Adaptimmune(ADAP) - 2020 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements The company's unaudited condensed consolidated financial statements for the periods ended June 30, 2020, are presented, detailing balance sheets, operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $122,359 | $50,412 | | Marketable securities | $296,629 | $39,130 | | Total assets | $512,201 | $181,543 | | Total liabilities | $104,616 | $57,905 | | Total stockholders' equity | $407,585 | $123,638 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $502 | $157 | $1,263 | $157 | | Research and development | $(20,460) | $(25,511) | $(41,724) | $(47,530) | | General and administrative | $(10,295) | $(10,148) | $(19,556) | $(21,921) | | Net loss | $(29,880) | $(41,087) | $(58,047) | $(68,499) | | Net loss per share | $(0.04) | $(0.07) | $(0.07) | $(0.11) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,058) | $(70,371) | | Net cash (used in) provided by investing activities | $(258,952) | $36,217 | | Net cash provided by financing activities | $339,463 | $366 | - The company entered into a collaboration agreement with Astellas in January 2020, receiving a $50.0 million non-refundable upfront payment[40] - This significantly increased deferred revenue, which grew from $2.1 million at the start of the year to $48.1 million by June 30, 2020[41] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage biopharmaceutical business, the impact of COVID-19, key clinical trial progress, and an analysis of financial results and liquidity - The company is a clinical-stage biopharmaceutical company focused on its proprietary SPEAR (Specific Peptide Enhanced Affinity Receptor) T-cell platform for solid tumors, aiming to be the first to have a TCR T-cell approved for a solid tumor indication[70] - The COVID-19 pandemic has restricted the ability of many clinical sites to treat patients, but the company's facilities in the U.S. and U.K. remain open to support manufacturing and R&D[71] - Key clinical programs include the SPEARHEAD-1 Phase 2 trial with ADP-A2M4, with plans for a commercial launch in 2022, and the SURPASS Phase 1 trial with next-generation ADP-A2M4CD8, which has shown initial responses in head and neck and esophagogastric junction cancers[73][75] - The company closed two underwritten public offerings in Q1 and Q2 2020, generating combined net proceeds of approximately $334.3 million[67][68][83] Results of Operations This section provides a detailed comparison of the company's operating results for the three and six-month periods ended June 30, 2020, highlighting changes in revenue and expenses Comparison of Operating Results for the Three Months Ended June 30 (in thousands) | Line Item | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $502 | $157 | $345 | 220% | | Research and development expenses | $(20,460) | $(25,511) | $5,051 | (20)% | | General and administrative expenses | $(10,295) | $(10,148) | $(147) | 1% | | Operating loss | $(30,253) | $(35,502) | $5,249 | (15)% | | Loss for the period | $(29,880) | $(41,087) | $11,207 | (27)% | Comparison of Operating Results for the Six Months Ended June 30 (in thousands) | Line Item | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,263 | $157 | $1,106 | 704% | | Research and development expenses | $(41,724) | $(47,530) | $5,806 | (12)% | | General and administrative expenses | $(19,556) | $(21,921) | $2,365 | (11)% | | Operating loss | $(60,017) | $(69,294) | $9,277 | (13)% | | Loss for the period | $(58,047) | $(68,499) | $10,452 | (15)% | - The decrease in R&D expenses for Q2 2020 was primarily due to a $2.0 million reduction in subcontracted expenditure (partly due to COVID-19 delays), a $1.8 million decrease in employee-related costs, and a $2.0 million decrease in in-process R&D costs compared to the prior year[109][113] Liquidity and Capital Resources The company details its funding sources, liquidity position as of June 30, 2020, and management's outlook on capital sufficiency, driven by recent public offerings and collaboration payments Total Liquidity (Non-GAAP, in thousands) | Component | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $122,359 | $50,412 | | Marketable securities | $296,629 | $39,130 | | Total Liquidity | $418,988 | $89,542 | - Net cash provided by financing activities was $339.5 million for the six months ended June 30, 2020, primarily from two public offerings that generated net proceeds of $90.5 million and $243.8 million, respectively[136] - Net cash used in operating activities decreased significantly to $8.1 million for the first six months of 2020 from $70.4 million in the same period of 2019, largely due to the receipt of a $50.0 million upfront payment from Astellas[131] - Management believes that its Total Liquidity of $419.0 million as of June 30, 2020, will be sufficient to fund operations into 2022[128] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Adaptimmune is not required to provide the information requested in this item - The company is not required to provide information for this item as it qualifies as a smaller reporting company[142] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2020 - Based on an evaluation as of June 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[143] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[144] PART II — OTHER INFORMATION Legal Proceedings As of June 30, 2020, the company reports that it was not a party to any material legal proceedings - As of June 30, 2020, the company was not a party to any material legal proceedings[145] Risk Factors This section outlines significant risks, including the impact of COVID-19, financial condition, challenges in cell therapy development, regulatory processes, and commercialization Risks Related to the COVID-19 pandemic The COVID-19 pandemic poses material risks to the business, potentially delaying clinical programs, research, financing, and impacting third-party suppliers and patient enrollment - The COVID-19 pandemic has caused many clinical trial sites to delay treatment and enrollment of patients, which will extend the time required to complete clinical trials and obtain data[150] - The pandemic may impact third parties necessary for commercialization, creating risks in scaling up manufacturing and ensuring timely availability of reagents, raw materials, and contract manufacturing services[151] Risks Related to Our Financial Condition and Capital Requirements The company faces risks due to a history of net losses and the need for additional capital, with future profitability uncertain and dependent on successful therapy development and commercialization - The company has incurred net losses every year since inception, with an accumulated deficit of $483.8 million as of June 30, 2020[158] - The company believes its total liquidity will be sufficient to fund operations into 2022, but this is based on estimates and failure to obtain additional financing in the future could raise doubt about its ability to continue as a going concern[162] Risks Related to the Development of Our Cell Therapies Developing novel cell therapies involves substantial risks, including dependence on lead candidates, potential for adverse events, manufacturing complexities, and challenges in clinical trial enrollment - The business is highly dependent on its wholly-owned SPEAR T-cell candidates (ADP-A2M4, ADP-A2M4CD8, ADP-A2AFP), which require significant additional clinical testing before seeking regulatory approval[172] - A prior SPEAR T-cell (MAGE-A3) caused two patient deaths due to cross-reactivity with the TITIN protein in the heart, highlighting the risk of potentially fatal off-target effects for current and future therapies[184] - Manufacturing and administering cell therapies is a complex, highly regulated process involving patient-specific logistics, with risks of failure at multiple steps that could delay or halt clinical trials[227][228] Risks Related to Government Regulation The company faces risks from a lengthy and uncertain regulatory approval process for novel cell therapies, ongoing compliance obligations, and the complexities of international approvals and anti-corruption laws - The novel nature of the company's SPEAR T-cells creates additional challenges in obtaining regulatory approval, as the FDA has limited experience with commercial development of T-cell therapies for cancer[270] - Even if regulatory approval is received, the company will be subject to ongoing surveillance, extensive recordkeeping, and compliance with cGMPs, with potential for significant penalties for non-compliance[292][293] - The company benefits from the U.K. R&D tax credit regime but may lose this benefit if it no longer qualifies as a small or medium-sized enterprise (SME), which could impact its need for investment[322][323] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds during the period - None[490] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[490] Mine Safety Disclosures This item is not applicable to the company - Not applicable[490] Other Information The company reports no other information for this item - None[490] Exhibits This section lists the exhibits filed with the Form 10-Q, which include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, and the financial statements formatted in iXBRL - Exhibits filed include: * Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906 * Financial information from the Form 10-Q formatted in iXBRL (Inline eXtensible Business Reporting Language)[491][492]