Sana Biotechnology, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited consolidated financial statements; amounts below are in U.S. dollars unless noted.
Business context and reporting period
Sana is a preclinical-stage biotechnology company developing in vivo and ex vivo engineered-cell medicines. All product candidates remained in preclinical development; the company had no approved products and had generated no revenue. It aims to file multiple investigational new drug applications (INDs) in 2022 and 2023.
In February 2021, Sana completed its IPO, issuing 27.0 million shares at $25 per share and receiving $626.4 million in net proceeds. Outstanding convertible preferred stock converted into common stock in connection with the IPO.
Financial results and liquidity
- Revenue: None from product sales or other sources reported.
- Q2 2021: Net income of $18.7 million, or $0.10 per basic share and $0.09 diluted, versus a net loss of $87.8 million in Q2 2020. Research and development (R&D) expense was $45.0 million; general and administrative (G&A) expense was $12.5 million.
- First half 2021: Net loss of $161.9 million, or $1.08 per share, versus a $120.7 million loss in first half 2020. R&D expense was $86.9 million and G&A expense was $24.3 million.
- Cash flow, first half: $90.5 million used in operating activities; $13.8 million provided by investing activities; and $627.0 million provided by financing activities, primarily from the IPO. Cash, cash equivalents, and restricted cash increased $550.3 million.
- Liquidity at June 30: $930.8 million in cash, cash equivalents, and marketable securities; $860.3 million in current assets and $42.8 million in current liabilities. Management said existing funds were expected to cover working capital and capital expenditures for at least 36 months, based on its current operating plan.
- Debt and obligations: No debt outstanding. Total liabilities were $353.9 million, including $140.5 million of contingent consideration and $109.0 million of success-payment liabilities. Contractual obligations listed were $112.7 million, mostly operating leases; contingent milestone and success payments were excluded.
- Margins: Not meaningful because the company reported no revenue.
Material changes versus prior comparable periods
- Q2 moved from a $87.8 million loss to $18.7 million income, primarily because of a $76.0 million non-cash gain from remeasurement of success-payment and contingent-consideration liabilities. The gain included $83.2 million of success-payment gains, partly offset by $7.2 million of contingent-consideration expense. The reported profit therefore did not reflect product revenue or positive operating cash flow.
- Q2 R&D expense increased $15.0 million year over year, to $45.0 million, principally from higher personnel, research and laboratory, and facility costs. G&A increased $6.5 million, to $12.5 million, reflecting staffing, legal, insurance, and public-company costs.
- First-half operating cash use rose to $90.5 million from $62.9 million in 2020, while the first-half net loss widened by $41.3 million. First-half R&D and G&A expenses also increased, by $30.5 million and $12.3 million, respectively.
- IPO proceeds materially strengthened liquidity and converted the preferred-stock balance into common equity. Stockholders’ equity was $905.9 million at June 30, compared with a $421.2 million deficit at year-end 2020.
Outlook, management commentary, risks, and unusual items
- Management expects expenses and operating losses to increase as Sana advances preclinical programs, prepares for clinical development, expands manufacturing capabilities, and grows its workforce and public-company infrastructure. Additional financing may be needed in the future; terms or availability are not assured.
- Sana adjusted the expected timing of a potential IND for its in vivo hepatocyte fusosome program to allow more time to achieve desired potency and yield. It reported modest COVID-19-related delays and described continuing uncertainty around research, suppliers, manufacturing, and future clinical activity.
- In July 2021, after quarter-end, Sana agreed to lease 163,193 square feet in Fremont, California, for a planned GMP manufacturing facility. The initial lease runs through November 2031 and carries $28.6 million of base rent; a $6.4 million letter of credit was obtained. The company expects the facility build-out and operationalization to take several years.
- Fair-value remeasurement of Cobalt and Harvard success-payment liabilities can cause substantial, non-cash quarterly swings in reported results. These obligations may ultimately require cash or stock, and the Cobalt agreement also includes contingent development-milestone payments of up to $500 million.
- Key risks include the unproven nature of the platforms, preclinical and regulatory uncertainty, manufacturing scale-up and supply constraints, reliance on third parties and licensed intellectual property, competition for personnel, and possible dilution or cash demands from future financing and contractual payments. No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Progress against the stated 2022–2023 IND objectives, including the hepatocyte program’s potency and yield work.
- Cash burn, spending plans, and the assumptions supporting management’s stated minimum 36-month liquidity runway.
- Future fair-value changes and potential settlement terms for success-payment and contingent-consideration obligations.
- Fremont facility construction, permitting, operating readiness, total costs, and any changes to lease or letter-of-credit commitments.
- Whether COVID-19, supply availability, preclinical results, or regulatory feedback changes development timelines or financing needs.