Sana Biotechnology, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless otherwise noted.
Business context
Sana is a pre-revenue biotechnology company developing engineered-cell therapies using ex vivo and in vivo platforms. All product candidates remained in preclinical development, and none had entered clinical trials or received approval for sale.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Product revenue | None reported | None reported |
| Research and development expense | $72.7 million | $41.9 million; up $30.8 million |
| General and administrative expense | $14.4 million | $11.8 million; up $2.6 million |
| Total operating expenses | $31.7 million | $180.8 million |
| Net loss | $31.4 million; $0.17 per share | $180.6 million; $1.52 per share |
| Net cash used in operating activities | $77.7 million | $49.9 million |
| Cash, cash equivalents and marketable securities | $657.4 million at March 31, 2022 | $551.0 million at December 31, 2021 |
| Total assets / liabilities | $1,047.6 million / $346.0 million | $1,129.4 million / $400.9 million at December 31, 2021 |
| Debt | None outstanding |
Gross margin and operating margin are not meaningful because the company had no product revenue. The much lower reported operating expenses and net loss versus Q1 2021 primarily reflect a $55.4 million non-cash gain from revaluing success-payment and contingent-consideration liabilities in Q1 2022, compared with a $127.1 million non-cash expense in Q1 2021. Excluding this line, R&D and G&A spending increased.
Operating cash use increased by $27.8 million year over year. Cash and cash equivalents were $188.5 million; marketable securities totaled $468.9 million. The company reported $701.7 million of stockholders’ equity. Accumulated deficit was $816.8 million. A $3.8 million unrealized loss on marketable securities contributed to comprehensive loss.
Material changes and operating developments
- R&D costs rose 74% year over year, mainly due to increased personnel, laboratory and external research costs, facility costs, and technology licensing for CD22 and BCMA programs.
- Cash, cash equivalents and marketable securities declined $72.5 million from December 31, 2021, while operating cash use was $77.7 million. Investing activities provided $12.5 million, principally reflecting net maturities of marketable securities; financing activities provided $0.7 million.
- Fair value of success-payment liabilities fell to $47.6 million from $102.5 million at year-end, generating a $54.9 million non-cash gain. Contingent consideration was $153.2 million, with a $0.5 million non-cash gain for the quarter.
- Operating lease liabilities totaled $112.2 million. In April 2022, Sana amended its South San Francisco lease to add 32,909 square feet, with $25.3 million of base rent over the initial term through April 2030.
Outlook, risks and contingencies
- Management stated that existing cash, cash equivalents and marketable securities were expected to fund working capital and capital expenditure needs for at least the next 12 months under its current operating plan. Sana expects losses and expenses to increase substantially and anticipates needing additional financing in the future.
- The company’s goal was to submit its first INDs in 2022, targeting hypoimmune allogeneic CD19 CAR T candidate SC291 and in vivo CD19 CAR T candidate SG295. These were plans, not confirmed submissions; timing and regulatory clearance were uncertain.
- Management cited modest COVID-19-related delays in discovery and development, including temporary partial shutdowns at some CROs and academic institutions. Further impacts on research, manufacturing buildout, supply availability, and future trial enrollment remained uncertain.
- Key risks include the unproven nature of the platforms, preclinical and regulatory uncertainty, complex manufacturing and supply constraints, reliance on third parties and licensed technology, competition for specialized personnel, and the possibility that future financing may not be available on acceptable terms.
- Potential obligations include up to $500 million of Cobalt contingent consideration, up to $500 million of Cobalt success payments, and up to $175 million of Harvard success payments. No success payment had been triggered as of March 31, 2022. The recorded fair values depend on estimates and can cause significant non-cash earnings volatility.
- The filing reported no material legal proceedings. Management concluded disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Progress and timing of the SC291 and SG295 IND plans, including any FDA feedback or delays.
- Quarterly operating cash use, cash runway assumptions, capital spending, and the timing and terms of any future financing.
- R&D spending growth and manufacturing facility buildout costs, including the added South San Francisco lease commitment.
- Changes in the fair value and potential payment terms of Cobalt and Harvard obligations; these estimates materially affect reported earnings but are not operating cash generation.
- Whether COVID-19, supply-chain constraints, third-party manufacturers, or recruitment challenges affect development timelines or planned trials.