Vera Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited financial statements. Vera is a clinical-stage biotechnology company developing treatments for immunological diseases. Its lead candidate, atacicept, was being developed for IgA nephropathy (IgAN); patient screening for the company’s Phase 2b trial began in Q2 2021. Vera had no approved products and generated no product revenue.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.932 million | $1.439 million |
| General and administrative expense | $1.784 million | $1.032 million |
| Total operating expenses | $4.716 million | $2.471 million |
| Net loss | $4.714 million | $2.474 million |
| Net loss per share | $12.23 | $7.79 |
| Cash used in operating activities | $4.121 million | $2.305 million |
At March 31, cash and cash equivalents were $49.505 million, down from $53.654 million at December 31, 2020; restricted cash was an additional $0.343 million. Current assets were $51.532 million and current liabilities $3.753 million. Accumulated deficit was $96.161 million. The company had no convertible notes outstanding at quarter-end; notes issued in 2020 had converted into preferred stock. Redeemable convertible preferred stock of $139.576 million was presented separately from liabilities and stockholders’ deficit.
There was no operating margin to report because Vera had no revenue. No cash was used for investing activities in Q1 2021. Financing activities used $0.028 million, mainly reflecting deferred IPO costs offset by stock-option exercise proceeds.
Changes versus the prior comparable period
- Operating expenses rose 91% and net loss increased by $2.240 million year over year.
- R&D expense increased 104%, primarily from consulting and contract research costs associated with Phase 2b trial start-up and higher compensation; lower facility costs and the cessation of internal research partly offset the increase.
- G&A expense increased 73%, mainly due to accounting, audit, tax and legal fees and stock-based compensation.
- Operating cash use increased by $1.816 million year over year. Q1 2020 financing had included $5.0 million of convertible-note proceeds; Q1 2021 had no comparable financing inflow.
Outlook, risks and notable items
- Funding and outlook: In May 2021, Vera completed its IPO, selling 5,002,500 shares at $11.00 per share for approximately $48.4 million in net proceeds. Management said quarter-end cash plus IPO proceeds were expected to fund operations for at least 12 months from issuance of the financial statements. The company expects significant and increasing losses and says it will need additional capital for longer-term objectives; the estimate depends on assumptions and could prove too optimistic.
- Development and execution: Atacicept is the company’s principal product candidate. Clinical outcomes, trial enrollment and retention, regulatory approval, safety, competition, and dependence on third-party manufacturers and research organizations are material uncertainties. COVID-19 could disrupt trials, suppliers and development timelines.
- License obligations: Under the Ares agreement for atacicept, Vera may owe up to $176.5 million in regulatory milestones and $515 million in commercial milestones, plus tiered royalties of low-double-digit to mid-teen percentages on covered net sales. These are contingent obligations, not current debt.
- Liquidity context: The filing says the company had recurring operating losses and negative operating cash flow. Its audited 2020 statements raised substantial doubt about long-term continuation as a going concern, while management’s Q1 assessment, taking the subsequent IPO into account, indicated funding for at least the next 12 months.
- Controls: Management concluded disclosure controls were not effective as of March 31, 2021 because of a material weakness involving insufficient qualified accounting personnel, segregation of duties and review procedures. Remediation included hiring accounting resources, using consultants and implementing an accounting system.
- Subsequent events: A reverse stock split took effect May 7, 2021, and historical share and per-share amounts were retroactively adjusted. On April 26, 2021, Vera completed the sale of PNAi-related assets to Neubase for $0.796 million cash and 308,635 Neubase shares, reported as worth $1.759 million at closing; 162,260 shares were placed in escrow.
- The company reported no material legal proceedings and no material changes to contractual obligations during the quarter. No dividend was declared or paid.
Key facts for investors to verify
- How actual cash burn and clinical-trial spending compare with the company’s stated funding runway, and when additional financing may be needed.
- Phase 2b trial enrollment, timing and results for atacicept, including any effects from COVID-19 or manufacturing and supply constraints.
- Progress in remediating the material weakness and whether disclosure and financial-reporting controls become effective.
- Potential timing and scale of Ares milestone and royalty obligations, and the status of the Neubase shares held in escrow.
- That post-quarter IPO proceeds and shares are not included in the March 31, 2021 balance sheet or quarter-end share data.