Atara Biotherapeutics, Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Unaudited results; balance-sheet comparisons are to December 31, 2017. Atara is a clinical-stage T-cell immunotherapy company and has not generated revenue.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $43.4 million | $20.6 million | $105.2 million | $56.4 million |
| General and administrative expense | $16.9 million | $11.1 million | $50.1 million | $29.3 million |
| Net loss | $58.4 million | $31.1 million | $150.7 million | $84.2 million |
| Net loss per share, basic and diluted | $1.29 | $1.02 | $3.49 | $2.84 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $122.4 million | $62.6 million |
Gross margin is not meaningful because the company reported no revenue. Q3 total operating expenses rose 90% year over year; nine-month expenses rose 81%. Management attributed the increases principally to expanded clinical and manufacturing activity, higher headcount, professional services, and facility costs.
At September 30, 2018, cash and cash equivalents were $66.0 million and short-term investments were $298.5 million, totaling $364.5 million. Total assets were $442.9 million; total liabilities were $39.9 million, including $12.9 million of long-term liabilities. The filing reports lease-related financing obligations, but no conventional borrowings. Cash, cash equivalents, and restricted cash totaled $67.4 million. Management expects available cash, cash equivalents, and short-term investments to fund planned operations to mid-2020.
Cash used in investing activities was $242.4 million for the first nine months, including $31.8 million of property and equipment purchases and net purchases of investments. Financing activities provided $351.5 million, including $293.3 million net proceeds from January and March public offerings and $47.6 million net proceeds from the ATM facility. The company ended September with 45.645 million shares outstanding; 45.648 million were outstanding as of October 31.
Material changes and business developments
- Net loss increased by $27.3 million in Q3 and $66.5 million for the first nine months versus 2017, reflecting substantially higher operating expenses, partly offset by increased interest and other income.
- R&D expense increased by $22.8 million in Q3 and $48.8 million for the first nine months. Tabelecleucel costs rose with Phase 3 trial and manufacturing work; ATA188, ATA190, and other program spending also increased.
- Property and equipment, net, increased to $68.3 million from $44.1 million, mainly reflecting development of the Thousand Oaks manufacturing facility. At September 30, $10.3 million of landlord-funded construction costs was recorded as a build-to-suit asset with a corresponding financing obligation.
- The company completed two underwritten stock offerings in early 2018 and sold shares through its ATM facility, raising substantial equity capital and increasing shares outstanding.
Outlook, programs, and risks
- Management expects research and development and general and administrative spending to continue increasing. The company anticipates ongoing losses and expects it will require additional capital; it has no committed external funding source.
- Tabelecleucel is in two Phase 3 trials for EBV-positive post-transplant lymphoproliferative disorder (PTLD). The company anticipated regulatory discussions and initial trial information in the first half of 2019 and planned to submit an EU conditional marketing authorization application in the second half of 2019. These are plans, not assured outcomes.
- ATA188 is in a Phase 1 multiple-sclerosis trial, with initial results in progressive MS expected in the first half of 2019. The company planned to initiate a randomized ATA190 study in progressive MS in 2019.
- The NPC combination study of tabelecleucel and pembrolizumab was initiated in Q4 2018. The Thousand Oaks ATOM facility was open for development work; commissioning and qualification for clinical manufacturing were expected to support production in 2019.
- Key uncertainties include clinical-trial outcomes and enrollment, regulatory requirements, manufacturing comparability and scale-up, third-party supplier and CRO performance, market acceptance and reimbursement, intellectual-property disputes, and the need for future financing. Product candidates may fail or be delayed, and the company may not achieve profitability.
- Potential future payments under licensing arrangements include up to $33.0 million in MSK regulatory and sales milestones, plus royalties and other contingent obligations. No milestone or royalty obligations were outstanding at September 30, 2018. Future minimum operating, capital, and finance lease payments totaled $19.4 million.
- The company reported no material legal proceedings. Management concluded disclosure controls were effective as of September 30, 2018 and reported no material change in internal control over financial reporting during the nine-month period.
Important facts for investors to verify
- Whether clinical enrollment, efficacy, safety, and manufacturing-comparability results support the planned tabelecleucel regulatory path and timelines.
- Whether the stated mid-2020 cash runway remains achievable as trial, manufacturing, facility, and commercialization-preparation spending increases.
- Future financing needs, potential dilution, and remaining availability under the ATM facility, which was $6.1 million at September 30, 2018.
- Progress in commissioning the ATOM facility and securing reliable clinical and potential commercial supply.
- Potential effects of lease accounting adoption planned for January 1, 2019, and contingent milestone, royalty, and other contractual commitments.