Filing summary
Entity note: The supplied filing is resTORbio, Inc.’s Form 10-Q, not Adicet Bio, Inc.’s. It covers the quarter and nine months ended September 30, 2018; the financial statements are unaudited.
Business context and reporting period
resTORbio is a clinical-stage biopharmaceutical company developing treatments for aging-related conditions. Its lead candidate, RTB101, is being studied alone and with rapalogs, including everolimus. The company had no product revenue and remained dependent on external financing.
Financial performance and position
| Metric | Q3 2018 / Sep. 30, 2018 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense | $6.8 million for Q3; $26.7 million for nine months | $3.3 million for Q3 2017; $10.0 million for nine months 2017 |
| General and administrative expense | $2.3 million for Q3; $6.6 million for nine months | $0.6 million for Q3 2017; $1.3 million for nine months 2017 |
| Net loss | $8.4 million for Q3; $31.9 million for nine months | $3.3 million for Q3 2017; $10.7 million for nine months 2017 |
| Operating cash flow | $(27.8) million for nine months | $(6.0) million for nine months 2017 |
| Cash, cash equivalents and marketable securities | $115.4 million | $53.3 million cash and cash equivalents at Dec. 31, 2017; no marketable securities then |
| Total liabilities | $8.1 million, including a $0.5 million funding advance | $5.5 million at Dec. 31, 2017 |
Operating expenses and losses increased substantially year over year as clinical and preclinical development activity expanded and the company incurred higher personnel and public-company costs. The company reported no debt or credit facility. As a pre-revenue company, operating margins are not meaningful. Nine-month investing cash outflow was $92.6 million, principally purchases of marketable securities; financing cash inflow was $89.9 million from the IPO.
Material changes, outlook and risks
- The January 2018 IPO generated approximately $89.4 million in net proceeds. Preferred stock converted into common stock at the IPO; common shares outstanding were 28.0 million at September 30, 2018.
- Management reported July 2018 topline Phase 2b results: RTB101 10 mg once daily significantly reduced the percentage of patients with one or more laboratory-confirmed respiratory tract infections versus placebo. The combination of RTB101 10 mg with everolimus 0.1 mg did not meet the primary endpoint. The filing also described significant reductions in prespecified analyses of patients with asthma and patients aged 85 or older; these findings do not establish regulatory approval or commercial success.
- Management expected cash resources to fund operations through 2020, including a pivotal Phase 3 program and an NDA filing if Phase 3 results were successful. The liquidity note separately says resources should cover at least the next 12 months; these runway statements use different horizons and assumptions. Management cautioned that estimates could prove wrong and additional financing may be needed.
- Expected spending increases include advancing RTB101, pursuing an additional proof-of-concept trial, manufacturing, hiring and public-company costs. Clinical, regulatory, manufacturing, enrollment, intellectual-property and financing risks could delay or prevent development. The company stated that it may need to delay, reduce or suspend programs if financing is unavailable.
- The Novartis license includes up to $4.3 million in clinical milestones, up to $42 million in regulatory milestones for the first two indications, up to $125 million in commercial milestones, and tiered royalties. No remaining milestones or royalties were reached or considered probable at September 30, 2018.
- A $0.5 million research advance from the Silverstein Foundation, where a company director is a co-founder and trustee, is restricted to research and is repayable if the company successfully conducts a positive Phase 3 Parkinson’s disease trial. No qualifying expenses had been incurred by September 30, 2018.
- The company reported no material litigation, no material changes to previously disclosed risk factors, effective disclosure controls, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: this filing is for resTORbio, not Adicet Bio.
- Review subsequent clinical disclosures for Phase 2b details, statistical analyses and the planned Phase 3 design and timing.
- Reconcile the stated cash runway through 2020 with the separate statement that funds cover at least 12 months, and assess assumptions underlying projected spending.
- Track operating cash burn, clinical-trial costs and any new financing, collaboration or licensing arrangements.
- Assess potential Novartis milestone and royalty obligations and the contingent repayment terms of the related-party research advance.