Adicet Bio(ACET) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's discussion and analysis for the period Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, showing increased net loss Condensed Consolidated Balance Sheets Total assets increased to $122.0 million from $109.9 million, driven by higher cash, while liabilities and equity also grew | Financial Metric | Sep 30, 2019 (in thousands) | Dec 31, 2018 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $23,621 | $7,042 | | Marketable securities | $93,641 | $100,986 | | Total current assets | $121,281 | $109,534 | | Total assets | $121,963 | $109,939 | | Liabilities & Equity | | | | Total current liabilities | $12,193 | $5,716 | | Total liabilities | $12,199 | $5,735 | | Total stockholders' equity | $109,764 | $104,204 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss significantly increased to $24.4 million for Q3 2019 and $53.8 million for nine months, primarily due to higher R&D expenses | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $22,118 | $6,765 | $47,523 | $26,716 | | General and administrative | $3,043 | $2,267 | $8,498 | $6,629 | | Total operating expenses | $25,161 | $9,032 | $56,021 | $33,345 | | Net loss | ($24,448) | ($8,407) | ($53,849) | ($31,857) | | Net loss per share | ($0.68) | ($0.30) | ($1.51) | ($1.23) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $48.0 million, offset by $56.5 million from financing, resulting in a $16.6 million cash increase | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($48,036) | ($27,805) | | Net cash provided by (used in) investing activities | $8,155 | ($92,626) | | Net cash provided by financing activities | $56,460 | $89,938 | | Net increase (decrease) in cash | $16,579 | ($30,493) | | Cash at end of period | $23,621 | $22,856 | Notes to Financial Statements Details accounting policies, financing activities including $49.8 million from public offering, and a $2.5 million milestone payment to Novartis - The company completed a public offering in March/April 2019, raising net proceeds of approximately $49.8 million. Additionally, an at-the-market (ATM) offering program was established, selling approximately 688,000 shares for net proceeds of $6.7 million through September 30, 2019[23][24] - As of September 30, 2019, the company had $117.3 million in cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations for at least the next twelve months[25] - Under the license agreement with Novartis, the company made a $2.5 million milestone payment in May 2019 upon initiating a Phase 3 clinical trial. Future potential payments include up to $1.8 million for clinical milestones, $42 million for regulatory milestones, and $125 million for commercial milestones, plus tiered royalties[52][53] Stock-Based Compensation | Expense Category | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Research and development | $633 | $1,409 | | General and administrative | $569 | $1,399 | | Total stock-based compensation | $1,202 | $2,808 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses the company's clinical programs for RTB101, increased R&D expenses, higher net loss, and liquidity position of $117.3 million Overview Introduces resTORbio as a clinical-stage biopharmaceutical company developing RTB101 for aging-related diseases, including Phase 3 and 1b/2a trials - The company's lead product candidate, RTB101, is being evaluated in a Phase 3 program (PROTECTOR 1 & 2) to reduce clinically symptomatic respiratory illness in adults 65 and older. PROTECTOR 1 has completed enrollment of 1,024 patients, with top-line data expected in early Q1 2020[87] - A Phase 1b/2a clinical trial of RTB101 for Parkinson's disease was initiated in April 2019. The trial will enroll 45 patients to evaluate safety and tolerability, with data expected in 2020[88] - The company expects to incur increasing operating losses as it advances its clinical programs, expands its pipeline, and prepares for potential commercialization[96] Results of Operations R&D expenses significantly increased to $22.1 million for Q3 and $47.5 million for nine months, driven by clinical trial costs Three Months Ended September 30 | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Research and development | $22,118 | $6,765 | | General and administrative | $3,043 | $2,267 | | Net loss | ($24,448) | ($8,407) | - The increase in R&D expenses for Q3 2019 was primarily driven by $17.0 million in costs related to clinical trials, including the ongoing Phase 3 program, compared to $2.6 million for the Phase 2b trial in the same period of 2018[118] Nine Months Ended September 30 | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Research and development | $47,523 | $26,716 | | General and administrative | $8,498 | $6,629 | | Net loss | ($53,849) | ($31,857) | - The increase in R&D expenses for the nine-month period was primarily due to $30.6 million in clinical trial costs and a $2.5 million milestone payment, compared to $17.3 million in clinical trial costs in the prior year period[123] Liquidity and Capital Resources The company held $117.3 million in cash and equivalents, funded by equity offerings, sufficient for operations through 2020 - As of September 30, 2019, the company had $117.3 million in cash, cash equivalents, and marketable securities and an accumulated deficit of $125.2 million[129] - Management believes existing cash will be sufficient to fund operating expenses and capital expenditure requirements through 2020, including the completion of the PROTECTOR Phase 3 program[131] Cash Flow Summary | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($48,036) | ($27,805) | | Net cash provided by (used in) investing activities | $8,155 | ($92,626) | | Net cash provided by financing activities | $56,460 | $89,938 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate sensitivity on $117.3 million in cash and securities, with minor foreign currency exposure - The company's main market risk is interest rate sensitivity on its $117.3 million portfolio of cash and short-term marketable securities. A 100 basis point change in interest rates is not expected to have a material effect on the portfolio's fair market value[147] - The company is subject to fluctuations in foreign currency rates through its contracts with global CROs and manufacturers but has not engaged in hedging activities[148] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of September 30, 2019, the Chief Executive Officer and Vice President, Finance concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[152] - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[153] PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures Item 1. Legal Proceedings As of September 30, 2019, no material adverse legal proceedings were pending against the company - As of September 30, 2019, the company was not party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow[155] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for 2018 - There have been no material changes to the risk factors set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2018[156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the use of $81.8 million from the January 2018 IPO proceeds for clinical trials and general corporate purposes - The company's January 2018 IPO generated aggregate net proceeds of approximately $89.4 million. As of September 30, 2019, approximately $81.8 million of these proceeds have been used to advance clinical trial programs and for general corporate purposes[158][159] Other Items (Items 3, 4, 5, 6) Items 3, 4, and 5 are reported as not applicable or none, while Item 6 lists the exhibits filed - Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) are all reported as not applicable or none[159]