Arcturus Therapeutics Holdings Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Arcturus is a clinical-stage mRNA medicines company developing vaccines and treatments for rare diseases. Financial statements are unaudited; amounts below are in U.S. dollars.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $5.2 million | $2.1 million; up 146.5% |
| Research and development expense, net | $44.9 million | $50.1 million |
| General and administrative expense | $10.7 million | $9.7 million |
| Operating loss | $50.4 million | $57.7 million |
| Net loss / loss per share | $51.2 million / $1.94 | $56.3 million / $2.15 |
| Operating cash used | $49.0 million | $43.0 million |
| Cash, cash equivalents and restricted cash | $321.8 million at March 31 | $372.6 million at December 31, 2021 |
| Total debt, current and long-term | $63.5 million | $63.1 million at December 31, 2021 |
| Current assets / current liabilities | $327.0 million / $107.3 million | At March 31, 2022 |
Revenue growth mainly reflected $2.9 million recognized under the Vinbiocare agreement. No gross margin measure is presented; operating expenses substantially exceeded revenue. Net cash decreased $50.8 million during the quarter. The company reported an accumulated deficit of $398.7 million. Deferred revenue was $59.7 million, including $34.8 million related to Vinbiocare.
Material changes versus the prior comparable period
- Revenue increased $3.1 million, primarily from Vinbiocare; existing partners contributed a smaller increase.
- Operating expenses fell $4.2 million. R&D expense decreased $5.2 million, including lower discovery-technology spending and lower COVID-19 and OTC program costs; personnel and facilities costs increased. Q1 2021 included a $5.0 million noncash license-related R&D charge.
- Net loss narrowed by $5.2 million, but operating cash use increased by $6.1 million. Q1 2021 financing cash included $46.6 million of Singapore loan proceeds; Q1 2022 had no comparable debt proceeds.
Outlook, developments and risks
- Management said available working capital was expected to fund operations for at least 12 months from issuance of the statements, subject to assumptions including anticipated partner funding, spending and debt payments. The company expects continued losses and may need additional financing or partnerships; financing may be unavailable or dilutive.
- Management expected to spend on COVID-19 booster development, flu vaccine programs, ARCT-810, ARCT-032 and platform work. At the time of the filing, it anticipated ARCT-032’s first-in-human application in the second half of 2022; ARCT-810 Phase 1b completion in Q4 2022 and interim Phase 2 data in the second half; and selection of a LUNAR-FLU STARR candidate by year-end, with a CTA anticipated in 2023. These are forward-looking expectations, not guarantees.
- After quarter-end, Vinbiocare submitted Phase 3b results to Vietnam’s Ministry of Health. The filing reports vaccine efficacy of 55.0% against COVID-19 overall and 95.3% against severe or fatal disease. A pivotal booster trial was in start-up activities; enrollment, comparator availability, regulatory review and the pandemic’s transition to an endemic phase could affect development and commercial prospects.
- After quarter-end, on April 14, 2022, Israel’s Ministry of Health notified Arcturus it was terminating the vaccine supply agreement; no termination penalties were incurred. The $12.5 million nonrefundable payment remained in deferred revenue as of March 31.
- The Singapore loan carried 4.5% interest and could require repayment of approximately $15.4 million in Q3 2022 for funds not used toward ARCT-021 manufacturing. Loan-term amendments were under discussion. A Western Alliance amendment signed in April moved the first principal payment to August 1, 2022. The company reported compliance with debt covenants at quarter-end.
- Other risks include clinical and regulatory uncertainty, reliance on partners and third-party manufacturing, additional funding needs, foreign-exchange exposure and disruption related to the Russia-Ukraine conflict. The company reported effective disclosure controls and no material legal proceedings.
Important facts for investors to verify
- Progress and regulatory decisions for ARCT-154, including the Vietnam review and any pivotal booster study; assess the reported efficacy and safety data in context of the full study results.
- Whether partner funding and collaboration revenue materialize as anticipated, and how deferred revenue—including the Israel payment—is recognized or otherwise resolved.
- The Singapore loan reconciliation, expected repayment amount and timing, and any amendments to its terms; also monitor Western Alliance debt payments and covenants.
- Cash burn relative to management’s runway estimate, planned clinical and facility spending, and the need for additional capital.
- Enrollment, timing and data for ARCT-810 and ARCT-032, and whether the stated development milestones are achieved.