Aura Biosciences(US:AURA)2022-11-09 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements Aura Biosciences' unaudited consolidated financial statements as of September 30, 2022, present key financial positions, operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $61,110 | $149,063 | | Marketable securities | $50,409 | $0 | | Total Assets | $143,147 | $160,030 | | Total current liabilities | $9,964 | $7,355 | | Long-term operating lease liability | $18,129 | $360 | | Total Liabilities | $28,093 | $7,715 | | Total Stockholders' Equity | $115,054 | $152,315 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Research and development | $29,079 | $17,182 | | General and administrative | $13,603 | $6,441 | | Total operating loss | ($42,682) | ($23,623) | | Net loss | ($42,204) | ($23,617) | | Net loss per share | ($1.44) | ($77.93) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($36,588) | ($20,324) | | Net cash used in investing activities | ($50,993) | ($1,306) | | Net cash provided by financing activities | $430 | $86,117 | - As of the report issuance date, the company expects its cash, cash equivalents, and marketable securities of $111.5 million to be sufficient to fund operating expenses and capital requirements through at least the next 12 months2830 - On November 1, 2022, the company filed a shelf registration statement for up to $250.0 million and entered into an "at-the-market" (ATM) offering agreement for up to $75.0 million of its common stock102 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, and belzupacap sarotalocan's clinical progress, highlighting expenses and liquidity Overview Aura Biosciences, a clinical-stage biotech, advances belzupacap sarotalocan for ocular and urologic cancers, planning a global Phase 3 trial - The lead product candidate, belzupacap sarotalocan, has received Orphan Drug Designation and Fast Track Designation from the FDA for the treatment of uveal melanoma106 - Interim six-month data from the Phase 2 trial of belzupacap sarotalocan with suprachoroidal (SC) administration showed a favorable safety profile, high levels of visual acuity preservation, and a statistically significant tumor growth rate reduction (p = 0.0007)106 - The company is expanding into urologic oncology, having initiated a Phase 1 trial for non-muscle invasive bladder cancer (NMIBC) in September 2022, with initial data expected in 2023107 Results of Operations This section compares Q3 and nine-month operating results, highlighting increased net losses due to higher R&D and G&A expenses Comparison of Operating Results (in thousands) | Period | R&D Expense | G&A Expense | Net Loss | | :--- | :--- | :--- | :--- | | Q3 2022 | $11,293 | $4,762 | ($15,901) | | Q3 2021 | $6,365 | $2,530 | ($8,838) | | Nine Months 2022 | $29,079 | $13,603 | ($42,204) | | Nine Months 2021 | $17,182 | $6,441 | ($23,617) | - The increase in R&D expenses was primarily due to ongoing preclinical costs, manufacturing and development costs for belzupacap sarotalocan, and higher personnel expenses from growing headcount132138 - The increase in G&A expenses was driven by higher personnel costs and increased general corporate expenses related to operating as a public company133139 Liquidity and Capital Resources Liquidity from equity sales, with $111.5 million cash as of September 30, 2022, funds operations into 2024, but substantial additional capital is needed - As of September 30, 2022, the company had cash, cash equivalents, and marketable securities totaling $111.5 million114150 - The company believes its existing cash will be sufficient to fund operating expenses and capital expenditure requirements into 2024, but this will not be enough to fund belzupacap sarotalocan through regulatory approval150177 Material Cash Requirements (in thousands) | Commitment | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | $34,718 | $3,089 | $6,458 | $6,851 | $18,320 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Aura Biosciences is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item161 Controls and Procedures Management, including CEO and CFO, concluded disclosure controls were effective as of September 30, 2022, with no material internal control changes - Management, including the CEO and CFO, concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective164 - No change in internal control over financial reporting occurred during the quarter that has materially affected, or is reasonably likely to materially affect, internal controls165 PART II. OTHER INFORMATION Legal Proceedings As of September 30, 2022, the company is not party to any claim or litigation expected to have a material adverse effect on its business - As of September 30, 2022, the company does not believe it is party to any claim or litigation that would be reasonably expected to have a material adverse effect on its business167 Risk Factors This section outlines material risks related to financial position, product development, third-party reliance, commercialization, intellectual property, and general business Risks Related to Financial Position and Capital Needs This section details financial risks, including significant net losses, an accumulated deficit of $194.3 million, and the need for substantial additional capital - The company has incurred significant net losses since inception, with an accumulated deficit of $194.3 million as of September 30, 2022, and expects to incur increasing operating losses for the foreseeable future170 - Substantial additional capital is required to finance operations. Existing cash is expected to fund operations into 2024 but is not sufficient to complete the development and commercialization of belzupacap sarotalocan176177 Risks Related to the Discovery and Development of our Product Candidates This section outlines product development risks, including dependence on belzupacap sarotalocan, regulatory uncertainty for combination products, and clinical trial failures - The company's business is heavily dependent on the successful development, regulatory approval, and commercialization of its only product candidate, belzupacap sarotalocan190 - The company has not yet successfully initiated or completed any pivotal clinical trials or commercialized any products, making it difficult to evaluate future prospects200 - Belzupacap sarotalocan is a biologic-device combination product, which may result in additional regulatory complexity and risks during the approval process204 Risks Related to Our Reliance on Third Parties This section details risks from reliance on third parties for clinical trials and manufacturing, including performance, compliance, and single-source supply disruptions - The company relies on third parties like CROs to conduct clinical trials, which reduces direct control over these activities but does not relieve the company of its regulatory responsibilities247248 - The company relies on third-party CMOs for the manufacture of belzupacap sarotalocan and is currently reliant on a single source for each of its regulatory starting materials, drug substance, and drug product252 Risks Related to Commercialization This section covers commercialization risks, including market acceptance, lack of sales infrastructure, intense competition, uncertain pricing, and healthcare law compliance - The company currently has no sales, marketing, or distribution capabilities and no experience in marketing products, which will require significant investment and resources to build266 - The market opportunity for belzupacap sarotalocan may be smaller than estimated, which would adversely affect potential revenue and profitability277 - The business is subject to numerous healthcare laws and regulations (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could lead to significant penalties279281 Risks Related to Intellectual Property This section details intellectual property risks, including patent protection challenges, reliance on third-party licenses, and the difficulty of protecting trade secrets - The company's ability to compete depends on adequately protecting its proprietary rights, which is subject to challenges, potential invalidation, and the high cost of enforcement299301 - The company relies on intellectual property licensed from third parties and could lose these rights if it fails to comply with its obligations under the license agreements307 - The company relies on confidentiality agreements to protect trade secrets, such as the manufacturing process for the IRDye 700DX® dye used in its lead product, which may be breached or difficult to enforce327 General Risks This section outlines general business risks, including personnel, disruptions, cybersecurity, data privacy, stock volatility, dilution, ownership, and emerging growth company status - The company's executive officers, directors, and 5%+ stockholders beneficially own approximately 60.1% of its outstanding common stock, enabling them to exert significant influence over corporate actions378 - The company is an "emerging growth company" and a "smaller reporting company," which allows for reduced public reporting requirements but may make its stock less attractive to some investors402 - Future sales of common stock, including through a new "at-the-market" (ATM) program, will be necessary for additional capital but could result in significant dilution to existing stockholders and cause the stock price to decline393394 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred, and no material change in the planned use of $78.3 million net IPO proceeds from November 2021 - The company completed its IPO on November 2, 2021, receiving total net proceeds of approximately $78.3 million after the underwriters fully exercised their option420 - There has been no material change in the planned use of proceeds from the IPO as disclosed in the original prospectus422 Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not applicable422 Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not applicable422 Other Information The company reported no other information for this item during the period - None422 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and certifications from the Principal Executive and Financial Officers - The filing includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002425