Adicet Bio, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Adicet is a clinical-stage biotechnology company developing allogeneic gamma delta T-cell therapies. It has no approved products and has generated no product-sales revenue; reported revenue is from its Regeneron collaboration.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue, related party | $4.8 million | $7.5 million | $0.8 million | $9.5 million |
| Research and development | $10.6 million | $8.7 million | $22.4 million | $15.7 million |
| General and administrative | $5.0 million | $7.4 million | $10.7 million | $9.9 million |
| Net loss | $10.9 million | $8.5 million | $32.2 million | $12.9 million |
| Net loss per share | $0.34 | $3.88 | $1.11 | $5.96 |
| Net cash used in operating activities | — | $27.9 million | $20.4 million |
Amounts are U.S. dollars; losses and cash used are shown as positive magnitudes. Gross margin is not meaningful to the business at this stage. Q2 operating expenses were $15.6 million and operating loss was $10.8 million; six-month operating expenses were $33.0 million and operating loss was $32.2 million.
At June 30, cash and cash equivalents were $208.7 million, with $4.5 million of restricted cash; no marketable debt securities remained. Total assets were $268.8 million, total liabilities $40.4 million, and stockholders’ equity $228.3 million. The company reported no drawn term debt under its $12 million Pacific Western Bank facility. Lease liabilities were $20.5 million in total. Management expected available cash and securities to fund forecast expenses, capital expenditures and debt service for at least 12 months from the financial-statement issuance date.
In February, Adicet raised approximately $143.8 million net from a public offering and concurrent private placement. It also had a $75 million at-the-market program, with no shares sold through June 30. Shares outstanding increased to 31.8 million from 19.7 million at year-end.
Changes versus comparable periods
- Q2 revenue fell 36%; first-half revenue fell 91%. The prior-year periods included a $5.0 million cumulative revenue catch-up related to a Regeneron clinical-candidate milestone. First-half 2021 revenue was also reduced by a $4.0 million cumulative adjustment after estimated costs and the collaboration performance period changed; the research term now extends into Q1 2022.
- Q2 R&D rose 22% and first-half R&D rose 42%, primarily reflecting increased staffing, stock compensation and clinical-development activity, including ADI-001. Management expects R&D spending to increase as development advances.
- Q2 G&A declined 32% as merger-related professional fees fell; first-half G&A increased 7%, with higher personnel and facility costs partly offset by lower professional fees.
- First-half net loss increased to $32.2 million from $12.9 million, while operating cash use increased to $27.9 million from $20.4 million. The 2021 loss included a $1.2 million impairment of acquired IPR&D.
Outlook, commentary and risks
- ADI-001’s first-in-human Phase 1 trial in non-Hodgkin lymphoma began in March 2021; patient dosing had commenced, with interim clinical data expected in 2021. The planned study can enroll up to 80 patients.
- Management intended to submit an IND for solid-tumor candidate ADI-002 in Q2 2022. Timing depends on preclinical and manufacturing progress. These are plans, not financial guidance; no revenue or earnings guidance was provided.
- On July 27, 2021, after quarter-end, Adicet notified Novartis of termination of the RTB101 license. The company had concluded the probability of commercialization was close to zero, recorded a $1.2 million first-half IPR&D impairment and reduced the related contingent value right liability to zero. Termination was to take effect within 60 days, no later than October 1, 2021.
- Adicet relies on Regeneron for all reported revenue and remains exposed to collaboration execution, contract-term and concentration risks. No product revenue is expected unless candidates are approved and commercialized or further collaborations are secured.
- Key risks include the unproven technology and early clinical stage of ADI-001 and ADI-002; trial safety, efficacy, enrollment and timing; reliance on external manufacturers and suppliers; regulatory uncertainty; competition; and the need for substantial future capital. COVID-19 could disrupt trials, supply, regulators or access to financing, although the company reported no significant operational disruption to date.
- Management identified material weaknesses in financial reporting controls, including insufficient accounting resources, inadequate formal controls and procedures, segregation-of-duties deficiencies, and controls over complex transactions. Remediation was underway, including hiring finance personnel, training and implementing a new ERP system; the weaknesses had not been reported as remediated.
- A Boston office sublease signed July 19, 2021 was expected to generate approximately $3.5 million of base rent through July 2026, subject to landlord approval. The company reported no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- Clinical-trial progress, safety findings and timing of ADI-001 interim data and the ADI-002 IND.
- Cash burn, runway assumptions and the pace of R&D spending relative to the stated 12-month funding expectation.
- Regeneron collaboration duration, remaining deferred revenue, and the impact of the Q1 estimate adjustment on future revenue recognition.
- Execution and financial impact of the Novartis termination and RTB101 impairment, and whether the Boston sublease receives approval.
- Progress in remediating material weaknesses and maintaining reliable financial reporting controls.
- Future dilution or financing needs, including any use of the ATM program, and manufacturing capacity for clinical development.