Adicet Bio(ACET) - 2022 Q4 - Annual Report

Part I Business Adicet Bio is a clinical-stage biotech developing allogeneic gamma delta T cell therapies for cancer, with lead candidate ADI-001 Overview and Pipeline Adicet Bio's pipeline includes lead candidate ADI-001 in Phase 1 for NHL, preclinical ADI-925, and licensed ADI-002 - The company is a clinical-stage biotechnology firm focused on developing "off-the-shelf" allogeneic gamma delta T cell therapies for cancer[16] - Lead product candidate ADI-001 is a first-in-class allogeneic gamma delta T cell therapy targeting CD20, currently in a Phase 1 study for relapsed or refractory B-cell non-Hodgkin's lymphoma (NHL)[18][19] - The pipeline includes ADI-925, a novel engineered CAd gamma delta T cell product candidate, with an IND application planned for the second half of 2023[23] - Regeneron has exercised its option to license the exclusive worldwide rights to ADI-002, a gamma delta CAR T-cell therapy for solid tumors. Regeneron is now responsible for all development, manufacturing, and commercialization[23][70] Strategy and Technology Strategy focuses on advancing ADI-001 and leveraging its Vδ1 gamma delta T cell platform for 'off-the-shelf' therapies - Key strategic elements include advancing ADI-001, innovating the gamma delta T cell platform, exploring outpatient administration, and expanding intellectual property[25] - The company's Vδ1 gamma delta T cell platform is designed to overcome limitations of autologous alpha beta T cell therapies, such as treatment delays, manufacturing variability, and high costs[33][37] - Key advantages of gamma delta T cells include lack of GvHD, MHC-independent tumor recognition, inherent tumor localization, and potential for re-dosing, making them suitable for an allogeneic, "off-the-shelf" approach[36] - The company's proprietary manufacturing process involves isolating peripheral blood cells from unrelated donors, activating Vδ1 gamma delta T cells, transducing them with CAR or CAd constructs, and expanding them over 6,000-fold at clinical scale[49][51] ADI-001 Clinical Program ADI-001, an allogeneic anti-CD20 CAR gamma delta T cell therapy, showed promising Phase 1 efficacy and safety in NHL ADI-001 Phase 1 Interim Efficacy Results (as of Dec 5, 2022) | Metric | Result | | :--- | :--- | | Overall Response Rate (ORR) | 75% overall response rate (ORR) (across all dose levels) | | Complete Response (CR) Rate | 69% complete response (CR) rate (across all dose levels) | | ORR & CR in post-CAR T LBCL patients | 100% (5/5) | | CR Rate in LBCL patients (DL3 and above) | 86% (6/7) | - ADI-001 has been generally well-tolerated, with no occurrences of dose-limiting toxicities, Graft versus Host Disease (GvHD), or Grade 3 or higher Cytokine Release Syndrome (CRS) or immune effector cell-associated neurotoxicity syndrome (ICANS)[64] - The company plans to discuss a potential pivotal study path with the FDA in Q2 2023 and intends to initiate a study in post-CAR T large B-cell lymphoma (LBCL) patients in the second half of 2023[19] Manufacturing, IP, and Competition The company is developing internal GMP manufacturing, holds IP, and faces intense competition in cell therapy - The company relies on third-party CDMOs for manufacturing but is also establishing internal GMP cell processing and vector manufacturing operations at its Redwood City, CA facility[88][89] - The patent portfolio for ADI-001 includes applications which, if issued, would expire in 2039, with additional methods of treatment applications potentially extending to 2042[77] - The patent portfolio for ADI-925 includes applications which, if issued, would expire between 2042 and 2043[77] - The company faces competition from numerous companies in the allogeneic T-cell therapy space (e.g., Allogene, Caribou, Fate) and autologous T-cell therapy space (e.g., Gilead, Bristol-Myers Squibb, Novartis)[94] Government Regulation The company's biologics are subject to extensive FDA and international regulations, including BLA and healthcare laws - The company's cell therapy products are regulated as biologics and require submission and approval of a Biologics License Application (BLA) from the FDA before marketing[101] - The FDA provides expedited development programs for serious conditions, including Fast Track, Priority Review, Accelerated Approval, and Regenerative Medicine Advanced Therapy (RMAT) designation, which the company may pursue[126][131] - The company's operations are subject to various U.S. healthcare laws, including the federal Anti-Kickback Statute, the False Claims Act, HIPAA, and the Physician Payments Sunshine Act[144][145][148][154] - Recent healthcare reform, such as the Inflation Reduction Act of 2022 (IRA), may impact the business through provisions allowing government price negotiation for Medicare drugs and imposing rebates for price increases faster than inflation[165][166] - International operations are subject to foreign regulations, including the EU's Clinical Trials Regulation and the General Data Protection Regulation (GDPR), which imposes stringent requirements for processing personal data[180][186] Risk Factors The company faces significant risks from limited operating history, net losses, ADI-001 dependency, and regulatory challenges - The business is highly dependent on the success of its lead product candidate, ADI-001. Any failure or delay in its development or commercialization would significantly harm the company[209][211] - The company's gamma delta T cell candidates represent a novel approach, making it difficult to predict development time, cost, and the likelihood of regulatory approval[212][215] - The company has a history of net losses ($69.8 million in 2022) and expects to incur substantial losses in the future, which could raise doubts about its ability to continue as a going concern without additional financing[204][207] - Reliance on third-party suppliers and manufacturers increases the risk of not having sufficient quantities of product candidates at an acceptable cost, which could impair development and commercialization[250] - Termination of or material breach by Regeneron of the collaboration agreement would materially harm the company's business, prospects, and financial condition[313] - Unstable market and economic conditions, including rising inflation and interest rates, could adversely affect the company's business, financial condition, and ability to raise capital[433][437] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[465] Properties The company leases executive offices in Boston and significant office/lab space, including GMP facilities, in Redwood City - The company leases office and laboratory space in Boston, MA (lease expires July 2023) and Redwood City, CA (leases expire Feb 2030 and June 2025)[465] Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[466] Mine Safety Disclosures This item is not applicable to the company - Not applicable[466] 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 'ACET' and does not anticipate paying cash dividends - The company's common stock trades on The Nasdaq Global Market under the symbol "ACET"[468] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[469] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2022 financials show increased revenue, higher expenses, a net loss, and cash for operations into H1 2025 Results of Operations In 2022, revenue surged from a Regeneron payment, while R&D and G&A expenses increased, leading to a wider net loss Comparison of Operations (Years Ended Dec 31) | Financial Metric | 2022 ($) | 2021 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $24.99M | $9.73M | 157% | | Research & Development | $71.25M | $48.94M | 46% | | General & Administrative | $26.30M | $22.22M | 18% | | Total Operating Expenses | $97.54M | $71.16M | 37% | | Net Loss | ($69.79M) | ($62.00M) | 13% | - The $15.3 million increase in revenue was primarily due to the $20.0 million payment received from Regeneron for the exercise of its option related to ADI-002[497] - R&D expenses increased by $22.3 million, mainly from a $9.9 million increase in payroll due to higher headcount, a $4.4 million increase in CDMO/CRO costs for ADI-001, and a $4.2 million increase in facility expenses[499] Liquidity and Capital Resources As of December 31, 2022, the company held $257.7 million in cash, expected to fund operations into H1 2025 - As of December 31, 2022, the company had cash and cash equivalents of $257.7 million[508] - Management expects current cash and cash equivalents to be sufficient to fund operations into the first half of 2025[261][508] - In August 2022, the company sold 2,611,723 shares of common stock through its ATM program, resulting in net proceeds of approximately $43.4 million[507] Summary Statement of Cash Flows (Years Ended Dec 31) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in Operating | ($44.77M) | ($51.05M) | | Net cash used in Investing | ($16.78M) | ($2.80M) | | Net cash provided by Financing | $41.51M | $242.69M | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on cash, but a 10% change is not expected to be material - The company's primary market risk is interest rate risk on its $257.7 million of cash and cash equivalents, but an immediate 10% change in rates is not expected to have a material impact[538] - Foreign currency exchange risk and inflation risk were not considered to have a material effect on the business during 2022 and 2021[539][540] Financial Statements and Supplementary Data This section incorporates by reference the company's consolidated financial statements and supplementary data from Part IV - All required financial statements and supplementary data are filed under Item 15(a) of the Annual Report on Form 10-K[541] 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[541] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[542] - Management assessed internal control over financial reporting and concluded it was effective as of December 31, 2022, based on the COSO framework[546] - No material changes in internal control over financial reporting occurred during the year ended December 31, 2022[548] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - The required information for this item is incorporated by reference from the company's 2023 Proxy Statement[551] Executive Compensation Information on executive compensation is incorporated by reference from the 2023 Proxy Statement - The required information for this item is incorporated by reference from the company's 2023 Proxy Statement[553] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2023 Proxy Statement - The required information for this item is incorporated by reference from the company's 2023 Proxy Statement[553] Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - The required information for this item is incorporated by reference from the company's 2023 Proxy Statement[554] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - The company's independent public accounting firm is KPMG LLP. Information on fees and services is incorporated by reference from the 2023 Proxy Statement[555] Part IV Exhibits and Financial Statement Schedules This section includes consolidated financial statements, the independent auditor's report, and an index of all filed exhibits - This section includes the Report of Independent Registered Public Accounting Firm and the Consolidated Financial Statements for the years ended December 31, 2022 and 2021[557] - An index of all exhibits filed as part of the Annual Report is provided[558] Financial Statements Consolidated Financial Statements In 2022, Adicet Bio reported $330.7M total assets, $25.0M revenue, $69.8M net loss, and $257.7M cash Consolidated Balance Sheet Data (as of Dec 31) | Account | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $257.7M | $277.5M | | Total Assets | $330.7M | $338.9M | | Total Liabilities | $38.4M | $35.8M | | Total Stockholders' Equity | $292.3M | $303.1M | Consolidated Statement of Operations Data (Year Ended Dec 31) | Account | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Revenue | $25.0M | $9.7M | | Total Operating Expenses | $97.5M | $71.2M | | Loss from Operations | ($72.6M) | ($61.4M) | | Net Loss | ($69.8M) | ($62.0M) | | Net Loss Per Share | ($1.70) | ($2.00) | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | Activity | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($44.8M) | ($51.1M) | | Net cash used in investing activities | ($16.8M) | ($2.8M) | | Net cash provided by financing activities | $41.5M | $242.7M | Notes to Consolidated Financial Statements The notes detail accounting policies, liquidity, Regeneron revenue, operating leases, stock compensation, and federal net operating loss carryforwards - The company has an accumulated deficit of $238.1 million as of December 31, 2022, but expects its cash and cash equivalents to be sufficient to fund operations for at least the next twelve months[582][586] - All revenue for 2022 and 2021 was generated from the License and Collaboration Agreement with Regeneron. The company's performance obligations under this agreement were completed in the first quarter of 2022[607][649] - As of December 31, 2022, the company had federal net operating loss carryforwards of approximately $271.2 million, of which $263.6 million can be carried forward indefinitely[709] - In August 2022, the company sold 2,611,723 shares of common stock under its ATM offering, raising net proceeds of $43.4 million[585][715]