Adaptimmune(ADAP) - 2023 Q4 - Annual Report

PART I Business Adaptimmune is a clinical-stage biopharmaceutical company transitioning to commercialization in 2024, focusing on engineered T-cell therapies for solid tumors with a lead product, afami-cel, under FDA review and a pipeline of clinical and preclinical assets Overview and Strategy - Adaptimmune is transitioning to a commercial-stage cell therapy company in 2024, with its first product, afami-cel for synovial sarcoma, expecting marketing approval and launch[8] - The company filed a Biologics License Application (BLA) for afami-cel in December 2023, which was accepted by the FDA with a PDUFA target action date of August 4, 2024[11][12] - On June 1, 2023, Adaptimmune combined with TCR² Therapeutics Inc. in an all-stock transaction, integrating TCR²'s operations and expanding its T-cell therapy pipeline[21] - Key business strategies include building a commercial franchise in sarcoma with afami-cel and lete-cel, progressing the SURPASS-3 Phase 2 trial for ovarian cancer, and advancing preclinical PRAME (ADP-600) and CD-70 (ADP-520) therapies into the clinic[22][23] Product Pipeline Afami-cel (SPEARHEAD-1 Trial) Clinical Data | Metric | Value | Source Chunk | | :--- | :--- | :--- | | Indication | Synovial Sarcoma | 36 | | Overall Response Rate (ORR) | ~39% | 36 | | Median Duration of Response | ~50 weeks | 36 | | 2-Year Survival (Responders) | 70% | 39 | | Median Overall Survival (All Patients) | ~17 months | 39 | Lete-cel (IGNYTE-ESO Trial) Interim Data | Metric | Value | Source Chunk | | :--- | :--- | :--- | | Indications | Synovial Sarcoma & MRCLS | 41 | | Overall Response Rate (ORR) | 40% (18/45 patients) | 42 | | Median Duration of Response | 10.6 months | 43 | | First-Line Setting ORR (Sub-study 1) | 80% (4/5 patients) | 14, 44 | ADP-A2M4CD8 (SURPASS Trial) Clinical Data | Metric | Value | Source Chunk | | :--- | :--- | :--- | | Overall Response Rate (ORR) | 35% (43 evaluable patients) | 46 | | ORR in Ovarian, Urothelial, Head & Neck | 50% | 46 | | ORR in Ovarian Cancer (Phase 1) | 40% (15 patients) | 48 | - The preclinical pipeline is focused on a T-cell therapy for the PRAME target (ADP-600) and a TRuC T-cell therapy for the CD70 target (ADP-520)[18][51][52] - The company is developing an allogeneic iPSC platform to create 'off-the-shelf' cell therapies, which involves gene-editing iPSCs to express engineered TCRs and differentiating them into T-cells[54][55] Collaborations and Intellectual Property - Adaptimmune has a strategic collaboration with Genentech to develop allogeneic T-cell therapies for up to five shared cancer targets and a personalized allogeneic platform. The agreement includes a $150 million upfront payment, up to $150 million in additional payments over five years, and significant potential milestones and royalties[60][61] - Following the termination of a collaboration with GSK, Adaptimmune is transitioning the NY-ESO program (lete-cel) back in-house, with the full transition expected by mid-2024. The agreement includes milestone-based payments to Adaptimmune totaling £30 million[19][63][64] - The company holds multiple patent families covering its key products. The afami-cel (ADP-A2M4) composition of matter patents are expected to expire in 2037, while the lete-cel (NY-ESO) patents expire in 2025, with next-generation patents extending to 2043[66][67] Competition and Regulation - The company faces intense competition from large pharmaceutical companies and other biotech firms in areas including other autologous cell therapies (CAR-T, TIL), other TCR T-cell therapies (e.g., Immatics), different cell-based immunotherapies (NK-cells, dendritic cells), and allogeneic approaches[76][77][78] - The company's products are subject to extensive government regulation in the U.S. by the FDA and in other jurisdictions like the EU and U.K. The approval process involves preclinical studies, an Investigational New Drug (IND) application, and adequate and well-controlled clinical trials to establish safety and effectiveness before a Biologics License Application (BLA) can be approved[80][81][82] - Adaptimmune has received several expedited program designations from the FDA, including Regenerative Medicine Advanced Therapy (RMAT) for afami-cel and ADP-A2M4CD8, and Orphan Drug designation for afami-cel, which provides benefits like a seven-year marketing exclusivity period in the U.S. for the designated indication[39][100][105] - Commercial success is dependent on pricing and reimbursement from third-party payors, including government programs like Medicare and Medicaid. The company will be subject to regulations such as the Medicaid Drug Rebate program and pricing pressures from the Inflation Reduction Act (IRA)[129][130][134] Risk Factors The company faces substantial risks including historical net losses, the need for further financing, dependence on regulatory approval and market acceptance of its lead products, complex manufacturing, and intense competition Risks Related to Financial Condition and Capital Requirements - The company has incurred net losses every year since its 2008 inception, with an accumulated deficit of $1,023.1 million as of December 31, 2023, and expects to continue incurring losses[174][175] - Existing cash, cash equivalents, and marketable securities of $146.9 million (as of Dec 31, 2023) are expected to fund operations into early 2026, but additional financing will be required to complete development and commercialization[182] - The company benefits from the U.K. R&D tax credit regime, but changes to the rules or the company no longer qualifying as an SME could reduce future cash rebates and increase funding needs[187][188] Risks Related to Commercialization and Marketing - The company is heavily dependent on the successful commercialization of afami-cel and lete-cel, which requires FDA approval and sufficient market uptake. There is no guarantee of approval or that it will occur on the anticipated Q3 2024 timeline for afami-cel[193][194] - As an organization, Adaptimmune has no experience in marketing or supplying commercial products and must transition from an R&D focus to a company capable of supporting commercial activities, which presents significant challenges[216][217] - Successful sales depend on obtaining coverage and adequate reimbursement from third-party payors like Medicare, Medicaid, and private insurers, which is a time-consuming and uncertain process[226][228] - Commercialization requires regulatory approval of a companion diagnostic to screen patients for MAGE-A4 and HLA-type. The company relies on a third party for this development, and any delays could impact the product launch[206][209][212] Risks Related to Clinical Development - The company's ability to secure additional financing is heavily reliant on positive data from ongoing clinical trials, particularly the ADP-A2M4CD8 (SURPASS) trials. Negative results could hinder funding and delay all programs[237] - T-cell therapy is a novel approach with significant risks of side effects, including cytokine release syndrome (CRS), neurotoxicity, and pancytopenia. Unacceptable toxicities could lead to the suspension or termination of clinical programs[247][248][250] - Clinical trials may face substantial delays due to difficulties in patient recruitment, as patients must have the specific HLA-type and antigen expression, and competition for patients at clinical sites[262][263] Risks Related to Manufacturing and Supply - The manufacturing process for autologous cell therapies is complex, patient-specific, and costly. Delays or failures can result from process errors, sterility failures, or variability in patient starting material, potentially preventing a patient from receiving treatment[291][292][293] - The company's Navy Yard facility is the sole source of supply for afami-cel and ADP-A2M4CD8. Any shutdown due to contamination or other issues would halt supply for clinical trials and commercial launch[293] - The company relies on third parties for critical components, such as the lentiviral vector for afami-cel and lete-cel, and for the manufacture of the lete-cel cell therapy itself. It also has a sole-source supplier (ThermoFisher) for the Dynabeads® technology used in its process[168][371] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[434] Cybersecurity The company integrates cybersecurity into its overall risk management, overseen by the Audit Committee, and has not identified any material threats to date - The company's cybersecurity policies and processes are integrated into its overall risk management program, which is overseen by the Audit Committee of the board of directors[433][438] - The company has not identified any cybersecurity threats that have materially affected its ability to conduct business or its financial standing[437] Properties As of December 31, 2023, the company leases four primary facilities in the UK and US for corporate, R&D, and manufacturing, deemed adequate for near-term needs Leased Facilities Summary (as of Dec 31, 2023) | Location | Approx. Square Feet | Primary Usage | Lease Expiration | | :--- | :--- | :--- | :--- | | Abingdon, UK | 67,140 | Corp. HQ, R&D, Manufacturing, Admin | Oct 2041 | | Abingdon, UK | 46,017 | Manufacturing, Process Dev, Research | Oct 2041 | | Philadelphia, PA | 47,700 | Manufacturing, Process Dev, Research | Oct 2031 | | Cambridge, MA | 22,890 | R&D, Process Development | Jun 2025 | Legal Proceedings As of December 31, 2023, the company was not a party to any material legal proceedings - As of December 31, 2023, we were not a party to any material legal proceedings[442] Mine Safety Disclosures This item is not applicable to the company - Not applicable[442] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's ADSs trade on Nasdaq under 'ADAP', with no unregistered securities sold or equity repurchases made in 2023 - The company's ADSs trade on The Nasdaq Global Select Market under the symbol "ADAP". Each ADS represents six ordinary shares[442] - As of March 4, 2024, there were approximately 27 holders of record of ordinary shares and 16 holders of record of ADSs. The closing price per ADS on December 31, 2023 was $0.793[442] - The company did not repurchase any of its equity securities during the year ended December 31, 2023[443] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations For 2023, the company reported increased revenue of $60.3 million and a reduced net loss of $113.9 million, ending the year with $146.9 million in liquidity expected to fund operations into early 2026 Results of Operations Comparison of Years Ended December 31, 2023 and 2022 (in thousands) | Line Item | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $60,281 | $27,148 | $33,133 | 122% | | Research and development expenses | ($126,509) | ($127,726) | $1,217 | (1)% | | General and administrative expenses | ($73,513) | ($63,387) | ($10,126) | 16% | | Operating loss | ($139,741) | ($163,965) | $24,224 | (15)% | | Gain on bargain purchase | $22,049 | $0 | $22,049 | N/A | | Loss for the period | ($113,871) | ($165,456) | $51,585 | (31)% | - Revenue increased by $33.1 million in 2023 primarily due to the termination of the Astellas collaboration, which resulted in the recognition of remaining deferred income[488] - R&D expenses decreased slightly by $1.2 million in 2023, mainly due to a $14.7 million decrease in R&D tax credits receivable and lower subcontracted expenditures, offset by costs from the TCR² acquisition[489][491][493] - G&A expenses increased by $10.1 million in 2023, largely due to higher corporate costs, including legal and professional fees related to the TCR² merger, and severance costs for former TCR² leadership[495][496][498] Liquidity and Capital Resources Total Liquidity (Non-GAAP, in thousands) | Component | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $143,991 | $108,033 | | Marketable securities | $2,947 | $96,572 | | Total Liquidity | $146,938 | $204,605 | - The company believes its total liquidity of $146.9 million as of December 31, 2023, is sufficient to fund operations into early 2026[517] - Net cash used in operating activities was $140.9 million for 2023, a slight decrease from $141.8 million in 2022, reflecting lower operating expenditure from restructuring, offset by costs from the TCR² acquisition and lower R&D tax credit receipts during the year[518][519] - As of December 31, 2023, the company had material cash requirements including $25.2 million in operating lease obligations and $13.7 million in non-cancellable purchase commitments for clinical materials and contract manufacturing[536][537] Quantitative and Qualitative Disclosures About Market Risk The company's market risks include interest rate, foreign currency (GBP/USD), and credit risk, managed through diversified holdings without hedging, with no material inflation impact in 2023 - The company is exposed to foreign currency risk, particularly between the pound sterling and the U.S. dollar, as its U.K. subsidiary incurs significant costs in U.S. dollars[561][563] - Credit risk is managed by holding cash with multiple banks and adhering to an investment policy that limits investments to certain types of instruments and specifies minimum credit ratings[565] - The company does not believe an immediate one percentage point change in interest rates would materially affect its portfolio's fair market value or operating results[562] Financial Statements and Supplementary Data This section lists consolidated financial statements and an index of exhibits, noting the omission of financial statement schedules 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[568] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes reported - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[568] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[571] Other Information The company reports that during the fourth quarter of 2023, none of its directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - During the three-month period ended December 31, 2023, none of our directors or officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement"[573] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[574] PART III Directors, Executive Officers and Corporate Governance The information required for this item, concerning directors, executive officers, and corporate governance, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Shareholders Executive Compensation The information required for this item, concerning executive compensation, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Shareholders Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item, concerning security ownership, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Shareholders Certain Relationships and Related Transactions, and Director Independence The information required for this item, concerning related transactions and director independence, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Shareholders Principal Accountant Fees and Services The information required for this item, concerning principal accountant fees and services, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Shareholders PART IV Exhibits and Financial Statement Schedules This section lists consolidated financial statements and an index of exhibits, noting the omission of financial statement schedules Form 10-K Summary The company reports that there is no Form 10-K summary - None[592]