Adicet Bio, Inc. — FY 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The company filed on March 11, 2021. In September 2020, former resTORbio completed a reverse merger with Adicet Therapeutics, changed its name to Adicet Bio, and effected a 1-for-7 reverse stock split. For accounting purposes, Former Adicet was the acquirer; results before the merger are primarily Former Adicet’s, so year-over-year comparisons are affected by the transaction.
Business context
Adicet is a clinical-stage biotechnology company developing allogeneic, “off-the-shelf” gamma delta T-cell therapies for cancer. Its lead candidate, ADI-001, targets CD20 for non-Hodgkin lymphoma (NHL); ADI-002 targets GPC3 for solid tumors. No candidate had entered clinical trials by year-end 2020, and the company had no approved products or product sales.
Financial results and liquidity
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Revenue, all related-party | $17.9 million | $1.0 million |
| Research and development expense | $34.3 million | $23.7 million |
| General and administrative expense | $22.8 million | $8.7 million |
| Net loss | $36.7 million | $28.1 million |
| Net cash used in operating activities | $41.6 million | $27.9 million |
- Revenue came entirely from the Regeneron collaboration; there was no product revenue. The 2020 increase included a $10.0 million ADI-002 candidate-selection milestone, of which $5.0 million was recognized as revenue in the quarter ended June 30, 2020, and increased collaboration activity.
- Operating expenses rose 76% to $57.1 million. R&D increased with staffing and CRO/CMO spending; G&A included $7.1 million of merger-related professional fees.
- At December 31, 2020, cash, cash equivalents and marketable debt securities totaled $94.6 million; current assets were $100.3 million and current liabilities were $22.5 million. The company reported an accumulated deficit of $106.3 million.
- No debt was drawn under the Pacific Western Bank facility, which permits term loans up to $12.0 million at the greater of 0.25% above prime or 5.00%. The facility is secured by substantially all assets other than certain intellectual property and includes financial and other covenants.
- Operating lease liabilities totaled $21.6 million at year-end. This includes the long-term Redwood City facility lease; the company said occupancy was expected in 2022.
- The filing states that February 2021 public and private stock sales generated approximately $137.5 million and $15.0 million, respectively, in gross proceeds before public-offering expenses. Management said year-end liquidity plus these proceeds was expected to fund operations, capital spending and debt service for at least 12 months from issuance of the financial statements.
Material changes and unusual items
- Net loss increased by $8.5 million year over year, while operating cash use increased by $13.7 million.
- The 2020 statement includes a $2.3 million impairment of acquired in-process research and development, a $1.9 million gain from remeasuring the contingent value right (CVR) liability, and a $2.8 million income tax benefit, principally from a CARES Act net operating loss carryback.
- The merger brought $64.1 million of cash and restricted cash onto the balance sheet and resulted in $20.1 million of goodwill and acquired RTB101 in-process R&D. The former resTORbio nursing-home study was terminated in November 2020 due to poor enrollment; the CVR relates to potential net proceeds from third-party commercialization of RTB101 for a COVID-19 indication.
- Revenue and operating metrics are not directly comparable across years because of the merger and a 2019 amendment to the Regeneron agreement. The 2019 change made certain future payments milestone-contingent, leading to a reduction in cumulative recognized revenue.
Outlook, risks and contingencies
- FDA cleared the IND for ADI-001 in October 2020. The company planned to begin a Phase 1 study in March 2021, enroll up to 80 late-stage NHL patients, and report interim data in 2021.
- Management planned to file an ADI-002 IND in late 2021 and, subject to regulatory review, treat the first patient in 2022. It also expected to advance at least one additional TCR-like antibody candidate into IND-enabling work in 2021.
- These are management plans, not assurances. Key risks include unproven safety and efficacy, clinical and enrollment delays, manufacturing scale-up and third-party supplier dependence, regulatory uncertainty, competition, COVID-19 disruption, and the need for substantial additional capital. The company cautioned that preclinical results may not predict clinical outcomes.
- Regeneron had not exercised an option on a candidate as of the filing. Its agreement includes target-selection and exclusivity provisions, potential option fees of up to $100 million, and royalties; termination or disputes could impair development and funding.
- Management identified material weaknesses in financial reporting controls, including inadequate accounting staffing and formal procedures, segregation-of-duties gaps, and controls over complex transactions. Management concluded disclosure controls were ineffective as of December 31, 2020; remediation efforts were underway.
- The 2020 financial statements received an unqualified audit opinion. The auditor stated it had audited 2020 and the retrospective share-ratio adjustments to prior-year statements, but did not express an opinion on the 2019 and 2018 statements as a whole. The prior-year auditor’s report had highlighted substantial doubt about going concern; management said the February 2021 financing alleviated that doubt.
Investor facts to verify
- Check ADI-001 trial initiation, enrollment, safety findings and interim data against the stated 2021 plans.
- Track ADI-002 IND timing and the evidence supporting its intended solid-tumor development.
- Reconcile cash burn and runway with post-year-end financing proceeds, offering costs, and subsequent spending.
- Review dilution: 31,780,347 common shares were outstanding as of March 10, 2021, after the February financing transactions.
- Assess progress in remediating material weaknesses and whether controls become effective.
- Monitor Regeneron option decisions, exclusivity restrictions, milestone economics, and any changes to the collaboration.