Wave Life Sciences Ltd. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Wave is a clinical-stage genetic medicines company; it has not generated product revenue and continues to incur operating losses. Unless stated otherwise, financial amounts below are in U.S. dollars.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $36.4 million | $3.5 million | $39.2 million | $10.6 million |
| Research and development expense | $31.1 million | $28.3 million | $96.1 million | $100.9 million |
| General and administrative expense | $12.9 million | $9.6 million | $34.0 million | $32.8 million |
| Operating loss | $7.6 million | $34.4 million | $90.9 million | $123.1 million |
| Net loss | $6.2 million | $33.1 million | $87.5 million | $121.1 million |
| Basic and diluted loss per share | $0.12 | $0.86 | $1.75 | $3.36 |
Q3 revenue was entirely from the Takeda collaboration. The quarter’s increase chiefly reflected recognition of previously constrained collaboration revenue and reimbursement of $22.5 million in research and preclinical expenses. Revenue is collaboration-based, not product sales. The filing does not report a gross margin.
For the nine months, operating cash used was $82.0 million, investing cash used was $0.5 million, and financing cash provided was $22.0 million. Cash, cash equivalents and restricted cash declined $60.6 million to $127.5 million; cash and cash equivalents alone were $123.9 million at September 30.
At September 30, current assets were $158.0 million and current liabilities were $31.6 million, implying working capital of approximately $126.3 million. Total liabilities were $162.7 million, including $116.3 million of deferred revenue and operating lease liabilities; the filing does not report financial borrowings. Accumulated deficit was $770.7 million.
Changes versus the prior comparable periods
- Q3 revenue increased $33.0 million year over year, while net loss narrowed $26.9 million. For the nine-month period, revenue rose $28.6 million and net loss narrowed $33.7 million.
- Nine-month R&D expense decreased $4.8 million, principally as spending on discontinued DMD and Huntington’s disease programs declined; spending on ALS/FTD and unallocated platform and discovery work increased.
- Q3 R&D and G&A expenses increased by $2.8 million and $3.4 million, respectively, year over year.
- Cash and cash equivalents fell from $184.5 million at year-end 2020 to $123.9 million at September 30, 2021. The company raised $21.2 million net through its ATM program during the first nine months, versus $59.9 million of ATM proceeds plus a $93.7 million follow-on offering in the comparable 2020 period.
Outlook, developments and risks
- Management said existing cash and cash equivalents were expected to fund operations for at least the next 12 months, while cautioning that estimates depend on assumptions and spending may need to be reduced. After quarter-end, Wave received Takeda’s $22.5 million payment and $29.6 million net from ATM share sales.
- On October 15, 2021, Wave and Takeda discontinued the Category 2 portion of their collaboration; Takeda paid $22.5 million for related research and preclinical expenses. The Category 1 programs, including C9orf72, HTT and ATXN3, remained in effect. Wave said it could advance other CNS programs independently or seek partners.
- Wave expected clinical data through 2022 from WVE-004 for ALS/FTD, WVE-003 for Huntington’s disease and WVE-N531 for Duchenne muscular dystrophy. It also expected to announce an AATD RNA-editing development candidate in 2022. These are forward-looking expectations, not assured outcomes.
- Key risks include clinical and regulatory uncertainty, the need for substantial future funding, potential dilution or unfavorable financing terms, collaboration and partner dependence, competition, intellectual-property risks, manufacturing and supply challenges, and possible COVID-19 effects on trials and operations. The company warned that it may never achieve product revenue or profitability.
- Wave reported no material legal proceedings and said disclosure controls were effective. It had a five-year lease for additional Cambridge space beginning October 1, 2021, with expected cash commitments of $5.4 million; the lease was not recognized on the September 30 balance sheet because it had not yet commenced.
Important facts for investors to verify
- How much of reported collaboration revenue reflects recurring performance obligations versus constrained revenue recognized or expense reimbursement, and what revenue remains under the amended Takeda arrangements.
- Whether cash use and planned clinical, platform and manufacturing spending remain consistent with management’s stated minimum 12-month runway, including the effect of post-quarter receipts and ATM proceeds.
- Clinical-trial progress, safety, biomarker and efficacy data for WVE-004, WVE-003 and WVE-N531, alongside the timing and evidence supporting the AATD candidate plan.
- Potential dilution: 2.9 million shares were sold through the ATM in the first nine months, followed by 6.8 million shares sold after quarter-end; ordinary shares outstanding were 58.8 million as of November 1, 2021.
- Takeda’s outstanding Category 1 options and the potential economic and strategic consequences of any future exercise, non-exercise or collaboration changes.