Wave Life Sciences Ltd. — 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. The filing also reports unaudited fourth-quarter results. Wave is a clinical-stage biotechnology company developing stereopure oligonucleotide medicines; it had no product sales.
Financial performance and position
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $3.7 million | $1.5 million |
| Research and development expense | $79.3 million | $40.8 million |
| General and administrative expense | $27.0 million | $16.0 million |
| Operating loss | $102.6 million | $55.3 million |
| Net loss | $102.0 million | $55.4 million |
| Net loss per share | $3.85 | $2.43 |
| Cash used in operating activities | $83.7 million | $31.9 million |
| Cash used in investing activities | $18.9 million | $8.2 million |
Revenue came from the Pfizer research collaboration, not product sales. Revenue increased by $2.2 million, reflecting a full year of activity for three nominated targets and a milestone. Operating expenses rose $49.5 million, driven by clinical and preclinical programs, platform research, staffing and facilities. Net loss widened $46.6 million.
Fourth-quarter 2017 revenue was $1.7 million, operating expenses were $32.3 million and net loss was $30.2 million, compared with $0.7 million, $19.2 million and $18.5 million, respectively, in fourth-quarter 2016. Product gross margins are not applicable because Wave had no product revenue.
At year-end, cash and cash equivalents were $142.5 million, restricted cash was $3.6 million, working capital was $130.9 million and total assets were $181.8 million. Cash and cash equivalents declined $7.8 million during 2017. Total liabilities were $34.2 million; conventional debt is not reported as material, and the capital lease obligation was $16,000. Operating lease commitments totaled $54.6 million. Management said existing cash and cash equivalents were expected to fund operations for at least 12 months, while warning that estimates could prove incorrect and additional financing may be needed.
Business progress, outlook and risks
- Wave initiated Phase 1b/2a trials of WVE-120101 and WVE-120102 for Huntington’s disease and a Phase 1 trial of WVE-210201 for Duchenne muscular dystrophy (DMD). Management expected Huntington’s top-line data in the first half of 2019 and DMD Phase 1 safety data in the third quarter of 2018.
- Management expected to begin a C9ORF72-targeting ALS/frontotemporal dementia trial in the fourth quarter of 2018 and a DMD exon 53 trial in the first quarter of 2019. These are forward-looking plans, not assured outcomes.
- In February 2018, after year-end, Wave signed a Takeda collaboration, subject to customary closing conditions. Terms included a proposed $110 million upfront payment, a proposed $60 million equity investment, and $60 million of research funding over four years for preclinical CNS programs. Takeda also received options on specified CNS programs; therefore, these amounts and arrangements were not year-end cash or completed transactions.
- The Pfizer collaboration covered up to five hepatic targets. Pfizer had nominated three and, under a November 2017 amendment, could nominate two more by May 2018. Wave reported $8.3 million of deferred revenue under the collaboration at year-end. The company anticipated that adoption of ASC 606 could change the timing and pattern of collaboration revenue recognition; the impact was not yet quantified.
- Key risks include clinical failure or adverse safety findings, uncertain translation of preclinical results to humans, regulatory and patient-enrollment delays, manufacturing scale-up and supply risks, dependence on collaborators, need for additional capital, and patent or competition challenges. Wave reported no material legal proceedings. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal control effectiveness because Wave was an emerging growth company.
Important facts for investors to verify
- Clinical-trial enrollment, safety, target engagement and scheduled readouts, particularly for the Huntington’s and DMD programs.
- Whether the Takeda collaboration and equity investment closed, and the timing and conditions of any payments or program options.
- Cash burn, available liquidity and financing needs relative to management’s runway estimate and planned development spending.
- Pfizer target nominations, milestone conditions and the realized effect of ASC 606 on revenue and deferred revenue.
- Manufacturing readiness at the Lexington facility, lease obligations, and the ability to produce consistent clinical supply.