Business Context and Reporting Period
The provided filing is Selecta Biosciences, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2017; it does not identify Cartesian Therapeutics, Inc. The company is a clinical-stage biopharmaceutical developer of synthetic vaccine particle technology intended to modulate immune responses. Its lead candidate, SEL-212, was in a Phase 1/2 program, including an ongoing Phase 2 trial. The company also reported development programs for LMB-100 and SEL-070.
The company had no approved products or product sales. Revenue consisted of grants and collaboration arrangements. The filing was signed August 11, 2017.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2017 | Three Months Ended June 30, 2016 | Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 |
|---|---|---|---|---|
| Grant and collaboration revenue | $0.0 million | $2.0 million | $0.2 million | $4.1 million |
| Research and development expense | $11.0 million | $6.0 million | $22.0 million | $12.6 million |
| General and administrative expense | $4.9 million | $2.4 million | $8.8 million | $4.8 million |
| Net loss | $16.0 million | $6.9 million | $31.1 million | $14.4 million |
| Net loss per share | $0.85 | $2.75 | $1.67 | $6.90 |
| Net cash used in operating activities | Not separately presented | Not separately presented | $23.9 million | $15.8 million |
At June 30, 2017, cash and cash equivalents were $82.6 million, short-term investments were $30.0 million, and restricted cash totaled $0.4 million. Total assets were $117.0 million and stockholders’ equity was $78.2 million. The accumulated deficit was $182.7 million.
Outstanding loan principal was approximately $10.2 million, bearing interest at approximately 8.1%, with scheduled maturity in 2019. Total loans payable, net of discounts and current classification, were $10.3 million. The company reported no financial covenant violations and no off-balance-sheet arrangements.
Material Changes Versus the Prior Comparable Period
- Six-month revenue declined 96% to $0.2 million from $4.1 million, primarily because grant programs were winding down and the Sanofi collaboration was terminated.
- Quarterly revenue declined 99% to $26,000 from $2.0 million.
- Six-month research and development expense increased 74% to $22.0 million, driven mainly by expanded SEL-212 clinical development and other pipeline activities.
- Six-month general and administrative expense increased 83% to $8.8 million, reflecting higher headcount, public-company costs, stock compensation, licensing and patent-related expenses.
- Six-month net loss more than doubled to $31.1 million from $14.4 million.
- Operating cash use increased to $23.9 million from $15.8 million.
- The company completed a June 2017 private placement of 3.09 million common shares and warrants for approximately $47.2 million of net proceeds. Gross proceeds were approximately $50.0 million.
- Sanofi’s collaboration termination became effective May 8, 2017. Related rights reverted to the company, which assumed responsibility for any further development of acquired programs.
Guidance, Outlook, Risks and Unusual Items
Management expected cash, cash equivalents, short-term investments and restricted cash at June 30, 2017 to fund operating expenses and capital expenditures into 2019. This estimate depended on assumptions that could prove inaccurate, and management stated that substantial additional funding would ultimately be required.
Deferred revenue related to the Spark agreement was approximately $12.2 million at June 30, 2017, of which approximately $2.5 million was current and $9.7 million was long term. Spark made a required payment and purchased 324,362 shares for $5.0 million under a June 2017 letter agreement; the filing noted that the collaboration could still face future termination risk.
The principal risks include continued losses and negative operating cash flow; dependence on additional equity, debt, grants and collaborations; clinical-trial delays or failure; regulatory uncertainty; potential safety issues; reliance on third-party manufacturers, including 3SBio for pegsiticase; intellectual-property challenges; collaborator termination; foreign-currency and Russia-related risks; and dilution from future financings. The filing disclosed multiple serious adverse events in the SEL-212 Phase 1/2 program as a risk factor but did not quantify their financial impact.
Subsequent to quarter-end, the company filed a Form S-3 shelf registration for up to $200 million of securities and entered into an agreement permitting an at-the-market offering of up to $50 million of common stock. The shelf registration had not yet been declared effective.
Management concluded that disclosure controls and procedures were effective as of June 30, 2017, and reported no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Verify the issuer identity: the supplied filing is for Selecta Biosciences, Inc., not Cartesian Therapeutics, Inc.
- Confirm the cash runway assumption through 2019 against actual clinical spending, enrollment timing and future financing needs.
- Review the terms, covenants, collateral and repayment schedule of the approximately $10.2 million term loan.
- Assess the effect of Sanofi’s termination and the continuing obligations and termination provisions under the Spark agreement.
- Evaluate SEL-212 clinical progress, safety data, serious adverse events and expected Phase 2 completion timing.
- Consider dilution from the June 2017 private placement, outstanding options and warrants, and the proposed ATM facility.
- Review manufacturing and supply-chain dependence on 3SBio and other contract manufacturers.
- Confirm the status and effectiveness of the post-quarter-end Form S-3 registration statement.