial amounts below are in millions of dollars unless stated otherwise.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.8 | $8.9 |
| General and administrative expense | $2.5 | $2.8 |
| Total operating expenses / operating loss | $7.4 | $11.7 |
| Other income, net | $0.3 | $0.6 |
| Net loss | $7.0 | $11.1 |
| Basic and diluted loss per share | $0.19 | $0.38 |
| Cash used in operating activities | $15.0 | $12.0 |
- At March 31, cash and cash equivalents were $61.2 million and marketable securities were $15.1 million, totaling $76.3 million. Total assets were $78.2 million; total liabilities were $2.6 million, with no material debt reported. Accumulated deficit was $161.2 million.
- Cash and cash equivalents plus restricted cash increased $27.5 million during the quarter, largely reflecting $42.5 million of marketable-security maturities. This was a shift in investment holdings, not operating cash generation.
- Operating cash use increased year over year despite the lower net loss, primarily because accounts payable and accrued liabilities declined by a combined $9.6 million. No profit margins are meaningful because the company had no revenue.
Changes, business developments, and outlook
- R&D expense fell 45% year over year, mainly reflecting reduced clinical-trial activity; G&A expense fell 11%. Net loss narrowed approximately 36%.
- Following the November 2019 Phase 3 PROTECTOR 1 failure to meet its primary endpoint, resTORbio stopped developing RTB101 for prevention of clinically symptomatic respiratory illness in older adults and reduced its workforce. It recorded $0.1 million of additional restructuring charges in Q1 and had $0.1 million of remaining restructuring accrual at quarter-end.
- In April 2020, after the reporting period, the company terminated its Parkinson’s disease RTB101 study and said it would not dose the fifth planned cohort. It had completed four dosing arms; data from those cohorts had been expected by mid-2020.
- On April 28, 2020, resTORbio agreed to merge with Adicet, subject to shareholder approvals and other closing conditions. Closing was expected in the second half of 2020. Eligible resTORbio shareholders would receive one contingent value right per share, potentially tied to net proceeds from third-party commercialization of RTB101 for a COVID-19-related indication; the CVRs could expire without payment. Certain circumstances could require a $6.1 million termination fee.
- Management said R&D spending was expected to decrease substantially as RTB101 development in the prior indications ended, while G&A expenses were expected to increase due to the potential merger and public-company costs. Future operations were described as highly dependent on completing the Adicet merger.
Risks and contingencies
- Merger completion is uncertain and depends on conditions outside resTORbio’s control. Failure or delay could disrupt operations, affect personnel and business relationships, and lead to transaction costs or, in specified circumstances, the termination fee.
- The merger agreement restricts certain business actions and limits pursuit of competing proposals; litigation related to the transaction could delay or prevent completion.
- COVID-19 could disrupt clinical sites, enrollment, suppliers, manufacturing, shipping, and operations. The filing also notes that clinical or commercial success for RTB101 in a COVID-19 indication is uncertain.
- Novartis license obligations include potential clinical, regulatory, and commercial milestone payments and royalties. As of March 31, 2020, remaining milestones and royalties had not been achieved or considered probable.
- The company reported no material litigation, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2020.
Most important facts to verify
- Whether the Adicet merger closed, the final transaction terms, shareholder approvals, and any termination-fee exposure.
- The CVR agreement’s conditions, time limits, and proceeds waterfall for any RTB101 COVID-19-related commercialization.
- Cash burn and liquidity after March 31, including merger expenses and the impact of discontinued clinical programs; the filing does not provide a clear cash-runway estimate.
- Whether any RTB101 clinical data, licensing, or other strategic transaction generated value after the filing date.