Atara Biotherapeutics, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. Although the request references 2016 Q4, this is an annual report; fourth-quarter results are included below where available. Atara is a clinical-stage biopharmaceutical company developing third-party-derived antigen-specific T-cell therapies. It had no approved products and generated no revenue.
Financial results and liquidity
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $56.5 million | $41.6 million |
| General and administrative expense | $24.7 million | $16.8 million |
| Total operating expenses / operating loss | $81.2 million | $58.4 million |
| Net loss | $79.0 million | $57.2 million |
| Net loss per share, basic and diluted | $2.75 | $2.24 |
| Net cash used in operating activities | $60.0 million | $37.2 million |
- FY2016 comprehensive loss was $78.7 million. Profit margins are not meaningful because the company had no revenue and incurred operating losses.
- At December 31, 2016, cash, cash equivalents and short-term investments totaled $255.7 million, down from $320.5 million a year earlier. Working capital was $250.9 million; total assets were $263.9 million and total liabilities were $10.2 million.
- The filing reports no debt balance. Long-term liabilities were $0.5 million; the filing does not identify this amount as debt.
- Management expected existing cash, cash equivalents and short-term investments to fund planned operations into the first quarter of 2019. The company had no committed external funding source and expected to need substantial additional capital.
- FY2016 investing cash flow was positive $83.7 million, largely reflecting investment maturities and sales net of purchases. Financing cash flow was positive $0.5 million, primarily from employee stock transactions; FY2015 financing included $263.4 million of net proceeds from follow-on offerings.
Material changes versus the prior comparable period
- Net loss increased to $79.0 million from $57.2 million; operating cash use rose to $60.0 million from $37.2 million.
- R&D expense increased $14.9 million, principally from ATA129 development and Phase 3 preparation, T-cell manufacturing and process transfer, and higher employee and overhead costs. G&A expense rose $7.9 million, mainly due to compensation and increased headcount.
- Spending on STM434 and other molecular programs fell to $1.1 million from $18.5 million after the company suspended development of PINTA 745 and ATA 842. Rights to those programs were returned to Amgen in 2016.
- Cash and investments declined $64.8 million. The balance-sheet cash-and-cash-equivalents line increased, but short-term investments decreased.
Outlook, developments and risks
- ATA129: The FDA agreed to designs for two Phase 3 studies in rituximab-refractory EBV-associated post-transplant lymphoproliferative disorder (EBV-PTLD): MATCH after hematopoietic cell transplant and ALLELE after solid organ transplant. Assay refinement and manufacturing comparability work remained prerequisites to trial initiation. Prior clinical results were encouraging but came from earlier studies and are not assurance of Phase 3 success.
- Other pipeline: ATA230 was in Phase 2 for refractory CMV, but the company prioritized EBV programs and deferred further Phase 3 planning. ATA520 was in Phase 1 studies; a company-sponsored Phase 1/2 trial was anticipated in 2018. ATA188 development for multiple sclerosis included a planned Phase 1 trial in the second half of 2017.
- Management outlook: Atara expected R&D and G&A costs to increase as it advanced clinical trials, manufacturing and pipeline programs. Financial results were expected to remain loss-making, and future capital needs depend on development costs, regulatory timing, manufacturing plans and other factors.
- Manufacturing and facilities: The company relied on outside manufacturers and was transferring processes from Memorial Sloan Kettering Cancer Center (MSK). It identified assays needing refinement and was preparing additional manufacturing lots. In February 2017, it entered a 15-year lease for approximately 90,580 square feet of office, laboratory and cell-therapy manufacturing space in Thousand Oaks; completion was expected in 2018. Delays, cost overruns, product comparability or supply problems could affect development.
- Unusual accounting item: Atara recorded a $3.3 million fourth-quarter 2016 out-of-period stock-based compensation adjustment for errors in prior-period award expense calculations. The company said the adjustment was not material to FY2016 or previously issued interim or annual statements.
- Key risks: No approved products or revenue; substantial ongoing losses and potential need for dilutive financing; clinical and regulatory uncertainty; novel T-cell therapy safety and adoption risks; manufacturing-transfer, scale-up and donor-supply dependence; competition; reimbursement and pricing uncertainty; and intellectual-property and licensing risks. The company also reported federal and state net operating loss carryforwards subject to annual limitations following an ownership change.
- The filing reported effective disclosure controls and effective management assessment of internal control over financial reporting as of year-end. The auditor did not provide an internal-control attestation, consistent with the company’s emerging-growth-company exemption.
Most important facts for investors to verify
- Whether ATA129 Phase 3 trials began on schedule, enrolled adequately and produced results supporting regulatory submissions.
- Whether manufacturing assays, comparability assessments and supply capacity met FDA expectations, and the cost and timing of the Thousand Oaks facility.
- Actual cash burn and runway relative to management’s estimate through the first quarter of 2019, including any financing, dilution or changes to development plans.
- Updated safety and efficacy results for ATA129, ATA230 and other pipeline programs, distinguishing preliminary or historical comparisons from controlled prospective evidence.
- The financial-statement notes and subsequent filings for the $3.3 million stock-compensation adjustment, lease obligations, licensing milestones and any material changes to controls or risk disclosures.