Vera Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited financial statements; amounts below are in millions of dollars unless stated otherwise.
Business context
Vera is a clinical-stage biotechnology company developing treatments for serious immunological diseases. Its lead candidate, atacicept, is being studied for IgA nephropathy (IgAN); patient screening for a Phase 2b trial began in Q2 2021. The company reported no approved products and no product-sale revenue. It completed its IPO in May 2021 and sold its PNAi-related assets to NeuBase.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $3.235 | $1.954 | $6.167 | $3.393 |
| General and administrative expense | $2.614 | $1.219 | $4.398 | $2.251 |
| Total operating expenses / operating loss | $5.849 | $3.173 | $10.565 | $5.644 |
| Net loss | $3.437 | $3.604 | $8.151 | $6.078 |
| Operating cash used | Not presented by quarter | $11.786 | $4.980 |
With no product revenue, gross margin and operating margin are not meaningful. Q2 net loss included a $2.691 gain on the NeuBase asset sale and a $0.281 unrealized loss on NeuBase shares. The gain reduced reported net loss even as operating expenses rose.
At June 30, cash and cash equivalents were $91.625, versus $53.654 at December 31, 2020. Total assets were $97.647 and current liabilities were $3.771. The company reported no convertible notes outstanding; its 2020 notes had converted into preferred stock, which converted into common shares before the IPO. Accumulated deficit was $99.598.
Six-month financing cash flow was $48.961, chiefly reflecting the IPO. Net IPO proceeds were $48.411; the company issued 5,002,500 Class A shares at $11 per share. Cash from investing activities was $0.796, from the PNAi asset sale. Cash and restricted cash increased $37.971 during the six months.
Changes versus the prior comparable period
- Q2 operating expenses increased 84% year over year: R&D rose 66%, primarily due to atacicept Phase 2b trial start-up and contract research; G&A rose 114%, including higher insurance, stock compensation and legal costs.
- Q2 net loss narrowed to $3.437 from $3.604, mainly because of the NeuBase sale gain; six-month net loss widened to $8.151 from $6.078.
- Six-month operating cash use increased to $11.786 from $4.980, including higher prepaid expenses and continued development spending.
- The May IPO materially increased cash and converted all outstanding preferred stock into common stock. A 11.5869-for-one reverse stock split was effected in May; share amounts in the filing reflect the split retroactively.
Outlook, risks and unusual items
- Management said June 30 cash was expected to fund operations and capital needs for at least 12 months from the filing date. It also said additional capital would be needed for longer-term objectives and expected losses and expenses to rise as development advances. The company specifically cited potential completion of the IgAN Phase 2b trial and initiation of a Phase 2b or Phase 3 LN trial as planned uses of resources.
- Atacicept is the company’s sole product candidate and remains in early clinical development. Trial efficacy, safety, enrollment, regulatory approval, manufacturing and commercialization are uncertain; the filing notes a prior atacicept LN trial was terminated after unexpected immunoglobulin G declines following initiation of background treatment.
- The Ares license carries up to $176.5 million of regulatory and filing milestones, up to $515 million of commercial milestones, and tiered royalties described as low double-digit to mid-teen percentages on net sales, plus potential sublicensing payments. These are contingent obligations, not current debt.
- The NeuBase transaction generated $0.796 million cash and 308,635 restricted shares initially valued at $1.759 million; Vera recorded a $2.691 million gain and later recorded a $0.281 million fair-value loss on the shares. Some shares were held in escrow.
- Operating lease commitments were $10.5 million, partly offset by $8.412 million of expected sublease income; Vera remained responsible for the lease. Restructuring liabilities totaled $1.795 million at June 30.
- COVID-19 could disrupt trial enrollment, sites, suppliers, manufacturing and development timelines. The company also cited competition, dependence on third parties, IP and Ares-license risks, and need for future financing.
- Management concluded disclosure controls were not effective at a reasonable assurance level because of a continuing material weakness in accounting staffing, segregation of duties, journal-entry review and account reconciliations. Remediation included additional accounting support and system implementation.
- No material legal proceedings were reported. The filing identifies no specific earnings or revenue guidance.
Most important facts for investors to verify
- Progress, enrollment and eventual results of the atacicept IgAN Phase 2b trial, and the timing and feasibility of an LN trial.
- Whether the stated cash runway remains achievable as trial and public-company expenses increase, and when additional financing may be required.
- Potential future Ares milestone, royalty and sublicensing obligations, and the terms and status of the NeuBase share restrictions and escrow.
- Remediation of the material weakness and whether disclosure and financial-reporting controls become effective.
- Clinical supply, manufacturing, enrollment and COVID-19 risks, as well as the timing of restricted IPO-era shares becoming eligible for resale.