Invivyd, Inc. (then Adagio Therapeutics, Inc.) — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The filing is under the name Adagio Therapeutics, Inc.; it describes a clinical-stage biopharmaceutical company developing antibody-based treatments and prevention for infectious diseases, initially focused on COVID-19. The financial statements are unaudited.
Financial performance and position
| Metric | Q2 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | No revenue | No revenue |
| Research and development expense | $35.1 million | $69.2 million |
| Acquired in-process R&D expense | $2.5 million | $3.5 million |
| Selling, general and administrative expense | $7.1 million | $10.7 million |
| Total operating expenses | $44.7 million | $83.4 million |
| Net loss | $44.7 million | $83.4 million |
| Net loss per share, basic and diluted | $0.18 | $0.66 |
| Operating cash used | Not separately stated | $57.3 million |
- At June 30, cash and cash equivalents were $392.5 million, including $316.6 million in a money market fund. Current assets were $396.1 million and current liabilities were $37.9 million.
- The company reported no debt outstanding. With no product revenue, operating margins are not meaningful.
- Accrued expenses rose to $27.2 million from $4.9 million at year-end, mainly reflecting accrued external research, development and manufacturing costs.
- Financing activities provided $334.8 million during the first half, primarily from the April Series C preferred stock financing. Cash increased by $277.5 million over the period.
Changes versus the prior comparable period
Expenses and losses increased substantially as the company advanced ADG20 and expanded staffing and public-company preparation. Q2 research and development expense was $35.1 million versus $48,000 for the period from inception through June 30, 2020; Q2 net loss was $44.7 million versus $98,000. These comparisons are not like-for-like: the company was formed in June 2020, so the prior-year comparison covers only a short inception period. First-half 2021 net loss was $83.4 million, compared with $98,000 for that same brief 2020 period.
Outlook, risks and unusual items
- Management expected cash, cash equivalents and short-term investments, including IPO proceeds, to fund operations and capital expenditure requirements into the first quarter of 2023. This estimate depends on assumptions that may prove incorrect; further capital may be needed.
- After quarter-end, the company completed an IPO on August 10, 2021, selling 20.93 million shares at $17 per share. It reported approximately $330.9 million net proceeds after underwriting discounts and commissions, before estimated offering expenses of $3.8 million; elsewhere the filing cites approximately $327.1 million after those estimated expenses. Preferred stock converted into 84.7 million common shares at the IPO closing.
- ADG20 was the lead candidate. The company reported completion of Phase 1 enrollment and interim tolerability and pharmacokinetic findings; it was conducting Phase 2/3 trials for treatment and prevention. In August, it dosed the first patient in a Phase 3 prevention trial, triggering a $4.0 million Adimab milestone expense expected in Q3.
- First-half acquired IPR&D expense of $3.5 million included $1.0 million and $2.5 million Adimab milestones. The filing’s notes associate these with first-patient dosing in Phase 1 and Phase 2 trials, respectively.
- Key risks include clinical and regulatory uncertainty, competition from vaccines and other COVID-19 treatments, changing variants and disease prevalence, reliance on WuXi and other third parties for manufacturing and trials, and possible pandemic-related disruption. The company had experienced some development delays, although the financial statement notes say it had not experienced significant delays to date.
- Disclosure controls and procedures were deemed ineffective at June 30 because of a material weakness in controls over the completeness and accuracy of R&D expenses, prepaid expenses, accounts payable and accrued expenses related to contract manufacturing. Management was designing and implementing remediation controls. Management stated the financial statements fairly presented the reported periods.
- The company reported recurring losses and an accumulated deficit of $148.7 million. It said it expected funding for at least 12 months from the September 20, 2021 issuance date, while also identifying the need for additional capital beyond its estimated runway. No material legal proceedings were reported.
Important facts for investors to verify
- Clinical-trial progress and complete, final data for ADG20, including efficacy against emerging variants and the status of treatment and prevention trials.
- Cash burn, committed manufacturing purchases and milestone obligations, and whether the stated runway remains achievable under updated development plans.
- The distinction between the IPO’s $330.9 million proceeds before estimated offering expenses and approximately $327.1 million after those expenses.
- Remediation and subsequent testing of the material weakness in manufacturing-related accrual and expense controls.
- The extent of related-party exposure to Adimab, including collaboration fees, milestone payments, royalties and governance connections.