Wave Life Sciences Ltd. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts are in U.S. dollars; financial figures below are in millions unless noted. Wave is a clinical-stage genetic medicines company and reported no product revenue.
Financial performance and liquidity
- Q2 revenue: $0.4 million, versus $2.8 million in Q2 2021. Revenue was primarily from the Takeda collaboration.
- Q2 net loss: $41.3 million, compared with $38.8 million; basic and diluted loss per share was $0.62 versus $0.78. Operating expenses were $42.5 million, nearly flat year over year; R&D was $29.7 million and G&A was $12.8 million.
- First-half results: Revenue was $2.1 million versus $2.8 million; net loss was $79.1 million versus $81.2 million. R&D expense declined to $57.2 million from $65.0 million, while G&A increased to $25.2 million from $21.0 million.
- Cash and liquidity: Cash, cash equivalents and short-term investments totaled $148.2 million at June 30; restricted cash was another $3.7 million. Management expected available cash and investments to fund operations for at least 12 months, subject to assumptions and potential spending changes.
- Cash flow, first half: Operating activities used $68.7 million, investing activities used $25.6 million, and financing activities provided $67.1 million. The financing inflow was primarily from the June equity and pre-funded warrant offering.
- Balance sheet: Total assets were $213.3 million, total liabilities $174.5 million, and shareholders’ equity $30.9 million. Liabilities included $112.7 million of deferred revenue and $39.5 million of operating lease liabilities; the filing presents no borrowings. Accumulated deficit was $884.6 million.
- Capital and dilution: The June offering generated approximately $65.5 million net proceeds. It included 25.5 million ordinary shares and pre-funded warrants for up to 7.1 million additional shares. Ordinary shares outstanding were 86.7 million at June 30 and 86.8 million on August 3.
- Margins: The filing does not present a gross-profit figure; revenue is collaboration revenue and is small relative to operating expenses. Conventional product gross-margin analysis is therefore not meaningful from the disclosed figures.
Material changes versus prior comparable periods
- Q2 net loss widened by $2.5 million year over year, despite total operating expenses being almost unchanged. Lower collaboration revenue and other income contributed to the change.
- First-half net loss narrowed by $2.1 million. Lower R&D spending, particularly on discontinued earlier Huntington’s disease programs, was partly offset by higher G&A, compensation-related costs and other research spending.
- Takeda revenue recognized was $0.3 million in Q2 and $1.9 million in the first half of 2022. The filing attributes lower revenue to the discontinued Category 2 collaboration component and changes in expected future services. Deferred revenue was $112.7 million at June 30.
- Operating cash use increased to $68.7 million from $53.8 million in the first half of 2021; the prior-year period included a $30.0 million decrease in accounts receivable.
Outlook, programs and risks
- Management expects significant R&D and operating losses to continue and does not expect product sales revenue in the foreseeable future. Additional financing may be needed; access to acceptable financing is not assured. Equity or warrant issuance may dilute existing shareholders.
- For WVE-004, management reported a 34% CSF poly(GP) reduction at day 85 in the 30 mg single-dose cohort versus placebo (p=0.011; small cohorts). It planned additional single- and multidose data in the second half of 2022 and anticipated regulatory discussions and an open-label extension.
- WVE-003 Huntington’s disease data were expected in the second half of 2022; WVE-N531 DMD data, including muscle biopsies, were expected in Q4 2022. WVE-006 AATD clinical trial applications were expected in 2023.
- In the WVE-004 study update, adverse events were described as balanced across groups and mostly mild to moderate. Four participants, including one placebo recipient, had severe and/or serious events; one event was reported as related to study drug. CSF neurofilament light elevations occurred in some participants in the 30 mg and 60 mg groups; the dataset was insufficient to assess clinical effects.
- Risks include clinical and regulatory uncertainty, ability to develop and manufacture candidates, competition, intellectual-property protection, financing needs, and possible COVID-19 effects on trials, research and supply chains. The company also noted that inflation could increase clinical-trial, labor and other costs if trends continued.
- Operating lease commitments totaled approximately $50.6 million at June 30. A Cambridge lease extension recorded an additional $12.0 million of right-of-use assets and lease liabilities; an August 2022 amendment extended the relevant lease through March 2028, with average base rent of about $3.3 million annually during the extension.
- Management reported effective disclosure controls as of June 30. The company reported no material legal proceedings.
Investor verification points
- Verify subsequent clinical updates and whether the small WVE-004 biomarker dataset translates into durable benefit, acceptable safety and clinical effects.
- Track cash burn against management’s at-least-12-month runway estimate, and any changes in spending, financing plans or collaboration receipts.
- Confirm the share count and potential dilution from the pre-funded warrants and any future equity issuance.
- Review the timing and remaining obligations under Takeda collaboration revenue, including the deferred-revenue balance and potential program options or milestones.
- Assess the full lease commitments and the financial impact of the Cambridge lease extension.