Atara Biotherapeutics, Inc. — Q2 2017 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and six months ended June 30, 2017. Atara is a clinical-stage cell therapy company developing allogeneic T-cell treatments for cancer and multiple sclerosis. It had no product revenue and reported continuing operating losses.
Financial performance and position
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $18.3 million | $35.8 million | $13.0 million / $24.2 million |
| General and administrative expense | $9.6 million | $18.2 million | $6.5 million / $12.3 million |
| Net loss | $27.4 million | $53.1 million | $18.9 million / $35.4 million |
| Basic and diluted loss per share | $0.94 | $1.82 | $0.66 / $1.24 |
| Cash used in operating activities | Not separately stated | $42.3 million | $23.3 million |
At June 30, cash and cash equivalents were $64.2 million and short-term investments were $152.7 million, totaling $216.9 million, down from $255.7 million at December 31, 2016. Current assets were $222.5 million and current liabilities $11.5 million. Total liabilities were $23.0 million, including a $10.9 million long-term financing obligation recognized for landlord-funded construction. Stockholders’ equity was $221.1 million; accumulated deficit was $230.2 million. No gross margin was reported because the company had no revenue. Investing activities provided $49.1 million, mainly reflecting investment maturities and sales; financing activities provided $9.5 million, including ATM share-sale proceeds.
Material changes versus 2016
- First-half net loss widened by $17.6 million, while operating cash use increased by $19.1 million.
- First-half R&D expense rose $11.6 million, primarily from ATA129 trial preparation and manufacturing, broader T-cell manufacturing activity, and higher employee and overhead costs.
- First-half G&A expense increased $5.9 million, reflecting higher payroll, stock-based compensation, and professional services.
- Property and equipment rose to $20.3 million from $3.3 million, mainly due to construction in progress for the Thousand Oaks facility.
- At June 30, 2017, 693,989 shares had been sold through the ATM facility for $9.8 million gross and $9.3 million net. By August 7, cumulative ATM sales were 1,349,865 shares for $20.0 million gross and $19.2 million net.
Outlook, commentary, and risks
- Management expected June 30 cash, cash equivalents, and short-term investments to fund planned operations into the first quarter of 2019. The company anticipated spending approximately $43.1 million on the Thousand Oaks office, laboratory, and manufacturing build-out through the remainder of 2017 and early 2018.
- Atara expected to initiate two Phase 3 ATA129 trials for EBV-associated post-transplant lymphoproliferative disorder in the second half of 2017, subject to completing comparability testing and submitting data to the FDA. It planned an EU conditional marketing authorization application in 2018, supported by earlier clinical data and ongoing Phase 3 data.
- An allogeneic ATA188 Phase 1 trial in multiple sclerosis was expected to begin in the second half of 2017; a Phase 1/2 ATA129 trial in nasopharyngeal carcinoma with pembrolizumab was planned for 2018. ATA230 was deprioritized relative to EBV programs, with Phase 3 planning deferred until after ATA129 trial initiation.
- Management expected R&D and G&A costs to continue rising and acknowledged the need for substantial additional funding over time. There was no committed external funding source; future financing could dilute shareholders or require unfavorable terms.
- Key risks include clinical and regulatory failure or delay; manufacturing comparability, scale-up, and facility construction risks; dependence on CROs, contract manufacturers, and collaborators; uncertain adoption, reimbursement, and commercialization; and intellectual-property and competition risks. Earlier ATA129 results, including approximately 60% one-year survival in small prior trial populations, are not proof of success in planned multicenter trials.
- The Thousand Oaks lease has a 15-year initial term and $16.4 million of aggregate contractual obligations; build-to-suit accounting resulted in recognition of construction assets and a financing obligation. The filing reported no material legal proceedings and no off-balance-sheet arrangements. Management assessed disclosure controls as effective at June 30, 2017.
Important facts for investors to verify
- Whether ATA129 comparability testing is completed and the two Phase 3 trials begin on the anticipated schedule.
- Whether actual cash burn, construction spending, and any subsequent ATM share issuance are consistent with management’s runway estimate.
- Progress, costs, and completion timing for the Thousand Oaks facility, including regulatory readiness for manufacturing.
- Clinical evidence and safety findings for ATA129 and ATA188, including whether early or interim results are confirmed in later trials.
- Potential future financing needs, dilution, and contingent milestone or royalty obligations under license agreements.