Atara Biotherapeutics, Inc. — Q3 2016 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2016. The unaudited financial statements are prepared under U.S. GAAP. Atara is a clinical-stage biopharmaceutical company and reported no revenue.
Financial performance and position
- Q3 2016: Operating expenses were $25.9 million, including $18.8 million of research and development and $7.1 million of general and administrative expenses. Net loss was $25.4 million, or $0.88 per share, versus a $11.9 million net loss, or $0.43 per share, in Q3 2015.
- Nine months 2016: Operating expenses were $62.5 million (R&D $43.0 million; G&A $19.4 million). Net loss was $60.8 million, or $2.12 per share, compared with a $36.0 million net loss, or $1.46 per share, in the comparable 2015 period.
- Revenue and margins: No revenue was generated. Gross profit and operating margins are therefore not applicable.
- Cash flow: Cash used in operations was $38.9 million for the first nine months, versus $25.8 million in 2015. Investing activities provided $61.0 million, principally reflecting investment sales and maturities, while financing activities provided $0.2 million. Cash and cash equivalents increased $22.3 million to $46.0 million.
- Liquidity: Cash, cash equivalents and short-term investments totaled $278.1 million at September 30, 2016, down from $320.5 million at year-end 2015. Current assets were $282.2 million and current liabilities $13.7 million. Management said existing cash and investments were expected to fund planned operations through 2018.
- Debt and liabilities: The filing reports no borrowings or debt balance. Total liabilities were $14.2 million, including $13.7 million of current liabilities. Operating lease commitments were $4.3 million gross and $4.2 million net of sublease income.
- Accumulated deficit: $158.9 million at September 30, 2016. Stock-based compensation was $15.1 million for the nine-month period, versus $7.3 million in 2015.
Material changes versus the prior period
- Q3 operating expenses more than doubled year over year, rising from $12.3 million to $25.9 million; nine-month expenses increased from $36.7 million to $62.5 million. Higher clinical, manufacturing, personnel and stock-based compensation costs drove the increase.
- R&D spending rose substantially as Atara advanced EBV-CTL and CMV-CTL and expanded other T-cell programs. Q3 R&D included a $7.1 million “other T-cell” category, with manufacturing costs and a $3.3 million QIMR Berghofer license-related charge among the cited items.
- Spending on STM 434 and other molecular programs declined following suspension of PINTA 745 development and return of rights to PINTA 745 and ATA 842 to Amgen in June 2016. Q3 included a net expense reversal for closeout accruals.
- Cash used in operations increased by $13.1 million year over year. Unlike 2015, when Atara raised $263.4 million net through a common-stock offering, there were no comparable equity-offering proceeds in the 2016 period.
Outlook, commentary and risks
- Management anticipated increasing R&D and G&A expenses as programs and operations expanded, and expected losses to continue for the foreseeable future. Atara said additional funding would ultimately be needed; it had no committed external source of funds.
- EBV-CTL was expected to enter two Phase 3 trials for EBV-associated post-transplant lymphoproliferative disorder by year-end 2016; final protocols had been submitted to the FDA. The company also reported an expanded-access trial and regulatory designations, including FDA breakthrough therapy and orphan-drug designations and EMA orphan-drug, ATMP and PRIME status.
- CMV-CTL was in Phase 2; Atara expected to initiate a Phase 3 trial in 2017 after further FDA discussions. WT1-CTL and STM 434 were in Phase 1. The company expected to complete STM 434 dose escalation by year-end and planned a Phase 2 NPC trial of EBV-CTL in 2017.
- Key execution risks include uncertain clinical-trial outcomes and timing, regulatory approval, manufacturing comparability and scale-up, dependence on contract manufacturers and research organizations, patient enrollment, intellectual-property protection, competition, reimbursement and future financing needs. The filing notes that earlier-stage results may not predict later trial results and that T-cell therapies present novel manufacturing and adoption challenges.
- License agreements contain contingent milestone, royalty and sublicensing obligations. The company reported no outstanding milestone or royalty obligations at September 30, 2016; potential future payments are not recorded because they depend on future events.
- There were no material legal proceedings. Disclosure controls were assessed as effective at September 30, 2016; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether the two planned EBV-CTL Phase 3 trials began on schedule, and their enrollment, manufacturing-supply and regulatory status.
- How quickly the $278.1 million cash-and-investment balance is consumed relative to the stated runway through 2018, especially as trial and manufacturing costs rise.
- Progress and FDA-agreed design for the planned CMV-CTL Phase 3 program, and clinical results and safety signals across the pipeline.
- Manufacturing comparability and scale-up progress with third parties, including the stated intention to build an internal cellular manufacturing facility.
- Future financing requirements and dilution risk, as well as contingent license milestones and royalties, including obligations to MSK, Amgen and QIMR Berghofer.