Aura Biosciences, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Financial statements are unaudited. Aura is a clinical-stage biotechnology company developing virus-like drug conjugates, with AU-011 its only product candidate disclosed. It had no approved products and generated no revenue.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $6.4 million | $2.9 million | $17.2 million | $14.5 million |
| General and administrative expense | $2.5 million | $0.8 million | $6.4 million | $2.8 million |
| Total operating expenses | $8.9 million | $3.6 million | $23.6 million | $17.3 million |
| Net loss | $8.8 million | $3.6 million | $23.6 million | $17.3 million |
| Net loss attributable to common stockholders | $12.5 million | $5.6 million | $33.2 million | $23.1 million |
| Net loss per share, basic and diluted | $28.33 | $14.81 | $77.93 | $63.69 |
Loss per share is presented as a loss; the filing reports the amounts in parentheses. The difference between net loss and loss attributable to common stockholders primarily reflects accrued preferred-stock dividends. As a pre-revenue company, gross margin and operating margin are not meaningful.
- Cash and liquidity: At September 30, 2021, cash and cash equivalents were $81.8 million; cash, cash equivalents and restricted cash totaled $82.0 million. Current assets were $83.5 million and current liabilities $5.8 million.
- Cash flow, nine months: Operating activities used $20.3 million, investing activities used $1.3 million, and financing activities provided $86.1 million. Cash and restricted cash increased by $64.5 million.
- Debt and liabilities: The balance sheet reports $6.4 million of total liabilities, including accounts payable, accruals, lease liabilities and a $0.1 million warrant liability. No conventional borrowings are reported.
- Accumulated deficit: $140.5 million at September 30, 2021, versus $116.9 million at December 31, 2020.
Changes versus the prior comparable period
- Q3 net loss increased to $8.8 million from $3.6 million; nine-month net loss increased to $23.6 million from $17.3 million.
- Q3 R&D expense rose $3.5 million, primarily from clinical-trial progression, AU-011 manufacturing development and increased personnel. Nine-month R&D rose $2.7 million; higher manufacturing-development and personnel costs were partly offset by lower preclinical expense.
- G&A expense increased in both periods, principally from headcount growth and higher audit, legal, consulting and facilities costs in preparation for public-company operations.
- Operating cash use was broadly similar year over year ($20.3 million versus $20.6 million for nine months), while financing cash inflows increased substantially following preferred-stock financings.
Outlook, risks and unusual items
- Development plans: Management planned to report six-to-twelve-month safety and efficacy data from the AU-011 suprachoroidal Phase 2 dose-escalation trial in 2022, select an administration route and initiate a pivotal trial in the second half of 2022, file a U.S. IND for choroidal metastases in the second half of 2022, and begin a Phase 1a trial in non-muscle invasive bladder cancer in the second half of 2022. These are forward-looking plans, not assurances.
- Clinical evidence: Management said the completed Phase 1b/2 intravitreal study showed statistically significant tumor-growth-rate reduction among patients with prior active growth, with tumor control and visual-acuity preservation in a majority of patients. The filing cautions that early results may not predict pivotal-trial outcomes.
- Funding outlook: Aura completed its IPO on November 2, 2021, issuing 6.21 million shares at $14 per share for $86.9 million gross proceeds and approximately $77.9 million net proceeds. The MD&A says existing cash plus IPO proceeds are expected to fund operations into 2024; the financial-statement liquidity note states the funds are expected to cover expenses and capital needs for at least 12 months from issuance. Management notes these estimates depend on assumptions and further capital will be needed beyond the projected runway.
- Capital structure: The IPO triggered conversion of preferred stock; a 1-for-13.7 reverse stock split took effect October 22, 2021. The filing reports 29,210,549 common shares outstanding as of November 19, 2021.
- Key risks: Aura has recurring losses, no product revenue, and depends heavily on AU-011. It has not completed a pivotal trial or commercialized a product. Regulatory review is complicated by AU-011’s drug-device/laser delivery requirements; clinical success, patient enrollment, manufacturing scale-up, market acceptance and additional financing remain uncertain.
- Manufacturing and COVID-19: Aura relies on third parties and disclosed a single source for each of AU-011’s regulatory starting materials, drug substance and drug product manufacturing. It reported minor manufacturing delays from a vendor supply constraint; broader pandemic effects could disrupt trials, suppliers and timelines.
- Other items: The company adopted ASC 842 lease accounting in 2021 and amended its facility lease, extending the term to July 2023 and adding laboratory space. Management reported disclosure controls were effective at September 30, 2021; internal-control effectiveness was not evaluated in this quarterly report.
Important facts for investors to verify
- Whether the AU-011 Phase 2 data, pivotal-trial start and other stated 2022 development milestones were achieved, and how final data compare with management’s reported early findings.
- Whether the stated runway into 2024 remains supportable given actual operating cash use, planned trial/manufacturing spending and the differing runway language in the filing.
- The effect of the IPO, preferred-stock conversion, reverse split, options and subsequent share issuance on fully diluted ownership and future dilution.
- Progress in commercial-process transfer and analytical comparability, plus mitigation plans for single-source suppliers and manufacturing delays.
- Whether clinical, regulatory, enrollment, reimbursement and COVID-related risks alter program timelines or require additional financing.