Senti Biosciences(SNTI) - 2024 Q4 - Annual Report

Financial Transactions and Agreements - The company sold purchased assets for a total consideration of $37.8 million in cash, with$18.9 million paid at closing and the remaining $18.9 million waived in connection with a private placement investment[115] - GeneFab was provided an option to purchase up to 1,963,344 shares of common stock, valued at up to$20.0 million, at an exercise price of $10.18670, exercisable by August 7, 2026[116] - The company will receive ten percent of the realized gains from GeneFab's parent company arising from any cash or in-kind distributions in connection with a dividend or sale event[117] - The Celest Agreement includes a potential aggregate amount of$156.0 million in option exercise fees and milestone payments, along with tiered royalty payments[120] - The exclusivity period under the Celest Agreement prohibits the company from exploiting similar CAR-NK cell therapies in mainland China during the option exercise period[121] Intellectual Property - The patent portfolio consists of over 13 issued patents and 214 pending patent applications, with 5 patents and 194 pending applications owned or co-owned by the company[128] - The company has filed trademark applications for "SENTI," "SENTI BIOSCIENCES," and related marks, owning five U.S. trademark registrations and multiple foreign registrations[130] FDA Approval Process - The FDA approval process for biologics involves substantial time and financial resources, including preclinical testing, IND submission, and BLA preparation[134] - The IND submission must become effective within 30 days unless the FDA raises safety concerns, which could delay the start of clinical trials[137] - The FDA released guidance in March 2022 to expedite oncology drug development through seamless trial designs, potentially reducing development costs and time[142] - Human clinical trials typically consist of three phases: Phase 1 focuses on safety and dosage, Phase 2 evaluates efficacy and side effects, and Phase 3 confirms clinical efficacy and safety across a larger population[140][147] - The FDA aims to review standard BLA applications within ten months and priority reviews within six months after filing acceptance[147][154] - A BLA submission requires comprehensive data from preclinical and clinical studies, including both positive and negative results, to establish safety and effectiveness[145] - The FDA may issue a Complete Response Letter (CRL) if the BLA is not approved, detailing deficiencies that must be addressed before resubmission[150] - Products may receive expedited designations such as fast track or breakthrough therapy to facilitate development and review processes[152][153] - Accelerated approval may be granted if a product shows effects on surrogate endpoints likely to predict clinical benefit, with post-marketing studies required to verify this[155] - The FDA requires compliance with cGMP and may inspect manufacturing facilities before approving a BLA[149] - The FDA may condition approval on Risk Evaluation and Mitigation Strategies (REMS) to manage known risks associated with a product[151] - Post-marketing studies may be mandated to monitor safety and effectiveness after commercialization, with the potential for withdrawal of approval if compliance is not maintained[151] - The FDA may grant orphan designation to a biologic intended to treat a rare disease with a patient population of fewer than 200,000 individuals in the U.S.[159] - Orphan drug designation provides financial incentives such as grant funding opportunities, tax advantages, and user-fee waivers[160] - A product with orphan drug designation is entitled to seven years of exclusivity upon receiving the first FDA approval for the specific disease[160] - The FDA may withdraw approval if compliance with regulatory requirements is not maintained, which can lead to product recalls or fines[163] - The FDA requires post-marketing testing and surveillance to monitor the effects of an approved product, which can result in new safety information being added to labeling[164] Legislative and Regulatory Environment - The Affordable Care Act created an abbreviated approval pathway for biosimilars, allowing for a more streamlined process for products similar to FDA-licensed reference biologics[167] - A biosimilar application cannot be submitted until four years after the reference product is licensed, and approval cannot be effective until 12 years post-licensure[169] - The company must ensure adequate coverage and reimbursement for its products from government and private payors to successfully commercialize its product candidates[172] - Legislative and regulatory proposals may lead to more rigorous coverage criteria and downward pressure on drug pricing, impacting revenue generation[175] - The European Union has options for member states to control prices and restrict reimbursement for medicinal products, which may affect the company's product candidates[177] - The statutory minimum rebates for manufacturers under the Medicaid Drug Rebate Program have increased to 23.1% for branded drugs and 13% for generic drugs, with a cap on innovator drugs at 100% of the Average Manufacturer Price[180] - The Inflation Reduction Act of 2022 will reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to$2,000 starting in 2025, effectively eliminating the coverage gap[182] - The American Rescue Plan Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug's average manufacturer price, for certain drugs starting January 1, 2024[182] - Medicare payments to providers will be reduced by 2% per fiscal year through 2031 due to the Budget Control Act of 2011 and subsequent legislation[180] - The Right to Try Act allows certain patients to access investigational new drug products that have completed a Phase 1 clinical trial without enrolling in clinical trials[186] - The implementation of the Inflation Reduction Act is currently subject to ongoing litigation, which may affect its impact on the business and healthcare industry[182] - States are increasingly passing legislation to control pharmaceutical pricing, which may reduce demand for products once approved[185] - The federal Anti-Kickback Statute prohibits remuneration to induce referrals for goods or services reimbursed by federal healthcare programs, with severe penalties for violations[189] - The European Union's Clinical Trials Regulation aims to simplify and streamline the approval of clinical studies across member states[194] - The company must obtain marketing authorization in the European Union before commercializing medicinal products, similar to the BLA process in the United States[195] Company Operations and Workforce - The company had 34 full-time employees as of March 18, 2025, with 67% being people of color and 67% being women[207] - The company occupies approximately 40,000 square feet of office and R&D space in South San Francisco, with a lease expiring in April 2027[211] - A cell therapy manufacturing facility was completed in June 2023, designed to meet cGMP standards, with a sublease agreement for 92,000 square feet expiring in September 2032[211] - The company is classified as a "smaller reporting company," with annual revenues below $100 million and market value of common stock held by non-affiliates below$250 million[213] - The company underwent a merger on June 8, 2022, changing its name to Senti Biosciences, Inc., with common stock trading on Nasdaq under the symbol "SNTI" from June 9, 2022[216] - The company has a good relationship with its employees, with no collective bargaining agreements in place[207] - The company aims to attract and retain employees through equity incentive plans to enhance stockholder value[208] Financial Performance and Projections - The company reported net losses of $52.8 million and$71.1 million for the years ended December 31, 2024, and 2023, respectively, with an accumulated deficit of $297.1 million as of December 31, 2024[225] - The company expects to continue incurring significant operating losses for the foreseeable future due to high costs associated with research and development, clinical trials, and regulatory approval processes[226] - As of December 31, 2024, the company had$48.3 million in cash and cash equivalents, raising substantial doubt about its ability to continue as a going concern for the next twelve months[230] - A strategic plan announced in January 2024 included a workforce reduction of approximately 37% to focus on the development of SENTI-202 and the SENTI-301A program in China[236] - The company has not generated any revenue from product sales to date and does not expect to do so in the foreseeable future[235] - The company is reliant on third parties for conducting clinical trials and preclinical studies, which may not perform satisfactorily[224] - The company has identified a material weakness in its internal control over financial reporting, which could adversely affect investor confidence and the value of its common stock[222] - The company may face challenges in obtaining regulatory approvals for its product candidates, which could delay or prevent commercialization[224] - The biotechnology product development is capital-intensive, and the company will require substantial additional funds to advance its product candidates and gene circuit platform[229] - The company may need to restructure its business or delay its research and development programs if it cannot raise capital on acceptable terms[227] - The company identified a material weakness in its internal control over financial reporting, which could adversely affect investor confidence and the value of its common stock[238] - As of December 31, 2024, the company reported net operating loss carryforwards (NOLs) of approximately $191.8 million for U.S. federal income tax purposes, with a portion expiring beginning in 2036 if not utilized[245] - The company holds a letter of credit with JPMorgan Chase Bank amounting to approximately$2.9 million related to the Alameda facility and $0.5 million related to headquarters facility leases[250] - The company has no products on the market or regulatory approvals, with its lead product candidate, SENTI-202, currently in early clinical development[255] - The company may experience additional turnover in its accounting group, which continues to hinder remediation efforts related to its internal control weaknesses[240] - The company may face limitations on utilizing its NOLs due to potential ownership changes, which could adversely affect future tax liabilities[246] - The company is subject to potential adverse effects from changes in U.S. fiscal, tax, and federal policies that could impact its business operations[247] - The company may incur additional expenses due to limited experience among its management team in handling day-to-day operations of a public company[244] Strategic Collaborations and Risks - The company has agreed to allow Celadon Partners to invest up to approximately$20 million for shares, which could significantly dilute existing shareholders' ownership[249] - The company is exposed to risks from liquidity issues in the financial services industry, which could adversely affect its financial condition and operations[250] - The FDA granted IND clearance for SENTI-202 in December 2023, with initial results from the Phase 1 clinical trial expected in Q4 2024[258] - SENTI-202 and SENTI-301A are the only product candidates tested in humans, with SENTI-202's Phase 1 trial initiated in Q2 2024[271] - The company faces significant risks in clinical development, including potential negative results from preclinical studies or clinical trials[259] - There are uncertainties regarding the efficacy and safety of product candidates, which may impact the ability to submit IND applications on expected timelines[261] - The company has observed dose limiting toxicities in early trials for SN-301A, leading to evaluations of lower dosing levels[262] - The gene circuit platform technologies are based on unproven methods, making it difficult to predict development timelines and costs[263] - The company has not initiated clinical trials for any other product candidates beyond SENTI-202 and SENTI-301A[271] - Regulatory approval processes may be complex and time-consuming due to the novelty of the technologies[264] - The company may not be able to access financial resources necessary for continued development of product candidates[259] - Market acceptance of the product candidates may be hindered by skepticism regarding the novel gene circuit technology[278] - The company may not generate or sustain revenue from sales of approved products, as market acceptance of its gene circuit platform technologies depends on various factors[279] - The company faces challenges in identifying additional therapeutic opportunities and developing suitable product candidates due to limited human and financial resources[279] - The company anticipates that chemistry, manufacturing, and control topics will be a focus of IND reviews, potentially delaying future IND submissions[283] - Clinical trials are expected to be expensive and time-consuming, with significant manufacturing and processing costs due to the new technologies involved[289] - Delays in patient enrollment for clinical trials could adversely affect the company's ability to advance product candidates and may increase costs[290] - The company may experience delays in obtaining regulatory approvals, which could impact the commercialization timeline of its product candidates[292] - The company may seek orphan drug designation for certain product candidates, which could provide financial incentives but does not guarantee expedited development or approval[297] - The company acknowledges that interim, topline, or preliminary data from clinical trials may change as more patient data become available, impacting business prospects[285] - The company may not achieve projected discovery and development milestones, which could adversely affect its stock price[288] - Regulatory changes may require the company to modify clinical development plans, impacting costs and timelines[295] - The company may face challenges in realizing anticipated benefits from the transaction with GeneFab, which could adversely affect its business and financial conditions[301] - The company relies on third parties for clinical trials and preclinical studies, which may lead to less control over timelines and quality[303] - The company has entered into a strategic collaboration with Celest Therapeutics for the clinical development of the SENTI-301A gene circuit to treat solid tumors in China[312] - The company may experience loss of institutional knowledge due to employee transfers to GeneFab, potentially harming its business operations[302] - The company is dependent on maintaining current arrangements and establishing new partnerships for the development and commercialization of its gene circuit platform technology[308] - The company may not be able to conduct animal testing in the future, which could harm its research and development activities[300] - The company faces risks related to regulatory compliance and the potential need to repeat clinical trials if third parties do not meet GCP standards[305] - The company’s marketing exclusivity for orphan drugs may be limited if it seeks broader indications or fails to assure sufficient product availability[299] - The company’s ability to enter into strategic transactions on acceptable terms could be adversely affected, impacting its ability to develop and commercialize product candidates[312] - The company may encounter significant operational and financial risks associated with acquiring new technologies and forming strategic alliances[313]