CRISPR Therapeutics AG — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual filing; it also reports unaudited fourth-quarter results. CRISPR Therapeutics is a clinical-stage gene-editing company with no approved products and no product-sales revenue. Its programs include CTX001 for beta thalassemia and sickle cell disease, allogeneic CAR-T candidates, and earlier-stage regenerative medicine and in vivo programs.
Financial performance and position
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Collaboration revenue | $289.6 million | $3.1 million |
| Research and development expense | $179.4 million | $113.8 million |
| General and administrative expense | $63.5 million | $48.3 million |
| Operating income (loss) | $46.7 million | $(158.9) million |
| Net income (loss) | $66.9 million | $(165.0) million |
| Basic / diluted earnings (loss) per share | $1.23 / $1.17 | $(3.44) / $(3.44) |
| Cash and cash equivalents at year-end | $943.8 million | $456.6 million |
| Working capital at year-end | $930.4 million | $438.6 million |
| Total assets / total liabilities at year-end | $1,066.8 million / $127.3 million | $489.0 million / $96.8 million |
- 2019 operating cash flow was positive $56.7 million, versus cash used of $96.2 million in 2018. Investing cash flow was positive $1.3 million, including $8.0 million of net cash and restricted cash acquired with Casebia, while financing cash flow was positive $431.0 million.
- Revenue was entirely collaboration revenue; the company reported no product sales. The filing does not present a meaningful product gross margin. The 2019 operating profit and net income are not a clear indicator of recurring operating economics, given substantial collaboration revenue and the Casebia consolidation gain.
- There was no conventional borrowing debt reported on the balance sheet. Operating lease liabilities totaled $52.5 million, and commenced operating lease and sublease commitments were $70.2 million undiscounted.
- Cash and cash equivalents included $891.0 million held outside the United States. The company reported no off-balance-sheet arrangements.
Material changes versus prior period
- Revenue rose by $286.5 million year over year, primarily because of $289.1 million recognized under Vertex agreements. This included recognition of DMD and DM1 licenses and collaboration-target options, rather than product sales.
- Operating expenses increased by $80.8 million: R&D rose $65.6 million and G&A rose $15.2 million, reflecting program activity, hiring, facilities, professional services and intellectual-property costs.
- Other income improved to $20.6 million from a $5.5 million expense in 2018. It included $10.1 million of interest income and a $16.0 million Casebia consolidation gain, partly offset by $5.5 million of equity-method investment losses.
- Operating cash flow swung to positive $56.7 million, but included significant working-capital movements: prepaid expenses and other current assets increased $32.6 million, and deferred revenue decreased $45.1 million.
- Cash increased by $487.1 million year over year. Net proceeds from common-share issuance were $415.0 million, including $294.4 million from a November offering and $120.6 million from the 2019 ATM; equity issuance increased dilution.
Outlook, developments and risks
- Management expected year-end cash and cash equivalents to fund the current operating plan for at least 24 months, while noting estimates depend on assumptions that may prove incorrect. It expected increased R&D and G&A spending and continuing losses; it did not expect 2019 profitability to continue.
- CTX001 was in Phase 1/2 trials for transfusion-dependent beta thalassemia and severe sickle cell disease. Preliminary results from one patient in each trial were reported in November 2019. The TDT patient was transfusion-free from one month after infusion through the nine-month data point; the SCD patient had no vaso-occlusive crises through the four-month data point. Serious adverse events occurred in both patients and were reported as resolved; investigators did not consider them related to CTX001. These are very small, early datasets, and follow-up was ongoing.
- CTX110 was in a Phase 1/2 trial for relapsed or refractory B-cell malignancies; CTX120 was in a Phase 1 trial for multiple myeloma. CTX130, targeting CD70, was in development for solid and blood cancers.
- In December 2019, CRISPR Therapeutics acquired full ownership of Casebia, ending the Bayer joint venture. Bayer received up to $22.0 million from Casebia operating cash, subject to adjustments, and obtained options relating to two products in specified disease areas. CRISPR recorded a $16.0 million gain on consolidation.
- Key risks include clinical safety, efficacy and durability; uncertain gene-editing and regulatory pathways; manufacturing and patient-enrollment challenges; dependence on partners; future financing needs; and substantial competition. Core CRISPR intellectual property faced a new U.S. interference proceeding involving the Broad Institute and European patent opposition proceedings. The company said outcomes and potential losses could not be meaningfully estimated.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also reported effective disclosure controls and internal control at year-end.
Most important facts for investors to verify
- Whether subsequent CTX001 data confirm the early efficacy signals, establish durability, and clarify treatment-related risks and long-term safety.
- How much reported collaboration revenue reflects non-recurring license and option recognition, and the timing and likelihood of future milestone payments.
- Whether operating cash use accelerates as trials and manufacturing expand, and whether the stated 24-month funding horizon remains adequate.
- Developments in the Broad/CVC patent interference and European oppositions, including any effects on freedom to operate, licensing or commercialization.
- The terms and consequences of the Casebia transition and Bayer options, including future funding obligations, partner elections and allocation of program rights.