Atara Biotherapeutics, Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Filing dated November 9, 2017. Atara is a clinical-stage cell therapy company developing treatments for cancer and multiple sclerosis (MS); it reported no revenue.
Financial position and results
| Metric | Q3 2017 / September 30, 2017 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense | $20.6 million for Q3; $56.4 million for nine months | Q3 2016: $18.8 million; nine months 2016: $43.0 million |
| General and administrative expense | $11.1 million for Q3; $29.3 million for nine months | Q3 2016: $7.1 million; nine months 2016: $19.4 million |
| Net loss | $31.1 million for Q3; $84.2 million for nine months | Q3 2016: $25.4 million; nine months 2016: $60.8 million |
| Basic and diluted loss per share | $1.02 for Q3; $2.84 for nine months | Q3 2016: $0.88; nine months 2016: $2.12 |
| Cash, cash equivalents and short-term investments | $200.2 million | $255.7 million at December 31, 2016 |
| Total assets / total liabilities | $229.7 million / $23.7 million | $263.9 million / $10.2 million at December 31, 2016 |
For the nine months, operating cash use was $62.6 million, versus $38.9 million in 2016. Investing activities provided $55.7 million, mainly reflecting purchases, maturities and sales of short-term investments; financing activities provided $19.4 million, including $19.2 million net proceeds from Atara’s at-the-market (ATM) stock sales. Cash and cash equivalents increased by $12.5 million during the period. The company had an accumulated deficit of $261.3 million. Profitability and operating margins are not meaningful because the company had no revenue and incurred operating losses.
The balance sheet included $22.2 million of net property and equipment, much of it construction in progress for the Thousand Oaks facility. A $6.2 million long-term financing obligation was recorded for landlord-funded construction costs. The new facility lease has an initial 15-year term and $16.4 million of aggregate contractual obligations; Atara expected to spend approximately $37.5 million of cash on the build-out through the remainder of 2017 and early 2018. Future minimum payments under other operating leases were $3.4 million. The filing reports no off-balance-sheet arrangements.
Material changes versus prior comparable periods
- Nine-month net loss increased by $23.4 million year over year, while total operating expenses rose by $23.2 million to $85.7 million. R&D costs increased $13.4 million and G&A costs increased $9.8 million.
- Management attributed R&D growth principally to ATA129 Phase 3 preparation and manufacturing, increased headcount and facility overhead, and ATA188/ATA190 development. G&A growth was primarily driven by higher payroll and professional services costs.
- Operating cash use increased by $23.7 million year over year. Cash and investments declined by $55.5 million from December 2016, despite ATM proceeds and investment-related cash flows.
- Atara sold 1.35 million shares through the ATM during the first nine months for $20.0 million gross and $19.2 million net proceeds; $55.0 million remained available under the facility at September 30, subject to its terms. Shares outstanding were 30.6 million at October 31, 2017.
Outlook, programs and risks
- Management expected September 30 cash, cash equivalents and short-term investments to fund planned operations into the first quarter of 2019. It also expected R&D and G&A expenses to continue increasing; no revenue or profitability guidance was provided. The company expects to need additional capital and has no committed external funding source.
- Atara expected to initiate two Phase 3 ATA129 trials for EBV-associated post-transplant lymphoproliferative disorder in Q4 2017, following FDA discussions about manufacturing comparability and trial initiation. It planned an ATA129 trial in nasopharyngeal carcinoma and a European conditional marketing authorization application in 2018.
- The filing described interim expanded-access results for ATA129: five of five reported EBV-PTLD patients after solid-organ transplant and four of five after hematopoietic-cell transplant responded at the abstract-submission cutoff. These are early, small-sample results, not confirmatory Phase 3 evidence. Treatment-related serious adverse events were reported in five of 22 treated patients.
- Atara reported that its allogeneic ATA188 Phase 1 MS trial commenced in October 2017, with U.S. expansion expected in early 2018. The company also described investigator-reported ATA190 improvements in six of ten progressive MS patients; these preliminary findings require further evaluation.
- Atara was prioritizing EBV programs ahead of ATA230. The filing described planned presentation of ATA230 data, including a reported 64% response rate among 50 post-transplant patients, and stated that later-stage trial designs would be evaluated after ATA129 Phase 3 initiation. ATA520 development was also deferred pending further process development and advancement of other programs.
- In October 2017, after the reporting date, Atara returned all remaining rights under its Amgen license agreements to Amgen.
- Key risks include clinical and regulatory failure or delay; manufacturing transfer, comparability, scale-up and facility-completion risks; dependence on third-party manufacturers and clinical organizations; continued cash burn and potential dilution or unfavorable financing; and uncertain intellectual-property protection, commercialization, reimbursement and market adoption. The company stated it was not involved in material legal proceedings. Management concluded disclosure controls were effective as of September 30, 2017.
Important facts for investors to verify
- Whether FDA discussions resolved ATA129 comparability questions and whether the two Phase 3 trials actually began on the expected schedule.
- Whether clinical efficacy and safety findings for ATA129 and the MS programs are confirmed in prospective, adequately sized trials.
- Whether the Thousand Oaks facility is completed on time and within budget, and whether it meets regulatory and manufacturing requirements.
- Whether the stated cash runway into Q1 2019 remains realistic as trial, manufacturing and facility costs rise, and what additional financing may be required.
- The effect of the October 2017 Amgen rights return and the company’s decision to prioritize EBV programs over ATA230 and ATA520.