Shattuck Labs, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; balance sheet compared with December 31, 2020. Shattuck is a clinical-stage biotechnology company developing ARC and GADLEN biologics. It has no approved products and has generated no product-sales revenue.
Financial performance and position
- Revenue: Collaboration revenue was $2.27 million, down 23.7% from $2.98 million in Q1 2020. All revenue to date came from the Takeda collaboration.
- Expenses and earnings: Research and development expense rose 27.0% to $10.34 million; general and administrative expense increased 172.3% to $4.36 million. Operating loss was $12.42 million, compared with $6.76 million. Net loss widened 80.2% to $11.81 million from $6.55 million. Basic and diluted loss per share was $0.28, versus $0.86 in Q1 2020; weighted-average shares increased substantially following the 2020 IPO.
- Margins: Gross margin is not meaningful because the filing reports collaboration revenue and operating expenses, not product sales or a comparable cost-of-sales measure.
- Cash flow: Operating cash use was $11.07 million, versus $10.45 million. Investing cash use was $62.13 million, primarily reflecting purchases of short-term investments; financing provided $0.03 million. Cash and cash equivalents decreased $73.16 million to $84.73 million.
- Liquidity and debt: Cash, cash equivalents and short-term investments totaled $321.18 million at quarter-end, down from $335.45 million at year-end 2020. Management expected these resources to fund projected operations through at least the end of 2024. Total liabilities were $38.19 million, including deferred revenue; the filing reports no conventional debt balance. Accumulated deficit was $83.91 million.
- Other items: Unrealized losses on short-term investments were $0.60 million. Property and equipment increased to $5.41 million from $3.00 million.
Changes versus Q1 2020 and prior year-end
- Revenue fell by $0.71 million, mainly due to reduced manufacturing and process-development work on SL-279252.
- R&D increased by $2.20 million, reflecting increased headcount and manufacturing/clinical-development capabilities, higher laboratory and facility costs, and clinical costs, partly offset by lower manufacturing costs.
- G&A rose by $2.76 million, mainly from higher personnel costs and costs of operating as a public company.
- Net loss increased by $5.26 million. Compared with December 31, 2020, cash and cash equivalents declined, while short-term investments increased; the filing attributes much of the cash movement to investment purchases and maturities rather than operating cash use.
Outlook, risks and contingencies
- Management expects significant ongoing expenses and operating losses, including increased R&D, clinical, manufacturing, staffing and public-company costs. Additional financing may be needed; availability and terms are uncertain.
- Expected development milestones included initial dose-escalation data for SL-172154 in ovarian cancer in the second half of 2021, SL-279252 in the second half of 2021, and SL-172154 in cutaneous squamous cell or head and neck cancer in the first half of 2022. The company anticipated IND filings for certain hematologic malignancy trials in the second half of 2021 and nomination of another ARC candidate in the second half of 2021.
- COVID-19 had disrupted, and could continue to delay, manufacturing and raw-material supply, clinical-trial enrollment and treatment, laboratory work, and third-party services. The potential future impact was not quantifiable.
- Takeda collaboration terms include potential option and milestone payments, but these depend on Takeda exercising options and future development outcomes. Takeda had paid approximately $79.6 million through March 31, 2021; additional contingent payments and royalties could apply under the agreement.
- A Heat Biologics license may require up to $20.6 million in development, regulatory and commercial milestones, plus certain sublicense payments and low-single-digit royalties. No milestone liability was recorded because achievement was not considered probable.
- The company disclosed dependence on a single contract manufacturer and a limited number of CROs and other service providers. It reported no material legal proceedings and no material changes to previously disclosed risk factors.
- In January 2021, Shattuck signed a lease for a new Austin office, with approximately $1.8 million in estimated rent over the lease term; commencement was expected in Q2 2021.
Investor facts to verify
- Whether clinical-trial data and IND milestones arrive on the stated timelines, and how COVID-19 or supply constraints affect them.
- Whether Takeda exercises its licensing options and whether collaboration revenue continues at a sustainable level.
- Quarterly cash use and investment balances relative to management’s end-of-2024 runway estimate, including future financing needs and potential dilution.
- Changes in R&D and public-company costs, and progress in reducing reliance on a single manufacturer and limited clinical-service providers.
- Potential future obligations under the Heat license and the new office lease.