Shattuck Labs, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Shattuck is a clinical-stage biopharmaceutical company developing ARC and GADLEN biologic platforms. It has no approved products and generates no product-sales revenue.
Financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $0.2 million | $1.9 million | $0.3 million | $(0.1) million |
| Research and development | $18.9 million | $15.1 million | $61.0 million | $40.4 million |
| General and administrative | $6.6 million | $4.3 million | $16.3 million | $14.1 million |
| Net loss | $(24.6) million | $(17.4) million | $(76.5) million | $(52.8) million |
| Basic and diluted loss per share | $(0.58) | $(0.41) | $(1.81) | $(1.26) |
| Net cash used in operating activities | — | $(70.7) million | $(38.4) million |
At September 30, 2022, cash and cash equivalents were $39.8 million and investments were $145.4 million, totaling $185.1 million. Total assets were $222.9 million, total liabilities $23.5 million, and stockholders’ equity $199.4 million. The filing reports no debt balance. The company had an accumulated deficit of $193.6 million. Gross or operating margins are not meaningful for this development-stage business with minimal collaboration revenue and no product sales.
Changes and notable items
- Q3 net loss widened 41.5% year over year; nine-month net loss increased 44.9%. Nine-month R&D expense rose 51.2%, principally from manufacturing, personnel and capability expansion, laboratory and facilities, and clinical costs.
- Takeda’s collaboration had been terminated in November 2021. A new third-party collaboration began in Q2 2022; Shattuck recognized $0.2 million in Q3 and $0.3 million year to date, and expects less than $1.0 million of total revenue from it.
- Cash and investments declined from $268.8 million at December 31, 2021 to $185.1 million at September 30, 2022. Nine-month capital expenditures were $10.9 million, primarily for in-house process development, manufacturing, and laboratory capabilities.
- The company adopted lease accounting standard ASC 842 in January 2022, recognizing operating lease assets and liabilities. Operating lease liabilities totaled $5.1 million at quarter-end.
Outlook, risks and contingencies
- Management expects continued operating losses and cash outflows, with expenses anticipated to increase as clinical development and manufacturing work advances. It stated cash and investments should fund projected operations into the second half of 2024; the notes separately say funding is sufficient for at least the next 12 months.
- Clinical programs include SL-172154 in Phase 1 trials for ovarian cancer and certain hematologic malignancies, and SL-279252 in a Phase 1 trial for advanced solid tumors. Management said it had not planned additional clinical-trial expense for SL-279252 beyond its ongoing Phase 1 study; advancing it later could substantially increase costs and capital needs.
- In July 2022, Shattuck established a $75 million at-the-market equity facility; no shares had been sold under it by September 30. Future financing may dilute shareholders or impose restrictions, and funding may not be available on acceptable terms.
- COVID-19-related manufacturing, raw-material, patient-enrollment, treatment, and vendor delays may continue. The company also cited inflation, supply-chain challenges, rising interest rates, geopolitical uncertainty, clinical and regulatory uncertainty, and dependence on third-party manufacturers and research organizations.
- A putative securities class action alleged misleading omissions concerning clinical-trial results and the Takeda collaboration. A $1.4 million settlement in principle was reached November 2, 2022, subject to definitive documentation, stockholder notice, and court approval; the amount was accrued at September 30.
- Potential Heat license payments include up to $20.6 million in development, regulatory, and commercial milestones, plus specified sublicense payments and low-single-digit royalties; no milestone liability was recorded because achievement was not considered probable.
Investor facts to verify
- Whether the projected cash runway into the second half of 2024 remains achievable given operating cash use, trial plans, manufacturing spending, and the different runway statements in the filing.
- Clinical-trial progress, safety and efficacy data, enrollment, and any resulting changes to development timelines or spending for SL-172154 and SL-279252.
- Terms, approval, and payment status of the $1.4 million litigation settlement, and any subsequent developments.
- Future use of the $75 million ATM facility and the associated potential share dilution.
- Extent of ongoing collaboration revenue and reliance on third-party manufacturing, CROs, and suppliers.