Arcturus Therapeutics Holdings Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Arcturus is a clinical-stage mRNA medicines company developing infectious-disease vaccines and treatments for rare liver and respiratory diseases. Financial statements are unaudited.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $27.1 million | $2.0 million | $32.3 million | $4.1 million |
| Research and development, net | $38.2 million | $45.7 million | $83.1 million | $95.7 million |
| General and administrative | $11.0 million | $10.0 million | $21.7 million | $19.8 million |
| Operating loss | $22.1 million | $53.7 million | $72.5 million | $111.4 million |
| Net loss | $21.6 million | $54.6 million | $72.7 million | $110.9 million |
| Basic and diluted loss per share | $0.82 | $2.07 | $2.75 | $4.22 |
Q2 revenue growth primarily reflected $12.7 million recognized under the Vinbiocare agreement and recognition of a $12.5 million Israeli Ministry of Health reservation payment after that agreement was terminated. First-half revenue was similarly driven by Vinbiocare ($15.6 million) and the Israeli payment. These items materially improved reported losses; they do not establish recurring product revenue. Gross margin is not separately presented.
Research and development expense declined, mainly due to lower clinical costs; management expects R&D spending to increase and remain substantial as programs advance. G&A increased, primarily from personnel and facility costs.
- Cash and liquidity: Cash and cash equivalents were $283.5 million at June 30, 2022; including restricted cash, total cash was $285.6 million. Unrestricted cash declined from $370.5 million at year-end 2021.
- Cash flow: First-half operating cash use was $85.9 million, versus $75.9 million a year earlier; investing cash use was $1.7 million. Cash, cash equivalents and restricted cash fell by $87.0 million.
- Debt: Debt carrying value totaled approximately $62.8 million ($27.0 million current and $35.8 million long-term). Western Alliance principal payments began August 1, 2022. Arcturus expected to repay approximately $15.4 million of the Singapore loan in 2022 for unused funds, subject to an audit; it intended to discuss potential forgiveness of approximately $31.2 million with the lender.
- Other balance-sheet items: Current assets were $291.5 million and current liabilities $92.7 million at June 30. Accumulated deficit was $420.2 million. A new facility lease contributed to operating lease liabilities of $35.6 million.
Material changes, outlook and risks
- Management stated available working capital was sufficient for at least the next 12 months, subject to assumptions including no significant unforeseen expenses, partner funding at expected levels and debt payments on schedule. The company expects continued losses and may need additional capital; financing may dilute shareholders or be unavailable on acceptable terms.
- ARCT-154’s Vietnam Phase 3b efficacy endpoint was reported met: vaccine efficacy was 55.0% against COVID-19 overall and 95.3% against severe or fatal disease. Regulatory review and whether the data will support approvals remain uncertain. A registrational booster study was expected to begin in Q4 2022; management was considering a two-trial global registration approach.
- Arcturus discontinued development of its first-generation COVID-19 candidate ARCT-021 after a potential partner declined to proceed. Management noted that further ARCT-154 studies require substantial funding and that competition from approved vaccines could limit trial and commercial opportunities.
- Other stated plans included identifying a STARR-based flu candidate by year-end, filing an ARCT-032 cystic-fibrosis clinical application in 2022, and advancing ARCT-810 OTC-deficiency studies. These are forward-looking plans, not achieved results.
- Additional ARCT-154 Omicron booster data were reported in August 2022, after the quarter: exploratory Day 91 neutralization results showed 44-fold and 39-fold rises over baseline for BA.1 and BA.2, respectively.
- Risks include clinical and regulatory uncertainty, manufacturing and partner execution, funding needs, foreign-exchange exposure tied to the Singapore loan, and possible delays in Vietnamese regulatory review. Management reported disclosure controls were effective and no material changes in internal control over financial reporting.
Investor facts to verify
- How much of future revenue depends on recognition of existing collaboration payments versus new or recurring commercial activity?
- What are the timing, design, funding source and regulatory requirements for ARCT-154’s planned booster studies and potential approvals?
- What amount of the Singapore loan must be repaid after the audit, and will any remaining balance be forgiven?
- Does the stated 12-month cash runway remain valid as clinical, manufacturing and facility costs evolve?
- How do subsequent full clinical datasets compare with the reported interim efficacy and immunogenicity results?