Wave Life Sciences Ltd. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Wave is a clinical-stage genetic medicines company developing stereopure oligonucleotide therapeutics using its PRISM platform. The interim financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 or prior period |
|---|---|---|
| Revenue | $0 | $4.2 million |
| Research and development expense | $33.4 million | $41.2 million |
| General and administrative expense | $10.1 million | $13.0 million |
| Net loss | $42.5 million | $47.5 million |
| Net loss per share, basic and diluted | $0.86 | $1.38 |
| Operating cash used | $44.4 million | $26.3 million |
| Cash and cash equivalents at period end | $148.5 million | $184.5 million at December 31, 2020 |
- Total operating expenses were $43.5 million, down $10.7 million year over year. No operating margin is meaningful because the quarter had no revenue.
- Cash, cash equivalents and restricted cash totaled $152.2 million at March 31. Current assets were $194.5 million and current liabilities $48.7 million. The filing reports no borrowings or conventional debt balance; liabilities include deferred collaboration revenue and operating leases.
- Deferred revenue was $133.0 million, including $24.8 million current. Operating lease commitments totaled $42.3 million; an additional leased space commitment of $5.4 million had not yet commenced.
- Wave raised $8.0 million net through its at-the-market equity program during the quarter. Management said existing cash and cash equivalents, together with committed cash from its existing collaboration, were expected to fund operations for at least the next 12 months.
Material changes and business developments
- Revenue fell to zero from $4.2 million. The prior-year revenue came from the Pfizer and Takeda collaborations. Pfizer’s research term ended in May 2020; Takeda revenue was not recognized in Q1 2021 under the applicable accounting and following the decision to discontinue two HD programs.
- Net loss improved by $5.0 million, primarily as lower R&D and G&A expenses more than offset lower other income. R&D decreased $7.8 million, including lower DMD and unallocated platform costs, partly offset by higher HD and ALS/FTD program spending.
- Operating cash use increased by $18.1 million year over year. The 2020 comparison included a $20.0 million decrease in accounts receivable that benefited operating cash flow.
- On March 29, 2021, Wave discontinued WVE-120101 and WVE-120102, its first-generation Huntington’s disease candidates. PRECISION-HD2 showed no statistically significant change in mutant huntingtin protein versus placebo through the tested doses and no evidence of a dose response; PRECISION-HD1 results through 16 mg were similar at comparable doses. Related trials were stopped.
- Wave continued development of WVE-003 for HD and reported plans to initiate dosing in 2021, alongside planned 2021 dosing for WVE-004 for ALS/FTD and WVE-N531 for DMD.
Outlook, risks and unusual items
- Management expects significant operating expenses and losses to continue and does not expect product revenue for the foreseeable future. It may need additional financing; available capital may be insufficient sooner than expected, and financing may dilute shareholders or restrict operations.
- The filing gives no financial earnings guidance. Program outlook includes planned 2021 trial dosing for WVE-004, WVE-003 and WVE-N531, and expected in vivo AATD program data in the first half of 2021.
- Takeda provides research funding under a collaboration with potential future option, milestone and royalty economics. Revenue recognition depends on performance and program status; future payments are not assured. Wave reported $133.0 million of deferred revenue related to unsatisfied or partially unsatisfied obligations.
- COVID-19 had affected and could continue to affect early discovery, clinical trial conduct and timing, manufacturing and supply chains. Other key risks include clinical and regulatory uncertainty, competition, intellectual-property protection, and the need to raise capital.
- Wave’s Cambridge lease for additional space was expected to commence October 1, 2021, triggering recognition of a right-of-use asset and lease liability. The filing disclosed no material legal proceedings and no material change to internal controls.
Important facts for investors to verify
- Whether the planned 2021 clinical trial dosing and AATD data milestones occurred, and what subsequent data show about safety and efficacy.
- Whether cash burn, collaboration receipts and deferred revenue support management’s stated minimum 12-month runway, especially after discontinuation of the first-generation HD candidates.
- Takeda collaboration status, remaining research funding, option decisions and the timing and conditions for recognizing deferred revenue.
- Future equity issuance under the shelf registration and ATM program, and resulting dilution.
- Lease obligations and other operating commitments, including the additional Cambridge space.