Werewolf Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Werewolf is a preclinical biopharmaceutical company developing conditionally activated cancer immunotherapies using its PREDATOR platform. It has no approved products and has generated no revenue.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $9.8m | $4.8m | $21.9m | $11.4m |
| General and administrative expense | $4.0m | $1.2m | $10.3m | $3.7m |
| Net loss | $13.8m | $6.1m | $32.1m | $7.6m |
| Net loss per share attributable to common stockholders | $0.51 | $6.61 | $11.89 | $8.03 |
As of September 30, cash and cash equivalents were $170.4m; total assets were $178.4m, total liabilities $9.1m, and stockholders’ equity $169.3m. The company had no outstanding term-loan borrowings and reported up to $14.0m available under its Pacific Western Bank facility, then drawable through November 29, 2021. Nine-month operating cash use was $30.2m; investing cash use was $0.2m; financing provided $109.4m, primarily from the IPO. The filing reports cash and cash equivalents sufficient through at least Q2 2023, based on current plans and assumptions. No revenue or meaningful profit margin was reported; margins are not applicable at this stage.
Changes versus comparable periods and unusual items
- Q3 operating expenses increased $7.7m year over year. Management attributed the R&D increase mainly to personnel, manufacturing and contract research supporting preclinical work and planned IND submissions; G&A growth mainly reflected public-company staffing, services and insurance costs.
- Nine-month operating expenses increased $17.2m year over year. Higher operating costs and the absence of a prior-year $7.3m gain from remeasuring the preferred-stock tranche liability contributed to the increase in net loss.
- Nine-month 2021 net loss attributable to common stockholders was $184.1m, including $151.9m of noncash preferred-stock accretion to redemption value before the IPO conversion. The preferred stock converted into common shares when the IPO closed.
- The May 2021 IPO raised $120.0m gross and approximately $109.2m net. At September 30, 2021, the company had an accumulated deficit of $235.0m.
Outlook, risks and other developments
- Management planned to submit IND applications for WTX-124 and WTX-330 in the first half of 2022 and then begin first-in-human trials. WTX-613 remained in preclinical development. These were plans, not achieved milestones.
- The company expects expenses and losses to rise as it advances development and prepares for clinical trials; existing cash is not expected to fund completion of development, so additional financing will be required.
- In August 2021, Werewolf entered a clinical-trial collaboration and supply agreement with Merck to evaluate WTX-124 alone and with KEYTRUDA. Werewolf sponsors the study; Merck supplies pembrolizumab; each party bears its own internal costs, and the parties jointly own certain combination-related inventions. The filing gives no stated cash payment or milestone value for this agreement.
- Key risks include the early, unproven development platform; clinical, regulatory and manufacturing uncertainty for novel biologics; reliance on contract manufacturers, CROs and third-party combination-drug supply; competition, intellectual-property dependence and future financing needs. COVID-19 had caused no material financial-statement impact or business disruption to date, but future effects remained uncertain.
- Disclosure controls were reported ineffective as of September 30, 2021 because of material weaknesses in financial-reporting controls, including insufficient accounting personnel and segregation of duties. Remediation was ongoing.
- The company also disclosed an approximately eight-year Watertown headquarters lease targeted to commence in March 2022, with estimated base rent of $18.6m over its term.
Important facts for investors to verify
- Whether WTX-124 and WTX-330 meet the stated IND and clinical-start timelines, and whether preclinical and manufacturing data support those plans.
- Cash burn, assumptions underlying the runway estimate through Q2 2023, and timing and terms of any additional financing.
- Status and terms of the $14.0m loan facility, including its November 29, 2021 draw deadline and cash-balance and capital-expenditure covenants.
- Progress in remediating the material weaknesses and whether subsequent filings report effective disclosure controls.
- The cover page marked “No” for having filed all required Exchange Act reports during the preceding 12 months; investors may wish to confirm the context and any related filing history.