Nautilus Biotechnology, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Financial statements are unaudited. Unless otherwise noted, amounts are in U.S. dollars.
Business context
Nautilus is a development-stage life sciences company developing a proteomics platform comprising instruments, consumables and software. It has no products available for commercial sale and has generated no revenue since inception. Substantially all resources are directed to research and development and preparation for commercialization.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $11.9 million | $8.9 million | $22.8 million | $18.5 million |
| General and administrative expense | $7.1 million | $6.6 million | $14.3 million | $13.0 million |
| Total operating expenses | $19.0 million | $15.5 million | $37.1 million | $31.5 million |
| Interest income | $3.2 million | $0.8 million | $6.3 million | $1.0 million |
| Net loss | $15.8 million | $14.7 million | $30.8 million | $30.5 million |
| Net loss per share | $0.13 | $0.12 | $0.25 | $0.24 |
With no revenue, gross profit and operating margins are not applicable. Higher interest income, primarily reflecting higher interest rates, partly offset increased operating expenses.
- Cash and liquidity: At June 30, cash and cash equivalents were $72.1 million; short-term investments were $91.2 million; and long-term investments were $123.4 million. Cash, cash equivalents and short-term investments totaled $163.3 million; total cash, cash equivalents and investments were $286.7 million.
- Cash flow: Six-month operating cash use was $26.1 million, versus $25.9 million in the prior-year period. Investing activities used $15.8 million, including purchases of securities and property and equipment; financing activities provided $0.1 million. Cash, cash equivalents and restricted cash decreased $41.7 million to $73.8 million.
- Balance sheet: Total assets were $330.8 million and stockholders’ equity was $289.7 million. Current assets of $166.7 million compared with current liabilities of $7.9 million.
- Debt and commitments: The filing reports no borrowings; liabilities primarily include operating lease obligations. Operating lease liabilities were $36.5 million, with $49.8 million of future minimum lease payments before imputed interest. Open purchase commitments were $1.3 million.
Changes versus prior comparable periods
- Q2 operating expenses rose 23% year over year; net loss widened 8%. R&D expense increased 35%, driven mainly by compensation, laboratory supplies and equipment, and facilities costs, partly offset by lower external development services.
- For the first six months, operating expenses increased 18%, while net loss increased 1%. R&D expense rose 23% and G&A rose 10%; increased compensation and facilities costs were major drivers. Higher interest income helped keep the increase in net loss comparatively modest.
- Cash and cash equivalents fell from $114.5 million at December 31, 2022 to $72.1 million at June 30, 2023. Short-term investments increased, while total investments were $214.6 million at quarter-end.
Outlook, risks and notable items
- Management said existing cash, cash equivalents and short-term investments were expected to fund planned operating expenses and capital expenditures for at least 12 months from the financial statements’ issuance. The company expects continued significant losses and negative operating cash flows and may need additional financing; availability and terms are uncertain.
- The stated commercialization plan was in a collaboration and product-validation phase, followed by limited early access and then broader commercialization. Nautilus anticipated early-access engagements and associated revenue in 2024 and expected broad launch in 2024; these are forward-looking expectations, not assured outcomes.
- Based on customer feedback, the company was refining initial launch specifications, including sample-input and proteome-coverage characteristics, and said later consumable releases were expected to enable previously announced specifications.
- Key risks include scientific and technical validation, development and launch delays, customer adoption, manufacturing scale-up, dependence on third-party and single-source suppliers, competition, intellectual-property protection, and the need for future capital. The company cited prior supply disruptions and uncertainty from economic conditions, inflation, interest rates and geopolitical events.
- Unrealized losses on available-for-sale securities were $2.4 million at June 30, 2023; no credit-loss allowance was recorded. Management estimated a hypothetical 100-basis-point interest-rate change would alter investment fair value by $2.2 million, with such a change realized only if securities were sold before maturity.
- Stock-based compensation was $6.0 million for the first six months, compared with $4.7 million a year earlier. No material adverse legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether development, validation and the stated 2024 early-access and broader-launch timelines remain achievable, and how refined launch specifications compare with customer needs.
- Cash burn and investment maturities, and whether the $163.3 million of cash, cash equivalents and short-term investments will support the operating plan for the stated period.
- Progress in qualifying suppliers and manufacturing capacity, particularly for complex reagents, antibodies and single-source components.
- Changes in R&D and G&A spending, stock-based compensation, and any subsequent financing needs or dilution.
- Whether investment valuation exposure, lease commitments and other contractual obligations change materially.