Senti Biosciences, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 9, 2024. The company is an early clinical-stage biotechnology business developing gene-circuit-enabled cell and gene therapies. Following its August 2023 transaction with GeneFab, Senti is focused on oncology programs, particularly SENTI-202, and partnered development of SENTI-301A in China.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $0 | $1.286 million |
| Research and development expense | $8.779 million | $7.059 million |
| General and administrative expense | $7.522 million | $9.191 million |
| Total operating expenses | $16.301 million | $16.250 million |
| Loss from continuing operations | $12.111 million | $13.852 million |
| Net loss | $12.111 million | $18.722 million |
| Basic and diluted loss per share | $0.26 | $0.42 |
| Net cash used in operating activities | $11.682 million | $16.304 million |
Revenue fell to zero after completion of Spark research services and the SBIR-funded project; the company reported no grant income in Q1 2024. Operating expenses were nearly unchanged overall: higher R&D costs, primarily external services and supplies, were largely offset by lower G&A costs. The lower reported net loss partly reflects the absence of $4.870 million of discontinued-operation losses recorded in Q1 2023. Q1 2024 other income included $1.461 million of GeneFab sublease income and a $2.314 million gain from remeasurement of the GeneFab option liability; these fair-value and sublease items are not product revenue.
At March 31, 2024, cash and cash equivalents were $23.723 million, down from $35.926 million at December 31, 2023; restricted cash was $4.028 million. Total assets were $102.185 million, total liabilities $46.091 million, and stockholders’ equity $56.094 million. Current assets were $55.666 million and current liabilities $9.609 million. GeneFab-related balances included $17.847 million of current receivables, $0.383 million of long-term receivables, and $11.300 million of prepaid services. Operating lease liabilities totaled $36.623 million; the filing does not show conventional borrowings on the balance sheet. No meaningful operating margin is available because Q1 2024 revenue was zero.
Material changes and developments
- Compared with Q1 2023, the company had no revenue, while R&D expense increased $1.720 million and G&A expense decreased $1.669 million.
- Operating cash use decreased by $4.622 million year over year. Investing cash use was nominal in Q1 2024, versus $9.497 million in Q1 2023; there was no financing cash flow in Q1 2024.
- The company reported a $12.111 million Q1 2024 net loss, versus $18.722 million in Q1 2023, which included discontinued-operation losses. The GeneFab-related disposal had been reported as a discontinued operation; its 2023 disposal gain was recognized in 2023, not Q1 2024.
- Management’s January 2024 prioritization plan focuses resources on clinical development of SENTI-202 and the Celest partnership for SENTI-301A. The FDA cleared the SENTI-202 IND in December 2023. The filing anticipated a Phase 1 trial for SENTI-202 and Celest dosing for SENTI-301A in Q2 2024; these are stated expectations, not confirmed outcomes in this filing.
- After quarter-end, on May 7, Senti entered into a GeneFab sublease for approximately 7,177 square feet at its headquarters, subject to landlord consent, expiring April 30, 2027.
Outlook, risks and unusual items
- Going concern and funding: Management concluded that substantial doubt exists about the company’s ability to continue as a going concern. As of the May 9 issuance date, it was uncertain whether cash and cash equivalents would fund operations, clinical-trial expenses and capital expenditures beyond the following 12 months. Senti expects substantial losses and negative operating cash flows and says it needs substantial additional funding; financing may not be available on acceptable terms.
- GeneFab dependence and estimates: GeneFab is a related party and provides manufacturing and research services. Senti recorded $3.632 million of related-party R&D costs in Q1 and held $11.3 million of prepaid services and significant receivables with GeneFab. Deferred consideration is subject to conditions, and GeneFab’s option, note receivable and economic share are remeasured using significant unobservable inputs. Collection, service delivery and valuation remain important uncertainties.
- Clinical and manufacturing risks: Product candidates remain early-stage; the filing describes risks from clinical outcomes, regulatory review, patient enrollment, manufacturing quality and capacity, and reliance on third parties. GeneFab had not previously operated a cGMP facility, and Senti disclosed no redundant second-source supply arrangement for its planned clinical supply.
- Listing and dilution: Nasdaq granted an extension through August 5, 2024 to regain compliance with the $1.00 minimum bid-price requirement, requiring at least 10 consecutive business days at or above that price. The GeneFab option may cover up to 19,633,444 shares at $1.01867 per share, subject to conditions and potential stockholder approval; exercise could materially dilute existing holders. The Chardan purchase agreement is another potential source of equity issuance.
- Controls and leadership: A previously identified material weakness in internal control over financial reporting remained under remediation; the company said further actions and testing were needed before concluding it was fully remediated. CFO Deborah Knobelman resigned effective May 3, 2024; Yvonne Li was appointed interim CFO and principal financial and accounting officer effective after this filing.
- Other obligations and contingencies: The company disclosed long-term operating lease commitments and up to $10 million of costs under the BlueRock collaboration arrangement. Management said it was not aware of legal proceedings expected to have a material adverse effect. No specific financial guidance was provided.
Most important facts for investors to verify
- Updated cash runway, financing plans and whether substantial doubt about continuing as a going concern has changed.
- Actual SENTI-202 Phase 1 initiation and clinical progress, and whether Celest began SENTI-301A dosing as anticipated.
- Receipt of GeneFab deferred payments, satisfaction of contractual conditions, delivery of prepaid services and manufacturing readiness.
- Progress toward Nasdaq’s August 5, 2024 bid-price compliance deadline and any resulting listing action.
- Whether the finance and accounting material weakness is fully remediated, and how the CFO transition affects reporting and controls.
- Potential dilution from the GeneFab option, Chardan facility, equity compensation and other share issuances.