Arcturus Therapeutics Holdings Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Arcturus is a late-stage clinical mRNA medicines company developing vaccines and therapies for infectious diseases and rare liver and respiratory diseases. Financial statements are unaudited and prepared under U.S. GAAP.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $80.3 million | $5.2 million; up $75.0 million |
| Operating expenses | $65.5 million | $55.6 million; up 17.8% |
| Income (loss) from operations | $14.8 million | $(50.4) million |
| Net income (loss) | $50.8 million | $(51.2) million |
| Basic / diluted EPS | $1.91 / $1.87 | $(1.94) / $(1.94) |
| Net cash used in operating activities | $(35.9) million | $(49.0) million |
| Cash and cash equivalents at period end | $327.9 million | $391.9 million at Dec. 31, 2022 |
Revenue was primarily collaboration revenue, including $78.2 million from CSL Seqirus; BARDA grant revenue was $0.6 million. The reported $50.8 million net income included a $34.0 million noncash gain from forgiveness of part of the Singapore loan. The filing does not report a gross margin; this is a development-stage business with no material product-sales revenue.
Research and development expense rose 15.3% to $51.8 million, while general and administrative expense increased 28.3% to $13.8 million. Cash, cash equivalents and restricted cash totaled $330.1 million. Accounts receivable increased to $92.5 million, largely reflecting collaboration amounts billed or due. Total liabilities were $141.6 million and stockholders’ equity was $329.2 million. No long-term debt remained at quarter-end after the reported repayments and forgiveness.
Material changes and notable developments
- Revenue growth chiefly reflected CSL Seqirus collaboration activity and $90.0 million of development milestones achieved in March; the milestone amount was due from CSL Seqirus at quarter-end.
- Arcturus paid approximately $17.1 million to Singapore’s EDB for unused loan funds and accrued interest; the remaining $34.0 million principal and interest was forgiven. It also paid approximately $7.4 million to terminate its Western Alliance loan facility.
- In April, the company received a $23.6 million CSL Seqirus advance for specified ARCT-154 manufacturing and supply runs. This is a subsequent-period receipt, not Q1 cash flow.
- On April 21, the company entered into a $50.0 million Wells Fargo revolving credit facility, secured by a pledge of $55.0 million in cash. The filing reported no outstanding borrowings as of May 9, 2023.
Outlook, programs, and risks
Management believes existing working capital will fund operations for at least 12 months from issuance of the financial statements, assuming no significant unforeseen expenses and partner funding at anticipated levels. The company expects continued losses and substantial, potentially increasing R&D spending, and says further capital may be needed over the longer term. It provides no numerical earnings or revenue guidance.
Program updates include completion of enrollment for an 828-participant ARCT-154 Phase 3 booster study in Japan and an NDA submission in Japan announced by Meiji in April. Arcturus reported that 15 of 16 planned participants had completed its ARCT-810 Phase 1b study and that a Phase 2 multiple-dose study had begun. A 32-person ARCT-032 Phase 1 single-ascending-dose study met its recruitment and dosing target; the company was working on a protocol amendment to enable dosing in cystic fibrosis patients.
Key risks include clinical and regulatory uncertainty, whether milestones and other partner funding are achieved or received on time, reliance on collaborators and third parties, rising development costs, and the need for future financing. The Wells Fargo facility carries variable SOFR-based interest, cash collateral requirements, covenants, and default provisions. The filing also describes contractual payments to Vinbiocare through early 2025 and potential capped sales-related payments. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Collection timing and conditions for the $90.0 million CSL Seqirus milestone receivable, and accounting for the later $23.6 million manufacturing advance.
- How much of Q1 reported profit reflects the one-time Singapore debt-forgiveness gain versus recurring collaboration activity.
- Cash burn, the increase in accounts receivable, and the assumptions supporting management’s 12-month liquidity assessment.
- Terms, cash-collateral impact, covenants, and any future usage of the Wells Fargo revolving facility.
- Regulatory progress and clinical outcomes for ARCT-154, ARCT-810, and ARCT-032, including the CF protocol amendment and partner decisions on collaborative programs.