Adverum Biotechnologies(ADVM) - 2019 Q4 - Annual Report

PART I Business Adverum Biotechnologies is a clinical-stage gene therapy company developing ADVM-022 for ocular diseases and leveraging a proprietary AAV vector platform - Adverum's lead product candidate, ADVM-022, is a gene therapy for wet AMD and diabetic retinopathy, administered as a single intravitreal injection using an AAV.7m8 vector[7] - The company is conducting the OPTIC trial, a Phase 1 study of ADVM-022 in wet AMD patients, which has received FDA Fast Track designation[7] - Adverum plans to file an IND for ADVM-022 in diabetic retinopathy in the first half of 2020 and initiate a Phase 1/2 trial in the second half of 2020[7] - The company's manufacturing process utilizes the Baculovirus Expression Vector System (BEVS) for high-yield, scalable AAV vector production up to 2000-liter scale[38] - In August 2019, development of ADVM-043 for Alpha-1 Antitrypsin deficiency was discontinued due to a lack of clinically meaningful protein expression in a Phase 1/2 trial[33] Our Product Candidates Adverum's product pipeline includes lead programs for wet AMD and diabetic retinopathy, a rare disease candidate, and a partnered program Product Pipeline Status | Gene Therapy Candidate | Indication | Preclinical | Phase 1 | Phase 2 | Phase 3 | | :--- | :--- | :--- | :--- | :--- | :--- | | Lead Programs | | | | | | | ADVM-022 | Wet AMD | | ■ | | | | ADVM-022 | Diabetic Retinopathy | ■ | | | | | Rare Disease | | | | | | | ADVM-053 (Early Dev) | Hereditary Angioedema | ■ | | | | | Partnered Program | | | | | | | GS030 (GenSight) | Retinitis Pigmentosa | | ■ | | | OPTIC Trial Cohort Details | Cohort | Patient Count (n) | Dose (vg/eye) | Prophylactic Steroid | | :--- | :--- | :--- | :--- | | Cohort 1 | 6 | 6 x 10^11 | 14-day oral taper | | Cohort 2 | 6 | 2 x 10^11 | 14-day oral taper | | Cohort 3 | 9 | 2 x 10^11 | 6-week topical taper | | Cohort 4 | 9 | 6 x 10^11 | 6-week topical taper | - As of February 2020, in the OPTIC trial, 6 of 6 patients in high-dose cohort 1 remained rescue injection-free at a median follow-up of 50 weeks, while 4 of 6 patients in lower-dose cohort 2 were rescue injection-free at 24 weeks[22] - ADVM-022 has been well-tolerated with no drug-related serious adverse events or dose-limiting toxicities, and low-grade ocular inflammation was responsive to steroid eye drops[22] - In May 2019, the FDA lifted a clinical hold on the ADVM-022 IND, allowing dose escalation up to 2 x 10^12 vg/eye, though a partial clinical hold remains for 6 x 10^12 vg/eye doses pending CMC resolution[32] Competition The company faces significant competition from established anti-VEGF therapies and emerging next-generation treatments for ocular diseases - ADVM-022 will compete with established anti-VEGF therapies from major pharmaceutical companies[40] - Key competitive categories for wet AMD and diabetic retinopathy include biosimilar anti-VEGFs, combination therapies, next-generation anti-VEGFs, and long-acting delivery systems or gene therapies like RGX-314[40] License and Collaboration Agreements The company manages various agreements, including a Regeneron collaboration expiring in 2020, an exclusive license for AAV.7m8, and an ongoing dispute with Virovek - The research collaboration with Regeneron, initiated in May 2014, is anticipated to expire on May 1, 2020, as Regeneron did not exercise its extension option[41] - The company holds an exclusive worldwide license from the University of California for intellectual property related to the AAV.7m8 capsid used in ADVM-022[42] - A dispute exists with Virovek, Inc. regarding their notice of intent to terminate a non-exclusive license for AAV manufacturing technology, which Adverum disputes[49] Intellectual Property The company protects its technology through over 40 issued patents and 150 pending applications, covering AAV-based delivery and the AAV.7m8 vector - The company owns or licenses over 40 issued patents and 150 pending patent applications in the U.S. and foreign jurisdictions[50] - Company-owned patent families cover AAV-based delivery of anti-VEGF proteins for eye diseases, with patents expected to expire between 2033 and 2039[51] - A key exclusively licensed patent family covers the novel AAV.7m8 vector, with patents expected to expire in 2032[54] Risk Factors The company faces substantial financial, development, clinical trial, third-party reliance, commercialization, and intellectual property risks, including a history of losses and dependence on ADVM-022 success - Financial Risk: The company has a history of significant operating losses and will require additional funding beyond existing cash, which is projected to fund operations into 2022[79][80][81] - Development Risk: The business substantially depends on the success of ADVM-022, whose IND remains on partial clinical hold for 6 x 10^12 vg/eye dosing pending resolution of FDA CMC requirements[83] - Clinical Trial Risk: Preliminary and interim data from trials like OPTIC may change, and ocular inflammation is a known side effect of ADVM-022 requiring management[88][92] - Third-Party Reliance Risk: Reliance on third parties for preclinical testing, clinical trials, and manufacturing introduces risks of delays, non-compliance, and supply disruptions[94][95][96] - Commercialization Risk: Significant uncertainties exist regarding market acceptance, pricing, and reimbursement for a single-administration gene therapy, alongside competition from established and developing therapies[107][118][112] - Intellectual Property Risk: Reliance on licensed patents and an ongoing dispute with Virovek over a manufacturing technology license pose risks to product development[141] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[176] Properties In January 2020, the company relocated its corporate headquarters to an 81,000 square foot facility in Redwood City, California, under a ten-year lease - The company's new corporate headquarters is an 81,000 square foot facility in Redwood City, California, under a ten-year lease that commenced in January 2020[177] Legal Proceedings The company reports no legal proceedings - Not applicable[178] Mine Safety Disclosures The company reports no mine safety disclosures - Not applicable[178] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "ADVM", has approximately 15 record holders, and has never paid cash dividends, nor does it anticipate doing so - The company's common stock is listed on the Nasdaq Global Market under the ticker symbol "ADVM"[180] - The company has never declared or paid cash dividends and intends to retain all future earnings for business development[182] Selected Financial Data The company is not required to provide this information as it qualifies as a smaller reporting company - The company is not required to provide this information as it qualifies as a smaller reporting company[184] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2019, the company reported a net loss of $64.5 million, an improvement from 2018, with $166.0 million in cash and investments, supplemented by a $140.8 million February 2020 offering, expected to fund operations into 2022 Results of Operations (2019 vs. 2018) (In thousands) | (In thousands) | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Collaboration and license revenue | $250 | $1,612 | $(1,362) | | Research and development | $40,419 | $50,133 | $(9,714) | | General and administrative | $28,376 | $24,560 | $3,816 | | Impairment of goodwill and intangible assets | $0 | $5,000 | $(5,000) | | Operating loss | $(68,545) | $(78,081) | $9,536 | | Net loss | $(64,486) | $(72,627) | $8,141 | - R&D expenses decreased by $9.7 million in 2019, primarily due to a $7.9 million reduction in manufacturing costs for ADVM-022 and ADVM-053[209] - G&A expenses increased by $3.8 million in 2019, driven by higher consulting, professional services, and facilities costs[210] - As of December 31, 2019, the company had an accumulated deficit of $385.0 million and cash, cash equivalents, and short-term investments totaling $166.0 million[188][215] - In February 2020, the company raised an additional $140.8 million in net proceeds from a public stock offering, with the total cash position expected to fund operations into 2022[215] Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide this information as it qualifies as a smaller reporting company - The company is not required to provide this information as it qualifies as a smaller reporting company[221] Financial Statements and Supplementary Data The consolidated financial statements for 2019 and 2018 are presented, showing 2019 total assets of $222.7 million, total liabilities of $47.8 million, and a net loss of $64.5 million, reflecting the adoption of Topic 842 Consolidated Balance Sheet Data (as of Dec 31) (In thousands) | (In thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $65,897 | $154,949 | | Short-term investments | $100,138 | $50,130 | | Total assets | $222,727 | $213,495 | | Total liabilities | $47,770 | $12,328 | | Total stockholders' equity | $174,957 | $201,167 | Consolidated Statement of Operations Data (Year ended Dec 31) (In thousands) | (In thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Collaboration and license revenue | $250 | $1,612 | | Total operating expenses | $68,795 | $79,693 | | Operating loss | $(68,545) | $(78,081) | | Net loss | $(64,486) | $(72,627) | | Net loss per share | $(1.01) | $(1.18) | - The company adopted the new lease accounting standard (Topic 842) on January 1, 2019, recording a right-of-use asset of $23.1 million and a lease liability of $24.7 million[259] - As of December 31, 2019, the company had federal net operating loss carryforwards of approximately $159.5 million and federal R&D tax credit carryforwards of $4.6 million, subject to ownership change limitations[295] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[299] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, a conclusion affirmed by Ernst & Young LLP - Management concluded that as of December 31, 2019, the company's disclosure controls and procedures were effective[300] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, based on the COSO 2013 framework[301] - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[304] Other Information This section details the company's 2020 Annual Meeting of Stockholders, scheduled for June 23, 2020, including proposal deadlines - The 2020 Annual Meeting of Stockholders is scheduled for June 23, 2020[310] PART III Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement[312] Executive Compensation The information required by this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement[313] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement[314] Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement[315] Principal Accountant Fees and Services The information required by this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement[316] PART IV Exhibits, Financial Statement Schedules This section provides an index of financial statements and exhibits filed with the Form 10-K, with consolidated financial statements located in Item 8 - This section contains the index of financial statements and exhibits filed with the Form 10-K[318][319] Form 10-K Summary The company reports no Form 10-K summary - None[322]