Wave Life Sciences Ltd. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Wave is a clinical-stage RNA medicines company; it has no product sales and reports collaboration revenue. Unless otherwise stated, amounts are in U.S. dollars.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $49.2 million | $0.3 million | $84.2 million | $2.4 million |
| Research and development expense | $31.6 million | $27.6 million | $95.9 million | $84.8 million |
| General and administrative expense | $13.1 million | $11.6 million | $37.6 million | $36.8 million |
| Operating income (loss) | $4.4 million | $(38.9) million | $(49.3) million | $(119.2) million |
| Net income (loss) | $7.3 million | $(39.0) million | $(41.3) million | $(118.1) million |
| Operating cash flow | Not presented by quarter | $13.8 million | $(94.3) million |
- Q3 revenue comprised $14.3 million from GSK and $34.9 million from Takeda. The Q3 net profit does not indicate a shift to product profitability: Wave says it has never generated product revenue and expects significant expenses and operating losses to continue.
- Q3 Takeda revenue included $28.0 million recognized after the C9 program was terminated and $7.0 million for a development milestone. The $0.7 million tax benefit also contributed to reported earnings.
- At September 30, cash and cash equivalents were $139.9 million, versus $88.5 million at year-end 2022; restricted cash was $3.7 million. Current assets were $158.6 million and current liabilities $100.0 million. Shareholders’ deficit was $40.5 million; accumulated deficit was $1,008.6 million.
- Operating cash flow was positive largely because deferred revenue increased $62.3 million, principally related to GSK. It should not be read as evidence of recurring operating cash generation. Financing activities provided $38.6 million, including $34.6 million from the GSK equity issuance and $3.1 million from ATM sales.
- The filing reports no conventional borrowings. Operating lease commitments totaled approximately $39.9 million. Deferred revenue was $173.6 million at quarter-end, including $68.3 million current.
- Management expects existing cash and cash equivalents to fund operations for at least the next twelve months, based on assumptions that may prove incorrect. The company may need additional financing thereafter, which could dilute shareholders or require less favorable terms.
Material changes and business developments
- Revenue rose sharply year over year, reflecting the GSK collaboration, which became effective in January 2023, as well as the Takeda C9 termination revenue and milestone. Nine-month revenue included $47.4 million from GSK and $36.9 million from Takeda.
- Research and development expense increased 13% year over year for the first nine months, with higher spending on Huntington’s disease, DMD and AATD programs. Ordinary shares outstanding increased from 86.9 million at December 31, 2022 to 99.0 million at September 30, 2023; the filing also reports 99.1 million as of November 1.
- Wave discontinued WVE-004 for C9orf72-associated ALS/FTD after biomarker reductions were not accompanied by observed clinical benefit at 24 weeks. The program’s termination under the Takeda collaboration led to recognition of remaining deferred revenue.
- GSK paid a $120 million upfront collaboration fee and separately purchased 10.7 million ordinary shares for $50 million. Wave is responsible for WVE-006 through the initial Phase 1/2 study; GSK is to take over subsequent development and commercialization. Wave may receive up to $525 million in WVE-006 milestones and tiered royalties reaching the high teens.
Outlook, risks and contingencies
- As described in the filing, Wave expected to begin WVE-006 dosing in healthy volunteers in Q4 2023 and to report proof-of-mechanism data in people with AATD in 2024. It expected WVE-003 multi-dose and single-dose data in Q2 2024, and WVE-N531 data in 2024.
- Wave expected to select an INHBE clinical candidate in Q4 2024 and five new clinical candidates, including INHBE, by the end of 2025. These are forward-looking expectations, not guaranteed outcomes.
- Key risks include clinical or regulatory setbacks, uncertain ability to demonstrate therapeutic benefit, reliance on collaboration funding and partners, potential need for further capital, and possible delays or increased costs in research, trials and manufacturing. GSK and Takeda have termination rights under specified circumstances.
- Wave reported no material legal proceedings. Management concluded disclosure controls were effective as of September 30, 2023.
Important facts for investors to verify
- Whether WVE-006 clinical initiation and the stated 2024 proof-of-mechanism plans occurred on schedule, and how the results affect GSK’s transition to later development.
- Whether WVE-003 and WVE-N531 meet their stated data timelines and show evidence supporting further development.
- How much of reported revenue and operating cash flow is collaboration-related, milestone-driven or recognition of previously deferred amounts, versus recurring funding.
- Cash consumption excluding deferred-revenue movements, the assumptions behind the stated twelve-month runway, and the timing and terms of any additional financing.
- Share dilution from equity issuance, equity compensation and outstanding options or warrants; and the status of remaining collaboration milestones and partner obligations.