Sana Biotechnology, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Sana is a preclinical-stage biotechnology company developing in vivo and ex vivo engineered-cell therapies. All product candidates remained in preclinical development; the company had no approved products and generated no product revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None reported | No product revenue in either period |
| Research and development expense | $168.9 million | $27.3 million; up $141.6 million |
| General and administrative expense | $11.8 million | $6.0 million; up $5.9 million |
| Net loss | $180.6 million | $32.9 million |
| Net loss per share, basic and diluted | $1.52 | $3.04 |
| Cash used in operating activities | $49.9 million | $29.5 million |
| Capital expenditures | $6.4 million | $5.6 million |
As of March 31, 2021, cash and cash equivalents were $750.7 million and marketable securities totaled $231.2 million, or $981.9 million combined. Current assets were $967.5 million and current liabilities were $35.2 million. The company reported no debt. Accumulated deficit was $610.0 million. No meaningful operating margin is available because Sana had no revenue.
Financing activities provided $626.7 million, principally from the February IPO, which generated $626.4 million net proceeds from 27.0 million shares issued at $25 per share. Preferred shares converted to common stock in connection with the IPO.
Material changes and unusual items
- Research and development expense rose sharply, largely reflecting $115.7 million of non-cash expense from revaluing success-payment liabilities and $11.4 million from revaluing contingent consideration. Higher personnel, laboratory, and facility costs also contributed.
- The IPO substantially increased cash and stockholders’ equity; preferred stock converted to common stock. Weighted-average shares rose to 119.1 million from 10.8 million, affecting per-share comparisons.
- At quarter-end, success-payment liabilities were $192.2 million in total: $156.5 million for Cobalt and $35.7 million for Harvard. Cobalt contingent consideration was an additional $133.3 million. These fair-value estimates may change significantly with stock price, market capitalization, milestone assumptions, and other inputs.
- Operating cash use was lower than the reported net loss, principally because the success-payment and contingent-consideration revaluations were non-cash charges.
Outlook, management commentary, and risks
- Management expected existing cash, cash equivalents, and marketable securities to fund working capital and capital expenditures for at least 36 months under its current operating plan. It also anticipated rising expenses and said additional financing would likely be needed in the future.
- Sana’s goal was to file multiple INDs in 2022 and 2023. This is a target, not a guarantee; the filing states all candidates were still preclinical.
- The company plans continued platform and candidate development, clinical-trial preparation, manufacturing capability development, technology licensing, and organizational expansion. These activities are expected to increase costs.
- COVID-19 had caused modest delays, including temporary partial shutdowns at certain CROs and academic institutions. Further effects on research, future trials, suppliers, and timelines remained uncertain.
- Principal risks include the unproven nature of the technologies, preclinical-to-human translation and safety, regulatory and clinical uncertainty, manufacturing scale-up and third-party supply dependence, intellectual-property and licensing risks, competition, and the need for future capital.
- Potential contractual payments are not included in the operating-lease commitments table: Cobalt contingent consideration may reach $500 million, Cobalt’s success payment may reach $500 million, Harvard success payments may reach $175 million, and Oscine milestone payments may reach $225.8 million, subject to specified conditions.
- The IPO did not trigger a Cobalt success payment. The first expected Harvard valuation measurement date was February 2022. Management reported no material legal proceedings and concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether cash burn, R&D spending, and the stated 36-month liquidity runway remain consistent with subsequent operating plans and results.
- Progress toward the targeted 2022–2023 IND filings and any clinical, regulatory, or manufacturing delays.
- Changes in the fair value and payment conditions of Cobalt and Harvard liabilities, including their potential effects on reported quarterly losses and cash or share dilution.
- Whether COVID-19, supplier constraints, or manufacturing buildout affect development timelines or costs.
- The timing and market impact of shares subject to IPO lock-ups; the filing said a substantial portion could become eligible for sale beginning August 3, 2021.