Nautilus Biotechnology, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; dollar amounts are in millions unless otherwise stated.
Business context
Nautilus is a development-stage life sciences company developing a proteomics platform comprising instruments, consumables, and software. It has no products available for commercial sale and has generated no revenue. Substantially all resources are directed to research and development and preparation for commercialization.
Financial results and liquidity
- Revenue and margins: No revenue was reported; operating and gross margins are therefore not meaningful.
- Q3 2022: Operating expenses were $15.8 million, including R&D of $9.6 million and G&A of $6.2 million. Net loss was $14.1 million, or $0.11 per share, versus a $14.5 million loss, or $0.12 per share, in Q3 2021.
- Nine months 2022: Operating expenses were $47.3 million (R&D $28.1 million; G&A $19.2 million). Net loss was $44.5 million, or $0.36 per share, versus a $33.6 million loss, or $0.47 per share, in the comparable 2021 period.
- Cash flow, nine months: Cash used in operations was $35.4 million, compared with $28.7 million in 2021. Investing activities provided $38.3 million, mainly from investment maturities; financing provided $0.4 million. Cash, cash equivalents, and restricted cash increased $3.3 million to $189.8 million.
- September 30 liquidity: Cash and cash equivalents were $188.9 million and short-term investments were $69.0 million, totaling $258.0 million as cited by the company. Long-term investments were $65.7 million; total cash and investments were $323.6 million. Management said available cash, cash equivalents, and short-term investments should fund operations for at least 12 months following issuance of the statements.
- Debt and obligations: The filing reports no borrowings. Operating lease liabilities totaled $29.2 million, including $1.6 million current; future minimum lease payments were $42.2 million. Open purchase commitments were $1.7 million, expected to be received within 12 months.
Changes versus the prior comparable period
- Q3 operating expenses increased 9% year over year, primarily from higher R&D spending; R&D rose 16%, while G&A declined 1%. Net loss narrowed by $0.4 million, helped by higher other income.
- For the first nine months, operating expenses rose 40%: R&D increased 44% and G&A increased 35%. Net loss widened by $10.9 million, or 32%, as expenses grew faster than interest income.
- Other income was $1.8 million in Q3 and $2.8 million year to date, mainly reflecting higher interest income amid rising rates. Unrealized losses on available-for-sale securities were $1.7 million year to date and were recorded in other comprehensive loss, not net loss.
- Investments shifted toward longer maturities: short-term investments fell from $160.1 million at year-end 2021 to $69.0 million, while long-term investments rose from $16.4 million to $65.7 million.
Outlook, risks, and unusual items
- Management expects significant losses and increasing expenses as it advances platform development, builds commercialization capabilities, and prepares for manufacturing. It expects to need substantial additional capital over time; future financing may be unavailable or dilutive or carry restrictive terms.
- The planned launch has three phases: customer collaborations and validation; limited early access, with meaningful engagements and associated revenue anticipated from the start of 2024; and broader commercialization anticipated in mid-2024. These are expectations, not assured milestones.
- Key execution risks include scientific and technical validation, development or launch delays, customer adoption, manufacturing scale-up, reliance on single-source suppliers and third-party collaborators, and competition. The company reported past COVID-related supply disruptions, including longer chip lead times and lower reagent availability.
- Marketable debt securities had $1.9 million of gross unrealized losses at September 30, 2022. The company estimated a hypothetical 100-basis-point interest-rate change would alter fair value by $1.4 million; this change would be realized only if securities were sold before maturity.
- The company reported no pending legal matters expected to have a material adverse effect. It recorded no income tax expense or benefit, primarily because of a full valuation allowance on deferred tax assets. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported for the quarter.
- After quarter-end, the board amended and restated the bylaws on October 27, 2022, including revisions to stockholder nomination and proposal procedures.
Important facts for investors to verify
- Whether platform validation and development remain on track for meaningful early-access activity in 2024 and broader commercialization in mid-2024.
- Whether the stated 12-month liquidity runway remains supportable as operating cash use, capital spending, and commercialization costs evolve.
- Progress in qualifying alternative sources for single-source components, reagents, and antibodies, and in establishing manufacturing capacity.
- Trends in R&D and G&A spending, stock-based compensation, investment maturities, and unrealized investment losses.
- Potential future capital needs, lease and purchase commitments, and any changes in supplier disruptions, collaboration arrangements, or regulatory exposure.