Adicet Bio, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Adicet is a clinical-stage biotechnology company developing allogeneic gamma delta T-cell therapies. It had no approved products and no product sales; reported revenue came entirely from its Regeneron collaboration.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $3.4M | $3.0M | $4.3M | $12.5M |
| Research and development expense | $11.9M | $8.9M | $34.3M | $24.7M |
| General and administrative expense | $5.2M | $7.7M | $15.9M | $17.7M |
| Operating loss | $13.7M | $13.7M | $45.9M | $29.8M |
| Net loss | $14.0M | $14.8M | $46.2M | $27.7M |
| Basic and diluted loss per share | $0.44 | $2.84 | $1.54 | $8.69 |
| Net cash used in operations | Not provided for quarter | Not provided for quarter | $37.6M | $28.2M |
At September 30, 2021, cash and cash equivalents were $192.2M, restricted cash was $4.5M, and marketable debt securities were nil. Current assets were $199.0M and current liabilities $20.0M. Total liabilities were $40.0M, including $20.5M of operating lease liabilities. No amounts were drawn under the PacWest loan agreement. The company reported an accumulated deficit of $152.5M and stockholders’ equity of $217.2M.
Material changes versus comparable periods
- Q3 revenue rose 13% year over year, reflecting increased Regeneron collaboration activity, while nine-month revenue fell 66%. The comparison was affected by a $10.0M milestone achieved in June 2020, which generated a $5.0M cumulative revenue catch-up; in Q1 2021, Adicet recorded a $4.0M revenue reduction from revised estimated costs and an extended completion timeline.
- Q3 R&D expense increased 33%, mainly from facility costs and external research, CRO and CMO work. Nine-month R&D increased 39%, primarily as clinical development of ADI-001 ramped up.
- Q3 G&A expense decreased 33%, and nine-month G&A decreased 10%, largely because 2020 included merger-related professional fees; increased personnel, facilities and public-company costs partly offset the nine-month reduction.
- Nine-month net loss increased 67%, notwithstanding lower collaboration revenue and higher R&D spending. Q3 net loss improved 5% year over year.
- Cash increased from $84.3M at year-end 2020 to $192.2M at September 30, 2021, principally following the February equity financing. Financing cash flow was $145.2M for the nine-month period; capital expenditures were $10.0M, primarily related to Redwood City construction.
Outlook, risks and unusual items
- Management said cash, cash equivalents and marketable securities were expected to fund forecast operating expenses, capital expenditures and debt service for at least 12 months from issuance of the interim financial statements. The company expects substantial ongoing losses and may need additional capital; funding availability and timing are uncertain.
- ADI-001’s Phase 1 NHL trial began in March 2021. As of November 10, dose level 1 was complete and enrollment at dose level 2 was ongoing; management expected interim dose-escalation data by year-end 2021. Adicet planned an ADI-002 IND filing in Q2 2022 and, subject to FDA review, a Phase 1 start in the second half of 2022.
- Key risks include early-stage clinical and regulatory uncertainty; novel technology and manufacturing scale-up; reliance on third-party manufacturers and research providers; dependence on Regeneron for all reported revenue; potential trial delays, patient-enrollment challenges and COVID-19 effects; and the need for future financing.
- The company recorded a $1.2M IPR&D impairment in the first half of 2021, fully impairing the remaining acquired RTB101 asset. It terminated the Novartis license, effective September 25, 2021, and reported the related contingent value rights liability at zero. A termination notice under the CVR agreement was delivered October 27, 2021.
- After quarter-end, on October 21, 2021, Adicet amended its PacWest facility; the amended arrangement provides for term loans and ancillary services subject to stated limits. No loan balance was outstanding at September 30.
- Adicet disclosed material weaknesses in internal control over financial reporting, including insufficient experienced accounting resources, inadequate formal controls and policies, segregation-of-duties deficiencies, and controls over complex transactions. Remediation efforts were underway, but management reported the weaknesses remained and said disclosure controls were not effective.
Investor verification priorities
- Track ADI-001 interim clinical data and the timing and regulatory progress of the planned ADI-002 IND and trial.
- Assess cash burn against the stated 12-month runway, planned clinical and facility spending, and potential financing needs.
- Confirm the timing and amount of future Regeneron collaboration revenue, given it is the sole revenue source and depends on estimates of costs to complete.
- Monitor whether internal-control material weaknesses are remediated and controls operate effectively.
- Review the terms, covenants and any future drawdowns under the amended PacWest facility, as well as lease obligations and sublease income.