Arcturus Therapeutics Holdings Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 28, 2022. Arcturus is a clinical-stage mRNA medicines company developing infectious-disease vaccines and therapies for rare liver and respiratory diseases. It had no approved products and had never generated product-sales revenue; reported revenue primarily came from collaborations, grants, and related services.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $12.4 million | $9.5 million |
| Research and development expense, net | $173.8 million | $57.8 million |
| General and administrative expense | $41.5 million | $23.2 million |
| Operating loss | $202.9 million | $71.5 million |
| Net loss | $203.7 million | $72.1 million |
| Net loss per share, basic and diluted | $7.74 | $3.55 |
| Net cash used in operating activities | $135.0 million | $42.9 million |
Fourth quarter: Revenue was $5.8 million and net loss was $38.7 million, compared with revenue of $2.2 million and net loss of $31.1 million in Q4 2020.
At year-end, cash and cash equivalents were $370.5 million; including restricted cash, total cash was $372.6 million. Unrestricted cash declined from $462.9 million at year-end 2020. Total debt carrying value was approximately $63.1 million: $46.0 million under the Singapore loan and the remainder primarily under the Western Alliance facility. Current debt included $22.5 million, including an estimated $15.2 million Singapore-loan repayment in 2022 tied to funds unused for ARCT-021 manufacturing. Management said available cash should fund planned operations for at least 12 months, while also warning that additional funding will be needed for longer-term development and commercialization.
Revenue increased by $2.8 million year over year, including $4.4 million recognized under the new Vinbiocare agreement, partly offset by lower revenue from other collaborators. The filing provides no meaningful product gross-margin measure because the company had no product sales. Research and development spending rose sharply, particularly for COVID-19 vaccine development; operating cash use also increased substantially. FY2021 results included $28.9 million of share-based compensation and a $5.0 million noncash in-process R&D charge for the Alexion patent license.
Business developments, outlook, and risks
- COVID-19 vaccines: ARCT-154 advanced into a Vinbiocare-sponsored and funded Phase 1/2/3 study in Vietnam, with more than 18,000 subjects dosed as reported. Arcturus submitted an application for emergency use authorization in Vietnam. Preliminary booster findings included reported increases in neutralizing antibodies, but the filing cautions that the studies were ongoing and some results involved small participant subsets. No vaccine had received marketing approval. Further ARCT-021 development depended on a global entity proceeding with a planned multinational trial; the company had no current plan to sponsor further ARCT-021 studies otherwise.
- Rare-disease programs: ARCT-810 (OTC deficiency) had completed a Phase 1 study and was in a Phase 1b patient study; the company anticipated first-cohort dosing completion in the first half of 2022 and Phase 2 screening in Q2 2022, with interim data expected in the second half. ARCT-032 (cystic fibrosis) was progressing toward a first-in-human application expected in Q3 2022. These are forward-looking expectations, not completed milestones.
- Other pipeline and manufacturing: Arcturus planned to select a STARR influenza vaccine candidate in 2022 and submit an application for a human study in 2023. It forecast manufacturing capacity of up to 200 million COVID-19 vaccine doses annually by the end of 2022, dependent on partners and technology transfer. Vietnam facility construction and commercial technology transfer were underway.
- Funding and commercial outlook: The company expected to use a significant portion of its cash during 2022 and said ARCT-154 commercialization would require significant additional funding. It was seeking potential partners but could not assure it would secure acceptable arrangements. It also had binding manufacturing commitments of at least $13 million.
- Key risks: Clinical and regulatory outcomes remain uncertain; ARCT-154 may not receive authorization, including as a booster, and COVID-19 market demand, pricing, competition, and trial-data acceptability are uncertain. Clinical enrollment delays, manufacturing scale-up and supply-chain dependence, partner performance, intellectual-property disputes, and the need for additional capital could materially affect results. COVID-19 had already delayed non-COVID trials. The company reported recent high employee turnover and a chief medical officer moving to a part-time role.
- Debt and contingencies: The Singapore loan carries 4.5% interest and is intended to be repaid from a 10% share of COVID-vaccine net sales, subject to exceptions, security, and potential maturity or default repayment conditions. It may be forgivable under specified conditions if approval and sales thresholds are not met. The Western Alliance loan has covenants and scheduled principal payments; the company reported compliance with both loan arrangements at year-end. A former-employee lawsuit was settled in 2021, with payment covered by insurance; the company reported no current legal proceedings.
Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Important facts for investors to verify
- Subsequent clinical and regulatory results for ARCT-154, including Vietnam authorization status, study design, sample sizes, and whether data support primary-series or booster use.
- Actual cash burn, the timing and amount of the Singapore-loan repayment, and whether cash runway assumptions or manufacturing commitments change.
- Progress and enrollment for ARCT-810 and timing of ARCT-032’s first-in-human application and studies.
- Whether Vinbiocare completes its facility and technology transfer, and whether Arcturus secures additional funding or commercialization partners.
- Revenue concentration and deferred revenue: the top four customers generated 99% of FY2021 revenue, and total deferred revenue was $63.4 million at year-end.
- Potential dilution from future financing and equity compensation; 4.65 million stock options were outstanding at year-end, with $97.5 million of unrecognized compensation cost.