Senti Biosciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Senti is a preclinical biotechnology company developing cell and gene therapies using its synthetic-biology gene-circuit platform. It has no approved products and has not generated product-sale revenue.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / prior year-end |
|---|---|---|
| Total revenue | $1.286 million | $1.104 million |
| Operating expenses | $21.120 million | $12.862 million |
| Operating loss | $19.834 million | $11.758 million |
| Net loss | $18.722 million | $11.808 million |
| Net loss per share, basic and diluted | $0.42 | $3.72 |
| Net cash used in operations | $16.304 million | $10.059 million |
| Cash, cash equivalents and short-term investments | $76.1 million | $98.6 million at Dec. 31, 2022 |
Q1 revenue comprised $1.036 million of contract revenue and $0.250 million of grant income. No product sales were recorded; a gross margin is not presented. Cash and cash equivalents were $31.600 million, short-term investments $44.506 million, and restricted cash $3.551 million at March 31. Total assets were $161.425 million, total liabilities $49.085 million, and accumulated deficit $192.008 million. The filing reports no conventional borrowings; lease obligations included $37.922 million of operating lease liabilities and $0.168 million of related-party finance lease liabilities.
Investing activities used $9.497 million, including $6.507 million for property and equipment net of investment maturities and purchases. Financing activities used $0.035 million. Total cash, cash equivalents and restricted cash declined $25.836 million during the quarter. Construction in progress was $51.347 million. The filing reports $46.0 million of future undiscounted operating lease payments for the Alameda facility and a $42.2 million construction purchase commitment, of which $37.5 million had been paid by quarter-end.
Material changes versus the prior comparable period
- Revenue rose $0.182 million, primarily from increased collaboration services; grant income was unchanged.
- R&D expense increased $3.715 million to $11.318 million, driven by personnel, professional services and facility costs.
- G&A expense increased $4.543 million to $9.802 million, including higher personnel-related costs, stock-based compensation and insurance.
- Net loss widened $6.914 million. Higher operating costs more than offset $1.061 million of net interest income and a $0.059 million noncash gain from remeasuring the contingent earnout liability.
- Operating cash use increased $6.245 million year over year. The year-over-year per-share loss comparison is affected by weighted-average shares increasing from 3.17 million to 44.07 million following the 2022 merger.
Outlook, risks and unusual items
- In January 2023, Senti prioritized SENTI-202 and SENTI-401, and said it would pursue partners for other programs, including solid tumors. It does not intend to fund clinical development of SENTI-301A itself at this time and is seeking geographic partners. Management said this plan was expected to extend runway through at least Q1 2024.
- The company expected to file multiple INDs starting in 2023. All current product candidates remained preclinical at the filing date; timelines and clinical advancement are uncertain.
- The liquidity disclosures are important to reconcile: management stated in MD&A that available cash and cash equivalents were expected to fund operations for the next 12 months from the report date, but the financial-statement note concluded that substantial doubt existed about the company’s ability to continue as a going concern beyond 12 months from issuance. The company said additional funding would be needed and was being pursued; no assurance was given it would be available on acceptable terms.
- Potential financing includes equity, debt, collaborations or strategic transactions. The Chardan purchase agreement permits sales of shares at the company’s discretion, subject to conditions and share limits; no shares were sold under it in Q1. Further equity issuance could dilute existing holders.
- The company disclosed two letters of credit totaling $3.3 million held with Silicon Valley Bank for its facility lease and warned it might be unable to access the funds following the bank’s receivership.
- A material weakness in internal control over financial reporting, related to finance and accounting resources, risk assessment, segregation of duties and review controls, remained under remediation. Management reported no material change in internal control during the quarter.
- Key risks include preclinical and regulatory failure, manufacturing and facility execution, dependence on collaborators and third parties, additional capital needs, dilution, and the possibility that the strategic reprioritization does not deliver expected savings or partnerships. Management reported no legal proceedings believed likely to have a material adverse effect.
Investor verification priorities
- Reconcile the going-concern substantial-doubt conclusion with management’s stated 12-month funding expectation, and assess the latest cash runway and financing needs.
- Track quarterly operating cash burn, construction spending, lease commitments and the timing and availability of the tenant-improvement allowance.
- Verify progress and timing for SENTI-202 and SENTI-401 IND filings, and whether Senti secures a partner for SENTI-301A or other programs.
- Monitor any Chardan facility share sales, other capital raises, dilution and the company’s ability to access the $3.3 million in SVB-related letters of credit.
- Assess completion of internal-control remediation and the operational readiness of the cGMP facility.