Vera Therapeutics, Inc. — Q3 2021 Form 10-Q
Business context and period. Unaudited results for the quarter and nine months ended September 30, 2021, compared with the corresponding 2020 periods. Vera is a clinical-stage biotechnology company with no approved products and no product-sales revenue. Its lead candidate, atacicept, is being developed for IgA nephropathy (IgAN); the company began screening patients for a Phase 2b IgAN trial in Q2 2021 and is also evaluating lupus nephritis.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $3.6 million | $2.0 million | $9.7 million | $5.4 million |
| General and administrative expense | $3.7 million | $0.7 million | $8.1 million | $2.9 million |
| Total operating expenses | $7.3 million | $4.0 million | $17.8 million | $9.7 million |
| Net loss | $7.6 million | $4.5 million | $15.8 million | $10.5 million |
| Net loss per share, basic and diluted | $0.36 | $13.68 | $1.46 | $32.64 |
| Cash used in operating activities | Not separately provided for the quarter | $17.3 million | $7.4 million |
At September 30, 2021, cash and cash equivalents were $86.2 million, with an additional $0.3 million of restricted cash; total assets were $91.2 million and total liabilities were $5.7 million. The filing reports no material debt outstanding: convertible notes had converted into preferred stock in 2020, and preferred stock converted into common stock before the May 2021 IPO. The company had an accumulated deficit of $107.2 million. Operating margins are not meaningful because Vera had no product revenue.
Financing activities provided $49.0 million in the first nine months of 2021, principally from the IPO; investing activities provided $0.8 million from the NeuBase asset sale. The IPO generated approximately $48.4 million in net proceeds. No material change in contractual obligations was reported during the nine-month period.
Material changes versus the prior comparable periods
- Q3 operating expenses increased 80% to $7.3 million and net loss increased 71% to $7.6 million year over year.
- Q3 R&D expense rose 81%, mainly from consulting and contract research associated with the enrolling Phase 2b trial and higher personnel costs. G&A increased 466%, reflecting, among other items, higher payroll and stock compensation, insurance, legal, and investor-relations costs following the IPO and public-company transition.
- For the nine months, operating cash use increased to $17.3 million from $7.4 million, reflecting higher development and corporate spending and working-capital changes.
- The company completed its IPO in May 2021 and converted all redeemable convertible preferred stock into common stock. It also sold its PNAi-related assets to NeuBase, recognizing a $2.7 million gain; consideration included $0.8 million cash and NeuBase shares.
Outlook, commentary, risks, and unusual items
- Management believes September 30 cash will fund operating expenses and capital requirements for at least 12 months from the filing date. It also stated that available funds are expected to support completion of the current IgAN Phase 2b trial and initiation of a Phase 2b or Phase 3 lupus nephritis trial. The company expects losses and expenses to increase and says additional capital will be needed for longer-term objectives; no revenue or profitability guidance was provided.
- Key execution risks include clinical-trial enrollment, uncertain safety and efficacy, regulatory approval, competition, dependence on third-party manufacturers and research organizations, and possible COVID-19-related disruption to trials, suppliers, or development timelines.
- The Ares atacicept license includes up to $176.5 million in regulatory milestone payments, up to $515 million in commercial milestones, and tiered royalties in the low-double-digit to mid-teen percentages on licensed-product sales, in addition to the license consideration already paid or issued. These are contingent obligations, not current debt.
- Vera recorded a $0.6 million nine-month unrealized loss on restricted NeuBase shares, including $0.4 million of expense in Q3. Restructuring charges were zero in Q3 2021 versus $1.4 million in Q3 2020.
- Management concluded disclosure controls were not effective at a reasonable assurance level because of a continuing material weakness in accounting staffing, segregation of duties, and review procedures. The company reported hiring accounting personnel and using consultants while implementing remediation.
- COVID-19’s impact on trial timing, enrollment, third parties, and future funding needs remained uncertain. Management also noted that cash deposits at one financial institution exceeded federally insured limits.
Important facts for investors to verify
- Progress, enrollment, timelines, and eventual results of the atacicept IgAN Phase 2b trial and any lupus nephritis trial initiation.
- Actual operating cash burn and whether the stated 12-month runway remains valid as development and public-company costs rise.
- Clinical, regulatory, manufacturing, and licensing milestones that could trigger Ares payments, and the implications of its royalty terms.
- Whether remediation of the material weakness is completed and controls become effective.
- Value and restrictions on the NeuBase share consideration, including escrowed shares and further fair-value changes.