Adaptimmune(ADAP) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2024, reflecting a significant revenue decrease, increased net loss, and cash inflows from financing activities. Unaudited Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2024, shows total assets decreased to $258.0 million from $282.6 million at year-end 2023, with total stockholders' equity declining to $24.4 million. Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $140,670 | $143,991 | | Total current assets | $186,903 | $207,552 | | Total assets | $258,010 | $282,616 | | Liabilities & Equity | | | | Total current liabilities | $66,411 | $72,788 | | Total liabilities | $233,635 | $243,103 | | Total stockholders' equity | $24,375 | $39,513 | | Total liabilities and stockholders' equity | $258,010 | $282,616 | Unaudited Condensed Consolidated Statements of Operations For Q1 2024, revenue significantly decreased to $5.7 million from $47.6 million in the prior-year period, resulting in a net loss of $48.5 million compared to a $1.0 million net profit in Q1 2023. Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Revenue | $5,678 | $47,601 | | Research and development | $(35,207) | $(25,548) | | General and administrative | $(19,732) | $(20,397) | | Operating (loss)/profit | $(49,261) | $1,656 | | Net (loss)/profit | $(48,503) | $1,036 | | Net (loss)/profit per share - Basic & Diluted | $(0.03) | $0.00 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $32.0 million for Q1 2024, with financing activities providing $29.2 million, leading to a $3.5 million decrease in total cash, cash equivalents, and restricted cash. Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(31,950) | $(37,283) | | Net cash (used in)/provided by investing activities | $(358) | $48,341 | | Net cash provided by financing activities | $29,235 | $196 | | Net (decrease)/increase in cash | $(3,489) | $11,842 | | Cash, cash equivalents and restricted cash at end of period | $143,528 | $121,444 | Notes to the Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies, revenue recognition, the Genentech agreement termination, the TCR2 business combination, and the establishment of a new loan facility. - The collaboration and license agreement with Genentech was terminated in April 2024, with $146.3 million in deferred revenue expected to be recognized in the remainder of 2024[93][115] - In Q1 2024, the company sold 27,278,176 ADSs under its At-The-Market (ATM) sales agreement, generating net proceeds of $29.1 million[76] - On May 14, 2024, the company entered into a loan and security agreement for a term loan facility of up to $125.0 million, with an initial tranche of $25.0 million drawn on the closing date[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a commercial-stage entity, the afami-cel BLA under FDA priority review, and financial results, attributing the significant revenue decline to a prior-year one-time recognition. Overview Adaptimmune is transitioning to a commercial-stage company, anticipating its first marketing approval for afami-cel in 2024, with a pipeline including lete-cel and uza-cel, and a preclinical focus on T-cell therapies. - The company's lead product, afami-cel, has a Biologics License Application (BLA) under priority review by the FDA, with a Prescription Drug User Fee Act (PDUFA) target action date of August 4, 2024[98] - Commercial launch preparations for afami-cel are underway, with plans to engage up to 30 authorized treatment centers (ATCs), focusing on sarcoma centers of excellence[98] - The clinical pipeline includes lete-cel for synovial sarcoma and MRCLS, with plans for a U.S. commercial launch in 2026, and the SURPASS trials for uza-cel in ovarian and other cancers[97][99][100] Results of Operations Q1 2024 revenue decreased by 88% ($41.9 million) primarily due to a one-time recognition of $42.4 million from the terminated Astellas agreement in Q1 2023, while research and development expenses increased by 38%. Comparison of Results of Operations (in thousands) | Line Item | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $5,678 | $47,601 | $(41,923) | (88)% | | Research and development expenses | $(35,207) | $(25,548) | $(9,659) | 38% | | General and administrative expenses | $(19,732) | $(20,397) | $665 | (3)% | | Operating (loss)/profit | $(49,261) | $1,656 | $(50,917) | (3,075)% | | Net (loss)/profit | $(48,503) | $1,036 | $(49,539) | (4,782)% | - The decrease in revenue was primarily due to the termination of the Astellas collaboration in Q1 2023, which resulted in the recognition of $42.4 million in deferred revenue during that period[137] - The $9.7 million increase in R&D expenses was mainly due to a $5.9 million rise in employee-related costs following the TCR2 acquisition and a $0.9 million increase in manufacturing facility expenditure[140][141] Liquidity and Capital Resources As of March 31, 2024, the company had $140.7 million in cash and cash equivalents and $143.7 million in total liquidity, with management believing current funds and a new debt facility are sufficient to fund operations into late 2025. Total Liquidity (Non-GAAP, in thousands) | Component | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $140,670 | $143,991 | | Marketable securities | $2,982 | $2,947 | | Total Liquidity | $143,652 | $146,938 | - The company believes its cash runway extends into late 2025, supported by current liquidity, expected revenues from afami-cel, and a new debt facility with Hercules Capital[148] - Net cash used in operating activities decreased to $32.0 million in Q1 2024 from $37.3 million in Q1 2023, partly due to the receipt of $30.8 million in R&D credits[150] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes to its market risk exposure during Q1 2024, referring to the more detailed disclosures in its Annual Report on Form 10-K for the year ended December 31, 2023. - There have been no material changes to the Company's market risk during the first quarter of 2024[158] Item 4. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024, with no material changes to internal control over financial reporting. - Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[159] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[160] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company reports that as of March 31, 2024, it was not a party to any material legal proceedings. - As of March 31, 2024, the company was not involved in any material legal proceedings[161] Item 1A. Risk Factors The company states there have been no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023. - There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023[163] Other Items (Items 2, 3, 4, 5, 6) This section covers other required disclosures, reporting no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and no Rule 10b5-1 trading plan changes by directors or officers. - Item 2: No unregistered sales of equity securities and use of proceeds were reported[163] - Item 5: No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[165]