Filing summary: AVROBIO, Inc. — Form 10-Q for the quarter ended September 30, 2018
Entity mismatch: The supplied filing is for AVROBIO, Inc., not Tectonic Therapeutic, Inc. Verify the issuer before relying on this summary.
Business context and reporting period
AVROBIO is a clinical-stage gene therapy company developing ex vivo lentiviral therapies for rare diseases. It reported unaudited results for the three and nine months ended September 30, 2018, compared with the same 2017 periods. The company had no product revenue and no approved products.
Key financial metrics
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $9.2 million | $5.4 million | $22.3 million | $8.7 million |
| General and administrative expense | $3.0 million | $1.0 million | $7.3 million | $2.2 million |
| Net loss | $11.6 million | $6.4 million | $30.3 million | $11.1 million |
| Net loss per share, basic and diluted | $0.49 | $2.85 | $3.28 | $5.01 |
| Operating cash used | Not separately presented | Not separately presented | $26.2 million | $7.6 million |
At September 30, 2018, cash and cash equivalents were $138.6 million, total current assets $140.1 million, total current liabilities $5.4 million, and total liabilities $6.2 million. Stockholders’ equity was $137.1 million. The company had no outstanding loan-facility borrowings; up to $10 million was available subject to conditions. No gross margin was reported because the company had no product sales.
Nine-month investing cash use was $1.6 million, while financing provided $160.4 million, principally from $104.2 million net IPO proceeds and $58.3 million net proceeds from Series B preferred stock. The company paid $2.0 million to University Health Network (UHN) in connection with its IPO dilution provision.
Material changes versus the prior comparable period
- Quarterly operating expenses increased $5.9 million and quarterly net loss increased $5.2 million year over year. The company attributed the cost increase mainly to expanded research and development, hiring, process development, facilities, and public-company costs.
- Nine-month operating expenses increased $18.6 million and net loss increased $19.3 million year over year. R&D spending rose across the Fabry, Gaucher, and cystinosis programs and in unallocated personnel and facility costs; spending on Pompe and AML declined.
- Cash and cash equivalents increased from $6.0 million at December 31, 2017, to $138.6 million at September 30, 2018, primarily reflecting the IPO and Series B financing.
- The June 2018 IPO converted outstanding preferred stock into common stock. Common shares outstanding were 23.8 million at September 30, 2018; 23.96 million were reported outstanding as of November 8, 2018.
Outlook, commentary, risks, and unusual items
- Management estimated that September 30 cash would fund operating expenses and capital requirements into 2020, while cautioning that the estimate depends on assumptions and capital could be exhausted sooner. Additional funding will be needed thereafter if operations continue as planned.
- Management expected expenses to increase substantially as it advances clinical and preclinical programs, scales manufacturing, hires staff, and operates as a public company. Profitability and the timing of product revenue remain uncertain.
- The first patient had been dosed in the company-sponsored Phase 2 AVR-RD-01 Fabry trial; a third patient was dosed in the investigator-sponsored Phase 1 trial. The company expected to open a U.S. Phase 2 site in 2019 and reported holding an FDA pre-IND meeting. October 1 clinical data release occurred after quarter-end.
- The $2.0 million UHN payment followed remeasurement of the related derivative liability at the IPO, producing $1.6 million of expense in the nine-month period; the payment was made in July 2018. The loan warrant also converted to a common-stock warrant at the IPO.
- The $10 million SVB facility was undrawn at September 30, and the filing says it remained undrawn through the October 31, 2018 end of its drawdown period. The facility carried collateral, covenants, and default provisions.
- Disclosure controls and procedures were deemed ineffective as of September 30 because of previously identified material weaknesses in financial-close and cash-disbursement controls. The filing cites a 2017 cyberattack that resulted in theft of a portion of funds; remediation was ongoing, with no assurance of success.
- Principal business risks include clinical and regulatory failure or delay, patient enrollment, gene-therapy safety, manufacturing scale-up and third-party supply dependence, financing needs, intellectual-property protection, competition, and the ability to secure reimbursement. No material legal proceeding was reported.
Important facts for investors to verify
- Confirm the filing issuer: this document identifies AVROBIO, Inc., not Tectonic Therapeutic, Inc.
- Review the cash runway estimate against subsequent cash use, clinical milestones, and financing activity; management’s estimate extends only into 2020 and is assumption-dependent.
- Check subsequent updates on AVR-RD-01 trial enrollment, safety and efficacy data, U.S. site opening, and the planned LV1-to-LV2 vector transition.
- Assess progress in remediating the disclosed material weaknesses and whether later filings report effective controls or further deficiencies.
- Verify the status and terms of the SVB facility after its drawdown period, as well as the potential dilution from outstanding options and warrants.