CRISPR Therapeutics AG annual report, FY2022

CRISPR Therapeutics AG — FY2022 Form 10-K

Business context and reporting period. This is the annual report for the fiscal year ended December 31, 2022, not a standalone fourth-quarter report. CRISPR Therapeutics is a clinical-stage gene-editing company with programs in hemoglobinopathies, immuno-oncology, regenerative medicine and in vivo editing. It reported no product sales; substantially all operations remain focused on research and development.

Financial results and liquidity

Metric	FY2022	FY2021
Total revenue	$1.2 million	$915.0 million
Research and development expense	$461.6 million	$340.6 million
General and administrative expense	$102.5 million	$99.7 million
Collaboration expense, net	$110.3 million	$101.2 million
Net loss / income	$(650.2) million	$377.7 million
Net cash used in / provided by operating activities	$(495.7) million	$539.0 million

FY2022 collaboration revenue was only $0.4 million, compared with $913.1 million in FY2021. The prior-year result was largely driven by Vertex’s $900 million upfront payment under the amended exa-cel agreement and a $12.0 million recognized milestone. The year-over-year earnings comparison is therefore dominated by a one-time collaboration payment, not product sales.
R&D expense increased $121.1 million, primarily from higher external research and development costs, employee costs, and facilities costs. Operating expenses totaled $674.4 million; operating loss was $673.2 million.
Cash, cash equivalents and marketable securities totaled $1.868 billion at year-end, down from $2.379 billion at December 31, 2021. Total current assets were $1.853 billion and current liabilities $121.1 million. Management expects existing cash and marketable securities to fund its current operating plan for at least 24 months, based on assumptions that may prove incorrect.
Investing cash flow was $(258.7) million, including $221.5 million of net purchases of marketable securities and $37.2 million of property and equipment purchases. Financing cash flow was $38.6 million, mainly from option exercises and employee share-purchase contributions.
The filing reports no financial borrowings in the presented balance sheet. Operating lease liabilities were $244.0 million; undiscounted lease payments totaled $340.2 million. These are lease obligations, not reported financial debt.
Margins are not meaningful indicators for this pre-commercial company: revenue was minimal in 2022 and there were no product sales.

Material changes and business developments

Exa-cel: Vertex and CRISPR completed European Medicines Agency and UK MHRA marketing application submissions in December 2022; both applications were validated. The U.S. rolling BLA submission began in November 2022, with completion expected by the end of Q1 2023.
In reported trial data, 42 of 44 evaluable TDT patients were transfusion-free at the February 2022 cutoff, and all 31 reported severe SCD patients were free of vaso-occlusive crises at last follow-up. These are interim clinical results, not final or independently established outcomes.
CTX110: Phase 1 Part A data showed a 67% overall response rate and 41% complete response rate among 27 patients treated at dose levels 3 and above. The company expanded the study to include a Phase 2, potentially registrational arm with consolidation dosing and reported that dosing had begun.
CTX130: early Phase 1 reports included responses in T-cell lymphoma and disease control in renal cell carcinoma; the filing describes small patient cohorts and preliminary data. CTX112’s IND was cleared by the FDA in Q4 2022. CTX131’s IND clearance occurred in Q1 2023, after the reporting year.
VCTX211’s clinical trial application was cleared by Health Canada in Q4 2022, and its Phase 1/2 trial was ongoing. The VCTX210 Phase 1 study was in follow-up.
R&D spending and operating losses increased as the company advanced programs and expanded facilities. The Framingham cell-therapy facility was built, but regulatory validation was still in progress at year-end.

Outlook, risks and contingencies

Management expects continued operating losses and rising expenses as clinical development, manufacturing, regulatory work and research continue. The company has no product revenue and says additional capital will be needed for long-term development; future equity financing could dilute shareholders.
Under the Vertex agreement, Vertex leads and controls exa-cel development, manufacturing and commercialization activities. CRISPR’s share of exa-cel net profits or losses is 40%, versus 60% for Vertex. CRISPR deferred $36.1 million of its 2022 share of specified program costs; it had not recognized the deferred amount as a liability at year-end because recoverability and measurement were not established.
Key risks include uncertain clinical efficacy and long-term safety of gene editing, regulatory delays or rejection, manufacturing and patient-enrollment challenges, competition, reimbursement and pricing uncertainty, reliance on collaborators, and the possibility of further financing.
Intellectual-property risk is significant. In February 2022, the U.S. Patent Trial and Appeal Board found Broad had priority over the CVC Group in the subject matter of an interference; CVC appealed. The company also disclosed European patent opposition proceedings and related uncertainty.
Reported safety items include serious adverse events in the exa-cel TDT trial, which the filing says resolved, and a post-cutoff SCD patient death following SARS-CoV-2 infection that the investigator attributed to the infection, with possible contribution from busulfan lung injury, and deemed unrelated to exa-cel. The filing also reports deaths from infections in CTX110/CTX130 trial settings, with stated investigator assessments of causality varying by event.
The company said the coronavirus pandemic had not significantly affected FY2022 financial results, while noting possible disruption to trials, suppliers and operations. It reported no material interest-rate exposure and no material foreign-currency transaction gains or losses.

Most important facts for investors to verify

Regulatory status and timing of exa-cel reviews in the U.S., EU and UK, including any additional data or manufacturing requirements.
Updated, mature clinical efficacy and safety data for exa-cel and the company’s CAR-T programs, including durability, conditioning-related risks and treatment-related adverse events.
Cash runway assumptions, actual quarterly cash burn, and the implications of deferred exa-cel costs and future collaboration economics.
Progress and cost to validate the Framingham manufacturing facility, and the company’s dependence on external manufacturers and collaborators.
Developments in the Broad/CVC patent appeal and other gene-editing intellectual-property disputes, including any effect on freedom to operate.
Whether future revenue or financing materially changes the company’s cash needs, potential dilution and path toward commercialization.