Werewolf Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited financial statements; amounts below are in U.S. dollars. Werewolf is a pre-revenue biopharmaceutical company developing conditionally activated cancer immunotherapies using its PREDATOR platform.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $0 | $0; no product revenue to date |
| Research and development expense | $10.9 million | $4.8 million; up $6.1 million |
| General and administrative expense | $4.4 million | $2.6 million; up $1.8 million |
| Total operating expenses | $15.4 million | $7.5 million; up $7.9 million |
| Net loss | $15.3 million | $7.4 million |
| Net loss per share, basic and diluted | $0.56 | $83.36, including $95.0 million of preferred-stock accretion in 2021 |
| Net cash used in operations | $14.0 million | $7.3 million |
| Cash and cash equivalents, March 31 | $143.7 million | $157.5 million at December 31, 2021 |
| Current assets / current liabilities, March 31 | $145.4 million / $11.0 million | Current ratio approximately 13.2 |
| Total liabilities, March 31 | $25.3 million | Includes $15.7 million in operating lease liabilities; no term-loan borrowings reported |
No product sales means gross margin is not applicable; the filing does not report a meaningful operating margin. Cash, cash equivalents and restricted cash totaled $145.0 million at quarter-end. Accumulated deficit was $268.2 million.
Material changes and operating developments
- R&D expense rose 127% year over year, chiefly from manufacturing, personnel, CRO and facility costs. External development costs were $2.2 million for WTX-124, $2.1 million for WTX-330 and $1.0 million for WTX-613.
- G&A expense rose 68%, largely from personnel and public-company costs, including higher management liability insurance expense.
- Operating cash use increased by $6.6 million year over year, principally reflecting the larger net loss. Capital purchases were $28,000; option exercises provided $159,000 in financing cash.
- At quarter-end, 27.420 million common shares were outstanding. The filing reports 4.133 million options outstanding.
Outlook, financing, and risks
- Management expects substantial and increasing expenses and losses as it advances WTX-124 and WTX-330 toward clinical development. The company has no approved products and has not generated product revenue; it says future funding will be required to complete development.
- The filing gives two runway descriptions: the financial-statement note says quarter-end cash should fund operations for at least 12 months from the filing date; MD&A estimates funding through at least Q4 2023 using existing cash, the Jazz payment and the first loan tranche. The loan tranche was still undrawn as of May 10, 2022, so the estimates depend on financing access and operating assumptions.
- After quarter-end, Jazz agreed to license rights to WTX-613 and related IFNα products. Werewolf received a $15.0 million upfront payment in April 2022 and is eligible for up to $520.0 million in development and regulatory milestones, up to $740.0 million in sales milestones, and tiered mid-single-digit royalties. Milestones and royalties are contingent, not assured. Jazz generally reimburses specified initial preclinical work and leads other development and commercialization, including the IND submission.
- Also after quarter-end, Pacific Western Bank made available up to $40.0 million in term loans: an initial tranche of up to $20.0 million and a further $20.0 million subject to FDA acceptance of two IND submissions by March 31, 2023. The facility includes covenants, collateral over substantially all assets other than intellectual property, and a requirement to raise at least $50.0 million in qualifying gross cash by September 30, 2023. The loans remained undrawn as of May 10, 2022.
- Key risks include early-stage clinical and regulatory uncertainty; manufacturing complexity and reliance on third parties; need for additional capital; competition; dependence on licensed intellectual property and collaborators; and possible COVID-19-related disruption. The company reported no material COVID-19 financial impact or business disruption to date.
- Management said disclosure controls were effective as of March 31, 2022, with no material change in internal control over financial reporting during the quarter. The company disclosed prior material weaknesses, which it said had been remediated.
Investor verification priorities
- Confirm the timing and conditions for IND submissions and clinical-trial initiation for WTX-124 and WTX-330, and whether clinical supply can be manufactured successfully.
- Reconcile the stated cash runway with the undrawn, conditional loan facility; assess expected burn, the $50.0 million financing covenant, and actual availability of the loan tranches.
- Review the Jazz agreement’s specific obligations, rights, reimbursement terms and conditions for milestones and royalties; distinguish potential payments from received cash.
- Track quarterly R&D spending, operating cash use, stock-based compensation and dilution from outstanding options and future equity financing.
- Check the cover-page response indicating “No” to having filed required Exchange Act reports during the preceding 12 months, and confirm whether this reflects the company’s filing status or a reporting error.