Cellectis S.A. — FY 2019 Form 20-F
Period and scope: Annual report for the fiscal year ended December 31, 2019; this is not a quarterly filing, and the supplied filing does not provide standalone Q4 financial results. Audited consolidated statements are prepared under IFRS and presented in U.S. dollars. Cellectis develops gene-edited cell therapies and consolidates its 68.9%-owned agricultural biotechnology subsidiary, Calyxt.
Financial performance and liquidity
| Metric ($ millions, except per-share data) | 2019 | 2018 |
|---|---|---|
| Revenue | 15.2 | 12.7 |
| Other income, mainly French research tax credit | 7.8 | 8.7 |
| Total revenue and other income | 23.0 | 21.4 |
| Cost of revenue | 11.4 | 2.7 |
| Research and development expense | 92.0 | 76.6 |
| Selling, general and administrative expense | 43.0 | 47.2 |
| Operating loss | (123.6) | (105.1) |
| Financial gain | 8.3 | 16.8 |
| Net loss | (115.2) | (88.3) |
| Net loss attributable to Cellectis shareholders | (102.1) | (78.7) |
| Basic and diluted loss per share | $(2.41) | $(1.93) |
| Operating cash flow | (69.1) | (68.1) |
Revenue rose 19.3%, but Cellectis had no approved therapeutic products and no therapeutic product sales. Calyxt’s commercial sales of high-oleic soybean products contributed $7.4 million of 2019 product and service revenue. No consolidated margin figure is stated in the filing.
At year-end, cash and cash equivalents were $340.5 million and current financial assets were $20.4 million, for combined liquidity of $360.9 million. Total assets were $467.5 million and equity was $355.5 million. Cash and cash equivalents declined from $451.5 million in 2018. The company reported $47.6 million of lease liabilities; the filing identifies these as its financial debt. Calyxt separately reported $58.6 million in cash and cash equivalents.
Material changes and unusual items
- R&D expense increased 20.2% to $92.0 million, mainly reflecting higher external research and development spending. SG&A declined 9.0%, in part because non-cash stock compensation fell.
- Cost of revenue increased to $11.4 million, including $9.3 million of cost of goods sold associated with Calyxt’s commercial launch and an inventory net-realizable-value adjustment.
- Operating loss widened by $18.5 million and net loss by $26.9 million. Lower financial gain, higher operating costs and commercialization expenses contributed; 2019 financial results also include a $2.6 million IFRS 16 lease interest expense.
- IFRS 16 was adopted in 2019 using the modified retrospective method. It added $45.6 million of right-of-use assets and increased recognized lease liabilities; prior periods were not restated. Accordingly, year-over-year balance-sheet and expense comparisons are affected.
- Cash used in investing activities was $35.9 million, including $12.9 million in property and equipment and increased restricted cash related to manufacturing-facility commitments. Financing activities used $3.9 million, primarily lease payments.
Outlook, commentary and risks
Management stated that Cellectis’ cash, expected collaboration receipts and government funding should fund Cellectis operations into 2022, and Calyxt operations through mid-2021. The company expects continued losses and substantial spending on clinical development, manufacturing, research and commercialization preparation; further funding may be needed, and availability or terms are not assured.
- Cellectis sponsored Phase I studies of UCART123 for AML, UCART22 for B-ALL and UCARTCS1 for multiple myeloma. UCART123’s replacement AML study began dosing its first patient in January 2020. Servier and Allogene sponsor additional UCART19 studies under licenses. Clinical outcomes, safety, regulatory review, enrollment and manufacturing remain material uncertainties.
- In 2018, manufacturing-material particle findings led Cellectis to withhold potentially affected batches pending FDA clearance. The filing says new, unaffected batches supported initiation of the three company-sponsored trials.
- Calyxt’s first commercial sales began in Q1 2019, but the filing says sales had not yet generated significant revenue. Its high-fiber wheat development faced field-trial damage reported in Q1 2020; Calyxt expected to harvest remaining crop and continue development, with a potential launch as early as 2022, subject to results and regulatory work.
- Post-year-end, on March 4, 2020, Cellectis amended its Servier agreement. The amendment provides for a €25 million upfront payment, up to $410 million in additional milestones and low-double-digit royalties; these are subsequent events, not 2019 revenue. The filing also reports up to $2.8 billion in potential Allogene milestones, contingent on development and sales milestones.
- Risks include clinical failure or adverse events, uncertain regulation of gene and cell therapies, dependence on collaborators and contract manufacturers, competition, intellectual-property disputes, financing needs, foreign-exchange exposure, Calyxt’s commodity, weather and market risks, and uncertainty over French research tax-credit claims. The French tax-credit audit remained unresolved; management said no provision was warranted at year-end.
The auditor issued an unqualified opinion on the financial statements and internal controls. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2019.
Important facts for investors to verify
- Current clinical-trial enrollment, safety findings and efficacy data for the UCART programs, including the 2020 UCART123 study restart.
- Actual cash burn and whether the stated runway assumptions remain valid, particularly given facility construction, lease commitments and future financing needs.
- Calyxt sales, gross economics, inventory valuation and the effect of the reported high-fiber wheat field damage.
- Receipt and terms of the €25 million Servier upfront payment, and the conditions attached to Servier and Allogene milestone and royalty potential.
- Outcome of the French research tax-credit audit and any resulting impact on cash receipts or financial statements.