Nautilus Biotechnology, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results; amounts below are in U.S. dollars unless stated otherwise.
Business context and reporting period
Nautilus is a development-stage life sciences company developing a proteomics platform comprising instruments, consumables and software. It has no products available for commercial sale and has generated no revenue. The platform remains under development and requires further research, technical validation and commercialization work.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $8.9 million | $6.4 million | $18.5 million | $11.2 million |
| General and administrative expense | $6.6 million | $4.3 million | $13.0 million | $7.9 million |
| Total operating expenses | $15.5 million | $10.7 million | $31.5 million | $19.1 million |
| Net loss | $14.7 million | $10.7 million | $30.5 million | $19.1 million |
| Net loss per share, basic and diluted | $0.12 | $0.19 | $0.24 | $0.43 |
| Net cash used in operating activities | Not separately stated for quarter | $25.9 million | $14.5 million |
Liquidity and capital: At June 30, cash and cash equivalents were $210.4 million, short-term investments $89.0 million and long-term investments $35.6 million. Cash, cash equivalents and short-term investments totaled $299.3 million; cash, cash equivalents and all investments totaled $334.9 million. Total assets were $371.7 million, total liabilities $34.1 million and stockholders’ equity $337.6 million. Liabilities included $29.6 million of operating lease liabilities; the filing reports no borrowings outstanding.
Six-month investing cash flow was $50.3 million provided, primarily reflecting $105.6 million of investment maturities, offset by $54.2 million of investment purchases and $1.1 million of property and equipment purchases. Financing cash flow was $0.3 million provided. Cash, cash equivalents and restricted cash increased $24.7 million to $211.2 million; investment activity significantly affects this cash-flow presentation.
No operating margin is presented because the company had no revenue. The filing does not provide a meaningful gross margin or profitability measure.
Material changes versus the prior comparable period
- Q2 operating expenses increased 45% year over year; R&D rose 39% and G&A rose 53%. Q2 net loss increased 37% to $14.7 million.
- For the first half, operating expenses increased 65% and net loss increased 59%. Management attributed higher spending mainly to personnel and stock-based compensation, development services, facilities and insurance.
- First-half operating cash use increased to $25.9 million from $14.5 million, while 2021 financing cash flow included substantial Business Combination and PIPE proceeds; 2022 financing cash flow did not.
- Compared with December 31, 2021, cash and cash equivalents rose to $210.4 million from $185.6 million, while short-term investments declined to $89.0 million from $160.1 million and long-term investments rose to $35.6 million from $16.4 million. Total cash and investments fell to $334.9 million from $362.1 million.
Outlook, risks, contingencies and unusual items
- Management stated that existing cash, cash equivalents and short-term investments were expected to fund planned operating expenses and capital expenditures for at least the next 12 months following issuance of the statements. The company expects significant losses and negative operating cash flow to continue and may need additional financing.
- Commercialization plan: collaboration and validation first; meaningful early-access engagements and associated revenue were anticipated to begin in early 2024, followed by a broader launch expected in mid-2024. These are forward-looking expectations, not assurances; the company cautioned that scientific, technical and commercial delays are possible.
- Key execution risks include platform performance and validation, customer adoption, manufacturing scale-up, reliance on third-party collaborators and single-source suppliers, and the ability to establish commercial capabilities. The filing notes prior supply disruptions, including extended chip lead times and reduced reagent availability.
- COVID-19, geopolitical conflict in Eastern Europe, inflation, rising interest rates and market volatility could disrupt operations, raise costs or impair access to capital. A hypothetical 100-basis-point interest-rate change would have changed the fair value of marketable securities by $1.1 million; the effect would be realized only if securities were sold before maturity.
- Open purchase commitments were $2.0 million, expected to be received through the next 12 months. Operating lease obligations totaled $43.3 million in future minimum payments, or $29.6 million after imputed interest. Management reported no pending legal proceedings expected to have a material adverse effect.
- Unrealized losses on available-for-sale securities were $0.6 million for the first half and were recorded in other comprehensive loss. No investment impairment charge was recorded. Disclosure controls were assessed as effective at a reasonable-assurance level; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether platform development and validation milestones support the stated early-2024 early-access and mid-2024 broader-launch expectations.
- Actual cash burn, investment balances and runway as development, facilities and commercialization spending increase.
- Progress in qualifying alternative suppliers and establishing manufacturing capacity for instruments, reagents and consumables.
- Evidence of customer collaborations, adoption and eventual revenue, given the company had no revenue through Q2 2022.
- Potential dilution: 11.7 million stock options were outstanding at June 30, 2022, alongside additional shares reserved under equity plans.