Atara Biotherapeutics, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; the filing also reports unaudited fourth-quarter results. Atara is a clinical-stage biotechnology company with no approved products or revenue. Its pipeline includes allogeneic T-cell therapies and molecularly targeted biologics.
Financial performance and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $41.6 million | $14.4 million |
| General and administrative expense | $16.8 million | $12.7 million |
| Total operating expenses / operating loss | $58.4 million | $28.2 million |
| Net loss | $57.2 million | $28.0 million |
| Net loss per share | $2.24 | $5.62 |
| Cash, cash equivalents and short-term investments (year-end) | $320.5 million | $104.1 million |
| Working capital (year-end) | $314.9 million | $103.3 million |
| Net cash used in operating activities | $37.2 million | $16.6 million |
Fourth-quarter 2015 net loss was $21.2 million, versus $10.5 million in fourth-quarter 2014. Fourth-quarter operating expenses were $21.8 million, including $16.2 million of R&D. Margins are not meaningful because the company had no revenue. Total liabilities at year-end were $9.9 million; the filing reports no borrowings or material debt. Management estimated available cash and investments would fund planned operations through 2018, but noted plans and costs could change and no external funding was committed.
Operating cash use increased as development spending expanded. Investing activities used $220.1 million, principally reflecting purchases of short-term securities. Financing provided $259.2 million, largely from two 2015 follow-on stock offerings that generated $263.4 million net in aggregate. Outstanding common shares rose from 19.7 million at year-end 2014 to 28.5 million at year-end 2015.
Material changes and operating developments
- Net loss more than doubled from 2014, as R&D expense rose substantially following program expansion, licensing activity, manufacturing work and increased staffing.
- Atara licensed three clinical-stage T-cell programs from Memorial Sloan Kettering Cancer Center (MSK) in June 2015: EBV-CTL and CMV-CTL, both in Phase 2 trials, and WT1-CTL, in Phase 1.
- In October 2015, Atara licensed technology and entered a research collaboration with QIMR Berghofer, paying $3.0 million upfront, to support additional allogeneic T-cell programs.
- PINTA 745’s Phase 2 proof-of-concept trial missed its primary endpoint and did not improve several secondary measures. Further clinical development was suspended; the company planned to complete the trial as designed.
Outlook, risks and unusual items
- EBV-CTL: The FDA granted breakthrough therapy designation for rituximab-refractory EBV-PTLD after HCT. Historical MSK trial results included approximately 60% one-year survival in HCT patients and approximately 60% in high-risk SOT patients; these were investigator-reported results from ongoing trials, not results of a pivotal trial. The FDA indicated a single-arm trial with response rate as the primary endpoint might support approval, but was unlikely to grant an SPA for the proposed design. Atara expected to continue discussions and initiate pivotal HCT and randomized SOT trials toward the end of 2016. Orphan drug designation was granted in February 2016.
- CMV-CTL: MSK Phase 2 experience reported response rates above 60% in refractory CMV viremia and disease after HCT. Atara expected to discuss late-stage development with the FDA in mid-2016. These findings remain early clinical evidence.
- STM 434: The Phase 1 trial for ovarian cancer and other solid tumors was ongoing, with initial data expected in the first half of 2016. Bleeding had been observed in some patients, with certain events considered possibly treatment-related. Earlier animal and laboratory findings raised a potential bleeding concern; the protocol excludes patients at heightened bleeding risk and adds monitoring. The FDA granted orphan drug designation for ovarian cancer in October 2015.
- Management anticipated higher 2016 spending on EBV-CTL, CMV-CTL and STM 434, while PINTA 745 spending was expected to decline. The company warned that further financing may be needed sooner than planned if assumptions change.
- Key risks include clinical and regulatory failure, uncertain trial timing and enrollment, manufacturing-process transfer and scale-up, reliance on third-party manufacturers and research partners, intellectual-property and licensing exposure, competition, reimbursement uncertainty and potential dilution from future financing. The company’s T-cell platform had not yet demonstrated success in company-run pivotal trials or commercial-scale manufacturing.
- Potential contingent payments include up to $33.0 million in development, regulatory and sales milestones to MSK. Amgen milestone obligations were described as up to $86.0 million before the PINTA suspension, with remaining milestone and sales-payment maxima reduced to $59.0 million and $104.0 million, respectively. Milestones and royalties were not recorded as liabilities because they depended on future events. Operating lease commitments totaled $4.5 million.
- The financial statements received an unqualified independent audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal controls because Atara qualified as an emerging growth company. A prior material weakness in financial-close and reporting controls had been remediated.
Important facts for investors to verify
- Whether planned EBV-CTL pivotal trials began on schedule and what the final FDA-agreed design, endpoints and evidentiary requirements were.
- Updated, prospectively collected efficacy and safety results for EBV-CTL and CMV-CTL, including patient numbers, follow-up and comparability with historical controls.
- STM 434 trial enrollment, dose escalation, bleeding events and subsequent safety findings.
- Cash and investment balances, operating cash burn and whether the stated runway through 2018 remains realistic after development plans and contingent obligations.
- Manufacturing transfer, comparability, supply capacity and cost for the T-cell programs and STM 434.
- Share-count growth, equity compensation and potential dilution from future capital raises and license milestones.