Wave Life Sciences Ltd. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; financial statements are unaudited and presented in U.S. dollars. Wave is a clinical-stage biotechnology company developing stereopure nucleic acid therapeutics for genetically defined diseases. It reported no product sales; quarterly revenue came from its Pfizer collaboration.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $1.422 million | $0.383 million |
| Research and development expense | $29.196 million | $14.740 million |
| General and administrative expense | $8.001 million | $5.850 million |
| Operating loss | $35.775 million | $20.207 million |
| Net loss | $35.241 million | $21.096 million |
| Basic and diluted loss per share | $1.26 | $0.90 |
| Cash used in operating activities | $32.426 million | $17.418 million |
- At March 31, cash and cash equivalents were $110.491 million; restricted cash was $3.612 million. Total current assets were $117.961 million versus current liabilities of $16.298 million.
- Total liabilities were $32.498 million. The balance sheet reported no material conventional debt; the current capital-lease obligation was zero, compared with $16,000 at year-end.
- Capital expenditures were $1.164 million. Cash, cash equivalents and restricted cash declined $32.010 million during the quarter.
- Management said March 31 cash and cash equivalents were expected to fund operations for at least 12 months, while cautioning that assumptions could prove incorrect. In April, Wave received $170 million from Takeda: a $110 million collaboration upfront payment and $60 million from an equity investment.
- The company remained unprofitable, with an accumulated deficit of $228.309 million. Operating and net losses exceeded revenue substantially; a meaningful revenue or profit margin is not applicable.
Material changes versus the prior comparable period
- Revenue rose $1.039 million, which the company attributed to increased research and development services for the first three Pfizer-nominated hepatic targets.
- R&D expense increased $14.456 million, principally from unallocated discovery/platform spending, higher headcount, supplies and services, and facility costs. DMD program expense decreased $1.676 million.
- G&A expense increased $2.151 million, primarily from higher compensation and professional-service costs.
- Net loss increased $14.145 million and operating cash use increased $15.008 million. Management expects expenses and operating losses to rise as development and manufacturing activities expand.
- The 2017 comparison is presented retrospectively under ASC 606. Adoption changed Q1 2017 reported revenue from $676,000 to $383,000 and net loss from $20.996 million to $21.096 million; operating cash use was unchanged.
Outlook, management commentary and risks
- Wave expected top-line data from its two Huntington’s disease Phase 1b/2a trials in the first half of 2019, safety data from its DMD exon 51 Phase 1 trial in Q3 2018, and to initiate its C9ORF72 ALS/FTD trial in Q4 2018. It expected to identify an SCA3 candidate by year-end 2018 and initiate the DMD exon 53 trial in Q1 2019.
- The Takeda collaboration, effective in April 2018, provides at least $230 million in committed cash and collaboration support, including $110 million upfront, $60 million of research funding over four years, reimbursement of certain budgeted research costs above that amount, and a $60 million equity investment. Takeda also has co-development, co-commercialization and licensing options. These are post-quarter developments, not March 31 cash.
- The Pfizer collaboration covers up to five hepatic programs. Pfizer had nominated all five by April 2018; it may elect to license programs after clinical-candidate selection. At March 31, $7.1 million was allocated to unsatisfied or partially unsatisfied performance obligations and recorded as deferred revenue, including $1.3 million current.
- Key risks include clinical or preclinical failure, regulatory delays, manufacturing and trial costs, competition, intellectual-property protection, and the need for additional financing. Wave stated that adequate financing may not be available on acceptable terms and that it may need to delay, reduce or terminate programs if unable to raise funds.
- No material legal proceedings, changes to previously disclosed risk factors, or off-balance-sheet arrangements were reported. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether clinical trials meet the stated timelines and produce data sufficient to support continued development.
- How the Takeda collaboration’s committed funding, research reimbursements, options and equity investment translate into cash availability and future obligations.
- The quarterly cash-burn trajectory and management’s runway assumptions, including spending growth and any future financing needs.
- Progress on Pfizer program nominations and licensing options, and the timing and judgment-dependent recognition of collaboration revenue under ASC 606.
- Whether platform, manufacturing and intellectual-property investments deliver the expected development and commercial benefits.