Century Therapeutics, Inc. — Q3 2021 Form 10-Q
Business context and reporting period. Unaudited results for the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Century is a preclinical biotechnology company developing iPSC-derived cell therapies for cancer; it has no approved products and has generated no revenue. Its programs include CNTY-101, CNTY-102, CNTY-103 and CNTY-104.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 reported | $0 reported | $0 reported | $0 reported |
| Research and development expense | $19.5 million | $10.8 million | $53.9 million | $27.2 million |
| General and administrative expense | $6.3 million | $2.3 million | $13.1 million | $6.7 million |
| Net loss | $26.0 million | $13.1 million | $67.6 million | $38.0 million |
| Net loss per share, basic and diluted | $0.48 | $1.75 | $2.72 | $5.08 |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(64.7) million | $(28.0) million |
Margins are not meaningful because the company had no revenue. Nine-month operating expenses were $66.9 million, versus $38.6 million in 2020; the prior period included a $4.7 million in-process research and development write-off.
Liquidity and balance sheet at September 30, 2021: cash and cash equivalents were $101.3 million; short- and long-term investments totaled $299.1 million; and cash, cash equivalents and investments were approximately $400.3 million. Current assets were $300.4 million and total assets were $469.7 million. Total liabilities were $46.7 million. Long-term debt, net, was $9.9 million, against $10.0 million principal. Stockholders’ equity was $423.0 million, compared with a $106.4 million deficit at December 31, 2020.
Cash flows for nine months: investing activities used $277.7 million, largely reflecting net purchases of fixed-maturity securities and $28.2 million of property and equipment purchases. Financing activities provided $417.7 million, primarily from the $221.4 million net IPO proceeds, $159.6 million net Series C proceeds, and collection of a $31.9 million subscription receivable. The filing reports no operating or profit margin because the company has no revenue.
Material changes versus the comparable period
- Q3 R&D expense increased $8.7 million year over year; management attributed the increase mainly to research and laboratory costs, personnel, facilities and FCDI collaboration work.
- Q3 G&A expense rose $4.0 million, reflecting personnel and stock compensation, consulting and legal fees, directors’ and officers’ insurance, and IT and facility costs.
- Nine-month net loss widened by $29.6 million. Increased operating costs and interest expense outweighed the absence of the $4.7 million 2020 IPR&D write-off and lower interest income.
- Century completed its IPO in June 2021, raising $221.4 million net, and converted its preferred shares into common stock. Common shares issued and outstanding were 54.6 million at September 30, 2021.
- Property and equipment, net, increased to $48.6 million from $15.4 million at year-end 2020, including $27.7 million of construction in progress.
Outlook, risks and unusual items
- Management expects operating losses and expenses to increase as it advances preclinical programs, prepares for clinical development, builds manufacturing capabilities and operates as a public company. It believes current cash, cash equivalents and investments can fund operations and capital expenditure requirements through 2024, while warning that assumptions may prove inaccurate. The filing also states the resources are adequate for at least the next 12 months.
- The company expects to need additional financing in the future; funding may be unavailable or involve dilution or restrictive debt terms. It reported a $360.0 million accumulated deficit and $64.7 million of operating cash use for the nine-month period.
- Century has a $10.0 million Hercules term loan at a 9.55% interest rate as of September 30, 2021. The company reported compliance with the loan agreement and that the minimum cash requirement no longer applied after meeting development milestones. Debt is secured by substantially all assets other than intellectual property.
- Operating lease liabilities totaled $15.4 million. A 10-year lease expected to commence in January 2022 carries approximately $17.3 million of future payments not recorded on the balance sheet at quarter-end.
- Key dependencies and risks include clinical and regulatory uncertainty, product development and manufacturing execution, competition, intellectual property, access to capital, and reliance on FCDI for important technology and services. The FCDI research plan and budget run through March 2022; management reported $26.0 million incurred against its $30.4 million budget by September 30, 2021.
- Management reported modest COVID-19-related delays to discovery and development activities, primarily from temporary shutdowns at certain CROs and academic institutions; the extent of future impact remains uncertain. The filing reports no material change in previously disclosed risk factors, no material pending legal claims, and effective disclosure controls.
- Subsequent to quarter-end, Century agreed to provide Outpace Bio up to $0.5 million over six months for research, in exchange for data and an exclusive option to negotiate for additional intellectual-property rights.
Important facts for investors to verify
- Whether the stated cash runway through 2024 remains supportable as R&D spending, capital investment and clinical-development costs rise.
- Progress, timing and funding needs for CNTY-101 and the other disclosed candidates, including any clinical-trial or IND milestones.
- Actual spending and remaining commitments under the FCDI collaboration, and Century’s ability to maintain key external manufacturing and technology relationships.
- Cash-burn trends, investment liquidity and any future capital raising, including potential dilution or debt restrictions.
- Lease commencement and total obligations, including the approximately $17.3 million lease not yet reflected on the balance sheet at September 30, 2021.
- Contingent collaboration, licensing and milestone obligations, which may become payable if development, regulatory or commercial milestones are achieved.