Senti Biosciences, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The filing issuer is Senti Biosciences, Inc. (Nasdaq: SNTI). The company is a preclinical biotechnology business developing gene-circuit cell and gene therapies; it has no approved products and has not generated product-sales revenue. Unless stated otherwise, financial figures below are in millions of dollars.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $0.338 | $1.766 | $2.561 | $4.227 |
| Operating expenses | $44.214 | $16.514 | $76.590 | $49.517 |
| Loss from continuing operations | $(36.615) | $(14.303) | $(64.718) | $(34.677) |
| Net loss, including discontinued operations | $(14.923) | $(16.640) | $(52.342) | $(40.000) |
| Operating cash used | — | — | $45.358 | $25.890 |
Revenue was primarily contract research revenue and grant income. The Spark collaboration research program was completed in July 2023, and the SBIR-funded project was completed in August. Gross margin is not separately presented in the filing.
At September 30, cash and cash equivalents were $39.430; restricted cash was $6.398, and short-term investments were nil. Total assets were $131.766, total liabilities $48.830, and stockholders’ equity $82.936. The filing reports no conventional borrowings on the balance sheet; operating lease liabilities were $37.192 and related-party finance lease liabilities were $0.121.
Material changes and unusual items
- Revenue fell $1.428 in Q3 and $1.666 for the first nine months year over year, mainly reflecting lower services under the Spark collaboration.
- Continuing-operations losses widened, including a $25.691 noncash impairment charge on Alameda facility leasehold improvements after the GeneFab transaction. The impairment reduced property and equipment; the filing attributes it to the changed expected recovery of the facility assets.
- The August 7 GeneFab transaction transferred specified non-oncology assets and manufacturing activities and subleased the Alameda facility. Senti recognized a $21.861 disposal gain in discontinued operations. This gain helped reduce reported Q3 consolidated net loss despite a substantially larger continuing-operations loss.
- GeneFab consideration included $18.9 of future services prepaid to GeneFab and a note receivable for the remaining $18.9, payable in 2024–2025 subject to conditions. The note’s reported fair value was $16.901 at quarter-end. Senti also recorded a $4.020 liability for GeneFab’s stock option after a $5.629 noncash fair-value gain in Q3.
- Operating cash use rose to $45.358 from $25.890 for the first nine months. Investing activities provided $29.976, mainly from investment maturities; financing activities provided $0.223. Cash, cash equivalents and restricted cash decreased $15.159 over the period.
Outlook, liquidity and principal risks
Management expected to continue substantial operating losses and negative operating cash flows as it advances development. The company stated that it was uncertain whether available cash, cash equivalents and short-term investments would fund operations, including clinical-trial and capital expenditure needs, beyond twelve months from the November 13, 2023 financial-statement issuance date. It concluded that substantial doubt existed about its ability to continue as a going concern and said additional financing was needed; there is no assurance financing will be available on acceptable terms.
Management said it remained on track for FDA clearance of the SENTI-202 IND in Q4 2023. All current candidates were preclinical in the filing, and timelines and development outcomes remain uncertain. The company’s January 2023 prioritization plan focused internal resources on SENTI-202 and SENTI-401 and suspended internal SENTI-301A research and development. A November 6, 2023 Celest agreement, disclosed as a subsequent event, provides for a pilot trial of SENTI-301A in mainland China and a conditional license option; potential milestone payments of up to $156 million and royalties depend on option exercise and later development.
- Financing and dilution: Senti may need additional capital and may issue equity or pursue collaborations. GeneFab’s option could cover up to 19,633,444 shares at $1.01867, subject to its terms, including execution of a license agreement and stockholder approval for certain shares. The Chardan purchase agreement offers a potential equity source, but availability and proceeds are not assured.
- Listing: Nasdaq notified Senti that its bid price had been below $1.00 for 30 consecutive trading days. The initial compliance period ended February 5, 2024; the filing gives no subsequent compliance outcome.
- Manufacturing and development: Senti relies on GeneFab for manufacturing and identifies risks around facility operations, scale-up, product quality, regulatory requirements and the lack of a redundant supply source.
- Controls and contingencies: A previously identified material weakness in internal control over financial reporting had not yet been fully remediated. The company reported no legal matters it believed would have a material adverse effect and no off-balance-sheet arrangements.
Important facts for investors to verify
- Current cash runway, financing plans and any subsequent developments affecting the going-concern assessment.
- Whether SENTI-202’s IND was cleared, and the status, funding and timelines of SENTI-202 and SENTI-401 development.
- GeneFab note payment conditions and collections, use of the prepaid services, manufacturing performance, and the status and potential dilution from GeneFab’s option.
- Nasdaq bid-price compliance and any actions taken to maintain the listing.
- Progress in remediating the material weakness and any subsequent changes to internal controls.
- The filing’s financial statements report Q3 general and administrative expense of $9.431, while the MD&A expense-component table totals $8.437; verify the reconciliation in the company’s filed financial statements or XBRL data.