Business context and reporting period
Filing identity: The supplied filing is Graphite Bio, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2023—not a filing for LENZ Therapeutics, Inc. Confirm the intended company before relying on this summary.
Graphite Bio discontinued development of its lead sickle cell disease candidate, nula-cel, after a serious adverse event in the first patient dosed that the company considered likely related to treatment. It is exploring strategic alternatives and is not currently developing product candidates. The company reported no product revenue.
Key financial metrics
| Metric | Q3 2023 / September 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $25.0 million | $26.2 million in Q3 2022 |
| Research and development | $2.4 million | $18.3 million in Q3 2022 |
| General and administrative | $11.3 million | $7.9 million in Q3 2022 |
| Restructuring and impairment costs | $11.3 million | None in Q3 2022 |
| Net loss | $22.5 million; $0.39 per share | $24.7 million; $0.45 per share in Q3 2022 |
| Nine-month net loss | $101.7 million | $76.5 million in 2022 |
| Cash, cash equivalents and marketable securities | $234.0 million | $283.6 million at December 31, 2022 |
| Nine-month operating cash flow | $(44.1) million | $(65.6) million in 2022 |
| Total liabilities | $62.2 million, including $53.1 million in operating lease liabilities | $25.6 million at December 31, 2022 |
Margins are not meaningful because the company reported no product revenue. Management said available cash, cash equivalents and marketable securities were expected to fund its current operating plan for at least 12 months from issuance of the financial statements.
Material changes and unusual items
- For the first nine months, operating expenses rose to $109.6 million from $78.9 million, primarily reflecting $51.1 million of restructuring and impairment costs. Net loss increased to $101.7 million from $76.5 million.
- Research and development expense fell substantially following the discontinuation of nula-cel and workforce reductions. The company reported a 78.1% total workforce reduction through the February, July and August actions.
- Nine-month restructuring and impairment costs included $35.0 million of non-cash impairment related to the Bayside lease, $7.9 million in severance expense, $6.8 million of property and equipment impairment and disposal costs, and $1.4 million of impairment related to another South San Francisco lease.
- In August, the company sold assets associated with its non-genotoxic conditioning program for $0.5 million upfront, with up to approximately $1.0 million in contingent milestone payments plus potential royalties and other fees. It also granted a third party an option over nula-cel and related assets in exchange for a 20% equity interest; the counterparty had not met the financing condition to exercise as of September 30, and the interest was recorded at no value.
- After quarter-end, the company amended its Bayside lease, providing for termination by December 31, 2024, and reported paying $15.9 million for remaining lease amounts and approximately $20.8 million as a lease termination payment. In November, it also agreed to pay approximately $1.4 million for a third party to assume obligations under another lease. These subsequent payments are not reflected in September 30 cash balances.
Outlook, risks and contingencies
Graphite Bio continues to evaluate strategic alternatives, but gave no transaction guidance or assurance that a transaction will be completed on favorable terms. Management said the board may pursue dissolution and liquidation if the strategic review is unsuccessful. The company expects costs from the review to consume cash and stated that future capital needs depend in part on its strategic direction.
The filing identifies risks including continued operating losses, the need for additional capital if operations or development resume, uncertainty around strategic alternatives, and uncertainty in estimates of lease impairment and potential sublease recoveries. The company reported no material legal proceedings and no material changes to previously disclosed risk factors. Management said disclosure controls were effective as of September 30, 2023.
Important facts for investors to verify
- Whether the intended filing is Graphite Bio’s 10-Q or a LENZ Therapeutics filing; the supplied document names Graphite Bio throughout.
- The status and terms of the strategic review, including whether a transaction or liquidation is pursued.
- Cash and liquidity after the post-quarter-end lease payments and other restructuring costs; the filing does not provide a post-payment cash balance.
- The counterparty’s financing milestone and any eventual exercise of the nula-cel asset option, and whether contingent consideration from the asset sale becomes payable.
- Lease and impairment exposure following the Bayside lease amendment and the November lease assumption agreement.