Adicet Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Adicet is a clinical-stage biotechnology company developing allogeneic gamma delta T-cell cancer therapies. Its lead candidate, ADI-001, is in a Phase 1 study; the company has no approved products and generates no product-sales revenue.
Financial results and liquidity
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $28.4 million | $55.1 million |
| General and administrative expense | $6.5 million | $13.1 million |
| Total operating expenses | $34.9 million | $68.2 million |
| Net loss | $32.4 million | $63.3 million |
| Basic and diluted loss per share | $0.75 | $1.47 |
| Net cash used in operating activities | Not stated for quarter | $49.0 million |
- Cash and cash equivalents were $205.5 million at June 30, 2023, down from $257.7 million at December 31, 2022. Six-month net cash decline was $52.2 million.
- Six-month investing cash outflow was $3.4 million, primarily for equipment; financing provided $0.2 million.
- Total assets were $277.6 million; total liabilities were $38.6 million and stockholders’ equity was $239.1 million. Accumulated deficit was $301.4 million.
- No term-loan debt was outstanding at the filing date; $10.6 million remained available under the PacWest loan agreement. The company reported compliance with its covenants. The agreement includes cash-deposit requirements.
- No meaningful operating margin comparison is available because the company had no current-period revenue and continues to incur development costs.
Material changes versus comparable periods
- Q2 R&D expense increased 75% to $28.4 million from $16.2 million; management attributed the rise primarily to higher personnel, external research/CDMO costs, facility costs and lab expenses.
- Six-month R&D expense increased 86% to $55.1 million from $29.7 million, reflecting increased external development costs, headcount, facility costs and lab expenses.
- Six-month revenue fell from $25.0 million in 2022 to zero in 2023. The prior-year amount included revenue recognized after Regeneron exercised its ADI-002 option; the associated performance obligations were completed in Q1 2022.
- Six-month net loss widened to $63.3 million from $17.9 million. The comparison reflects both the absence of prior-year Regeneron revenue and increased operating expenses.
- Interest income rose to $5.3 million for the first half from $0.4 million, primarily due to higher interest rates and investments in Treasury securities and money-market funds.
Outlook, risks and unusual items
- Management said cash and cash equivalents were expected to fund forecasted expenses, capital expenditures and debt service for at least 12 months from issuance of the statements. Separately, the risk-factor discussion said the company believed its $205.5 million cash balance capitalized it into the first half of 2025. These are estimates subject to operating assumptions; additional financing will be needed for longer-term development and commercialization.
- Adicet planned to advance ADI-001 toward a potentially pivotal single-arm Phase 2 study in post-CAR-T large B-cell lymphoma patients in 2024, subject to further patient follow-up. It also planned an expansion cohort in that population and continued enrollment in mantle cell lymphoma. The company expected a clinical update, including efficacy, six-month complete response rate and safety data from additional post-CAR-T patients, in the second half of 2024.
- The company described ADI-925 and ADI-270 as preclinical programs and identified plans to file an IND for ADI-925 in the second half of 2023 and ADI-270 in the first half of 2024; timing and regulatory clearance are uncertain.
- Key risks include clinical safety, efficacy and enrollment; regulatory and manufacturing delays; dependence on third-party suppliers and manufacturers; competition; and the need for substantial additional capital. The Redwood City GMP cell-processing and vector-manufacturing suite was completed in February 2023, but the company said it had not yet commenced manufacturing operations at its facility and continued to rely on third parties.
- On August 8, 2023, the board approved repricing 6,431,077 options effective August 14, 2023, and issuing 1,418,043 new options to eligible employees whose inducement awards could not be repriced. The company expected to record the impact in Q3 2023.
- The company reported no legal proceedings expected to have a material adverse impact. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether ADI-001 follow-up data support the proposed post-CAR-T Phase 2 path, and whether planned study and data-update timelines remain achievable.
- Cash burn, the assumptions underlying the stated runway through the first half of 2025, and whether additional financing or ATM sales will be required.
- Execution of the PacWest cash-maintenance covenants and any changes to available borrowing or banking arrangements.
- Readiness and operating status of the company’s manufacturing facility, and continued third-party supply capacity for clinical programs.
- The Q3 2023 accounting and dilution effects of the option repricing and new option grants.