Atara Biotherapeutics, Inc. — Q3 2015 Form 10-Q
Business context and reporting period. This clinical-stage biopharmaceutical company reported results for the quarter and nine months ended September 30, 2015. It has no approved products and has generated no revenue. Its programs include PINTA 745 (Phase 2), STM 434 (Phase 1), and three MSK-licensed T-cell candidates: EBV-CTL and CMV-CTL (Phase 2), and WT1-CTL (Phase 1).
Financial performance and position
Amounts below are in millions of dollars unless stated otherwise.
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $8.1 | $4.2 | $25.4 | $10.4 |
| General and administrative expense | $4.1 | $1.7 | $11.3 | $7.2 |
| Net loss | $(11.9) | $(5.9) | $(36.0) | $(17.5) |
| Basic and diluted loss per share | $(0.43) | $(4.20) | $(1.46) | $(13.07) |
| Operating cash used | — | — | $(25.8) | $(11.7) |
- At September 30, cash and cash equivalents were $54.5 million and short-term investments were $279.8 million, totaling $334.3 million, compared with $104.1 million at December 31, 2014. Working capital was $333.8 million.
- Total liabilities were $6.6 million; the balance sheet reports no debt. Total assets were $340.4 million and stockholders’ equity was $333.7 million.
- Cash provided by financing activities was $259.0 million for the nine months, primarily from common-stock offerings. Investing activities used $200.7 million, largely reflecting purchases of short-term investments.
- Operating margins are not meaningful because the company had no revenue and reported operating losses.
Material changes versus the prior comparable period
- Q3 net loss approximately doubled year over year, while nine-month net loss increased from $17.5 million to $36.0 million. Nine-month operating cash use rose by $14.1 million.
- R&D spending rose substantially, driven by increased manufacturing, clinical and preclinical work, higher employee and overhead costs, and a $4.5 million MSK license expense in Q2 2015. Nine-month 2014 included $1.1 million of Amgen R&D costs and the 2015 period did not.
- G&A increased with headcount-related costs, stock compensation, professional services and public-company expenses. The company raised net proceeds of approximately $69.5 million in February and $193.9 million in July 2015.
- Loss per share comparisons are affected by the 2014 recapitalization and the substantial increase in shares outstanding; the lower 2015 loss per share does not indicate improved profitability.
Outlook, risks and unusual items
- Management expected September 30 cash and cash equivalents to fund the current operating plan for at least 12 months, and stated that cash, cash equivalents and short-term investments were expected to support planned lead-candidate preclinical and clinical trials through the second half of 2018. Additional funding will be needed to pursue regulatory approval and commercialization; no external funding was committed.
- Management expects losses and R&D and G&A expenses to continue increasing. Planned work includes advancing clinical programs, manufacturing clinical supply, expanding the T-cell platform and developing early pipeline candidates. Timing and costs remain uncertain.
- Key risks include clinical and regulatory failure or delay, trial enrollment and execution, manufacturing scale-up and single-source supplier dependence, market adoption and reimbursement, competition, intellectual-property protection, and future financing and dilution.
- The filing discloses a randomization and inventory-distribution error in the PINTA 745 Phase 2 trial that unblinded the initial six patients and required a trial restart. It also cites cracked vials in certain STM 434 lots in April 2014.
- Amgen agreements provide for up to $86.0 million in development and regulatory milestones, plus commercial milestones and royalties; $1.0 million of development/regulatory milestones had been paid by the reporting date. The MSK license provides for up to $33.0 million in specified milestones, royalties and other potential payments.
- In October 2015, after quarter-end, Atara licensed QIMR Berghofer technology, paid $3.0 million upfront and accepted potential future development, regulatory and sales-related milestone obligations.
- The company amended its Westlake Village lease in September 2015, extending it to April 2019; disclosed operating lease commitments totaled $1.7 million. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm cash burn and whether the stated trial-funding runway remains consistent with the pace and cost of clinical development, manufacturing and licensing.
- Track clinical progress, enrollment, safety and results for each lead program, including any implications of the PINTA 745 trial restart.
- Review future financing needs, equity dilution, and contingent milestone, royalty and sublicense obligations under the Amgen, MSK and QIMR agreements.
- Reconcile the filing’s February offering share count: the notes state 4,147,358 shares, while MD&A states 4,417,358 shares; both describe approximately $69.5 million of net proceeds.
- Assess whether manufacturing transfers, supply availability and trial execution can support the company’s stated development timetable.