Adicet Bio(US:ACET)2021-03-11 16:00PART I Business Adicet Bio develops allogeneic gamma delta T cell therapies for cancer, with lead candidates ADI-001 for NHL and ADI-002 for solid tumors - Adicet Bio is a biotechnology company developing allogeneic gamma delta T cell therapies, which are "off-the-shelf" treatments for cancer and other diseases24 - The lead product candidate, ADI-001, targets Non-Hodgkin's Lymphoma (NHL), with its IND cleared in October 2020 and a Phase 1 trial initiated in Q1 20212530 - The second product candidate, ADI-002, targets solid tumors expressing GPC3, with an IND filing planned for late 2021 and clinical trial initiation in 20223136 - The company utilizes a proprietary T cell receptor-like antibody (TCRL) platform to target intracellular tumor antigens, critical for treating solid tumors32 - A key strategic partnership is a five-year collaboration with Regeneron, initiated in 2016, for engineered gamma delta immune cell therapeutics, with Regeneron having options to license candidates34127 - The company relies on third-party contract manufacturing organizations (CMOs) for cGMP-compliant manufacture of its product candidates, lacking its own facility1426 Risk Factors The company faces significant risks including limited operating history, substantial net losses, reliance on lead candidates, novel technology challenges, and internal control weaknesses - The business is highly dependent on the success of its two lead product candidates, ADI-001 and ADI-002, with failure to obtain regulatory approval and commercialize them significantly harming the business2522 - The company's gamma delta T cell candidates represent a novel approach to cancer treatment, creating significant challenges in manufacturing, efficacy, regulatory approval, and market acceptance2552 - The company has incurred net losses every period since inception and anticipates substantial future losses, with an accumulated deficit of $106.5 million as of December 31, 2020246247 - Material weaknesses in internal control over financial reporting have been identified, related to insufficient experienced accounting professionals, lack of formal policies, and inadequate segregation of duties3413424 - The company relies on a collaboration with Regeneron; termination or breach of this agreement would materially harm business prospects, and the company is subject to exclusivity obligations3433514 - The company does not operate its own manufacturing facility and relies on third-party CMOs, exposing it to risks of production delays, quality control issues, and supply chain disruptions2946 - The COVID-19 pandemic may adversely affect business operations, including potential disruptions to the supply chain and the conduct of clinical trials3133144 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments454 Properties The company leases office and laboratory facilities in Boston, Menlo Park, and Redwood City, with principal executive offices in Boston - Principal executive offices are located at 500 Boylston Street, 13th Floor, Boston, MA 02116, with a lease expiring on July 31, 2026454 - The company also leases office and laboratory space in Menlo Park, CA (lease expires March 31, 2022) and has a new lease for a facility in Redwood City, CA, with occupancy expected in Q2 2022454 Legal Proceedings The company is not currently subject to any material legal proceedings, with prior merger-related lawsuits dismissed or settled - The company is not currently a party to any material legal proceedings455 - Seven lawsuits filed in connection with the 2020 merger were either dismissed or settled for $0.2 million in the fourth quarter of 2020767 Mine Safety Disclosures The company has no mine safety disclosures, rendering this item not applicable - This item is not applicable455 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Adicet Bio's common stock trades on Nasdaq under 'ACET', with no cash dividends paid or intended, and a $15.0 million private placement completed in February 2021 - The company's common stock trades on The Nasdaq Global Market under the symbol "ACET"457 - The company has never declared or paid cash dividends and intends to retain future earnings to fund business development458 - In February 2021, the company raised $15.0 million through a private placement of 1,153,840 shares of common stock at $13.00 per share to existing investors459 Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations The company's financial condition is characterized by net losses, with a $36.8 million net loss in 2020, relying on equity financing and collaboration revenue, significantly improved by recent public and private offerings Results of Operations (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Change | % Change | |:---|---:|---:|---:|---:| | Revenue – related party | $17,903 | $995 | $16,908 | 1699% | | Research and development | $34,334 | $23,691 | $10,643 | 45% | | General and administrative | $22,760 | $8,692 | $14,068 | 162% | | Loss from operations | ($39,191) | ($31,388) | ($7,803) | 25% | | Net loss | ($36,678) | ($28,138) | ($8,540) | 30% | - The significant increase in 2020 revenue was primarily due to achieving a $10.0 million milestone under the Regeneron Agreement and increased R&D activities, leading to higher proportional performance revenue recognition491 - R&D expenses rose by $10.6 million (46%) in 2020 due to increased personnel costs, higher CRO/CMO fees for ADI-001 manufacturing and preclinical activities, and merger-related costs493 - G&A expenses increased by $14.1 million (162%) in 2020, mainly driven by $7.1 million in professional fees related to the merger and a $5.1 million increase in personnel expenses494 Summary Statement of Cash Flows (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | - As of December 31, 2020, the company had cash, cash equivalents, and marketable debt securities of $94.6 million, augmented in February 2021 by $137.5 million gross proceeds from a public offering and $15.0 million from a private placement510517 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on its $94.6 million in cash and investments, but a 10% rate change is not expected to be material - The company's market risk is primarily from potential adverse changes in interest rates affecting its $94.6 million in cash, cash equivalents, and marketable debt securities as of December 31, 2020558 - Due to the short-term maturities and low-risk profile of its investments, a 10% change in interest rates is not expected to materially impact the fair value of its holdings or future interest income558 Financial Statements and Supplementary Data This section refers to the consolidated financial statements and the independent auditor's report, included from page F-1 to F-43 - The company's consolidated financial statements and the report of its independent registered public accounting firm are included in the report560 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 - There were no changes in or disagreements with accountants on accounting and financial disclosure560 Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2020, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of December 31, 2020564 - Material weaknesses were identified in internal control over financial reporting, including: lack of sufficient experienced accounting staff, lack of formal accounting policies and procedures, ineffective controls over segregation of duties, and lack of controls to account for complex transactions563 - A remediation plan is in progress, including hiring a permanent VP, Corporate Controller and a senior manager for technical accounting, implementing formal training, and deploying a new ERP system (Microsoft 365 Business Central) in January 2021567 Other Information The company reports no other information - There is no other information to report569 PART III Directors, Executive Officers and Corporate Governance Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2021 Proxy Statement571 Executive Compensation Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2021 Proxy Statement573 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding security ownership is incorporated by reference from the forthcoming 2021 Proxy Statement574 Certain Relationships and Related Transactions, and Director Independence Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the forthcoming 2021 Proxy Statement575 Principal Accountant Fees and Services Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2021 Proxy Statement576 PART IV Exhibits and Financial Statement Schedules This section lists documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and exhibits - The report includes the company's consolidated financial statements578 - An index of exhibits filed with the report is provided579 Form 10-K Summary The company has elected not to include a summary of the Form 10-K - The company elected not to include summary information580 Financial Statements Consolidated Balance Sheets As of December 31, 2020, total assets increased to $153.8 million, total liabilities were $44.0 million, and stockholders' equity improved to $109.8 million, reflecting the resTORbio merger Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | |:---|---:|---:| | Assets | | | | Cash and cash equivalents | $84,330 | $10,607 | | Total current assets | $100,336 | $64,186 | | Goodwill | $20,089 | $0 | | Total assets | $153,835 | $81,587 | | Liabilities & Equity | | | | Total current liabilities | $22,479 | $14,865 | | Total liabilities | $44,008 | $27,870 | | Total redeemable convertible preferred stock | $0 | $114,083 | | Total stockholders' equity (deficit) | $109,827 | ($60,366) | | Total liabilities & stockholders' equity (deficit) | $153,835 | $81,587 | Consolidated Statements of Operations and Comprehensive Loss For 2020, the company reported a net loss of $36.7 million on revenues of $17.9 million, an increased loss driven by a 76% rise in operating expenses due to pipeline advancement and merger costs Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Revenue—related party | $17,903 | $995 | $8,181 | | Research and development | $34,334 | $23,691 | $14,717 | | General and administrative | $22,760 | $8,692 | $8,428 | | Total operating expenses | $57,094 | $32,383 | $23,145 | | Loss from operations | ($39,191) | ($31,388) | ($14,964) | | Net loss | ($36,678) | ($28,138) | ($9,299) | | Net loss per share | ($5.01) | ($13.15) | ($4.78) | Consolidated Statements of Cash Flows For 2020, net cash used in operating activities was $41.6 million, while investing activities provided $115.2 million, resulting in a $74.0 million net increase in cash, cash equivalents, and restricted cash Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $73,968 | $1,132 | ($23,192) |