Adagio(IVVD) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the quarter ended March 31, 2022, show a net loss of $100.7 million, a significant increase from the $38.7 million loss in the same period of 2021, driven by a substantial rise in research and development expenses Condensed Consolidated Balance Sheets As of March 31, 2022, total assets decreased to $556.3 million from $620.1 million at year-end 2021, while total liabilities increased to $96.9 million and stockholders' equity decreased to $459.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $532,220 | $542,224 | | Total current assets | $554,301 | $616,711 | | Total assets | $556,273 | $620,091 | | Total current liabilities | $95,534 | $62,060 | | Total liabilities | $96,881 | $62,072 | | Total stockholders' equity | $459,392 | $558,019 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q1 2022, the company reported a net loss of $100.7 million, significantly higher than the $38.7 million loss in Q1 2021, primarily due to increased R&D expenses Comparison of Operations (Three Months Ended March 31, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Research and development | $92,035 | $34,032 | | Selling, general and administrative | $8,704 | $3,677 | | Loss from operations | $(100,739) | $(38,709) | | Net loss | $(100,666) | $(38,700) | | Net loss per share, basic and diluted | $(0.93) | — | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $59.0 million in Q1 2022, primarily due to higher net loss, with overall cash and cash equivalents decreasing by $10.0 million to $532.2 million Cash Flow Summary (Three Months Ended March 31, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(59,049) | $(23,741) | | Net cash provided by investing activities | $49,000 | $— | | Net cash provided by financing activities | $45 | $— | | Net decrease in cash and cash equivalents | $(10,004) | $(23,741) | | Cash and cash equivalents at end of period | $532,220 | $91,247 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's focus on adintrevimab for COVID-19, its expectation of continued losses, and sufficient cash for at least 12 months, alongside key agreements and a CEO resignation - The company is a clinical-stage biopharmaceutical company focused on its lead product candidate, adintrevimab, for the prevention and treatment of COVID-19[23] - The company expects its existing cash and cash equivalents to be sufficient to fund operating expenses and capital expenditure requirements for at least 12 months from the financial statement issuance date[28] - In February 2022, the CEO resigned, resulting in the forfeiture of his stock options and a reversal of approximately $4.6 million in related stock-based compensation expense[119] - In April 2022, the company reduced its contractually binding manufacturing commitments with WuXi, resulting in a decrease of a $107.8 million purchase obligation and a related credit in the low eight-figures for future services[84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses adintrevimab's efficacy against pre-Omicron variants but reduced activity against Omicron BA.2, leading to a paused EUA submission, with R&D expenses increasing to $92.0 million and cash sufficient into H2 2024 - The company has paused its planned Emergency Use Authorization (EUA) submission for adintrevimab following FDA feedback regarding the drug's markedly reduced neutralizing activity against the Omicron BA.2 variant[143] - In pre-Omicron populations, adintrevimab demonstrated statistically significant efficacy, with a 71% risk reduction in pre-exposure prophylaxis and a 66% risk reduction in hospitalization or death for treatment[142] Research and Development Expenses (Three Months Ended March 31, in thousands) | Expense Category | 2022 | 2021 | | :--- | :--- | :--- | | Adintrevimab Direct Costs | $77,583 | $30,652 | | Personnel-related costs | $9,512 | $2,260 | | External discovery-related and other costs | $4,940 | $1,120 | | Total R&D Expenses | $92,035 | $34,032 | - The company believes its existing cash and cash equivalents of $532.2 million as of March 31, 2022, will be sufficient to fund operations into the second half of 2024[155] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Adagio Therapeutics is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Adagio Therapeutics is not required to provide quantitative and qualitative disclosures about market risk[193] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[194] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[195] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings but may face future litigation in the ordinary course of business - The company is not currently a party to any material legal proceedings[198] Item 1A. Risk Factors This section outlines significant risks including a history of losses, dependence on adintrevimab's success, uncertainty of regulatory approval due to new variants, reliance on third-party manufacturers, competition, and public company risks - The company has a history of significant losses ($100.7 million for Q1 2022) and may never achieve or maintain profitability[201] - A key risk is the emergence of SARS-CoV-2 variants, such as Omicron BA.2, which has shown reduced in vitro susceptibility to adintrevimab, leading the company to pause its planned EUA submission[200][216] - The company relies on third parties for manufacturing, such as WuXi, and faces risks related to manufacturing complexity, supply chain shortages, and regulatory compliance of these partners[285][293] - A group of stockholders, the Mithril Group, representing approximately 49% of outstanding shares, submitted a notice of intent to nominate three directors to the board for the 2022 annual meeting[457] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the use of $327.5 million net IPO proceeds with no material change, and the repurchase of 1.16 million shares in February 2022 related to employee cessation - The company received net proceeds of approximately $327.5 million from its IPO in August 2021, with no material change in the planned use of proceeds[480] - In February 2022, the company repurchased 1,158,089 shares of common stock at $0.002 per share in connection with its repurchase right upon the cessation of employment of certain employees[481] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, employment agreements, and officer certifications - Lists exhibits filed with the report, including corporate governance documents, employment agreements, and required officer certifications[483]