Atara Biotherapeutics, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. Unaudited financial statements; filed August 8, 2016. Atara is a clinical-stage biopharmaceutical company developing allogeneic T-cell therapies and molecularly targeted biologics. It has not generated revenue.
Financial and liquidity overview
Amounts below are in millions, except per-share data. No revenue or profit margins are reported; losses reflect the company’s development-stage operations.
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $12.991 | $11.507 | $24.238 | $17.274 |
| General and administrative expense | $6.494 | $3.601 | $12.308 | $7.145 |
| Total operating expenses | $19.485 | $15.108 | $36.546 | $24.419 |
| Net loss | $18.880 | $14.945 | $35.441 | $24.105 |
| Basic and diluted loss per share | $0.66 | $0.62 | $1.24 | $1.04 |
| Net cash used in operating activities | Not presented by quarter | $23.279 | $12.864 |
- At June 30, cash and cash equivalents were $26.356 and short-term investments were $268.201, totaling $294.557, down from $320.482 at December 31, 2015. Restricted cash was $0.194.
- Current assets were $298.883 and current liabilities $10.006, implying working capital of approximately $288.9. Total liabilities were $10.569; the filing does not disclose interest-bearing debt.
- Six-month investing activities provided $25.917, primarily reflecting net purchases, sales and maturities of short-term investments. Financing activities used $0.024; the prior-year period included $69.445 net proceeds from a common-stock offering.
- Accumulated deficit was $133.551. Stock-based compensation was $9.860 for the first six months, versus $5.053 a year earlier.
Material changes and business developments
- Year-over-year Q2 net loss increased by $3.935; six-month net loss increased by $11.336. Six-month R&D expense rose $6.964, while G&A rose $5.163. Higher headcount, payroll and stock-based compensation contributed to the increases.
- EBV-CTL development spending increased following exercise of the MSK license option. Management expected two pivotal EBV-PTLD trials to commence by year-end 2016; a multi-center expanded-access protocol opened in June.
- Management reported initial STM 434 Phase 1 observations at ASCO: stable disease lasting up to 12 months in 20% of patients, including a 40% stable-disease rate among granulosa cell tumor patients. These are early clinical observations, not confirmatory efficacy results.
- The PINTA 745 Phase 2 study had failed its primary endpoint; Atara suspended development and returned rights to PINTA 745 and ATA 842 to Amgen in June 2016.
- Atara added 4.0 million shares to its 2014 Equity Incentive Plan reserve with stockholder approval. Shares outstanding were 28.706 million at June 30 and 28.811 million at July 31.
Outlook, risks and contingencies
- Management estimated existing cash, cash equivalents and short-term investments would fund planned operations through 2018. The company nevertheless expects continued losses, rising development costs and a need for substantial additional capital; it had no committed external funding source.
- Management anticipated increased R&D spending in 2016, particularly for EBV-CTL and T-cell programs, and expected G&A to continue increasing. No revenue or profitability guidance was provided.
- Key execution risks include clinical-trial outcomes and enrollment, regulatory approval, manufacturing scale-up and transfer to third parties, dependence on CROs and single-source suppliers, and the ability to obtain future financing. T-cell therapies are novel and their manufacturing and regulatory pathways remain uncertain.
- EBV-CTL had FDA breakthrough-therapy designation for a specified post-HCT indication, FDA and EMA orphan designations for EBV-PTLD, and EMA Adaptive Licensing Program acceptance; the EMA classified it as an ATMP. These designations do not ensure approval. Management planned parallel EMA and health-technology-assessment scientific advice in Q4 2016.
- License agreements provide for contingent milestone payments, including up to $33 million to MSK and, under remaining Amgen licenses, up to $58 million in development/regulatory milestones and $104 million in sales milestones, plus royalties. These amounts were not recorded as liabilities because the triggering events were uncertain.
- Operating lease commitments were $4.579 million gross and $4.438 million net of expected sublease income. The filing reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of June 30.
Important facts for investors to verify
- Whether the two planned EBV-PTLD pivotal trials started on schedule, and their designs, enrollment and results.
- Whether clinical, manufacturing-transfer and supply plans for EBV-CTL and other T-cell programs are progressing as expected.
- Whether the stated runway through 2018 remains supportable as operating cash use and development spending rise, and whether additional financing is needed.
- How later-stage data compare with the preliminary STM 434 observations, and the implications of the PINTA 745/ATA 842 program discontinuation.
- Potential dilution from equity compensation and future capital raises, and the timing and likelihood of contingent license milestones and royalties.