CRISPR Therapeutics AG — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The company is a clinical-stage gene-editing biotechnology business; it reported no product sales, and all revenue came from collaborations. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $0.3 million | $1.1 million | $0.6 million | $2.4 million |
| Research and development expense | $39.5 million | $25.6 million | $73.4 million | $45.2 million |
| General and administrative expense | $15.8 million | $12.7 million | $30.7 million | $21.6 million |
| Net loss | $53.7 million | $38.4 million | $102.1 million | $66.7 million |
| Net loss per share, basic and diluted | $1.01 | $0.82 | $1.94 | $1.44 |
- Revenue was immaterial relative to operating costs; a conventional operating margin is not meaningful for this pre-revenue company. Q2 collaboration revenue fell mainly because less research was conducted under the Casebia joint venture.
- At June 30, cash and cash equivalents were $427.9 million; restricted cash was $3.9 million. Current assets were $438.5 million versus current liabilities of $31.4 million. Accumulated deficit was $393.7 million.
- Operating cash use was $80.1 million in the first half, versus $47.9 million a year earlier. Capital expenditures were $3.3 million. Financing provided $55.4 million, principally from ATM share sales and option exercises; cash, cash equivalents and restricted cash declined by $28.0 million.
- The balance sheet reported no borrowings. Operating lease liabilities totaled $42.1 million ($4.9 million current); adoption of ASC 842 added lease assets and liabilities without affecting net loss or cash flows.
Material changes and business developments
- First-half R&D expense rose $28.2 million year over year, reflecting higher headcount and compensation, research and license costs, consulting, and facilities. G&A increased $9.1 million, chiefly from staffing and professional fees.
- In the first half, the company sold 1.36 million shares under its ATM program for net proceeds of approximately $52.5 million. It sold another 1.12 million shares through July 29 for approximately $52.8 million net, diluting shareholders.
- Vertex and CRISPR’s 2015 collaboration and joint development agreement cover CTX001 for beta thalassemia and sickle cell disease, with research and development costs and profits or losses shared equally. No milestone or royalty payments had been received under Vertex collaborations as of June 30.
- In July, a new Vertex collaboration for Duchenne muscular dystrophy and myotonic dystrophy type 1 became effective. It provided a $175 million nonrefundable upfront payment, with up to $825 million in potential milestones and tiered royalties. This is a post-quarter event, not included in June 30 cash or results.
Outlook, risks and unusual items
- Management expected existing cash to fund operating expenses and capital expenditures for at least 24 months, excluding potential additional collaboration receipts and future financing. The estimate depends on assumptions and cash could be used sooner than expected; the company anticipated rising expenses and continuing losses.
- CTX001 trials were underway for transfusion-dependent beta thalassemia and severe sickle cell disease; the first patient had been treated in each. The filing reported that, in a July 29 update, the first TDT patient remained transfusion-independent more than four months after engraftment. CTX110, an allogeneic CAR-T candidate, had begun enrolling patients.
- The company cited clinical, regulatory, manufacturing, intellectual-property, financing, and commercialization uncertainties. It said it had no committed external liquidity source beyond collaboration-related funding and potential capital raises.
- A PTAB patent interference proceeding initiated in June 2019 concerns CRISPR/Cas9 technology in eukaryotic cells and includes patent rights licensed to CRISPR Therapeutics. The company said it could not predict the outcome; it reported no other legal or arbitration proceeding expected to have a significant financial effect.
- Casebia’s first-half net loss was $32.3 million; CRISPR reported a $2.0 million equity-method investment loss for the period and disclosed $60.5 million of unrecognized losses exceeding its investment balance.
- The company adopted lease accounting standard ASC 842 on January 1, 2019. It also disclosed $1.7 million and $2.1 million of research-agreement commitments in 2019 and 2020, respectively.
Important facts for investors to verify
- Whether clinical data and enrollment for CTX001 and CTX110 support continued development, and whether safety or regulatory issues emerge.
- Progress and potential economic terms of the July Vertex DMD/DM1 collaboration, including whether the company exercises its DM1 co-development option.
- Developments and potential consequences of the PTAB patent interference for the company’s licensed intellectual-property position.
- Actual cash burn and runway relative to management’s 24-month estimate, including the effect of the $175 million upfront payment and post-quarter ATM proceeds.
- Future collaboration revenue, milestone eligibility, dilution from equity issuance, and the growth of operating expenses and lease obligations.