cs UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share ARCT The NASDAQ Stock Market LLC FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ...

[Executive Summary & Recent Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Recent%20Highlights) Arcturus Therapeutics reported Q1 2024 financial results and significant pipeline advancements, including Kostaive® commercialization, positive Phase 3 data, new study initiations, and strategic financial updates [Q1 2024 Overview](index=1&type=section&id=Q1%202024%20Overview) Arcturus Therapeutics announced its financial results for the first quarter ended March 31, 2024, alongside significant pipeline advancements across its vaccine and therapeutic programs, and strategic corporate updates - Commercial manufacture of Kostaive® is on track for delivery of initial **4 million doses** in Q3[1](index=1&type=chunk) - Kostaive® European Marketing Authorization Application approval decision is expected in Q3[1](index=1&type=chunk) - Topline immunogenicity and safety data for ARCT-2138 (LUNAR-FLU) Phase 1 is anticipated in Q3[1](index=1&type=chunk) - Interim data and updates for ARCT-810 (LUNAR-OTC) Phase 2 and ARCT-032 (LUNAR-CF) Phase 1b will be provided on July 1[1](index=1&type=chunk) - JP Morgan has been engaged to monetize Arcturus' investment in the ARCALIS JV in Japan[1](index=1&type=chunk) [Recent Corporate Highlights](index=1&type=section&id=Recent%20Corporate%20Highlights) The company provided detailed updates on its vaccine and therapeutic pipeline, including progress on Kostaive® commercialization, positive Phase 3 results for ARCT-2301, initiation of new Phase 3 studies, and advancements in its rare disease programs, alongside strategic financial initiatives - Meiji Seika Pharma announced plans to supply Japan with **4 million doses** of Kostaive® for the fall/winter season of 2024, with Arcturus and CDMO partners on track to deliver initial commercial doses in Q3[2](index=2&type=chunk) - The bivalent COVID-19 Vaccine candidate, ARCT-2301, met the primary endpoint (non-inferiority) in a Phase 3 clinical study in Japan, demonstrating non-inferiority and superiority criteria for neutralizing antibodies against SARS-CoV-2 (Omicron BA.4/5) and Wuhan strains, with no causally-associated serious adverse events[2](index=2&type=chunk)[3](index=3&type=chunk) - A Phase 3 pivotal study was initiated for the ARCT-2303 candidate vaccine (Omicron XBB.1.5 variant) to generate immunogenicity and safety data for U.S. licensure and assess co-administration with seasonal influenza vaccines[3](index=3&type=chunk) - A Marketing Authorization Application (MAA) for Kostaive® has been filed with the European Medicines Agency (EMA), with an approval decision expected in Q3[3](index=3&type=chunk) - ARCT-2138 (LUNAR-FLU, Quadrivalent Seasonal Influenza) Phase 1 dose-finding and immunogenicity study is progressing, with **84 healthy young adults** recruited[3](index=3&type=chunk) - ARCT-810 (LUNAR-OTC) Phase 1 single ascending dose (SAD) studies demonstrated general tolerability with no serious or severe adverse events, facilitating the initiation of a Phase 2 multiple ascending dose study (ARCT-810-03) in OTC deficiency adolescents and adults, with a progress update expected July 1, 2024[3](index=3&type=chunk) - ARCT-032, an inhaled mRNA therapeutic for cystic fibrosis, is on track to share Phase 1b interim data on July 1, 2024[3](index=3&type=chunk) - Arcturus will begin to qualify for commercial milestones under its CSL collaboration upon commencement of Kostaive® revenues in Japan this year[2](index=2&type=chunk) - The company's cash runway remains strong for at least **three years** into the first quarter of fiscal year 2027[2](index=2&type=chunk)[9](index=9&type=chunk) [First Quarter 2024 Financial Results](index=2&type=section&id=First%20Quarter%202024%20Financial%20Results) Arcturus Therapeutics' Q1 2024 financial results show a significant year-over-year revenue decrease, increased operating expenses leading to a net loss, yet maintaining a strong cash position with a multi-year runway [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Total revenues for Q1 2024 significantly decreased year-over-year, primarily due to lower revenue recognition from the CSL agreement, partially offset by an increase from the BARDA agreement Revenue Summary (Three Months Ended March 31) | Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Total Revenues | 38.0 | 80.3 | (42.3) | (52.7%) | | CSL Agreement Revenue | 32.4 | 78.2 | (45.8) | (58.6%) | | BARDA Agreement Revenue | N/A | N/A | +4.9 (increase) | N/A | [Operating Expenses](index=3&type=section&id=Operating%20Expenses) Total operating expenses saw a slight increase year-over-year, driven by higher research and development costs related to key programs and increased general and administrative expenses Total Operating Expenses (Three Months Ended March 31) | Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | Change (%) | | :------------------- | :----------- | :----------- | :---------- | :--------- | | Total Operating Expenses | 68.4 | 65.5 | 2.9 | 4.4% | [Research and Development Expenses](index=3&type=section&id=Research%20and%20Development%20Expenses) R&D expenses increased due to investments in CSL, BARDA, internal OTC, Cystic Fibrosis, and early-stage discovery programs Research and Development Expenses (Three Months Ended March 31) | Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | Change (%) | | :------------------- | :----------- | :----------- | :---------- | :--------- | | R&D Expenses | 53.6 | 51.8 | 1.8 | 3.5% | - The increase in R&D expenses was primarily driven by the CSL and BARDA programs, as well as Arcturus' internal OTC and Cystic Fibrosis programs, and investments in early-stage discovery technologies including Lyme Disease and Gonorrhea vaccine programs[6](index=6&type=chunk) [General and Administrative Expenses](index=3&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses rose due to increased personnel, travel, consulting, and facility-related rent expenses General and Administrative Expenses (Three Months Ended March 31) | Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | Change (%) | | :------------------- | :----------- | :----------- | :---------- | :--------- | | G&A Expenses | 14.9 | 13.8 | 1.1 | 8.0% | - The increase in G&A expenses resulted primarily from increased personnel expenses due to higher salaries, increased travel and consulting expenses, and escalated rent expense associated with facilities[7](index=7&type=chunk) [Net Loss](index=3&type=section&id=Net%20Loss) The company reported a net loss in Q1 2024, a significant shift from net income in the prior year, primarily due to lower revenues and increased operating expenses Net (Loss) Income and EPS (Three Months Ended March 31) | Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change ($M) | | :---------------- | :----------- | :----------- | :---------- | | Net (Loss) Income | (26.8) | 50.8 | (77.6) | | Diluted EPS | ($1.00) | $1.87 | ($2.87) | [Cash Position and Balance Sheet Highlights](index=3&type=section&id=Cash%20Position%20and%20Balance%20Sheet%20Highlights) Arcturus maintained a strong cash position at the end of Q1 2024, with a projected cash runway extending into Q1 2027, supported by ongoing CSL milestone payments Cash, Cash Equivalents and Restricted Cash | Metric | March 31, 2024 ($M) | December 31, 2023 ($M) | Change ($M) | | :----------------------------------- | :------------------ | :--------------------- | :---------- | | Cash, cash equivalents and restricted cash | 345.3 | 348.9 | (3.6) | - Arcturus achieved approximately **$420.1 million** in upfront payments and milestones from CSL as of March 31, 2024[9](index=9&type=chunk) - The company expects to continue receiving future milestone payments from CSL supporting the ongoing development of COVID and flu programs and three additional vaccine programs[9](index=9&type=chunk) - The expected cash runway extends at least **three years** based on the current pipeline and programs through the first quarter of fiscal year 2027[9](index=9&type=chunk) [Company Information & Disclosures](index=4&type=section&id=Company%20Information%20%26%20Disclosures) This section provides an overview of Arcturus Therapeutics as a global mRNA company, highlighting its technologies and pipeline, alongside important disclaimers regarding forward-looking statements [About Arcturus Therapeutics](index=4&type=section&id=About%20Arcturus%20Therapeutics) Arcturus Therapeutics is a global mRNA medicines and vaccines company, founded in 2013, known for its LUNAR® lipid-mediated delivery and STARR® mRNA Technology, and for developing the first approved self-amplifying mRNA COVID vaccine (Kostaive®). It has extensive collaborations and a broad pipeline - Arcturus Therapeutics Holdings Inc. is a global mRNA medicines and vaccines company, founded in **2013** and based in San Diego, California[10](index=10&type=chunk) - The company's enabling technologies include LUNAR® lipid-mediated delivery, STARR® mRNA Technology (sa-mRNA), and mRNA drug substance along with drug product manufacturing expertise[10](index=10&type=chunk) - Arcturus developed Kostaive®, the world's first approved self-amplifying messenger RNA (sa-mRNA) COVID vaccine[10](index=10&type=chunk) - The company has an ongoing global collaboration for innovative mRNA vaccines with CSL Seqirus and a joint venture in Japan, ARCALIS, focused on mRNA vaccine and therapeutic manufacturing[10](index=10&type=chunk) - Arcturus' pipeline includes RNA therapeutic candidates for ornithine transcarbamylase deficiency and cystic fibrosis, as well as partnered mRNA vaccine programs for SARS-CoV-2 (COVID-19) and influenza[10](index=10&type=chunk) - Arcturus' technologies are covered by an extensive patent portfolio with over **400 patents** and patent applications globally[10](index=10&type=chunk) - The Arcturus logo and trademarks LUNAR® and STARR® are the property of Arcturus[12](index=12&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the forward-looking nature of statements made in the press release, emphasizing inherent risks and uncertainties that could cause actual results to differ materially from projections, and disclaims any obligation to update such statements - This press release contains forward-looking statements that involve substantial risks and uncertainties, provided for the safe harbor under the Private Securities Litigation Reform Act of 1995[11](index=11&type=chunk) - Forward-looking statements include those regarding strategy, future operations, pipeline success (ARCT-032, ARCT-810), partnered programs (COVID-19, flu with CSL Seqirus), Kostaive delivery and commercialization, European MAA approval, ARCALIS JV monetization, clinical data predictability, timing of clinical study updates, CSL collaboration milestones, cash position, and general business conditions[11](index=11&type=chunk) - Actual results may differ materially from anticipated outcomes due to known and unknown risks, uncertainties, and other factors, including those discussed in Arcturus' most recent Annual Report on Form 10-K and subsequent SEC filings[11](index=11&type=chunk) - Arcturus disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date they were made, unless required by law[11](index=11&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated balance sheets and statements of operations for Q1 2024, detailing the company's financial position and performance [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the unaudited condensed consolidated balance sheets for Arcturus Therapeutics as of March 31, 2024, and December 31, 2023, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2024 (unaudited) | December 31, 2023 | | :------------- | :------------------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $288,396 | $292,005 | | Restricted cash | $55,000 | $55,000 | | Accounts receivable | $27,057 | $32,064 | | Prepaid expenses and other current assets | $5,335 | $7,521 | | Total current assets | $375,788 | $386,590 | | Property and equipment, net | $11,763 | $12,427 | | Operating lease right-of-use asset, net | $29,413 | $28,500 | | Non-current restricted cash | $1,885 | $1,885 | | Total assets | $418,849 | $429,402 | | **Liabilities** | | | | Accounts payable | $9,144 | $5,279 | | Accrued liabilities | $34,770 | $31,881 | | Deferred revenue (current) | $71,516 | $44,829 | | Total current liabilities | $115,430 | $81,989 | | Deferred revenue, net of current portion | $11,795 | $42,496 | | Operating lease liability, net of current portion | $27,652 | $25,907 | | Other non-current liabilities | — | $497 | | Total liabilities | $154,877 | $150,889 | | **Stockholders' Equity** | | | | Common stock | $27 | $27 | | Additional paid-in capital | $658,628 | $646,352 | | Accumulated deficit | $(394,683) | $(367,866) | | Total stockholders' equity | $263,972 | $278,513 | | Total liabilities and stockholders' equity | $418,849 | $429,402 | [Consolidated Statements of Operations and Comprehensive (Loss) Income](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) Presents the unaudited consolidated statements of operations and comprehensive (loss) income for the three months ended March 31, 2024, and 2023, detailing revenues, operating expenses, net income/loss, and earnings per share Consolidated Statements of Operations and Comprehensive (Loss) Income (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | **Revenue:** | | | | Collaboration revenue | $32,598 | $79,729 | | Grant revenue | $5,414 | $556 | | Total revenue | $38,012 | $80,285 | | **Operating expenses:** | | | | Research and development, net | $53,573 | $51,768 | | General and administrative | $14,851 | $13,762 | | Total operating expenses | $68,424 | $65,530 | | **(Loss) income from operations** | $(30,412) | $14,755 | | Loss from foreign currency | $(53) | $(328) | | Gain on debt extinguishment | — | $33,953 | | Finance income, net | $4,016 | $2,477 | | Net (loss) income before income taxes | $(26,449) | $50,857 | | Provision for income taxes | $368 | $103 | | Net (loss) income | $(26,817) | $50,754 | | **(Loss) earnings per share** | | | | Basic | $(1.00) | $1.91 | | Diluted | $(1.00) | $1.87 | | **Weighted-average shares used in calculation of (loss) earnings per share:** | | | | Basic | 26,879 | 26,555 | | Diluted | 26,879 | 27,149 | | **Comprehensive (loss) income:** | | | | Net (loss) income | $(26,817) | $50,754 | | Comprehensive (loss) income | $(26,817) | $50,754 |

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Arcturus Therapeutics, with a focus on how actual results compare to estimates, which could significantly impact stock price [1] Financial Expectations - Arcturus Therapeutics is expected to report a quarterly loss of $1.17 per share, reflecting a year-over-year change of -233% [2] - Revenues are projected to be $22.12 million, down 72.5% from the same quarter last year [2] Estimate Revisions - The consensus EPS estimate has been revised 109.3% lower in the last 30 days, indicating a bearish sentiment among analysts [2] - The Most Accurate Estimate for Arcturus is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -5.43% [5] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with predictive power being significant for positive readings only [3][4] - Arcturus currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [6] Historical Performance - In the last reported quarter, Arcturus was expected to post a loss of $1.69 per share but actually reported a loss of $0.32, resulting in a surprise of +81.07% [7] - Over the past four quarters, the company has beaten consensus EPS estimates two times [7] Conclusion - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [8] - Arcturus Therapeutics does not appear to be a compelling earnings-beat candidate, and investors should consider additional factors before making decisions [8]

Financial Performance and Position - The company has incurred significant losses since inception, with an accumulated deficit of $367.9 million as of December 31, 2023[185]. - The company has never generated revenue from product sales and relies on limited collaboration and grant revenue, primarily from a partnership with CSL Seqirus[185]. - The company expects to continue incurring substantial expenses and operating losses for the foreseeable future, with significant fluctuations in net losses anticipated from quarter to quarter[185]. - As of December 31, 2023, the company had unrestricted cash and cash equivalents of $292.0 million, expected to fund operations for the near future[188]. - The company anticipates needing to raise additional capital in the future, which may not be available on acceptable terms[188]. - The company has identified material weaknesses in internal control over financial reporting, which could impact the accuracy and timeliness of financial results[189]. - The company has devoted most financial resources to research and development, with ongoing activities expected to significantly increase expenses[185]. - The company may face limitations on its ability to use net operating loss carryforwards due to potential ownership changes, which could increase future tax liabilities[192][193]. - The company’s debt obligations include customary default clauses, which could lead to accelerated repayment if breached, potentially requiring alternative financing[191]. - The company expects to face pricing pressures due to managed healthcare trends and increasing demands for discounts from payors[217]. - If adequate coverage and reimbursement are not available for future products, it may be difficult to sell those products profitably[216]. - The company does not intend to pay dividends on common stock, limiting returns to investors to share value appreciation[246]. - The market price of the company's common stock is expected to remain highly volatile, influenced by various operational and regulatory factors[246]. - The company has incurred significant legal, accounting, and compliance costs due to being publicly traded, which may strain resources and divert management's attention[249]. - The company expects to need significant additional capital in the future, potentially leading to dilution of existing shareholders' ownership[250]. - A total of 6,631,712 shares of common stock were issued to former shareholders of Arcturus Therapeutics, which may be sold in the public market, potentially impacting share price[250]. - The company is subject to Nasdaq's continued listing requirements, including a minimum closing bid price of $1.00 per share, with the risk of delisting if not met[251]. - If the company's common stock is delisted from Nasdaq, liquidity will be reduced, and the trading price is expected to decline immediately[251]. - The company has entered into a Sales Agreement allowing for the sale of up to $200 million in common stock, but has not yet sold any shares under this agreement[250]. - The company faces risks related to securities class action litigation, particularly due to dependence on clinical trial outcomes and regulatory approvals[250]. - Compliance with new regulations may increase legal and financial compliance costs, impacting operational efficiency[249]. Product Development and Regulatory Challenges - The partnered next-generation COVID-19 vaccine candidate, ARCT-154, has only received marketing approval in Japan, with uncertain prospects for approval in other countries[183]. - The company may face challenges in commercializing product candidates due to competition and regulatory hurdles, impacting potential revenue generation[183]. - Regulatory authorities may change their recommendations, complicating the approval process for the company's COVID-19 vaccine candidates and increasing development costs[196]. - The company has no products approved for commercial marketing other than ARCT-154, with all other candidates still in preclinical or clinical development[199]. - The company may experience increased research and development costs when updating COVID-19 vaccines to address new variants, which could impact its financial resources[197]. - Clinical trials are expensive and uncertain, with failures possible at any stage, which could lead to increased costs and delays in obtaining marketing approvals[204]. - Delays in clinical trials could shorten exclusive commercialization periods and allow competitors to enter the market sooner[206]. - The company may face challenges in patient recruitment for clinical studies, particularly for rare genetic diseases, which could delay regulatory approval[207]. - Undesirable side effects from product candidates could lead to halted trials and regulatory restrictions, impacting market acceptance[208]. - Regulatory authorities may impose significant restrictions on approved products, requiring ongoing compliance with extensive regulations[210]. - The company may incur additional costs if required to conduct further clinical trials or testing beyond current plans[205]. - Non-compliance with regulatory requirements post-approval could result in severe penalties, including withdrawal of approval or product recalls[211]. - Manufacturing issues could arise during the scale-up of product candidates, potentially increasing costs and delaying regulatory approvals[213]. - The commercial success of product candidates will depend on acceptance by the medical community, influenced by factors such as clinical safety, efficacy, and pricing[214]. - Strategic alliances are crucial for the clinical development and commercialization of product candidates, and failure of these alliances could delay or terminate development efforts[218]. - The company may need to seek alternative strategic alliances if current partners do not fulfill their responsibilities, which could increase cash expenditures and limit program scope[220]. - The company relies on outside contractors for drug discovery and clinical studies, and any failure by these contractors could delay product development[221]. - The company’s ability to compete effectively depends on obtaining and maintaining intellectual property rights, which may be challenged or invalidated[226]. - The company may face claims of infringement related to mRNA technology, which could block development and commercialization efforts[227]. - The company’s patents have a limited lifespan, generally 20 years from filing, which may expose it to competition from generic medications[227]. - The company may experience increased costs and delays in regulatory approvals if it encounters issues with its CROs or manufacturing partners[225]. - The company’s commercialization prospects could be materially diminished if it cannot secure timely and adequate supply of materials from vendors[224]. Operational and Compliance Risks - The company is highly dependent on collaboration partners, and any failure in these relationships could adversely affect business operations and results[189]. - The company must establish effective sales and marketing capabilities or partnerships to generate revenue from product sales, as competition is strong in the market[215]. - The company owns over 438 patents and pending patent applications, including 46 granted U.S. patents as of February 26, 2024[226]. - The company relies on a limited number of suppliers for raw materials, which may lead to supply shortages and delivery delays impacting clinical trials and commercialization[224]. - The company may face significant disruptions in sales if supply from approved manufacturers is interrupted, requiring qualification of alternative vendors[225]. - The company has established manufacturing relationships with a limited number of suppliers, which poses risks to the timely production of drug candidates[224]. - The company’s reliance on contract research organizations (CROs) for clinical trials may result in delays or increased costs if they fail to perform satisfactorily[225]. - Regulatory compliance and environmental laws may impose significant costs and risks that could adversely affect business success[212]. - The company may face significant costs and distractions due to potential lawsuits related to intellectual property rights, which could adversely affect its business operations[228]. - The U.S. government may exercise "march-in" rights under the Bayh-Dole Act, which could harm the company's business and financial condition if it fails to commercialize inventions developed with government funding[229]. - The company is subject to various federal and state fraud and abuse laws, which could result in civil, criminal, and administrative penalties if not complied with[233]. - The company may incur substantial expenses if claims arise regarding the wrongful use or disclosure of confidential information by its employees or contractors[228]. - The company must comply with the European General Data Protection Regulation (GDPR) as it expands operations in the EU, which may increase regulatory scrutiny[235]. - The company may face penalties and reputational harm if found in violation of healthcare fraud and abuse laws, impacting its future earnings and operational capabilities[234]. - The company’s ability to manage growth effectively is crucial for maintaining operational efficiency and achieving financial performance targets[231]. - The company’s patents may be subject to federal regulations due to their development through government-funded programs, potentially affecting its intellectual property rights[228]. - Cybersecurity risks could lead to reputational damage and financial penalties if the company's data is compromised[239]. - Business interruptions from natural disasters could disrupt product development, and the company lacks sufficient insurance for such events[241]. - A contract with BARDA for developing a pandemic influenza candidate is subject to government audit and termination provisions, posing additional risks[242]. - Material weaknesses in internal controls over financial reporting were identified, which could affect the accuracy and timing of financial results[244].

Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) Q4 2023 Earnings Conference Call March 7, 2024 4:30 PM ET Company Participants Neda Safarzadeh - Vice President, Head of Investor Relations, Public Relations & Marketing. Joe Payne - President & Chief Executive Officer Andy Sassine - Chief Financial Officer Pad Chivukula - Chief Scientific Officer & Chief Operating Officer Conference Call Participants Evan Wang - Guggenheim Securities Whitney Ijem - Canaccord Genuity Myles Minter - William Blair Jan Hughes - ...

Arcturus Therapeutics (ARCT) came out with a quarterly loss of $0.32 per share versus the Zacks Consensus Estimate of a loss of $1.69. This compares to earnings of $4.33 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 81.07%. A quarter ago, it was expected that this pharmaceutical company would post a loss of $1.79 per share when it actually produced a loss of $0.61, delivering a surprise of 65.92%.Over the last four quarters, ...

Revenue Performance - Arcturus reported revenue of $169.9 million for the year ended December 31, 2023, a decrease from $206.0 million in 2022, primarily due to the discontinuation of collaborations with Vinbiocare and Janssen[4] - Revenue from CSL in 2023 was $157.4 million, slightly increasing by $3.0 million compared to 2022[4] - Total revenue for 2023 was $169.933 million, a decrease of 17.5% from $205.999 million in 2022[17] - Collaboration revenue for 2023 was $160.882 million, down from $205.755 million in 2022, representing a decline of 22%[17] Operating Expenses - Total operating expenses for 2023 were $245.0 million, up from $193.8 million in 2022[5] - Research and development expenses increased to $192.1 million in 2023 from $147.8 million in 2022, driven by CSL and BARDA programs[6] - Research and development expenses increased to $192.133 million in 2023, up 30% from $147.751 million in 2022[17] - Operating expenses for the three months ended December 31, 2023, were $49.127 million, compared to $38.841 million for the same period in 2022[19] Net Income and Loss - The net loss for 2023 was approximately $26.6 million, or ($1.00) per diluted share, compared to a net income of $9.3 million, or $0.35 per diluted share in 2022[8] - Net loss for 2023 was $26.591 million, compared to a net income of $9.349 million in 2022[17] - Basic and diluted loss per share for 2023 was $(1.00), compared to earnings of $0.35 per share in 2022[17] - Net loss for the three months ended December 31, 2023, was $8.573 million, compared to a net income of $117.347 million for the same period in 2022[19] Cash and Assets - Cash, cash equivalents, and restricted cash were $348.9 million at December 31, 2023, down from $394.0 million at the end of 2022[9] - Total current assets decreased to $386.590 million as of December 31, 2023, from $403.333 million at the end of 2022[15] - Total liabilities decreased to $147.755 million as of December 31, 2023, from $180.075 million at the end of 2022[15] - Total assets decreased to $429.402 million as of December 31, 2023, from $450.387 million at the end of 2022[15] Future Developments - The cash runway has been extended to Q1 2027 due to disciplined cost management and progress in collaborations[2] - Kostaive® is anticipated to launch in Japan in 2024, marking a significant milestone as the world's first self-amplifying mRNA product approved for COVID-19[3] - ARCT-032 received Orphan Drug Designation from the U.S. FDA and the European Commission, with Phase 1b interim data expected in Q2 2024[2] - New vaccine discovery programs for Lyme Disease and Gonorrhea have been initiated based on the validation of LUNAR® and STARR® technologies[3]

Core Insights - The article emphasizes the significant potential of AI and technology sectors, highlighting their capacity for transformative growth and innovation in various aspects of life [1] Group 1: Arcturus Therapeutics Holdings (ARCT) - Arcturus Therapeutics is a biotechnology company focused on treatments for COVID-19 and influenza, with a one-year stock price prediction ranging from $18 to $140, averaging $65.25 [2] - The company announced a successful COVID-19 vaccine booster that enhances immunity duration and antibody strength, positioning it as a key player in future vaccine rollouts [2] - Arcturus has a low P/E ratio of 9.82x compared to the industry average of 16.38x, with a YoY revenue growth of 30% and an impressive YoY EPS growth of 974% [3] Group 2: Cisco Systems (CSCO) - Cisco Systems is a communications technology company with a one-year stock price forecast between $43 and $76, averaging $53.47 [4] - The company has partnered with Microsoft to upgrade transatlantic cables to support cloud and AI services, indicating its commitment to future growth in these areas [5] - Cisco's P/E ratio stands at 14.72x, significantly lower than the industry average of 30x, with a YoY EPS growth of approximately 7% [5] Group 3: SurgePays (SURG) - SurgePays is a telecommunications and financial technology company targeting unbanked populations, with a one-year price target between $13.25 and $15 [6] - The company is expanding its presence in convenience stores, which is expected to enhance recurring revenues and customer loyalty [6] - SurgePays reported a significant improvement in profitability, with EBITDA rising from a loss of -$0.8 million to $7.5 million and gross profit margin increasing from 5.3% to 30.7% [7]

Financial Data and Key Metrics Changes - For Q3 2023, revenues were reported at $45.1 million, a significant increase from $13.4 million in Q3 2022, representing a year-over-year increase of $31.7 million [19] - Total operating expenses for Q3 2023 were $64.5 million, compared to $50.2 million in Q3 2022, indicating an increase in expenses [20] - The net loss for Q3 2023 was approximately $16.2 million, or $0.61 per diluted share, an improvement from a net loss of $35.3 million, or $1.33 per diluted share, in Q3 2022 [22] Business Line Data and Key Metrics Changes - The ARCT-154 COVID-19 vaccine is under review by Japan's PMDA, with a new drug application supported by successful Phase 3 studies [5][7] - The ongoing Phase 3 bivalent COVID vaccine trial has reached its enrollment target of 850 participants, with initial top-line results expected in Q1 2024 [8] - The ARCT-810 program for OTC deficiency has received Orphan Drug Designation and is currently in two clinical studies, with interim data expected in H1 2024 [11][12] Market Data and Key Metrics Changes - The company has achieved approximately $365 million in upfront payments and milestones from CSL Seqirus as of September 30, 2023, which supports ongoing development activities [22] - The cash runway is expected to extend through the end of 2026 based on the current pipeline and program [23] Company Strategy and Development Direction - The strategic collaboration with CSL Seqirus focuses on developing and commercializing next-generation mRNA vaccines, with significant progress reported [9] - The company is committed to enhancing the STARR next-generation mRNA vaccine platform, which aims to provide a longer-lasting immune response compared to conventional mRNA technologies [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the approval of ARCT-154 in Japan, which is anticipated in December 2023, marking a critical milestone for the company [24] - The management acknowledged the challenges in patient recruitment for the ARCT-810 program but emphasized efforts to enhance patient experience and recruitment strategies [38] Other Important Information - The ARCALIS facility in Japan is expected to become a key player in the global mRNA drug manufacturing landscape, with significant government funding supporting its development [17][18] - The company is exploring the potential for inhaled vaccines for respiratory viruses, leveraging its existing technologies [63] Q&A Session Summary Question: Update on Japan's vaccine order commitment for 2024 - Management indicated that Meiji is responsible for soliciting orders and that no orders can be placed until approval is granted [27] Question: Timeline for bivalent vaccine data - Top-line data for the bivalent vaccine is expected in Q1 2024, with anticipated PMDA approval in Q3 2024 [27] Question: Concerns about patient recruitment for the OTC program - Management acknowledged the slow recruitment but highlighted measures taken to enhance patient experience and recruitment efforts [38] Question: Clarification on regulatory conversations regarding ARCT-154 - Management confirmed that the six-month durability data was shared with the regulatory agency and is being considered for approval [30] Question: Expectations for EMA feedback on ARCT-154 - Management stated that the EMA approval process is considerable, with guidance from CSL indicating a 2024 approval [57] Question: Potential for developing inhaled vaccines - Management noted that the success in large vaccine trials could present opportunities for combining technologies for inhaled vaccines [63]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Special Note Regarding Forward-Looking Statements](index=3&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position as of September 30, 2023 Assets (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Cash and cash equivalents | $311,918 | $391,883 | $(79,965) | | Restricted cash | $35,000 | — | $35,000 | | Accounts receivable | $38,220 | $2,764 | $35,456 | | Total current assets | $393,268 | $403,333 | $(10,065) | | Total assets | $457,650 | $450,387 | $7,263 | Liabilities & Equity (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Accounts payable | $18,362 | $7,449 | $10,913 | | Current portion of long-term debt | — | $60,655 | $(60,655) | | Deferred revenue (current) | $40,768 | $28,648 | $12,120 | | Total current liabilities | $87,683 | $126,984 | $(39,301) | | Long-term debt | $20,000 | — | $20,000 | | Total liabilities | $177,588 | $180,075 | $(2,487) | | Total stockholders' equity | $280,062 | $270,312 | $9,750 | - Key Balance Sheet Changes include a **$79.97 million decrease in cash**, a **$35.46 million increase in accounts receivable**, and a **$9.75 million increase in total stockholders' equity**[11](index=11&type=chunk) - **Restricted cash increased significantly** to $35.0 million (current) and $22.13 million (non-current)[11](index=11&type=chunk) - Current portion of long-term debt was eliminated, while **new long-term debt of $20.0 million** was added[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company's financial performance shows significant revenue growth and a reduced net loss Revenue (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Collaboration revenue | $43,376 | $13,369 | $132,670 | $45,706 | | Grant revenue | $1,764 | — | $3,274 | — | | Total revenue | $45,140 | $13,369 | $135,944 | $45,706 | Operating Expenses (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development, net | $51,077 | $37,688 | $155,513 | $120,770 | | General and administrative | $13,377 | $12,488 | $40,364 | $34,211 | | Total operating expenses | $64,454 | $50,176 | $195,877 | $154,981 | Profitability (in thousands, except per share) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Loss from operations | $(19,314) | $(36,807) | $(59,933) | $(109,275) | | Gain on debt extinguishment | — | — | $33,953 | — | | Finance income (expense), net | $3,981 | $(321) | $9,710 | $(1,445) | | Net loss | $(16,222) | $(35,266) | $(18,018) | $(107,998) | | Net loss per share, basic and diluted | $(0.61) | $(1.33) | $(0.68) | $(4.09) | - **Total revenue for Q3 2023 increased by 237.6%** to $45.14 million, driven by the CSL Seqirus collaboration and BARDA grant[13](index=13&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - **Net loss significantly decreased** for both the three-month and nine-month periods, aided by a **$33.95 million gain on debt extinguishment**[13](index=13&type=chunk)[106](index=106&type=chunk) - **Research and development expenses increased by 35.5%** for the quarter, reflecting higher clinical research and manufacturing costs[13](index=13&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) - **Finance income turned positive**, driven by higher interest rates and reduced interest expense[13](index=13&type=chunk)[105](index=105&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, reflecting net losses and share-based compensation Total Stockholders' Equity (in thousands) | Metric | Dec 31, 2022 | Mar 31, 2023 | Jun 30, 2023 | Sep 30, 2023 | | :--------------------------- | :----------- | :----------- | :----------- | :----------- | | Total Stockholders' Equity | $270,312 | $329,248 | $285,175 | $280,062 | - For the nine months ended Sep 30, 2023, changes in equity were driven by a **net loss of $18.02 million** and **share-based compensation expense of $25.83 million**[16](index=16&type=chunk)[20](index=20&type=chunk)[63](index=63&type=chunk) - **Common shares outstanding increased** from 26,555 thousand to 26,723 thousand since December 31, 2022[11](index=11&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details cash flows, indicating improved operating cash flow and an increase in total cash Cash Flow Summary (9 months ended Sep 30, 2023 vs. 2022, in thousands) | Activity | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash provided by (used in) operating activities | $(17,470) | $(128,266) | $110,796 | | Net cash used in investing activities | $(2,026) | $(3,919) | $1,893 | | Net cash used in financing activities | $(5,430) | $(627) | $(4,803) | | Net decrease in cash, cash equivalents and restricted cash | $(24,926) | $(132,812) | $107,886 | | Cash, cash equivalents and restricted cash at end of period | $369,051 | $239,757 | $129,294 | - **Operating cash outflow improved by $110.80 million**, primarily due to a lower net loss and a substantial increase in deferred revenue[20](index=20&type=chunk) - **Deferred revenue increased by $33.96 million**, reflecting upfront and milestone payments from collaborations[20](index=20&type=chunk) - Financing activities included **$20.0 million in proceeds from new debt** and **$27.36 million in debt obligation payments**[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations for figures in the financial statements [Note 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Description%20of%20Business,%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Arcturus Therapeutics is a global late-stage clinical messenger RNA medicines company focused on infectious disease vaccines and rare diseases[23](index=23&type=chunk)[70](index=70&type=chunk) - The company had an **accumulated deficit of $356.2 million** but believes it has sufficient working capital to fund operations for at least the next twelve months[26](index=26&type=chunk) - The company operates as **one operating segment** focused on research and development of its nucleic acid-focused technology[28](index=28&type=chunk) - Revenue from collaboration agreements is recognized based on a five-step model, with variable consideration constrained until uncertainty is resolved[29](index=29&type=chunk) - All **R&D costs are expensed as incurred**, net of grants[33](index=33&type=chunk) [Note 2. Revenue](index=12&type=section&id=Note%202.%20Revenue) Contract Assets and Liabilities (in thousands) | Metric | Dec 31, 2022 | Additions | Deductions | Sep 30, 2023 | | :------------------ | :----------- | :-------- | :--------- | :----------- | | Accounts receivable | $2,764 | $170,244 | $(134,788) | $38,220 | | Deferred revenue | $48,719 | $169,904 | $(135,944) | $82,679 | Revenue by Source (in thousands) | Source | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | CSL Seqirus | $43,433 | — | $129,257 | — | | Vinbiocare | — | $11,237 | — | $26,815 | | Janssen | — | $934 | $660 | $2,593 | | Other collaboration | $(57) | $1,198 | $2,753 | $3,798 | | BARDA | $1,764 | — | $3,274 | — | | **Total Revenue** | **$45,140** | **$13,369** | **$135,944** | **$45,706** | - The CSL Seqirus collaboration includes a **$200.0 million upfront payment** and eligibility for over **$4.3 billion in future milestones**[44](index=44&type=chunk)[45](index=45&type=chunk) - The Vinbiocare License & Supply Agreements were terminated in October 2022, with no remaining performance obligations[47](index=47&type=chunk) - The BARDA grant is a cost reimbursement contract for up to **$63.2 million** for pandemic influenza vaccine development[48](index=48&type=chunk) [Note 3. Fair Value Measurements](index=15&type=section&id=Note%203.%20Fair%20Value%20Measurements) - The company uses a three-level hierarchy for fair value measurements, with all recurring fair value assets classified as **Level 1**[49](index=49&type=chunk)[50](index=50&type=chunk) - The carrying values of cash, receivables, payables, and the Singapore Loan approximate their fair values due to short maturities[49](index=49&type=chunk) [Note 4. Balance Sheet Details](index=16&type=section&id=Note%204.%20Balance%20Sheet%20Details) Property and Equipment, Net (in thousands) | Asset Category | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Research equipment | $15,764 | $10,251 | | Total (gross) | $20,640 | $18,198 | | Less: accumulated depreciation | $(7,925) | $(5,783) | | **Property and equipment, net** | **$12,715** | **$12,415** | - Depreciation and amortization expense was **$0.8 million for Q3 2023** and **$2.1 million for 9M 2023**[52](index=52&type=chunk) Accrued Liabilities (in thousands) | Liability Category | Sep 30, 2023 | Dec 31, 2022 | | :---------------------------------------- | :----------- | :----------- | | Accrued compensation | $10,200 | $4,038 | | Income tax payable | $482 | $1,295 | | Current portion of operating lease liability | $4,200 | $3,884 | | Clinical accruals | $3,180 | $4,531 | | Contractual liabilities | $3,492 | $7,468 | | Other accrued research and development expenses | $6,999 | $9,016 | | **Total Accrued Liabilities** | **$28,553** | **$30,232** | [Note 5. Debt](index=16&type=section&id=Note%205.%20Debt) - A **$50.0 million revolving credit line** was established with Wells Fargo in April 2023, with $20.0 million drawn in September and repaid in October[54](index=54&type=chunk)[109](index=109&type=chunk) - The remaining **$34.0 million Singapore Loan was forgiven in Q1 2023**, resulting in a gain on debt extinguishment[55](index=55&type=chunk) - The Western Alliance Bank Agreement was terminated in March 2023 with a payoff of approximately **$7.4 million**[56](index=56&type=chunk) [Note 6. Stockholders' Equity](index=18&type=section&id=Note%206.%20Stockholders'%20Equity) - Potentially dilutive securities were excluded from diluted EPS calculation as they were anti-dilutive, including **1.2 million for Q3 2023** and **0.8 million for 9M 2023**[58](index=58&type=chunk) [Note 7. Share-Based Compensation Expense](index=18&type=section&id=Note%207.%20Share-Based%20Compensation%20Expense) - As of September 30, 2023, **1,523,452 shares** remain available under the 2019 Omnibus Equity Incentive Plan[59](index=59&type=chunk) - As of September 30, 2023, **100,725 shares** remain available under the 2021 Inducement Equity Incentive Plan[59](index=59&type=chunk) Share-Based Compensation Expense (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $3,863 | $3,996 | $11,112 | $10,811 | | General and administrative | $5,406 | $5,440 | $14,722 | $13,270 | | **Total** | **$9,269** | **$9,436** | **$25,834** | **$24,081** | [Note 8. Income Taxes](index=18&type=section&id=Note%208.%20Income%20Taxes) - Income tax expense was **$0.9 million for Q3 2023** and **$1.6 million for 9M 2023**[61](index=61&type=chunk) - No tax benefit was provided for U.S. losses due to a **full valuation allowance** on deferred tax assets[61](index=61&type=chunk) [Note 9. Commitments and Contingencies](index=18&type=section&id=Note%209.%20Commitments%20and%20Contingencies) - The Cystic Fibrosis Foundation (CFF) agreement was amended, increasing the award for LUNAR-CF to **$24.6 million**[62](index=62&type=chunk)[85](index=85&type=chunk) - Operating lease liabilities total **$31.22 million** as of September 30, 2023, with a weighted-average remaining lease term of 8.3 years[64](index=64&type=chunk) [Note 10. Related Party Transactions](index=20&type=section&id=Note%2010.%20Related%20Party%20Transactions) - The company discontinued equity method accounting for its investment in GRI Bio, Inc. in April 2023[67](index=67&type=chunk) - The company's ownership in the ARCALIS, Inc. joint venture was **45.8%** as of September 30, 2023[25](index=25&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) [Overview](index=21&type=section&id=Overview) Arcturus is a late-stage clinical mRNA medicines company focused on vaccines and rare diseases - The company's focus is on infectious disease vaccines and liver/respiratory rare diseases[70](index=70&type=chunk) - It leverages proprietary **LUNAR® lipid nanoparticle (LNP) delivery** and **STARR® self-amplifying mRNA** technologies[70](index=70&type=chunk)[71](index=71&type=chunk) [Business Updates](index=21&type=section&id=Business%20Updates) This section provides key updates on the company's ongoing development programs and collaborations [Updates on Vaccine Program](index=21&type=section&id=Updates%20on%20Vaccine%20Program) - The CSL collaboration grants exclusive global rights for self-amplifying mRNA vaccines against COVID-19, influenza, and other respiratory diseases[72](index=72&type=chunk) - The LUNAR-FLU program received a **$17.5 million milestone payment** in Q3 2023, with a Phase 1 study planned for Q4 2023[72](index=72&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) [COVID Collaboration Program Updates](index=21&type=section&id=COVID%20Collaboration%20Program%20Updates) - The ARCT-154 Phase 3 trial in Japan demonstrated **immunological non-inferiority and superiority** over a conventional mRNA vaccine[73](index=73&type=chunk) - Phase 1/2 trial data showed **one-year durability of immune response** following an ARCT-154 booster[75](index=75&type=chunk) - A Phase 3 study for a bivalent vaccine (ARCT-2301) was initiated, with preliminary results expected by end of Q1 2024[79](index=79&type=chunk) - The European Medicines Agency (EMA) validated the marketing authorization application for ARCT-154[79](index=79&type=chunk) [Flu Collaboration Program Updates](index=23&type=section&id=Flu%20Collaboration%20Program%20Updates) - Received a **$17.5 million milestone payment** from CSL Seqirus in Q3 2023 for the LUNAR-FLU program[80](index=80&type=chunk) - A Phase 1 clinical study with a novel influenza mRNA vaccine candidate is planned for Q4 2023[72](index=72&type=chunk)[82](index=82&type=chunk) [Key Updates on Arcturus-Owned mRNA Therapeutic Development Candidates](index=24&type=section&id=Key%20Updates%20on%20Arcturus-Owned%20mRNA%20Therapeutic%20Development%20Candidates) - The LUNAR-OTC Phase 1b study completed enrollment, with a Phase 2 study initiated but facing challenging enrollment rates[83](index=83&type=chunk) - The LUNAR-CF Phase 1 study in healthy participants completed dosing, and a Phase 1b study in adults with CF initiated enrollment in October 2023[83](index=83&type=chunk][84](index=84&type=chunk) [Updates on Collaboration Agreements](index=25&type=section&id=Updates%20on%20Collaboration%20Agreements) This section details the latest developments in the company's collaboration agreements - The Cystic Fibrosis Foundation (CFF) Agreement was amended, increasing funding for LUNAR-CF to **$24.6 million**[85](index=85&type=chunk) - The Development and Option Agreement with CureVac expired on July 24, 2023[86](index=86&type=chunk) [Updates on ARCALIS Joint Venture](index=25&type=section&id=Updates%20on%20ARCALIS%20Joint%20Venture) ARCALIS, the company's manufacturing joint venture, received significant government grants for facility construction - ARCALIS was awarded up to **$115 million in two grants** in August 2023 for factory construction and equipment[87](index=87&type=chunk) - Total funding awarded to ARCALIS by the Japanese government is approximately **$165 million** to date[88](index=88&type=chunk) - The company's ownership in ARCALIS was **36.7%** as of November 6, 2023[88](index=88&type=chunk) [Updates on Research and Platform Activities](index=26&type=section&id=Updates%20on%20Research%20and%20Platform%20Activities) The company continues exploratory platform development to expand its product pipeline - Ongoing activities include evaluating genome editing and new targeting approaches using its LUNAR® and STARR® platforms[89](index=89&type=chunk) [Updates on Supply and Manufacturing](index=26&type=section&id=Updates%20on%20Supply%20and%20Manufacturing) The company is adapting its global manufacturing footprint to evolving market demands - An Integrated Global Supply Chain Network has been established with partners across the US, EU, and Asia[90](index=90&type=chunk) - Manufacturing processes are being adapted to market shifts from multi-dose to single-dose vial formats for COVID vaccines[90](index=90&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes financial performance, detailing changes in revenue and operating expenses [Revenue](index=26&type=section&id=Revenue) Total Revenue (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Three Months Ended Sep 30 | $45,140 | $13,369 | $31,771 | >100% | | Nine Months Ended Sep 30 | $135,944 | $45,706 | $90,238 | >100% | - The revenue increase is primarily attributable to the **CSL Seqirus collaboration** and grant revenue from BARDA[94](index=94&type=chunk)[95](index=95&type=chunk) - The increase was partially offset by decreased revenue from terminated collaboration agreements[94](index=94&type=chunk)[97](index=97&type=chunk) [Research and Development Expenses, net](index=27&type=section&id=Research%20and%20Development%20Expenses,%20net) Total R&D Expenses, Net (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Three Months Ended Sep 30 | $51,077 | $37,688 | $13,389 | 35.5% | | Nine Months Ended Sep 30 | $155,513 | $120,770 | $34,743 | 28.8% | R&D Expenses by Category (9 months ended Sep 30, 2023 vs. 2022, in thousands) | Category | 2023 | 2022 | $ Change | % Change | | :--------------------------- | :----------- | :----------- | :--------- | :--------- | | LUNAR-COVID, net | $71,501 | $60,774 | $10,727 | 17.7% | | Early-stage programs | $11,594 | $7,031 | $4,563 | >100% | | Discovery technologies | $16,266 | $8,287 | $7,979 | >100% | | Personnel related expenses | $40,206 | $31,862 | $8,344 | 26.2% | | Facilities and equipment | $8,426 | $6,345 | $2,081 | 32.8% | - The increase was driven by higher clinical research, manufacturing, and personnel-related costs[100](index=100&type=chunk) - **R&D costs are expected to increase** and remain substantial as the pipeline progresses[100](index=100&type=chunk) [General and Administrative Expenses](index=28&type=section&id=General%20and%20Administrative%20Expenses) Total G&A Expenses (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Three Months Ended Sep 30 | $13,377 | $12,488 | $889 | 7.1% | | Nine Months Ended Sep 30 | $40,364 | $34,211 | $6,153 | 18.0% | - The increase was primarily due to higher personnel, travel, consulting, and rent expenses[103](index=103&type=chunk) - **G&A expenses are not expected to increase** on a yearly basis from the current quarter's trend[103](index=103&type=chunk) [Finance income (expense), net](index=28&type=section&id=Finance%20income%20(expense),%20net) Total Finance Income (Expense), Net (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Three Months Ended Sep 30 | $3,981 | $(321) | $4,302 | >100% | | Nine Months Ended Sep 30 | $9,710 | $(1,445) | $11,155 | >100% | - **Interest income increased significantly** due to higher interest rates and a larger cash balance[105](index=105&type=chunk) - **Interest expense decreased** due to the extinguishment and forgiveness of debt in Q1 2023[105](index=105&type=chunk) [Other income and expense](index=28&type=section&id=Other%20income%20and%20expense) Total Other Income and Expense (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Three Months Ended Sep 30 | $4 | $1,862 | $(1,858) | -99.8% | | Nine Months Ended Sep 30 | $33,778 | $2,722 | $31,056 | >100% | - A **$33.95 million gain on debt extinguishment** was recorded in Q1 2023 from the forgiveness of the Singapore Loan[106](index=106&type=chunk) [Off-balance sheet arrangements](index=29&type=section&id=Off-balance%20sheet%20arrangements) The company has not engaged in any off-balance sheet arrangements as of September 30, 2023 - As of September 30, 2023, the company had **no off-balance sheet arrangements**[108](index=108&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, funding sources, and anticipated use of capital - Operations are funded by capital stock sales, debt, collaboration agreements, and government contracts[109](index=109&type=chunk) - The company held **$311.9 million in unrestricted cash** and cash equivalents as of September 30, 2023[109](index=109&type=chunk) - Significant cash inflows were received from the CSL Seqirus collaboration, including a **$200.0 million upfront payment** and **$90.0 million in milestones**[109](index=109&type=chunk) - Future cash will be used to fund the ARCT-810 Phase 2 trial, the LUNAR-CF program, and other operational expenses[112](index=112&type=chunk) [Funding Requirements](index=30&type=section&id=Funding%20Requirements) The company anticipates continued losses and the necessity of additional future financing - The company expects to continue generating losses and requires additional capital for long-term operations[113](index=113&type=chunk) - Management believes **current cash is sufficient for at least the next twelve months**[113](index=113&type=chunk) - The future capital strategy involves seeking additional capital through equity, debt, or partnership arrangements[113](index=113&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the company's critical accounting policies and estimates - There were **no material changes** to critical accounting policies and estimates from the 2022 Annual Report[115](index=115&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest income sensitivity to changes in U.S. interest rates - The company believes it is **not subject to any material market risk exposure** and does not use derivative financial instruments[116](index=116&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) [Evaluation of Disclosure Controls and Procedures](index=31&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023 - Management concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level**[117](index=117&type=chunk) [Changes in Internal Control over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Management reported no material changes to internal control over financial reporting during the period - There were **no material changes** in internal controls over financial reporting during the quarter[118](index=118&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company may be involved in various legal proceedings arising in the ordinary course of business - Outcomes of legal proceedings are inherently uncertain, making assessment of loss difficult[120](index=120&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, highlighting challenges in the evolving COVID-19 vaccine market - The **evolving market for COVID-19 vaccines** poses challenges, including a fragmented customer base and less predictable orders[121](index=121&type=chunk) - These factors could impact the potential market for the company's COVID-19 vaccine and increase R&D costs[121](index=121&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - There were **no unregistered sales of equity securities** or use of proceeds[122](index=122&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - There were **no defaults upon senior securities**[122](index=122&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is **not applicable**[122](index=122&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This section reports on changes in Rule 10b5-1 trading arrangements by company officers [Rule 10b5-1 Trading Arrangements](index=32&type=section&id=Rule%2010b5-1%20Trading%20Arrangements) - A company officer **modified an existing Rule 10b5-1 trading arrangement** on August 24, 2023[123](index=123&type=chunk) - The arrangement provides for the exercise of up to **36,064 options** and subsequent sale of the underlying shares[123](index=123&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q - The exhibit list includes corporate governance documents, equity plans, and various collaboration and financing agreements[125](index=125&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are included[145](index=145&type=chunk) - Financial statements are formatted in **Inline Extensible Business Reporting Language (Inline XBRL)**[146](index=146&type=chunk) [Signatures](index=36&type=section&id=Signatures)