Filing context and reporting period
This is Selecta Biosciences, Inc.’s Form 10-K for the fiscal year ended December 31, 2022, filed March 2, 2023. The request identifies Cartesian Therapeutics, Inc. and “2022 Q4,” but the supplied filing is for Selecta Biosciences, Inc. and reports full-year 2022 results; it is not a quarterly filing.
Selecta is a clinical-stage biotechnology company developing ImmTOR and ImmTOR-IL tolerogenic therapies for biologic therapies, AAV gene therapies and autoimmune diseases. Its lead partnered candidate, SEL-212, was in Phase 3 development for chronic refractory gout.
Financial results and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Collaboration and license revenue | $110.8 million | $85.1 million | Up 30% |
| Research and development expense | $72.4 million | $68.7 million | Up 5% |
| General and administrative expense | $23.9 million | $20.9 million | Up 14% |
| Operating income (loss) | $14.5 million | $(4.6) million | Improved |
| Net income (loss) | $35.4 million | $(25.7) million | Improved |
| Diluted earnings (loss) per share | $0.10 | $(0.22) | Improved |
| Net cash used in operating activities | $(31.6) million | $(60.4) million | Lower use |
2022 profitability was driven primarily by collaboration and license revenue and a $20.9 million gain from the decrease in the fair value of warrant liabilities. The warrant-related gain was non-cash and primarily reflected the decline in the company’s share price. The company also recorded a $0.6 million income tax benefit related to penalty abatements, compared with $16.0 million of tax expense in 2021.
- SEL-212 research and development expense was $26.8 million, down 15% from 2021; other research and development expense was $45.6 million, up 22%.
- Sobi-related revenue was $82.6 million in 2022, including reimbursement of Phase 3 DISSOLVE costs and revenue recognized from the license arrangement. Sarepta revenue was $10.2 million, AskBio termination revenue was $7.0 million, Spark termination revenue was $9.2 million and Takeda revenue was $1.8 million.
- Cash, cash equivalents, restricted cash and marketable securities totaled $136.2 million at year-end, including $106.4 million of cash and cash equivalents and $28.2 million of marketable securities.
- Cash, cash equivalents and restricted cash declined to $108.0 million from $115.4 million at year-end 2021.
- Total debt was $26.3 million, consisting of $25.0 million of principal under the 2020 Term Loan, net of $0.99 million of debt discount. Amortization began April 1, 2023, and the loan matures August 1, 2025.
- Total liabilities were $72.1 million and stockholders’ equity was $93.8 million at December 31, 2022.
- Accumulated deficit remained substantial at $394.9 million despite the 2022 net income.
- The company had no product revenue and does not expect product sales revenue for the foreseeable future.
Material changes versus the prior comparable period
- Revenue increased $25.7 million, primarily due to higher Sobi-related recognition and additional milestone or termination-related revenue from Sarepta, Spark, AskBio and Takeda.
- Net income replaced the prior-year net loss, but the improvement was materially affected by non-recurring or non-operating items, particularly the warrant liability revaluation gain and the change in tax expense.
- Operating cash burn improved by $28.8 million, although operations still consumed $31.6 million of cash.
- Cash and cash equivalents decreased by $7.6 million, while marketable securities increased by $14.2 million.
- The company raised $36.9 million of net proceeds in an April 2022 offering of common stock and warrants and $2.1 million through its at-the-market program. Shares outstanding increased to 153.0 million from 123.6 million at year-end 2021.
- Outstanding warrants increased to 31.2 million from 10.7 million, creating potential dilution. Warrant liabilities were $19.1 million at year-end 2022.
- In December 2022, the company initiated the Phase 1/2 ReiMMAgine trial of SEL-302 for methylmalonic acidemia and selected a next-generation IgA protease candidate for IgA nephropathy.
- The company amended its headquarters lease, expanding space by approximately 7,216 square feet, and subsequently subleased that space through March 2024.
Guidance, outlook, risks and unusual items
Management estimated that year-end cash, cash equivalents, restricted cash and marketable securities would fund current planned operations into mid-2024. The financial statements state that funding would cover at least the next twelve months from issuance. This estimate depends on clinical spending, collaboration milestones, financing access and other assumptions, and management expects additional capital will be required.
- Top-line results from the Phase 3 DISSOLVE I and DISSOLVE II trials of SEL-212 were expected in the first quarter of 2023. DISSOLVE II enrollment was increased to 153 subjects to mitigate potential effects from instability in Russia and Ukraine.
- Future funding may come from equity or debt financing, collaborations, royalty or milestone monetization, or other strategic transactions. Additional equity financing could dilute shareholders, while debt could impose additional restrictions.
- SEL-212 development is funded and reimbursed by Sobi, but Sobi may terminate its license. Sobi would control regulatory filings and would be responsible for commercialization if SEL-212 is approved.
- In January 2023, Astellas licensed Xork for use with its investigational AT845 Pompe disease gene therapy. Selecta received a $10.0 million upfront payment in February 2023 and may receive up to $340.0 million in additional milestones plus royalties; it also paid Genovis $4.0 million.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, reliance on collaborators and contract manufacturers, dependence on 3SBio in China for pegadricase, supply-chain and geopolitical disruptions, intellectual-property challenges, future dilution and the need for additional financing.
- The company relies substantially on non-product revenue and milestone payments. Reported 2022 earnings are therefore not indicative of recurring commercial profitability.
- The derivative stockholder litigation relating to the 2019 private placement was settled and dismissed with prejudice on August 1, 2022. The filing states that no litigation was expected to have a material adverse effect as of year-end.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is Selecta Biosciences, Inc., not Cartesian Therapeutics, Inc.
- Review the full 2022 revenue composition and determine how much is recurring reimbursement versus milestone, termination or other non-recurring recognition.
- Verify the final DISSOLVE I and DISSOLVE II results, regulatory status and any subsequent development or commercialization decisions for SEL-212.
- Assess cash runway after the April 2023 start of debt amortization, ongoing clinical spending and the absence of product sales.
- Review the $19.1 million warrant liability, 31.2 million outstanding warrants, equity awards and the resulting potential dilution.
- Evaluate dependence on Sobi, 3SBio and other third parties, including the effects of termination rights, manufacturing capacity and geopolitical risks.
- Check the January 2023 Astellas transaction, February 2023 cash receipts and Genovis payment, none of which were included in year-end 2022 cash balances.