Atara Biotherapeutics, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; balance-sheet amounts are compared with December 31, 2014. The company is a clinical-stage biopharmaceutical developer and reported no revenue. The 2014 comparative period reflects combined results before the March 2014 recapitalization and is not fully equivalent in corporate presentation.
Financial performance and liquidity
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $5.8 million | $3.0 million |
| General and administrative expense | $3.5 million | $4.1 million |
| Total operating expenses | $9.3 million | $7.1 million |
| Net loss | $9.2 million | $7.0 million |
| Basic and diluted loss per share | $0.42 | $5.58 |
| Net cash used in operating activities | $6.6 million | $2.9 million |
- At March 31, cash and cash equivalents were $71.3 million and short-term available-for-sale investments were $95.4 million, totaling $166.7 million, up from $104.1 million at year-end 2014. Working capital was $166.2 million.
- Q1 financing provided $69.5 million net from the February follow-on stock offering. Investing activities used $13.4 million net, mainly reflecting purchases of short-term investments and maturities.
- Total liabilities were $3.7 million; the filing reports no outstanding debt. No gross margin is presented because the company had no revenue.
- Accumulated deficit was $50.0 million. Management expected cash on hand to fund the current operating plan for at least 12 months; elsewhere, it projected existing cash, cash equivalents and investments would fund projected operating requirements into mid-2018. These are management estimates, not a guarantee.
Material changes and business developments
- R&D expense rose $2.8 million year over year. PINTA 745, ATA 842, employee and overhead costs, and T-cell program costs increased; STM 434 expense declined as prior-year manufacturing costs were higher.
- G&A expense declined $0.6 million, principally due to lower stock-based compensation, partly offset by higher payroll and public-company costs.
- The February follow-on offering sold 4.15 million shares at $18 per share for approximately $69.5 million net proceeds. Common shares outstanding were 23.9 million at March 31 and 24.36 million at April 30.
- Cash used in operations increased $3.7 million year over year, reflecting higher net loss, lower stock-based compensation add-backs and increased cash use from working-capital changes.
Outlook, risks and contingencies
- Lead candidates were PINTA 745, in Phase 2 for protein-energy wasting in end-stage renal disease, and STM 434, in Phase 1 for ovarian cancer and other solid tumors. Five other candidates were in preclinical development. The company planned continued development and manufacturing work and anticipated increasing R&D spending.
- The company had never generated revenue and expected losses for the foreseeable future. It stated it would need additional capital to complete development and support potential commercialization; no external funding source was committed.
- Beginning May 15, 2015, vested restricted stock units were expected to settle quarterly. Associated payroll taxes could exceed $10 million in 2015 depending on the stock price and settlement amounts.
- Potential Amgen obligations include up to $86 million in development and regulatory milestones, future commercial milestone payments, and mid-single-digit royalties. No amounts were due at quarter-end. The MSK option could entail an additional $4.5 million upfront payment and up to $33 million in specified milestone/license payments if exercised, plus royalties.
- Management disclosed a prior PINTA 745 trial randomization and inventory-distribution error that unblinded the first six patients and led to a trial restart. It also disclosed cracked vials in certain STM 434 lots in April 2014 and an amendment to the STM 434 clinical plan following findings from a related preclinical study.
- Key risks include clinical and regulatory failure or delay, reliance on single-source contract manufacturers and CROs, manufacturing comparability and supply constraints, competition, dependence on Amgen-licensed intellectual property, future financing and dilution, and uncertain reimbursement. Management reported disclosure controls effective at March 31, 2015, no material change in internal control during the quarter, and no material litigation.
Important facts for investors to verify
- Clinical-trial enrollment, execution and results for PINTA 745 and STM 434, including the status and implications of the PINTA 745 restart.
- Cash burn, investment liquidity, the assumptions behind the stated mid-2018 operating runway, and potential RSU-related tax payments.
- Manufacturing supply, quality and comparability for clinical candidates, including any resolution of the disclosed vial issue.
- Potential milestone and royalty obligations under the Amgen licenses and the cost and strategic decision regarding the MSK option.
- Future financing needs, equity dilution and the progress of candidates toward regulatory approval and commercial viability.