Atara Biotherapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Business context
Atara is a clinical-stage T-cell immunotherapy company. Its lead product, tab-cel (Ebvallo), is authorized for sale in the EU and UK and is in Phase 3 development in the U.S. The company also prioritizes ATA188, in Phase 2 development for progressive multiple sclerosis, and ATA3219, in preclinical development. Commercialization in Europe and selected territories is partnered with Pierre Fabre; Atara retains rights in North America and other major markets.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $1.0 | $51.6 | $2.2 | $58.9 |
| Operating loss | $(71.4) | $(32.1) | $(146.4) | $(120.4) |
| Net income (loss) | $(71.1) | $18.5 | $(145.9) | $(69.6) |
| Research and development expense | $56.1 | $64.9 | $118.3 | $139.9 |
| General and administrative expense | $13.3 | $18.8 | $27.2 | $39.4 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $(91.2) | $(148.5) |
- Commercialization revenue was $0.8 million in Q2 and $1.7 million for the six months, versus none in the 2022 periods. License and collaboration revenue fell sharply after Bayer terminated its agreements in 2022; the prior-year comparisons included substantial Bayer revenue.
- Q2 2022 results also included a $50.2 million gain on the sale of the ATOM Facility. These prior-year items materially affect comparisons; Q2 2023 had no comparable gain.
- Commercialization costs were $2.9 million in Q2 and $3.1 million for the six months, exceeding reported commercialization revenue. Atara says costs included inventory adjustments and sales-related milestone expense; shipments to date were from inventory expensed as R&D before approval.
- Cash, cash equivalents and short-term investments totaled $153.6 million at June 30, 2023, down from $242.8 million at December 31, 2022. Cash, cash equivalents and restricted cash were $46.0 million at June 30.
- Current assets were $172.3 million and current liabilities $74.6 million. Stockholders’ equity was $7.5 million, down from $126.6 million at year-end 2022.
- The company reported a $32.7 million liability related to the sale of future Ebvallo royalties and milestones to HCRx, including $0.6 million classified as current. The arrangement’s estimated annual effective interest rate was approximately 16% at June 30. The filing does not present conventional borrowings as a separate debt balance; operating lease liabilities were also reported.
- Cash used in operations improved year over year, partly reflecting a $40 million Pierre Fabre milestone payment received in January 2023 and lower compensation costs. Financing cash inflow was only $0.7 million for the six months, including $0.6 million net ATM proceeds.
Margins are not a useful indicator of the company’s performance at this stage: revenue remains small relative to operating expenses, and the company continues to incur substantial losses.
Material changes and outlook
- Atara stated that available cash, cash equivalents and short-term investments were expected to fund planned operations into the second quarter of 2024, but not for at least twelve months from the financial statements’ issuance. Management concluded that substantial doubt exists about the company’s ability to continue as a going concern.
- Management plans to seek additional capital through equity or debt offerings, the remaining $55.2 million capacity under its 2021 ATM facility, and/or strategic transactions, including a potential U.S. tab-cel commercialization partner. There is no assurance funding will be available on acceptable terms. The company may need to delay, reduce or terminate development activities.
- Atara reported that the FDA discussions on tab-cel CMC had addressed outstanding questions, with comparability between clinical and intended commercial processes remaining a key issue. The company planned further FDA discussion; a new clinical trial may be needed if agreement on a filing pathway cannot be reached, potentially delaying or preventing a U.S. BLA submission.
- Ebvallo received UK marketing authorization in May 2023, and Pierre Fabre was progressively launching the product in Europe. The EU and UK authorizations were granted under exceptional circumstances and require post-marketing obligations and annual reassessment.
- Atara expected initial data from its Phase 2 tab-cel multi-cohort study in Q4 2023. It planned to communicate ATA188 Phase 2 primary-endpoint and other study results in early November 2023. It also planned to begin an ATA3219 Phase 1 study in the coming months after receiving an FDA Safe to Proceed letter.
- The August 2022 workforce reduction of approximately 20% and sale of the ATOM manufacturing facility reduced staffing and altered the company’s manufacturing model. Atara relies on third-party manufacturers, including Fujifilm, and has minimum purchase commitments. Its CRL manufacturing agreement was extended until the earlier of September 30, 2023 or receipt of certain batches.
Risks, contingencies and unusual items
- Key risks include financing needs and dilution, clinical and regulatory uncertainty, tab-cel manufacturing comparability, commercial-scale manufacturing and supply continuity, and dependence on Pierre Fabre and contract manufacturers.
- Atara disclosed mold contamination in certain manufacturing suites at a contract manufacturer and said it was working on remediation while production continued in other suites.
- HCRx is entitled to specified Ebvallo royalties and milestones up to a cap of 185%–250% of its $31 million investment. Atara said it will not receive meaningful Pierre Fabre milestone or royalty payments until that cap is met, if ever.
- The filing reported no material legal proceedings and no material changes to contractual obligations from the 2022 Form 10-K. Disclosure controls were deemed effective, with no material change in internal control over financial reporting identified during the quarter.
Important facts for investors to verify
- Cash burn, the stated runway into Q2 2024, and the company’s ability to raise capital before funds run short.
- Progress and outcome of FDA discussions on tab-cel process comparability, and whether an additional clinical trial will be required for a U.S. filing.
- ATA188 Phase 2 results and tab-cel Phase 2 multi-cohort data against the timelines stated in the filing.
- Ebvallo launch, reimbursement and demand in Europe, alongside the royalty-sharing cap and related HCRx liability.
- Manufacturing qualification, contamination remediation, supply capacity, and the operational and financial terms of Atara’s CMO commitments.
- Potential dilution from future financing, equity awards and outstanding options and warrants.