Molecular Partners AG — Form 6-K Summary
Reporting period: Unaudited interim results for the three and nine months ended September 30, 2022, furnished in an October 27, 2022 Form 6-K. The company is a clinical-stage biopharmaceutical business developing and commercializing DARPin therapeutic proteins. Financial statements are prepared under IAS 34 and presented in CHF thousands unless otherwise stated.
Key financial metrics
| Metric | 9M 2022 | 9M 2021 | Q3 2022 | Q3 2021 |
|---|---|---|---|---|
| Total revenues and other income | CHF 186.9 million | CHF 8.0 million | CHF 2.4 million | CHF 3.5 million |
| Operating expenses | CHF 55.3 million | CHF 55.6 million | CHF 17.1 million | CHF 16.4 million |
| Operating result | CHF 131.6 million | CHF (47.6) million | CHF (14.7) million | CHF (12.8) million |
| Net result | CHF 135.3 million | CHF (45.9) million | CHF (13.3) million | CHF (12.3) million |
| Net cash from operating activities | CHF 132.8 million | CHF (71.6) million | Not provided | Not provided |
| Basic EPS | CHF 4.17 | CHF (1.50) | CHF (0.41) | CHF (0.38) |
The nine-month operating margin was approximately 70.4% and net margin approximately 72.4%, largely reflecting significant collaboration-related revenue recognized in the first quarter. The nine-month research and development expense was CHF 38.5 million, down from CHF 43.3 million, while selling, general and administrative expense increased to CHF 16.8 million from CHF 12.3 million.
At September 30, 2022, cash and cash equivalents were CHF 69.7 million and short-term time deposits were CHF 197.4 million, for total reported cash and short-term deposits of approximately CHF 267.1 million. Total current assets were CHF 273.7 million versus current liabilities of CHF 19.0 million. Total shareholders’ equity was CHF 251.4 million and total liabilities were CHF 29.7 million.
The filing does not report conventional borrowings. Lease liabilities totaled CHF 5.1 million, consisting of CHF 4.0 million non-current and CHF 1.2 million current. Cash and cash equivalents declined by CHF 2.1 million during the nine months, while CHF 137.0 million was used in investing activities, primarily reflecting net investments in short-term time deposits.
Material changes versus prior comparable periods
- Revenue increased sharply because Novartis option exercise and license arrangements generated CHF 150.0 million of option exercise revenue, CHF 13.1 million related to commercial supply and drug substance, and CHF 7.0 million related to a Federal Office of Public Health reservation fee. These amounts were recognized in the first quarter.
- Additional nine-month revenue included CHF 6.2 million recognized from a Novartis oncology research upfront payment, CHF 0.9 million of employee-cost recharges, and CHF 9.7 million from the release of the remaining Amgen contract liability after Amgen returned global rights to MP0310.
- Amgen represented CHF 9.7 million of nine-month 2022 revenue, compared with CHF 7.6 million in the prior-year period. Novartis and the FOPH represented CHF 177.2 million in 2022 revenue.
- Quarterly revenue declined to CHF 2.3 million from CHF 3.5 million because the major Novartis and FOPH recognition events occurred earlier in the year and no Amgen revenue was recorded in the quarter.
- Equity increased from CHF 107.3 million at December 31, 2021 to CHF 251.4 million, primarily due to the nine-month comprehensive result of CHF 140.6 million. The company also issued 3.5 million shares to its wholly owned subsidiary, held as treasury shares, and incurred approximately CHF 0.6 million of related transaction costs.
- Contract liabilities declined from CHF 35.2 million to CHF 12.4 million, all relating to Novartis and scheduled between current and non-current liabilities.
Outlook, risks and unusual items
- The filing provides no specific financial guidance or cash runway forecast.
- Revenue is dependent on alliance contracts, milestones and progress under research plans; it is therefore expected to vary significantly between periods. The company states that its business is not seasonal.
- Amgen’s return of MP0310 rights eliminated the remaining performance obligations under that agreement and resulted in recognition of the associated CHF 9.7 million contract liability. The filing does not provide a future development outlook for MP0310.
- The company reported a Swiss tax-loss carry-forward of CHF 212.2 million at December 31, 2021. No income tax expense was recorded for the nine months because estimated taxable profit was expected to be offset by loss carry-forwards; no deferred tax assets were recognized.
- A putative securities class action was filed in the U.S. District Court for the Southern District of New York on July 12, 2022, concerning alleged disclosures relating to ensovibep and MP0310. The matter was described as being in its early stages, with unspecified damages sought. The company disputes the claims and intends to defend itself.
- Allergan terminated a 2012 discovery alliance agreement on October 4, 2022. No other post-balance-sheet event requiring adjustment or disclosure was identified.
- COVID-19 caused no major operational disruptions during the reported periods, according to management.
Investor verification points
- Confirm the sustainability and timing of future revenue after the non-recurring Novartis option exercise, supply-related amounts, FOPH fee and Amgen contract-liability release.
- Review remaining Novartis contract liabilities of CHF 12.4 million and the expected recognition pattern for the research-plan upfront payment.
- Assess cash deployment, short-term deposit maturities and the company’s future operating cash requirements, as the filing provides no explicit runway guidance.
- Monitor the MP0310 program following Amgen’s rights return and the status and potential exposure of the U.S. securities litigation.
- Verify dilution from 284,765 outstanding options and 739,675 outstanding PSUs and RSUs, as well as the potential use of treasury shares and the at-the-market ADS program.