Wave Life Sciences Ltd. — Q2 2019 Form 10-Q
Business context and reporting period
Wave is a clinical-stage genetic medicines company developing stereopure oligonucleotide therapeutics using its PRISM platform. This unaudited filing covers the quarter and six months ended June 30, 2019. Wave had no product sales; reported revenue came from Pfizer and Takeda collaborations.
Financial results and liquidity
Amounts below are in millions of U.S. dollars, except per-share data.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $7.6 | $4.9 | $10.7 | $6.3 |
| Research and development expense | $41.6 | $32.5 | $81.7 | $61.7 |
| General and administrative expense | $11.6 | $8.9 | $22.5 | $16.9 |
| Operating loss | $(45.6) | $(36.6) | $(93.6) | $(72.3) |
| Net loss | $(41.9) | $(35.9) | $(86.1) | $(71.1) |
| Net loss per ordinary share | $(1.22) | $(1.23) | $(2.58) | $(2.49) |
| Cash used in operating activities | Not separately stated | Not separately stated | $(83.3) | $39.0 provided |
- At June 30, cash and cash equivalents were $252.9 million, versus $174.8 million at December 31, 2018; restricted cash was an additional $3.6 million. Management said existing cash was expected to fund operations for at least the next 12 months, subject to assumptions that may prove incorrect.
- Current assets were $289.6 million and current liabilities $124.1 million. Total liabilities were $217.4 million, including $34.0 million of operating lease liabilities. The filing does not report funded borrowings; deferred revenue is a collaboration-related obligation, not borrowing debt.
- Cash increased by $78.1 million in the first half, primarily reflecting $161.8 million net proceeds from the January 2019 share offering. Wave also reported $50.0 million in collaboration-related accounts receivable and $158.4 million in total deferred revenue.
- No operating or net profit margin was reported; Wave remained loss-making. Its accumulated deficit was $425.9 million at June 30.
Material changes versus the prior comparable period
- Q2 revenue increased $2.7 million year over year; first-half revenue increased $4.4 million. Management attributed the changes to completion of certain Pfizer performance obligations and, for the first half, Takeda revenue being recognized for six months in 2019 versus three months in 2018.
- First-half operating expenses rose $25.6 million. R&D increased $20.0 million, including $17.6 million for DMD programs, chiefly suvodirsen clinical work and the DYSTANCE 51 trial; G&A increased $5.6 million, primarily from compensation and organizational growth.
- First-half operating cash flow shifted from $39.0 million provided in 2018 to $83.3 million used in 2019. The prior-year inflow included substantial Takeda-related changes in deferred revenue and receivables.
- Wave issued 4.54 million ordinary shares in the January 2019 follow-on offering, raising $161.8 million net. Ordinary shares outstanding were 34,266,260 at June 30 and 34,280,578 as of August 1.
Outlook, management commentary, and risks
- Management expects expenses and operating losses to increase as clinical development, research, and internal cGMP manufacturing continue. Wave expects to need substantial additional funding to reach its business objectives and may never achieve profitability.
- Wave expects suvodirsen open-label-extension interim data in Q4 2019, intended to inform a possible U.S. accelerated-approval submission in the second half of 2020 if results are positive. DYSTANCE 51, a global Phase 2/3 trial, began in June 2019.
- Management expected WVE-N531 topline clinical data in the second half of 2020, subject to clinical-trial applications and authorization. It expected PRECISION-HD2 topline data by year-end 2019 and PRECISION-HD1 topline data in early 2020. U.S. multiple-dose portions of the HD trials could not proceed without additional preclinical work and FDA review; higher proposed single doses in PRECISION-HD1 also required FDA review of additional monitoring plans.
- A micronucleus assay in nonclinical toxicology work for the HD candidates required additional studies, which were ongoing. Wave also described WVE-C092 as a new ALS/FTD lead candidate, with clinical development anticipated in the second half of 2020 subject to required submissions and approvals. The first ophthalmology candidate was expected to be announced in the second half of 2019.
- Wave filed a shelf registration statement in May 2019, including an at-the-market program for up to $250 million of ordinary shares. Future equity financing could dilute shareholders; additional financing may not be available on acceptable terms.
- Other income included an estimated UK R&D tax credit and dividend income. Wave maintained a full valuation allowance against deferred tax assets. The filing reports no material legal proceedings and no material change to previously disclosed risk factors.
Key facts for investors to verify
- Whether the planned clinical readouts and regulatory milestones occur on the stated timelines, and whether results support continued development or accelerated approval.
- How long cash will last under actual R&D spending and collaboration receipts, and whether additional financing or use of the ATM program becomes necessary.
- Collection and timing of the $50.0 million collaboration receivable, and the assumptions and schedule for recognizing deferred collaboration revenue.
- The outcome of additional HD nonclinical studies and FDA review requirements, and any resulting effect on trial plans or timing.
- The amount and timing of UK R&D tax credits and other income, which contributed to reported results but do not represent product revenue.