Business Context and Reporting Period
The filing is Selecta Biosciences, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The provided metadata identifies Cartesian Therapeutics, Inc., but the filing itself identifies Selecta Biosciences, Inc. as the registrant. Selecta is a clinical-stage biopharmaceutical company developing its ImmTOR immune-tolerance platform for enzyme therapies, gene therapies and autoimmune diseases. It had no approved products or product revenue.
Key Financial Metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Collaboration and grant revenue | $24.4 million, versus $4.6 million | $55.1 million, versus $4.6 million |
| Research and development expense | $21.0 million, versus $14.0 million | $48.4 million, versus $39.4 million |
| General and administrative expense | $5.4 million, versus $4.4 million | $15.4 million, versus $14.2 million |
| Operating loss | $2.0 million, versus $13.7 million | $8.7 million, versus $48.9 million |
| Net loss | $17.9 million, versus $9.7 million | $37.9 million, versus $53.4 million |
| Basic and diluted loss per share | $0.16 loss, versus $0.09 loss | $0.34 loss, versus $0.54 loss |
Revenue was primarily recognized under the Sobi license for SEL-212, including clinical-supply shipments and reimbursement of Phase 3 DISSOLVE program costs. The company reported no product sales and expects product revenue to remain absent for the foreseeable future.
- Cash and cash equivalents were $114.6 million at September 30, 2021, compared with $138.7 million at December 31, 2020.
- Marketable securities were $24.0 million, compared with none at year-end 2020. Cash, cash equivalents, restricted cash and marketable securities totaled approximately $140.0 million.
- Net cash used in operating activities was $28.9 million, compared with $42.1 million provided in the prior-year period.
- Net cash used in investing activities was $26.9 million, primarily reflecting purchases of marketable securities and the $2.0 million investment in Cyrus Biotechnology.
- Net cash provided by financing activities was $31.7 million, primarily from $30.9 million of at-the-market offering proceeds.
- Outstanding term-loan principal was $25.0 million, with $4.1 million classified as current and $21.3 million as non-current after discounts and deferred charges. The loan matures in August 2025 and bears interest at a floating rate subject to a 7.90% floor.
- Deferred revenue was $82.4 million, including $55.9 million current and $5.5 million non-current related to the Sobi agreement, with additional contract liabilities from Sarepta and AskBio.
- Stockholders’ deficit was $18.7 million, compared with a deficit of $18.0 million at December 31, 2020. The accumulated deficit was $442.6 million.
Material Changes Versus the Prior Comparable Period
- Three-month collaboration revenue increased 426% to $24.4 million; nine-month revenue increased 1,087% to $55.1 million, driven principally by Sobi-related revenue recognition.
- Research and development expense increased 50% in the quarter and 23% year to date. Quarterly increases reflected preclinical programs, personnel and AskBio collaboration costs. Year-to-date increases reflected OTC and gene-therapy preclinical programs, salaries and SEL-399 collaboration costs, partly offset by lower SEL-212 clinical-supply expense.
- The operating loss narrowed substantially because revenue growth exceeded the increase in operating expenses.
- Net loss increased in the quarter because of a $15.8 million income-tax expense related to the company’s election to opt out of installment-sale taxation for the Sobi transaction. Year-to-date net loss improved despite this tax charge.
- The company recorded an $11.3 million year-to-date non-cash increase in the fair value of warrant liabilities, compared with a $3.6 million increase in the prior-year period. The warrant liability increased to $40.0 million from $28.7 million at year-end.
- Common shares outstanding increased to 115.4 million from 108.1 million at December 31, 2020, primarily reflecting at-the-market sales and equity compensation activity.
- The company filed an IND for a Phase 1/2 SEL-302 trial in pediatric methylmalonic acidemia. FDA’s 30-day review period had expired, but FDA was still considering chemistry, manufacturing and controls matters.
- AskBio opted out of development of the MMA indication; Selecta stated that it intended to continue developing SEL-302.
Guidance, Outlook, Risks and Unusual Items
- Management expected existing cash, cash equivalents, restricted cash and marketable securities to fund operating expenses and capital expenditures into the second quarter of 2023, while cautioning that this estimate depends on assumptions that may prove inaccurate.
- Management expects continuing operating losses and substantial additional financing needs. Potential funding sources include equity, debt, strategic collaborations, licensing transactions and grants.
- Topline results from the Phase 3 DISSOLVE program for SEL-212 were expected in the second half of 2022. The program consists of two Phase 3 trials funded by Sobi.
- The company expected to file an IND for its IgA nephropathy program in 2022, an IND or clinical trial application for SEL-313 in 2022, and an IND for its primary biliary cholangitis program in the second half of 2022.
- The SEL-302 trial could be delayed or placed on clinical hold if FDA concerns regarding chemistry, manufacturing and controls are not resolved. The company intended to await formal FDA clearance before initiating the trial.
- COVID-19 could disrupt clinical-trial enrollment, research activities, manufacturing, supply chains and access to capital, although management stated that it had not materially affected clinical programs as of the filing date.
- The company faces typical development-stage biotechnology risks, including clinical failure, adverse events, regulatory delays, manufacturing and supply constraints, intellectual-property challenges, dependence on collaborators and the need for additional capital.
- A derivative stockholder lawsuit concerning the December 2019 private placement was stayed pending review by a board-appointed Special Committee. No liability was accrued because any potential liability was not probable or estimable.
- Subsequent to quarter-end, Selecta entered into licensing or collaboration arrangements with Takeda, Genovis and Ginkgo. The Takeda arrangement included potential future payments of up to $1.124 billion plus royalties; these amounts were contingent and were not recognized as revenue in the quarter.
- Subsequent to quarter-end, the company established a new at-the-market program for up to $75.0 million of gross proceeds, subject to market conditions and potential dilution.
Important Facts for Investors to Verify
- Confirm the issuer identity: the filing is for Selecta Biosciences, Inc., not Cartesian Therapeutics, Inc.
- Assess the sustainability and timing of Sobi-related collaboration revenue, deferred-revenue recognition and reimbursement of DISSOLVE trial costs.
- Verify the Phase 3 DISSOLVE enrollment, timing of topline data and the potential regulatory and commercial path for SEL-212.
- Monitor FDA’s resolution of the SEL-302 chemistry, manufacturing and controls questions and any resulting clinical hold.
- Reconcile the stated cash runway with operating cash burn, additional financing needs, debt service and the new post-quarter-end equity program.
- Evaluate the effect of warrant-liability remeasurement, stock-based compensation and future equity issuance on reported earnings and dilution.
- Review the status and potential exposure of the derivative litigation and other contractual commitments.