CRISPR Therapeutics AG — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Amounts below are U.S. dollars; financial statement figures are converted from thousands to millions unless otherwise noted.
Business context and reporting period
CRISPR Therapeutics is a gene-editing biotechnology company with clinical and preclinical programs in hemoglobinopathies, oncology, regenerative medicine and rare diseases. It has no product sales; revenue to date has primarily come from collaborations. Its lead candidate, CTX001, is being developed with Vertex for transfusion-dependent beta thalassemia and severe sickle cell disease.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $900.7 million | $0.04 million | $901.2 million | $0.2 million |
| Research and development expense | $108.3 million | $59.4 million | $198.8 million | $113.6 million |
| General and administrative expense | $29.8 million | $21.4 million | $54.3 million | $40.9 million |
| Net income (loss) | $759.2 million | $(79.7) million | $646.1 million | $(149.4) million |
| Operating cash flow | Not presented quarterly | $706.3 million | $(81.5) million |
The exceptional revenue and profit reflect a $900 million upfront payment from Vertex, recognized in Q2 upon transfer of an exclusive CTX001 license; they are not evidence of recurring product revenue. Reported Q2 net income margin was approximately 84%, but is similarly dominated by this transaction.
- At June 30, cash and cash equivalents were $1,646.6 million and marketable securities were $942.8 million, totaling $2,589.4 million. Current assets were $2,620.9 million against current liabilities of $99.9 million.
- Total liabilities were $295.7 million, including $191.2 million of operating lease liabilities. The balance sheet reports no conventional borrowings.
- For the first six months, investing cash outflow was $461.5 million, including $426.1 million net purchases of marketable securities and $35.5 million of property and equipment. Financing cash inflow was $234.4 million, including net share-issuance proceeds and option/ESPP proceeds.
- Capital expenditures and facilities investment increased: property and equipment net rose to $75.4 million from $42.2 million at year-end 2020. Operating lease assets rose to $179.4 million, principally reflecting commencement of the Boston office and laboratory lease.
Material changes versus prior period
- Revenue increased by approximately $900.7 million in Q2 versus Q2 2020, principally due to the Vertex upfront license payment. Operating expenses also rose, with Q2 R&D up $48.9 million and G&A up $8.5 million year over year.
- R&D increases reflected higher variable program costs, headcount and stock-based compensation, and facility expenses. G&A growth reflected higher personnel and intellectual-property costs.
- The April 2021 amended Vertex agreement closed June 2. Vertex assumed prospective control of CTX001 development and commercialization, and the parties changed the prospective allocation of CTX001 net profits and losses from equal sharing to 40% for CRISPR Therapeutics and 60% for Vertex, effective July 1, 2021.
- CRISPR Therapeutics issued shares through its at-the-market program during the half-year; common shares outstanding were 76.1 million at June 30, compared with 73.9 million at December 31, 2020.
Outlook, commentary and risks
- Management estimated existing cash would fund operating expenses and capital expenditures for at least 24 months from the filing’s outlook date, excluding potential additional Vertex proceeds and future capital raises. The estimate depends on assumptions that may prove incorrect.
- The company expects substantial spending and operating losses for the foreseeable future, including increased clinical and preclinical development, staffing, manufacturing infrastructure and Boston-area facility costs. Management does not expect the period’s profitability to continue.
- At the European Hematology Association meeting, the company reported updated CTX001 data for the first 15 TDT patients and first 7 SCD patients who had at least three months of follow-up. The supplied filing text does not provide the underlying efficacy or safety results.
- The company cites clinical-development, regulatory, manufacturing, intellectual-property, funding and commercialization risks. COVID-19 could disrupt trials, patient dosing, facilities, suppliers and timelines. Management also describes ongoing ordinary-course IP and other proceedings, but says no pending claim is likely, in its opinion, to have a material adverse effect.
- In July 2021, after quarter-end, CRISPR Therapeutics entered a joint development and commercialization agreement with ViaCyte for diabetes programs.
Important facts for investors to verify
- Whether the $900 million Vertex license payment and revised CTX001 economics change the program’s expected value, costs and future profit-sharing materially.
- The full CTX001 clinical data, including durability, safety, follow-up, patient numbers and trial timelines; the filing excerpt does not give detailed results.
- Whether the stated 24-month cash runway remains reasonable as R&D, facilities and manufacturing spending increase.
- Potential dilution from further ATM share sales and the scale and timing of capital expenditures and lease commitments.
- Potential milestone and royalty receipts, including the $200 million first-approval milestone, and the clinical, regulatory and commercial conditions attached to them.