Shattuck Labs, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. Shattuck is a clinical-stage biopharmaceutical company developing ARC and GADLEN dual-sided fusion proteins. It has no products approved for sale and has not generated product revenue. Its lead clinical-stage candidate, SL-172154, is being evaluated in Phase 1 trials for ovarian cancer and certain hematologic malignancies.
Financial results and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0.2 million | $0.05 million | $0.257 million | $0.05 million |
| Research and development expense | $18.2 million | $23.0 million | $34.9 million | $42.2 million |
| General and administrative expense | $4.7 million | $4.7 million | $9.8 million | $9.7 million |
| Net loss | $21.3 million | $27.4 million | $42.1 million | $51.9 million |
| Basic and diluted loss per share | $0.50 | $0.65 | $0.99 | $1.22 |
| Operating cash used | Not separately stated | Not separately stated | $45.1 million | $42.6 million |
At June 30, 2023, cash and cash equivalents were $71.9 million and investments were $45.3 million, totaling $117.2 million. Total assets were $155.3 million, total liabilities $16.8 million, and stockholders’ equity $138.5 million. Current assets of $136.5 million compared with current liabilities of $13.0 million. The filing reports no borrowings; liabilities primarily include operating leases and current operating obligations. Six-month investing cash inflow of $69.6 million largely reflected a $69.9 million net reduction in investments, rather than operating cash generation. Cash and cash equivalents increased by $24.5 million during the period.
Margins are not particularly informative for this pre-commercial company: collaboration revenue was minimal relative to operating expenses, and operations remained loss-making. Other income was $1.4 million for Q2 and $2.3 million for the first half of 2023, compared with $0.3 million and an expense of $0.1 million, respectively, in the prior-year periods.
Material changes and management commentary
- Q2 research and development expense decreased $4.8 million (20.7%) year over year; first-half expense fell $7.3 million (17.3%). Management attributed the reductions mainly to lower GMP clinical-material manufacturing costs. These savings were partly offset by higher clinical-trial, pipeline, personnel, and facility costs.
- Net loss narrowed by $6.0 million in Q2 and $9.8 million for the first half, reflecting lower R&D expense and higher other income. Collaboration revenue increased, primarily from clinical activity under the ImmunoGen collaboration; the company expects up to $2.0 million of revenue under that agreement beginning in 2023 and continuing into or through 2024.
- Management expects significant R&D spending and operating losses to continue. It states in MD&A that cash and investments should fund projected operations through year-end 2024; the liquidity note separately says they are sufficient for at least the next twelve months. The difference in stated runway should be reconciled.
- In a second non-human-primate toxicology study, the CD20-directed GADLEN produced B-cell depletion that was inferior in depth and durability to published results for other B-cell-depleting agents. Shattuck is investigating the cause and does not currently plan to file an IND for a GADLEN compound until the findings are better understood.
Risks, contingencies, and unusual items
- The company has incurred recurring losses and negative operating cash flows, with an accumulated deficit of $261.1 million. It expects to need additional capital or collaborations; funding may not be available on acceptable terms, and equity financing could dilute shareholders.
- Clinical, regulatory, manufacturing, enrollment, and product-development outcomes are uncertain. The company relies on a limited number of CROs, CMOs, and other service providers. Management also cites macroeconomic, inflation, supply-chain, and capital-market uncertainties.
- A securities class-action settlement of $1.4 million was paid into escrow in June 2023. Preliminary court approval was granted; final approval was scheduled for October 30, 2023.
- A license agreement with Nighthawk Biosciences includes up to $20.6 million in development, regulatory, and commercial milestones, plus specified sublicense payments and low-single-digit royalties. Shattuck paid a $0.1 million milestone for completion of a Phase 1 trial; other milestone liabilities were not recorded because achievement was not considered probable.
- The company had a $75 million at-the-market equity sales facility, with no sales made through June 30, 2023. NOL and tax-credit carryforwards begin expiring in 2024, and a full valuation allowance is recorded against deferred tax assets.
Important facts for investors to verify
- Reconcile the filing’s two cash-runway statements and monitor cash burn against the stated year-end 2024 funding outlook.
- Track SL-172154 trial enrollment, safety, efficacy, and development costs, and the scientific resolution of the GADLEN toxicology results.
- Assess whether collaboration revenue, new partnerships, or use of the ATM facility can help fund ongoing losses, and consider potential dilution if equity is issued.
- Confirm final court approval and closure of the $1.4 million settlement, and monitor potential Nighthawk milestone and royalty obligations.