Adicet Bio(ACET) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial instruments, and other relevant disclosures for the periods ended March 31, 2019 and 2018 Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Total Assets | $145,080 | $109,939 | | Total Liabilities | $4,624 | $5,735 | | Total Stockholders' Equity | $140,456 | $104,204 | | Cash & Cash Equivalents | $7,181 | $7,042 | | Marketable Securities | $135,910 | $100,986 | - Total assets increased by $35.1 million, primarily driven by a $34.9 million increase in marketable securities[9] - Total stockholders' equity increased by $36.3 million, while total liabilities decreased by $1.1 million[9][10] Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $8,852 | $8,106 | | General and administrative | $2,839 | $2,094 | | Total operating expenses | $11,691 | $10,200 | | Net loss | $(11,069) | $(9,859) | | Net loss per share, basic and diluted| $(0.38) | $(0.46) | - Net loss increased by $1.2 million, from $9.9 million in Q1 2018 to $11.1 million in Q1 2019, primarily due to higher operating expenses[12] - Total operating expenses rose by $1.5 million, with both R&D and G&A contributing to the increase[12] Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the three months ended March 31, 2019 and 2018 | Metric | December 31, 2018 (in thousands) | March 31, 2019 (in thousands) | | :----------------------------------- | :------------------------------- | :---------------------------- | | Total Stockholders' Equity | $104,204 | $140,456 | | Additional Paid-In Capital | $175,635 | $222,882 | | Accumulated Deficit | $(71,393) | $(82,462) | - Stockholders' equity increased by $36.3 million, primarily driven by $46.6 million in net proceeds from a public offering[14] - Accumulated deficit increased by $11.1 million, reflecting the net loss for the period[14] Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 | Cash Flow Activity | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities| $(12,049) | $(7,304) | | Net cash used in investing activities| $(34,628) | $(278) | | Net cash provided by financing activities| $46,816 | $89,938 | | Net increase in cash and cash equivalents| $139 | $82,356 | | Cash and cash equivalents at end of period| $7,181 | $135,705 | - Net cash used in operating activities increased to $12.0 million in Q1 2019 from $7.3 million in Q1 2018[17] - Investing activities resulted in a net cash outflow of $34.6 million in Q1 2019, primarily due to purchases of marketable securities[17] - Financing activities provided $46.8 million in Q1 2019 from a public offering, compared to $89.9 million from the IPO in Q1 2018[17] Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization - resTORbio, Inc. is a clinical-stage biopharmaceutical company developing innovative medicines targeting aging-related diseases, primarily involved in research and development[19][20] - The company has not generated product revenue and has an accumulated deficit of $82.5 million as of March 31, 2019[20][22] - As of March 31, 2019, the company had $143.1 million in cash, cash equivalents, and marketable securities, which is believed to be sufficient to fund operations for at least the next twelve months[22] 2. Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, reflecting management's estimates, with no material changes in significant accounting policies during Q1 2019[23][25][26] | Description | March 31, 2019 (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :---------------------------------------- | :---------------------------- | :--------------------- | :--------------------- | :--------------------- | | Money market funds | $7,150 | $7,150 | $— | $— | | U.S. treasury securities (marketable) | $135,910 | $135,910 | $— | $— | | Total | $143,091 | $143,091 | $— | $— | - All assets measured at fair value (cash, money market funds, U.S. treasury securities) are classified as Level 1, indicating unadjusted, quoted prices in active markets[29] - The company is evaluating new accounting pronouncements (ASU 2016-02, 2016-18, 2017-11, 2018-07) but does not expect a material impact from most on its consolidated financial statements[32][33][34][35] 3. Marketable Securities | Description | Amortized Cost (in thousands) | Unrealized Gains (in thousands) | Unrealized Losses (in thousands) | Fair Value (in thousands) | | :---------------------------------------- | :---------------------------- | :------------------------------ | :------------------------------- | :------------------------ | | U.S. government agency securities and treasuries | $135,878 | $32 | $— | $135,910 | - As of March 31, 2019, marketable securities totaled $135.9 million, primarily U.S. government agency securities and treasuries, all classified as available-for-sale and maturing within one year or less[37][39] 4. Property and equipment, net | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total property and equipment, net | $318 | $321 | | Depreciation and amortization expense (Q1) | $27 | $9 | - Net property and equipment decreased slightly to $318,000 as of March 31, 2019, from $321,000 at December 31, 2018[40] - Depreciation and amortization expense increased to $27,000 for the three months ended March 31, 2019, from $9,000 in the prior year period[40] 5. Accrued Liabilities | Accrued Liability | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---------------------------------- | :---------------------------- | :------------------------------- | | Accrued payroll and related expenses| $557 | $1,189 | | Accrued research and development expenses| $524 | $1,028 | | Other | $164 | $510 | | Total accrued liabilities | $1,245 | $2,727 | - Total accrued liabilities decreased by $1.48 million to $1.25 million at March 31, 2019, primarily due to reductions in accrued payroll and R&D expenses[42] 6. License Agreements - The company holds an exclusive, field-restricted, worldwide license from Novartis for RTB101 alone or in combination with everolimus[43] - The agreement includes potential milestone payments of up to $4.3 million for clinical, $42 million for regulatory, and $125 million for commercial achievements, plus tiered royalties[46] - A $2.5 million milestone payment was triggered in May 2019 upon the initiation of a Phase 3 clinical trial for the first indication[47] 7. Research Funding Agreement - The company has a research funding agreement with the Silverstein Foundation to partially fund preclinical and Phase 2 clinical trial expenses for RTB101 in Parkinson's Disease[48] - An upfront sum of $0.5 million was received in 2018, which is recognized as a reduction to research and development expenses as qualifying expenses are incurred[49][50][51] 8. Preferred Stock and Common Stock - As of March 31, 2019, the company had 10,000,000 shares of preferred stock authorized with none issued, and 35,255,344 common shares issued and outstanding[9][52] | Metric | March 31, 2019 | December 31, 2018 | | :--------------------------------------- | :------------- | :---------------- | | Options issued and outstanding | 1,706,317 | 1,122,677 | | Unvested restricted stock units | 24,960 | 24,960 | | Options available for future grants | 1,889,155 | 1,350,582 | | Shares available for issuance under 2018 ESPP | 555,583 | 275,030 | | Total shares reserved for future issuance| 4,176,015 | 2,773,249 | - The total number of shares reserved for future issuance under equity plans increased to 4.18 million as of March 31, 2019, from 2.77 million at December 31, 2018[52] 9. Stock-based Compensation | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total stock-based compensation expense| $663 | $1,181 | | Research and development | $277 | $625 | | General and administrative | $386 | $556 | - Total stock-based compensation expense decreased by $0.5 million to $0.7 million for Q1 2019[58] - The company granted 604,440 stock options in Q1 2019 with a weighted-average exercise price of $8.58[59] - As of March 31, 2019, total unrecognized compensation expense for unvested options, restricted stock, and restricted stock units was approximately $10.9 million, to be recognized over weighted-average periods ranging from 0.05 to 3.30 years[62][63][64][67] 10. Commitments and Contingencies - The company is not a party to any litigation and has no contingency reserves established for litigation liabilities as of March 31, 2019[69] 11. Net Loss per Share - Basic and diluted net loss per share are computed using the two-class method; due to net losses, no income allocation or dilution from share-based awards was applied[70] | Potentially Dilutive Securities | As of March 31, 2019 | As of March 31, 2018 | | :------------------------------ | :------------------- | :------------------- | | Options issued and outstanding | 1,706,317 | 667,590 | - Potentially dilutive securities, totaling 1,706,317 options, were excluded from diluted net loss per share calculation as their inclusion would have been anti-dilutive[71] 12. Related Party Transactions - The company has an intellectual property license agreement with Novartis, an affiliate of which is a shareholder[73] - A research funding agreement exists with the Silverstein Foundation, a related party, from which $0.5 million was received in Q1 2018, but no funds were received in Q1 2019[74] 13. Subsequent Event - In April 2019, the company amended its multi-year office lease for a new 7-year term, with an initial annual base rent of $0.6 million[75] - In May 2019, the company was awarded a 5-year grant of up to $1.5 million from the National Institutes of Health[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of resTORbio's business, clinical development progress, and detailed analysis of its financial condition and results of operations for the three months ended March 31, 2019. It highlights the company's lead product candidate, RTB101, in Phase 3 trials for respiratory tract infections and a Phase 1b/2a trial for Parkinson's disease, along with its liquidity position and future funding needs Overview - resTORbio is a clinical-stage biopharmaceutical company developing innovative medicines targeting the biology of aging, with lead product candidate RTB101, an oral TORC1 inhibitor[79] - Initiated Phase 3 program (PROTECTOR 1 and 2) in May 2019 to evaluate RTB101 10mg once daily for reducing clinically symptomatic respiratory illness in elderly subjects (65+ excluding smokers/COPD), with top-line data expected in mid-2020[79][85] - Initiated a Phase 1b/2a clinical trial of RTB101 alone or in combination with sirolimus for Parkinson's disease in April 2019, with data expected in 2020[80] - Phase 2 clinical trials showed RTB101 10mg once daily improved immune function and reduced incidence of laboratory-confirmed RTIs by 30.6% and severe RTI symptoms by 52.1% in high-risk elderly patients[82] - The company has incurred significant net losses ($11.1 million in Q1 2019) and has an accumulated deficit of $82.5 million as of March 31, 2019, with no product revenue generated to date[89] - A public offering in March 2019 generated approximately $46.6 million in net proceeds, expected to fund operations through 2020[88][90] Novartis License Agreement - The company holds an exclusive, worldwide license from Novartis for RTB101 and its combination with everolimus, covering composition of matter, formulations, and methods of use[93] - The agreement includes potential milestone payments of up to $4.3 million for clinical, $42 million for regulatory, and $125 million for commercial achievements, plus tiered royalties[96] - A $2.5 million milestone payment was triggered in May 2019 upon the initiation of a Phase 3 clinical trial for the first indication[97] Financial Operations Overview - The company has not generated any revenue from product sales and does not expect to until RTB101 receives regulatory approval and is commercialized[98] - Research and development expenses are expensed as incurred and are expected to increase substantially as product candidates advance through clinical development and manufacturing[100][103] - General and administrative expenses are expected to increase due to anticipated headcount growth and costs associated with operating as a public company[108] - Other income, net, primarily consists of interest income earned on cash, cash equivalents, and marketable securities[109] Revenue - The company has not generated any revenue from product sales and does not expect to until regulatory approval and commercialization of RTB101[98] Operating Expenses - Research and development expenses include personnel, third-party contract organizations, clinical trial sites, preclinical/clinical material production, and lab expenses, all expensed as incurred[100][102] - R&D expenses are expected to increase substantially due to continued investment in product candidates, manufacturing, and clinical trials[103] - General and administrative expenses are expected to increase due to anticipated headcount and costs associated with operating as a public company[108] Other Income, Net - Other income, net, primarily consists of interest income earned on cash, cash equivalents, and marketable securities[109] Results of Operations | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $8,852 | $8,106 | | General and administrative | $2,839 | $2,094 | | Total operating expenses | $11,691 | $10,200 | | Net loss | $(11,069) | $(9,859) | | Other income, net | $631 | $341 | - Net loss increased to $11.1 million in Q1 2019 from $9.9 million in Q1 2018, driven by a $1.5 million increase in total operating expenses[110] Comparison of the Three Months Ended March 31, 2019 and 2018 - Research and development expenses increased by $0.7 million to $8.9 million in Q1 2019, primarily due to higher costs from third-party contract organizations, clinical trials, preclinical studies, and personnel[112] - General and administrative expenses increased by $0.7 million to $2.8 million in Q1 2019, mainly due to increased personnel and professional services fees (intellectual property, legal, accounting, insurance, and consulting)[113] - Other income, net, increased to $0.6 million in Q1 2019 from $0.3 million in Q1 2018, primarily from interest income[114] Liquidity, Capital Resources and Plan of Operations - The company completed a public offering in March 2019, generating approximately $46.6 million in net proceeds[115] - As of March 31, 2019, the company had $143.1 million in cash, cash equivalents, and marketable securities, and an accumulated deficit of $82.5 million[116] - Existing capital is expected to fund operations through 2020, including the completion of a pivotal Phase 3 clinical program for RTB101 and an NDA filing[118] - The company will require additional financing for future development and operations, with no current credit facility or committed sources of capital, and failure to raise capital could negatively impact business plans[118][120][121] | Cash Flow Activity | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities| $(12,049) | $(7,304) | | Net cash used in investing activities| $(34,628) | $(278) | | Net cash provided by financing activities| $46,816 | $89,938 | - Cash used in operating activities increased to $12.0 million in Q1 2019, primarily due to the net loss and changes in operating assets and liabilities[123] - Cash used in investing activities was $34.6 million in Q1 2019, mainly for purchases of marketable securities ($77.1 million) offset by maturities ($42.5 million)[124] - Cash provided by financing activities was $46.8 million in Q1 2019 from the public offering, compared to $89.9 million in Q1 2018 from the IPO[125] Contractual Obligations and Other Commitments - There have been no material changes to the company's contractual obligations and commitments since those reported in the Annual Report on Form 10-K for the year ended December 31, 2018[127] Off-Balance Sheet Arrangements - The company does not have any off-balance sheet arrangements or holdings in variable interest entities[128] Critical Accounting Polices and Estimates - The financial statements are prepared under U.S. GAAP, requiring management estimates and assumptions, particularly for accrued research and development costs[129][130] - Research and development costs are expensed as incurred, including personnel, lab supplies, and fees paid to third parties[131][132] Recently Issued and Adopted Accounting Pronouncements - The company is evaluating the potential effects of ASU 2016-02 (Leases), ASU 2016-18 (Cash Flows), ASU 2017-11 (Down Round Features), and ASU 2018-07 (Share-Based Payment Accounting)[133][135][136][137] - Most new pronouncements are not expected to have a material impact on the consolidated financial statements[135][136] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate sensitivity on its investment portfolio and foreign currency fluctuations from global contracts - The company's primary market risk exposure is interest rate sensitivity on its $143.1 million in short-term marketable securities (U.S. treasury securities and money market funds)[138] - An immediate 100 basis point change in interest rates is not expected to materially affect the fair value of the investment portfolio due to its short-term duration and low risk profile[138] - The company is subject to foreign currency fluctuations from global contracts but has not engaged in hedging activities[139] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2019[143] - There were no material changes in internal control over financial reporting during the fiscal quarter ended March 31, 2019[144] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section states that the company is not currently involved in any legal proceedings expected to have a material adverse impact on its financial condition - As of March 31, 2019, the company was not a party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow[146] Item 1A. Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018[147] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the proceeds from the company's initial public offering (IPO) and how those funds have been utilized since its closing - The company closed its initial public offering (IPO) on January 30, 2018, issuing 6,516,667 shares of common stock at $15.00 per share, generating approximately $89.4 million in net proceeds[148][149] - As of March 31, 2019, approximately $48.9 million of the IPO proceeds have been used to advance product candidates through clinical trial programs, for working capital, and general corporate purposes[150] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - Not applicable[150] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[150] Item 5. Other Information This section indicates that there is no other information to report - None[150] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report, including various agreements, certifications, and XBRL documents - The Exhibit Index includes amendments to offer letters and office leases, certifications of principal officers, and XBRL taxonomy documents[151][152] Signatures This section contains the official signatures of the company's principal executive and financial officers, certifying the report - The report is signed by Chen Schor, President and Chief Executive Officer, and John J. McCabe, Vice President, Finance, on May 15, 2019[154]