Wave Life Sciences, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Wave is a clinical-stage genetic medicines company developing stereopure oligonucleotide therapeutics. It had no product sales; reported revenue came from collaborations. Unless stated otherwise, figures below are in millions of U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $3.45 | $2.93 | $10.64 | $13.58 |
| Research and development expense | $28.28 | $44.59 | $100.91 | $126.30 |
| General and administrative expense | $9.59 | $12.52 | $32.79 | $35.06 |
| Operating loss | $(34.42) | $(54.18) | $(123.06) | $(147.78) |
| Net loss | $(33.10) | $(50.73) | $(121.12) | $(136.87) |
| Loss per ordinary share, basic and diluted | $(0.86) | $(1.48) | $(3.36) | $(4.06) |
| Operating cash flow | Not stated quarterly | $(84.57) | $(126.99) |
- At September 30, cash and cash equivalents were $216.36 million, versus $147.16 million at December 31, 2019. Restricted cash was an additional $3.65 million.
- Current assets were $258.43 million and current liabilities $109.66 million, implying working capital of approximately $148.77 million. Total liabilities were $193.95 million, including $142.48 million of deferred revenue and approximately $30.17 million of operating lease liabilities. The filing does not report borrowing debt.
- For the first nine months, cash used in investing was $0.78 million; financing provided $154.52 million. Cash, cash equivalents and restricted cash increased $69.21 million.
- Accumulated deficit was $654.48 million. No income tax provision was recorded; a full valuation allowance was maintained.
Material changes versus prior periods
- Q3 revenue increased $0.52 million year over year, reflecting higher Takeda collaboration research revenue. Nine-month revenue fell $2.95 million, mainly because Pfizer collaboration research revenue declined as its research term ended in May 2020.
- Operating expenses fell $19.24 million in Q3 and $27.67 million year to date. R&D spending declined as the discontinued suvodirsen DMD program and February 2020 workforce reduction lowered costs; spending on Huntington’s disease and ALS/FTD programs increased.
- Despite lower operating expenses, nine-month total other income declined $8.97 million year over year, primarily due to reduced dividend income and refundable tax credits. Net loss nevertheless narrowed by $15.75 million.
- Wave raised estimated net proceeds of $93.7 million from a September public offering and $59.9 million through its at-the-market program during the first nine months. Ordinary shares outstanding rose to 48.77 million from 34.34 million at year-end 2019, a substantial increase in share count.
Outlook, management commentary and risks
- Management expected cash and cash equivalents, together with expected and committed cash from existing collaborations, to fund operations for at least the next 12 months. This estimate depends on assumptions that may prove incorrect; management said spending or capital needs could be higher than expected and additional financing may not be available on acceptable terms.
- Management expects significant R&D and operating losses to continue and no product revenue for the foreseeable future. Takeda’s collaboration includes $60 million of committed research and preclinical funding and potential future option, milestone and royalty payments; timing and amounts of potential contingent payments are uncertain.
- At the time of the filing, Wave expected to submit clinical trial applications for WVE-003 (Huntington’s disease) and WVE-004 (ALS/FTD) in Q4 2020, and WVE-N531 (DMD) in Q1 2021. It expected PRECISION-HD1/HD2 cohort data and initial open-label extension data in Q1 2021. These are forward-looking plans, not reported outcomes.
- FDA restrictions affected U.S. progression of the multiple-ascending-dose portions of PRECISION-HD1/HD2: additional preclinical work and FDA review were required. U.S. dose escalation in PRECISION-HD1 also depended on FDA review of additional monitoring plans.
- COVID-19 had affected and could continue to affect early discovery work, clinical trials, site activities, manufacturing and supply chains. Wave reported continuity measures and resumed some onsite lab and manufacturing activity from early June, but the duration and full impact remained uncertain.
- A February 2020 cost-reduction plan followed discontinuation of suvodirsen and reduced the workforce by approximately 22%. Wave recorded a one-time restructuring charge of about $3.4 million; $0.3 million remained payable through March 2021.
- The filing reported no material legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether cash burn, collaboration funding and subsequent financing support the stated minimum 12-month liquidity outlook.
- Clinical-trial progress, FDA requirements and whether the stated WVE-003, WVE-004, WVE-N531 and PRECISION-HD timelines were achieved.
- Future collaboration revenue and cash receipts, especially following the end of Pfizer’s research term and as Takeda-funded work and options progress.
- How continued equity issuance may affect share count and existing shareholders, and the company’s remaining financing capacity.
- The extent to which COVID-19, clinical results, regulatory review, manufacturing execution and access to capital could alter planned spending and development programs.