Adicet Bio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Adicet is a clinical-stage biotechnology company developing allogeneic gamma delta T-cell therapies for cancer. Its lead candidate, ADI-001, is in a Phase 1 study for relapsed or refractory B-cell non-Hodgkin lymphoma (NHL); ADI-925 and other programs remain in preclinical development.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0 | $25.0 million |
| Research and development expense | $26.8 million | $13.5 million; up 98% |
| General and administrative expense | $6.6 million | $6.8 million; down 3% |
| Net income (loss) | $(30.9) million | $4.6 million |
| Operating cash flow | $(24.1) million | $4.1 million |
| Capital expenditures | $1.9 million | $2.6 million |
| Cash and cash equivalents | $231.6 million at March 31 | $257.7 million at December 31, 2022 |
The prior-year revenue and profit reflected Regeneron’s ADI-002 option exercise and related collaboration revenue; Adicet recognized no Regeneron revenue in Q1 2023. It has no approved products or product-sales revenue. Interest income rose to $2.7 million from $0.03 million, primarily due to higher interest rates. Gross margin is not meaningful for this period because there was no revenue.
At March 31, current assets were $234.8 million and current liabilities were $18.1 million. The company reported no debt outstanding under its PacWest loan agreement and $10.6 million available to draw. Lease liabilities totaled $23.5 million, including current and non-current amounts. Accumulated deficit was $269.0 million.
Material changes and management outlook
- R&D expense increased $13.3 million, mainly due to higher external research and manufacturing costs, increased headcount, facility costs, and lab supplies. The company completed its GMP cell-processing and vector-manufacturing suite in Redwood City in February 2023, but disclosed that manufacturing operations at its facility had not yet commenced.
- Management expected cash and cash equivalents to cover forecast operating expenses, capital expenditures, and debt service for at least 12 months from issuance of the statements. Separately, the risk factors state that the company believed its cash capitalized it into the first half of 2025, with additional funding required thereafter. These are estimates subject to assumptions and changing needs.
- Management planned an additional ADI-001 clinical update and discussions with the FDA in Q2 2023, followed by EMA discussions, regarding a potential pivotal-development path. It expected to initiate a potential pivotal study in post-CAR-T large B-cell lymphoma in Q4 2023. These are forward-looking plans, not assured outcomes.
- The company planned one new IND every 12–18 months, including one in the second half of 2023. ADI-001 had received FDA Fast Track designation; this does not assure approval or a particular review timeline.
Risks, contingencies, and other notable items
- Adicet expects continuing losses and negative operating cash flows and anticipates needing substantial additional financing. If financing is unavailable on acceptable terms, it may delay, reduce, or discontinue programs or grant product rights to collaborators.
- On March 13, 2023, Adicet and PacWest temporarily modified deposit-balance covenants through June 30, 2023. Adicet transferred $187.2 million from PacWest insured cash sweep accounts to Pacific Western Asset Management, which invested the funds in money market funds held in custody at U.S. Bank. The company said it was in covenant compliance and had no loan balance as of the report date; covenant requirements were to resume after June 30.
- Key risks include ADI-001 clinical safety and efficacy, trial delays or enrollment, regulatory uncertainty for novel cell therapies, dependence on third-party manufacturers and suppliers, scaling and quality control, and competition. Adicet also cited financing and banking-sector risks, supply-chain disruptions, and potential COVID-19 impacts.
- No material legal proceedings were reported. Management concluded disclosure controls and procedures were effective as of March 31, 2023; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether Q2 2023 clinical updates and FDA/EMA discussions occurred as planned, and what evidence supports the proposed ADI-001 pivotal path and Q4 2023 study timing.
- Cash-burn assumptions behind the stated 12-month funding sufficiency and first-half-2025 capitalization estimate, including expected trial, manufacturing, and facility costs.
- Current location and accessibility of cash, PacWest covenant compliance after June 30, 2023, and any changes to banking or loan arrangements.
- Progress toward operating the Redwood City GMP suite and the company’s continued reliance on external manufacturers for clinical supply.
- Potential dilution from the $100 million at-the-market program, equity awards, and any future financing; 42,957,586 common shares were outstanding as of May 5, 2023.