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Adverum Biotechnologies(ADVM) - 2019 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The company's unaudited Q1 2019 financials show a net loss of $14.5 million and total assets of $221.0 million Condensed Consolidated Balance Sheets Total assets grew to $221.0 million due to a new lease asset, while liabilities also increased accordingly Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $144,107 | $154,949 | | Short-term investments | $45,381 | $50,130 | | Total current assets | $193,137 | $208,754 | | Operating lease right-of-use asset | $22,592 | $— | | Total assets | $221,047 | $213,495 | | Liabilities & Equity | | | | Total current liabilities | $10,610 | $10,719 | | Lease liability, non-current | $22,078 | $— | | Total liabilities | $32,904 | $12,328 | | Accumulated deficit | $(335,032) | $(320,543) | | Total stockholders' equity | $188,143 | $201,167 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a Q1 2019 net loss of $14.5 million, an improvement from the prior year due to lower R&D expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Collaboration and license revenue | $— | $216 | | Research and development | $10,131 | $12,794 | | General and administrative | $5,576 | $5,368 | | Operating loss | $(15,707) | $(17,946) | | Net loss | $(14,489) | $(17,200) | | Net loss per share | $(0.23) | $(0.30) | Condensed Consolidated Statements of Stockholders Equity Stockholders' equity declined to $188.1 million, primarily driven by the quarterly net loss - Total stockholders' equity decreased by $13.1 million during the first quarter of 2019, mainly due to the net loss of $14.5 million8 Condensed Consolidated Statements of Cash Flows Net cash used in operations was $13.2 million, contributing to a total cash decrease of $10.8 million for the quarter Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,217) | $(12,984) | | Net cash provided by investing activities | $2,745 | $25,383 | | Net cash provided by (used in) financing activities | $(370) | $69,798 | | Net (decrease) increase in cash | $(10,842) | $82,197 | - The significant difference in financing activities between Q1 2019 and Q1 2018 is due to $70.2 million in net proceeds from common stock sales in 2018, which did not recur in 201961 Notes to Condensed Consolidated Financial Statements Key notes cover the company's clinical-stage status, adoption of a new lease standard, and collaboration agreement updates - The company is a clinical-stage gene therapy company with an accumulated deficit of $335.0 million as of March 31, 2019, but believes it has sufficient funds to continue operations into 202114 - On January 1, 2019, the company adopted the new lease accounting standard (Topic 842), recording a lease liability of $24.7 million and a right-of-use asset of $23.1 million16 - The collaboration agreement with Editas generated no revenue in Q1 2019, as the remaining performance obligations were completed in 20182526 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Management discusses the clinical hold on its lead product, ADVM-022, and financial results, including a reduced net loss - The company's lead product candidate, ADVM-022 for wet AMD, is in a Phase 1 OPTIC trial; however, the FDA placed the IND on clinical hold in April 201941 - Development of ADVM-043 for A1AT deficiency was discontinued based on data from the ADVANCE trial41 - R&D expenses decreased by $2.7 million, primarily due to a $3.3 million reduction in costs from discontinuing the ADVM-043 program53 - As of March 31, 2019, the company had $189.5 million in cash, cash equivalents, and short-term investments, which is believed to be sufficient to fund operations into 20214356 Results of Operations Comparison (in thousands) | Line Item | Q1 2019 | Q1 2018 | Change | | :--- | :--- | :--- | :--- | | Collaboration and license revenue | $— | $216 | $(216) | | Research and development | $10,131 | $12,794 | $(2,663) | | General and administrative | $5,576 | $5,368 | $208 | | Operating loss | $(15,707) | $(17,946) | $2,239 | | Net loss | $(14,489) | $(17,200) | $2,711 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from this disclosure as a smaller reporting company - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company under SEC rules64 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter-end - The CEO and CFO concluded that as of March 31, 2019, the company's disclosure controls and procedures were effective65 - No material changes were made to the company's internal control over financial reporting during the first quarter of 201965 PART II—OTHER INFORMATION Item 1. Legal Proceedings The company reports no material legal proceedings for the period - Not applicable68 Item 1A. Risk Factors The company faces significant financial, developmental, commercial, and operational risks - Financial Risk: The company has a history of significant operating losses, with an accumulated deficit of $335.0 million as of March 31, 2019, and will require substantial additional funding70 - Development Risk: The FDA placed the IND for lead candidate ADVM-022 on clinical hold in April 2019; failure to lift the hold would harm the business7374 - Commercialization Risk: ADVM-022, if approved, will compete with well-established anti-VEGF therapies like Lucentis® and EYLEA®, requiring market acceptance and adequate reimbursement104 - Reliance on Third Parties: The company depends on third parties to conduct clinical trials and manufacture its product candidates, introducing risks related to performance and supply chain continuity8183 - Intellectual Property Risk: The business relies on licensed patents and proprietary technology, and the inability to maintain or protect this IP could materially harm the company125126 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable162 Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None162 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable162 Item 5. Other Information The company reports no other material information for the period - Not applicable162 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications - Exhibits filed include the Employment Agreement with CFO Thomas Leung, CEO and CFO certifications (Rule 13a-14(a) and Section 906), and XBRL interactive data files163164 Signatures Signatures The report is duly signed by the Chief Executive Officer and Chief Financial Officer - The Form 10-Q was signed on May 8, 2019, by Leone Patterson (CEO) and Thomas Leung (CFO)166167