Business context and reporting period
This is resTORbio, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020—not an Adicet Bio standalone filing. resTORbio was a clinical-stage biopharmaceutical company developing RTB101. It had no product revenue and said future operations were highly dependent on completing its proposed merger with Adicet Bio. The merger was announced April 28, 2020, remained subject to closing conditions and shareholder approval, and was expected to close in the second half of 2020.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.8 million | $16.6 million | $6.6 million | $25.4 million |
| General and administrative expense | $3.9 million | $2.6 million | $6.4 million | $5.5 million |
| Net loss | $5.6 million | $18.3 million | $12.6 million | $29.4 million |
| Net loss per share, basic and diluted | $0.15 | $0.51 | $0.35 | $0.91 |
| Operating cash used | Not separately stated | Not separately stated | $20.4 million | $26.2 million |
At June 30, 2020, cash and cash equivalents were $70.9 million, with no marketable securities; total current assets were $73.7 million and total current liabilities were $3.6 million. Total liabilities were $3.6 million, and the filing reports no debt. Stockholders’ equity was $70.7 million and accumulated deficit was $166.8 million. No gross or operating margins are meaningful given the absence of revenue.
Cash, cash equivalents and restricted cash increased $37.1 million in the first half, principally because $57.5 million of marketable securities matured; operating activities used $20.4 million. Financing activities used $2,000, with no equity offering proceeds in the period. The filing does not provide a specific cash runway estimate.
Material changes versus prior comparable periods
- Net loss narrowed year over year, primarily reflecting the sharp reduction in R&D spending after resTORbio discontinued RTB101 development for clinically symptomatic respiratory illness and terminated its Parkinson’s disease study.
- Q2 R&D expense fell to $1.8 million from $16.6 million; first-half R&D fell to $6.6 million from $25.4 million. The 2019 comparison included a $2.5 million Novartis milestone payment following initiation of a Phase 3 trial.
- G&A increased to $3.9 million in Q2 from $2.6 million, including $1.8 million of merger-related professional fees. First-half G&A rose to $6.4 million from $5.5 million and included $2.0 million of merger-related fees.
- First-half operating cash use declined from $26.2 million to $20.4 million. The balance-sheet decline in accounts payable and accrued liabilities reflected reduced clinical activity.
- In 2019, resTORbio raised $50.4 million net through a public offering and at-the-market sales; there were no comparable financing proceeds in the first half of 2020.
Outlook, risks and unusual items
- RTB101’s Phase 3 PROTECTOR 1 study did not meet its primary endpoint; development for that respiratory-illness indication was stopped. The Parkinson’s disease study was terminated in May 2020. The company said no other RTB101 clinical studies were ongoing apart from COVID-19 studies.
- A randomized COVID-19 nursing-home trial began in May, targeting approximately 550 adults aged 65 or older. As of July 21, 15 participants had been randomized. A separate National Institute on Aging grant announced July 28 is expected to fully fund a roughly 60-subject COVID-19 post-exposure prophylaxis feasibility study, anticipated to start in the second half of 2020.
- Management expected R&D expenses to decrease substantially for the foreseeable future, while G&A could rise due to the proposed merger and public-company costs. No revenue or earnings guidance was provided.
- The proposed merger carried execution and timing risks. If it failed, resTORbio could owe Adicet a $6.1 million termination fee in specified circumstances, in addition to transaction costs. Each resTORbio share was to receive one contingent value right (CVR); any payment depended on qualifying net proceeds from third-party commercialization of RTB101 for a COVID-19 indication, and the CVRs could expire without value.
- Six merger-related lawsuits were described in the legal proceedings section; they alleged omissions or misrepresentations in merger disclosures and sought, among other relief, to enjoin the merger. The company said it believed the claims were without merit and planned to seek dismissal. A seventh suit had been dismissed.
- COVID-19 had postponed or disrupted clinical activity, including a trial cohort in New Zealand that was subsequently terminated. The company warned that further effects on trial enrollment, operations, vendors and partners were uncertain.
- A 2019 restructuring reduced headcount by eight employees, with two additional reductions in January 2020. All related charges had been paid by June 30; no further restructuring costs were expected. As of July 29, the company had 10 full-time employees.
- Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the merger closed, the final merger terms and exchange ratio, and the status and outcome of the related lawsuits.
- Whether resTORbio’s reported cash balance and expected expenses provide sufficient resources through the merger or any alternative transaction; the filing gives no explicit runway estimate.
- Enrollment, timing and results of the COVID-19 trials, and whether any findings lead to a viable commercial partner or CVR proceeds.
- The final terms and conditions of the CVR agreement, including applicable deadlines, deductions and commercialization requirements.
- Whether discontinued programs, reduced staffing, transaction costs or COVID-19 disruptions create additional costs or liabilities not quantified in this filing.