Wave Life Sciences, Inc. (Wave Life Sciences Ltd.) — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing is an annual report, not a standalone Q4 report; unaudited Q4 results are also summarized below. Amounts are in U.S. dollars.
Business context
Wave is a clinical-stage genetic medicines company developing stereopure oligonucleotide therapies using its PRISM platform. It has no approved products and has not generated product sales; reported revenue primarily comes from research and development collaborations with Pfizer and Takeda. Lead clinical programs target mutant huntingtin for Huntington’s disease (HD). Other programs include ALS/FTD, SCA3, inherited retinal disease, and hepatic research.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $16.0 million | $14.4 million |
| Research and development expense | $175.4 million | $134.4 million |
| General and administrative expense | $48.9 million | $39.5 million |
| Operating loss | $208.3 million | $159.5 million |
| Net loss | $193.6 million | $146.7 million |
| Basic and diluted loss per share | $5.72 | $5.06 |
| Net cash used in operating activities | $188.2 million | $22.9 million |
| Cash and cash equivalents at year-end | $147.2 million | $174.8 million |
- Revenue increased about 11%, while operating expenses rose about 29% and net loss widened about 32%. R&D spending growth was driven chiefly by DMD trial costs and broader platform and organizational investment.
- Losses substantially exceed collaboration revenue; conventional operating and profit margins are therefore not meaningful for this pre-commercial business.
- Operating cash use increased sharply in 2019. The 2018 figure benefited from a large increase in deferred revenue associated primarily with Takeda consideration.
- Year-end working capital was $67.3 million, down from $72.2 million. Cash, cash equivalents and restricted cash totaled $150.8 million, including $3.6 million restricted.
- Total liabilities were $212.6 million, including $153.1 million of deferred revenue and $32.5 million of operating lease liabilities. The filing does not report conventional financial borrowings as a material liability.
- Management stated that cash and cash equivalents were expected to fund operations for at least 12 months from the filing’s assessment, while cautioning that assumptions could prove incorrect. Wave reported no product revenue and expects continued losses and additional financing needs.
- Wave raised $161.8 million net in its January 2019 follow-on offering. A shelf registration covered up to $500 million of securities, including a $250 million at-the-market share program; no shares had been sold under that program as of March 2, 2020.
Q4 2019 snapshot and material changes
For the quarter ended December 31, 2019, revenue was $2.4 million, operating expenses were $62.9 million, and net loss was $56.8 million. In Q4 2018, the comparable figures were $3.6 million, $52.6 million, and $37.9 million, respectively.
- On December 16, 2019, Wave discontinued suvodirsen after interim Phase 1 open-label extension results showed no change from baseline in dystrophin expression. It also stopped the DYSTANCE 51 trial, suspended WVE-N531 development, and ceased other DMD discovery work. No safety signal was observed in the interim analysis.
- On February 6, 2020, Wave announced a workforce reduction of approximately 22%, completed in February. It estimated one-time restructuring charges of about $3.5 million, mostly payable in Q1 2020.
- Revenue recognition depends on estimates of progress and remaining costs or hours under collaboration R&D obligations. The auditor identified this as a critical audit matter; the financial statements received an unqualified audit opinion.
Outlook, management commentary and risks
- Wave expected to report data from both PRECISION-HD trials in the second half of 2020, initiate clinical development of its HD SNP3 and C9orf72 programs in that period, and continue advancing ophthalmology, hepatic and partnered CNS work. These are forward-looking expectations, not assurances.
- In December 2019, Wave reported a statistically significant 12.4% reduction in CSF mutant huntingtin protein versus placebo in an analysis of PRECISION-HD2. The company described WVE-120102 as generally safe and well tolerated across cohorts. The result is an early clinical biomarker finding, not evidence of demonstrated clinical benefit.
- The FDA required an additional preclinical study before U.S. multiple-dose portions of the HD trials could proceed. U.S. escalation to the highest proposed PRECISION-HD1 doses also depended on FDA review and approval of additional monitoring plans.
- Key risks include clinical failure or delays, regulatory uncertainty, manufacturing and supply constraints, reliance on collaboration partners, intellectual-property challenges, and the need to raise capital. Additional equity financing could dilute shareholders. The filing also cited possible effects from the coronavirus outbreak on operations and supply chains.
- Wave reported effective disclosure controls and internal control over financial reporting as of year-end; KPMG gave an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Whether subsequent HD trial data confirm the PRECISION-HD2 biomarker result, establish dose response, and show safety or meaningful clinical effects.
- Whether FDA requirements delay or constrain U.S. HD trial dosing, and whether the planned SNP3 and C9orf72 clinical starts occur.
- Cash use after the workforce reduction, updated cash runway, restructuring costs, and any use of the at-the-market or other financing programs.
- Progress and option decisions under the Takeda and Pfizer collaborations, including the timing and conditions of future funding, milestones, and licenses.
- Whether collaboration revenue estimates and deferred revenue balances change materially as research obligations are completed or options are exercised.