Nautilus Biotechnology, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing reports full-year results, not a standalone fourth quarter. Nautilus is a development-stage life sciences company developing a proteomics analysis platform; it had no commercial products or revenue during the period.
Business context
The company’s planned platform combines instruments, consumables and cloud-based analysis software to identify and quantify proteins. Its June 9, 2021 business combination with ARYA Sciences Acquisition Corp. III was accounted for as a reverse recapitalization. The transaction included a $200 million PIPE financing; Nautilus reported approximately $335.4 million of net proceeds from the business combination and PIPE, after transaction costs and fees. Shares began trading as NAUT on Nasdaq in June 2021.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $29.4 million | $12.4 million |
| General and administrative expense | $21.1 million | $3.3 million |
| Total operating expenses | $50.5 million | $15.7 million |
| Net loss | $50.3 million | $15.6 million |
| Net loss per share, basic and diluted | $0.60 | $0.54 |
| Net cash used in operating activities | $39.2 million | $14.0 million |
| Net cash used in investing activities | $139.0 million | $25.3 million |
| Net cash provided by financing activities | $327.4 million | $75.9 million |
At December 31, 2021, cash and cash equivalents were $185.6 million and short-term investments were $160.1 million; the company also held $16.4 million in long-term investments. Management stated that cash, cash equivalents and short-term investments of $345.7 million were expected to fund planned operations for at least 12 months. Accumulated deficit was $80.6 million. Total assets were $398.5 million and total liabilities were $34.9 million, including $30.0 million of operating lease liabilities. The balance sheet reports no borrowings.
FY2021 cash used in investing primarily reflects purchases of securities, rather than solely operating investment. Interest-rate sensitivity analysis estimated that a 100-basis-point change would affect the fair value of marketable securities by $1.1 million; the impact would be realized only if securities were sold before maturity.
Changes versus FY2020
- Net loss increased by $34.7 million, or 222%, as operating expenses rose 221%.
- R&D expense increased 136%, principally reflecting higher personnel and stock-based compensation, laboratory supplies and equipment, development services, and facilities costs.
- G&A expense increased 538%, reflecting higher compensation, professional services, insurance and facilities costs, including costs associated with becoming a public company.
- Liquidity increased substantially following the business combination and PIPE. Operating cash use rose to $39.2 million from $14.0 million; investing outflows also increased as the company invested proceeds in securities.
Outlook, commentary and key risks
- Development and launch: Management described the platform as still under development and subject to scientific and technical validation. Its three-phase plan is collaborations, early access and broad commercial launch. The filing targets broad commercialization by the end of 2023 or beginning of 2024 and says material revenue is not expected before the second half of 2023. These are forward-looking expectations, not guarantees.
- Collaborations: Research agreements with Genentech, Amgen and MD Anderson were intended to generate data and validation; the filing says these agreements were for research and would not generate revenue.
- Ongoing losses and financing: Nautilus expects significant losses and negative operating cash flows for the foreseeable future, with expenses rising as it develops the platform and builds commercial and manufacturing capabilities. It may need additional capital; future financing could dilute shareholders or impose restrictions.
- Execution and market risks: Key uncertainties include platform performance and reproducibility, customer adoption, competition, manufacturing scale-up, supplier concentration, third-party performance, and the timing and cost of commercialization. Many performance claims in the filing are based on internal testing or company expectations.
- Other risks: COVID-19 had disrupted laboratory work and supply availability; future effects remained uncertain. RUO products could face regulatory scrutiny if authorities determine they are intended for diagnostic use. The filing also highlights intellectual-property, data-security, privacy, inflation and public-company compliance risks.
- Unusual items and contingencies: The reverse recapitalization and PIPE materially changed financing and share capital. Open purchase commitments were $3.0 million, expected to be received within 12 months. The company disclosed no pending legal matter expected to have a material adverse effect. It did not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Whether subsequent technical validation and independent customer studies support the platform’s stated sensitivity, breadth, accuracy and reproducibility.
- Whether development milestones, early-access activity and commercialization timing remain on schedule, and when meaningful revenue begins.
- How quickly cash is being consumed relative to the stated runway, and whether additional financing will be needed.
- Whether manufacturing capacity, reagent availability and supplier diversification can support launch at acceptable cost and quality.
- Whether collaborations lead to published validation, customer adoption or revenue-generating agreements; current research collaborations were not expected to generate revenue.
- How lease commitments, stock-based compensation and potential share issuance affect future cash needs and shareholder dilution.
The financial statements received an unqualified audit opinion from PricewaterhouseCoopers LLP. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not attest to internal-control effectiveness, consistent with the company’s emerging-growth-company exemption.