Shattuck Labs, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet comparisons are with December 31, 2021. Shattuck is a clinical-stage biotechnology company developing ARC and GADLEN dual-sided fusion-protein platforms. Its clinical-stage candidates are SL-172154 and SL-279252; it has no approved products and no product-sale revenue.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Collaboration revenue | $0 | $2.27 million |
| Research and development expense | $19.19 million | $10.34 million |
| General and administrative expense | $4.98 million | $4.36 million |
| Operating loss | $24.17 million | $12.42 million |
| Net loss | $24.53 million | $11.81 million |
| Net loss per share, basic and diluted | $0.58 | $0.28 |
| Net cash used in operating activities | $26.28 million | $11.07 million |
| Cash and cash equivalents, March 31 | $50.74 million | $92.27 million at Dec. 31, 2021 |
| Investments, March 31 | $188.48 million | $176.54 million at Dec. 31, 2021 |
At March 31, cash, cash equivalents and investments totaled $239.2 million; current assets were $255.0 million and current liabilities $16.8 million. Total liabilities were $21.6 million, including $5.3 million of operating lease liabilities. The filing reports no borrowings or other debt. Accumulated deficit was $141.6 million. The company reported no income-tax benefit, citing a full valuation allowance on deferred tax assets.
Operating expenses were $24.17 million versus $14.69 million a year earlier. The company had no revenue in the quarter, so a revenue-based margin is not meaningful; the filing does not present a gross margin. Investing cash outflow was $15.38 million, primarily reflecting net investment purchases and $2.49 million of property and equipment purchases. Financing cash inflow was $0.13 million. Cash and cash equivalents declined by $41.53 million during the quarter.
Material changes and management commentary
- Revenue fell to zero after the Takeda collaboration was mutually terminated in November 2021; the remaining deferred revenue had been recognized in Q4 2021. The termination ended future Takeda milestones, royalties, licensing options and rights of first negotiation.
- R&D expense increased 85.6%, driven primarily by $5.4 million more in manufacturing-related costs, $1.8 million more in personnel costs, and $1.0 million more in nonclinical pipeline costs. R&D expense by program included $8.18 million for SL-172154 and $0.73 million for SL-279252.
- Management expects significant expenses and operating losses to continue and R&D spending to increase as clinical trials, manufacturing, process development and pipeline work advance. It planned to nominate a third clinical candidate from its preclinical pipeline in 2022.
- Management stated that March 31 liquidity was sufficient to fund projected operations into the second half of 2024. The notes separately state that cash and investments were expected to fund operations for at least the next 12 months.
- The company adopted lease accounting standard ASC 842 on January 1, 2022, recognizing operating lease right-of-use assets and liabilities; prior-period amounts were not adjusted.
Outlook, risks and contingencies
Management does not expect significant product revenue unless and until candidates complete development and receive regulatory and marketing approval, which it expects would take several years. It may need additional capital through equity, debt, collaborations or licensing; funding may not be available on acceptable terms or at all. Failure to obtain funding could require delaying or curtailing operations.
COVID-19 had disrupted manufacturing and raw-material sourcing, clinical-trial enrollment and treatment, vendors, laboratories and nonclinical work. The company said future impact was difficult to predict and could increase costs or delay development. It also depends on a limited number of contract manufacturers, research organizations and service providers. Other risks include clinical and regulatory uncertainty, product manufacturing and supply, intellectual-property protection, competition and retention of key personnel.
Two putative class-action lawsuits filed in January and February 2022 allege false or misleading statements concerning the Takeda collaboration. Plaintiffs seek unspecified damages and fees. The company and named officers and directors deny wrongdoing and intend to defend the cases. Separately, the Heat license agreement may require up to $20.6 million in development, regulatory and commercial milestones, plus certain sublicense payments and low-single-digit royalties; no liability was recorded because milestone achievement was not considered probable.
Important facts for investors to verify
- Reconcile the stated runway disclosures: “at least the next twelve months” in the notes versus “into the second half of 2024” in MD&A, and monitor cash burn against both estimates.
- Track clinical progress, safety and efficacy data, enrollment, and any timing changes for SL-172154 and SL-279252, as well as the planned third-candidate nomination.
- Assess whether manufacturing capacity, raw-material availability and third-party vendors can support planned trials, particularly amid COVID-related disruptions.
- Monitor the class-action litigation and any financial, operational or disclosure developments arising from the terminated Takeda collaboration.
- Review future financing needs, potential dilution or debt terms, and the progress and potential obligations tied to the Heat license.