Sana Biotechnology, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Sana is a preclinical-stage biotechnology company developing ex vivo and in vivo engineered cell therapies. It had no approved products and had generated no product revenue.
Key financial metrics
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior balance |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $72.5 million for Q2; $145.2 million for H1 | $45.0 million for Q2 2021; $86.9 million for H1 2021 |
| General and administrative expense | $18.3 million for Q2; $32.7 million for H1 | $12.5 million for Q2 2021; $24.3 million for H1 2021 |
| Net income (loss) | $(72.5) million for Q2; $(103.9) million for H1 | $18.7 million for Q2 2021; $(161.9) million for H1 2021 |
| Cash used in operating activities | $(149.2) million for H1 | $(90.5) million for H1 2021 |
| Cash, cash equivalents and marketable securities | $579.6 million | $746.9 million at December 31, 2021 |
| Total liabilities / debt | $331.6 million total liabilities; no debt outstanding | $400.9 million total liabilities at December 31, 2021 |
Current assets were $494.4 million and current liabilities $97.1 million. Accumulated deficit was $889.3 million. Sana reported a Q2 loss per share of $0.39 and an H1 loss per share of $0.56. Operating margins are not meaningful given the absence of revenue.
Changes and unusual items
- R&D expense rose 61% year over year in Q2, mainly reflecting increased personnel, contract manufacturing, facility, and laboratory costs. H1 R&D increased by $58.4 million year over year.
- Q2 2022 included $17.9 million of non-cash gains from remeasurement of success-payment and contingent-consideration liabilities, versus $76.0 million of gains in Q2 2021. The much larger prior-year gain contributed to Q2 2021 net income; these valuation changes are not operating cash generation.
- H1 2022 included $73.4 million of non-cash gains from those remeasurements, compared with $51.0 million of expenses in H1 2021. This was a key reason the H1 net loss improved despite higher operating spending.
- G&A included a $4.5 million write-off of construction-in-progress costs for the Fremont manufacturing site, which Sana decided to replace with a Bothell, Washington facility.
- Unrealized losses on marketable securities reduced accumulated other comprehensive income by $5.0 million during H1. Sana reported no material credit deterioration in the securities.
Outlook, liquidity and risks
- Management said existing cash, cash equivalents and marketable securities were expected to fund working capital and capital expenditure needs for at least 12 months from the filing’s current operating plan. Sana expects losses and expenses to rise substantially and anticipates needing additional financing in the future; access to acceptable financing is not assured.
- Management’s stated goal was to submit INDs in 2022 for hypoimmune allogeneic CD19 CAR T candidate SC291 and in vivo CD19 CAR T candidate SG295, with potential IND submissions as early as 2023 for SC276 and an islet-cell candidate. All candidates remained preclinical at quarter-end; timelines and regulatory clearance were uncertain.
- Sana signed a 16-year lease for the Bothell facility, with approximately $68.8 million of base rent over the initial term. It expected the facility to take several years to become operational and planned to rely on external manufacturers in the interim. It intended to sublease or terminate the Fremont lease.
- Potential Cobalt contingent consideration is up to $500 million; Cobalt and Harvard success payments may also be substantial. None had been triggered as of June 30, 2022. Fair-value estimates depend on significant assumptions and can materially fluctuate with the share price, market capitalization, milestone probabilities and timing.
- Key risks include the unproven nature of the platforms, preclinical and regulatory uncertainty, manufacturing scale-up and facility delays, reliance on third-party manufacturers and suppliers, supply-chain constraints, rising costs, competition for talent, intellectual-property dependence, and possible COVID-19-related disruption. Sana reported modest pandemic-related delays to discovery and development work.
- The company reported effective disclosure controls as of June 30, 2022, no material change in internal control over financial reporting during the quarter, and no material legal proceedings.
Investor verification priorities
- Track actual IND submissions and regulatory decisions against the stated 2022–2023 goals.
- Monitor operating cash use, development and manufacturing spending, and whether management’s at-least-12-month liquidity estimate remains supportable.
- Verify progress, costs and timing for the Bothell build-out, the Fremont lease exit or sublease, and interim manufacturing arrangements.
- Assess the sensitivity and potential cash or dilution impact of Cobalt and Harvard payment obligations, separately from non-cash quarterly fair-value gains.
- Review subsequent updates on preclinical safety, supply availability, inflation, and any changes to program prioritization or development timelines.