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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

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 September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-38359

 

Adicet Bio, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

81-3305277

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 Boylston Street, 13th Floor

Boston, MA

 

02116

(Address of principal executive offices)

 

(Zip Code)

 

(857) 315-5528

(Registrant’s telephone number, including area code)  

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

ACET

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 3, 2020, the registrant had 19,600,567 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

EXPLANATORY NOTE

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

3

 

 

 

PART I.

FINANCIAL INFORMATION

4

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019

5

 

Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2020

6

 

Condensed Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2019

7

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

PART II.

OTHER INFORMATION

46

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

84

Item 3.

Defaults Upon Senior Securities

84

Item 4.

Mine Safety Disclosures

84

Item 5.

Other Information

84

Item 6.

Exhibits

84

Signatures

87

 

 

i


Summary of the Material Risks Associated with Our Business

 

 

Our product candidates are based on novel technologies, which makes it difficult to predict the likely success of such product candidates and the time and cost of product candidate development and obtaining regulatory approval. Specifically, our gamma delta T cell candidates represent a novel approach to cancer treatment that creates significant challenges for us.

 

 

Our business is highly dependent on the success of ADI-001 and ADI-002. If we are unable to obtain approval for ADI-001 or ADI-002 and effectively commercialize ADI-001 or ADI-002 for the treatment of patients in our approved indications, our business would be significantly harmed.

 

 

All of our product candidates, including ADI-001 and ADI-002, will require additional clinical and non-clinical development and will require substantial investment. If we are unable to raise sufficient capital when needed, our business, financial condition and results of operations will be harmed, and we will need to significantly modify our operational plans to continue as a going concern.

 

 

Our clinical trials may fail to demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory approval and commercialization.

 

 

We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.

 

 

A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially adversely affect our business.

 

 

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

 

 

We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our common stock.

 

 

We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

 

 

If our collaboration agreement with Regeneron is terminated, or if Regeneron materially breaches our obligations thereunder, our business, prospects, operating results, and financial condition would be materially harmed.

 

 

We are subject to certain exclusivity obligations under our agreement with Regeneron.

 

 

The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates.

 

 

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

 

 

We currently have no marketing and sales organization and as a company has no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

 

 

We do not currently operate our own manufacturing facility, which would require significant resources and any failure to successful manufacture our products could adversely affect our clinical trials and the commercial viability of our product candidates.

1


EXPLANATORY NOTE

 

Prior to September 15, 2020, we were a clinical-stage biopharmaceutical company known as resTORbio, Inc. (“resTORbio”) that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans. resTORbio was originally incorporated under the laws of the State of Delaware in July 2016 and commenced research and development operations in March 2017.

 

On September 15, 2020, we completed our business combination whereby a wholly-owned subsidiary of resTORbio merged with and into Adicet Bio, Inc. (“Former Adicet”), with Former Adicet surviving as a wholly-owned subsidiary of resTORbio and changing its name to Adicet Therapeutics, Inc. (such transactions, the “Merger”). In connection with the completion of the Merger, resTORbio was renamed Adicet Bio, Inc. (“Adicet Bio”).

 

Immediately prior to the effective time of the Merger, resTORbio effected a reverse stock split of its common stock at a ratio of 1-for-7 (the “Reverse Stock Split”). At the effective time of the Merger, each outstanding share of Former Adicet’s capital stock was converted into the right to receive 0.1240 (the “Exchange Ratio”) shares of Adicet Bio’s common stock.

 

Unless otherwise noted, all references to common stock share and per share amounts in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the conversion of shares in the Merger based on the Exchange Ratio and Reverse Stock Split. As used herein, the words “the Company,” “we,” “us,” and “our” refer to, for periods following the Merger, Adicet Bio (formerly resTORbio, Inc.), together with is direct and indirect subsidiaries, and for periods prior to the Merger, Adicet Therapeutics, Inc. (formerly Adicet Bio, Inc.), and its direct and indirect subsidiaries, as applicable.  In addition, the word “resTORbio” refers to the Company prior to the completion of the Merger, and we sometimes refer to Adicet Therapeutics, Inc. as “Adicet” or “Former Adicet.”

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

 

the anticipated timing of our initiation of future clinical trials for ADI-001 in non-Hodgkin’s Lymphoma (“NHL”), including the anticipated results;

 

the anticipated timing of our submission of INDs or equivalent regulatory filings and initiation of future clinical trials for ADI-002 in solid tumors, including the timing of the anticipated results;

 

the impacts of the current COVID-19 pandemic on our continuing operations, clinical development plans, including the timing of initiation and completion of studies or trials, financial forecasts and expectations, potential delays and increased costs in conducting clinical trials in nursing homes, and other matters related to our business and operations;

 

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

 

the rate and degree of acceptance and clinical utility of any products for which we receive regulatory approval;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position and strategy;

 

our ability to identify additional product candidates with significant commercial potential;

 

our plans to enter into collaborations for the development and commercialization of product candidates;

 

the potential benefits of any future collaboration;

 

our ability to contract with third party suppliers and manufacturers and their ability to perform adequately;

 

the success of competing therapies that are or may become available;

 

our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;

 

our financial performance;

 

our expectations related to the use of cash, cash equivalents and marketable securities;

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

our ability to remediate the material weaknesses in internal control over financial reporting and to maintain effective internal control over financial reporting;

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

developments relating to our competitors and our industry;

 

the impact of government laws and regulations; and

 

other risks and uncertainties, including those listed under the caption “Risk Factors.”

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

3


PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ADICET BIO, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

84,960

 

 

$

10,607

 

Short-term marketable debt securities

 

 

23,160

 

 

 

51,793

 

Prepaid expenses and other current assets

 

 

9,291

 

 

 

1,786

 

     Total current assets

 

 

117,411

 

 

 

64,186

 

Property and equipment, net

 

 

2,043

 

 

 

2,121

 

Goodwill

 

 

20,739

 

 

 

 

In-process research and development

 

 

3,490

 

 

 

 

Restricted cash

 

 

4,527

 

 

 

4,282

 

Long-term marketable debt securities

 

 

 

 

 

10,588

 

Other non-current assets

 

 

2,187

 

 

 

410

 

     Total assets

 

$

150,397

 

 

$

81,587

 

Liabilities, redeemable convertible preferred stock, and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,838

 

 

$

1,052

 

Contract liabilities — related party, current

 

 

19,390

 

 

 

10,993

 

Accrued and other current liabilities

 

 

6,849

 

 

 

2,820

 

     Total current liabilities

 

 

30,077

 

 

 

14,865

 

Contract liabilities — related party, net of current portion

 

 

 

 

 

10,890

 

Deferred rent, net of current portion

 

 

102

 

 

 

234

 

Redeemable convertible preferred stock warrant liability

 

 

 

 

 

1,881

 

Contingent consideration liability

 

 

2,880

 

 

 

 

Deferred tax liability

 

 

367

 

 

 

 

Other liabilities

 

 

41

 

 

 

 

     Total liabilities

 

 

33,467

 

 

 

27,870

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value; none and

   99,363,444 shares authorized as of September 30, 2020 and December 31,

   2019, respectively; none and 97,166,921 shares issued and outstanding

   as of September 30, 2020 and December 31, 2019, respectively;

   liquidation preference $0 and $128,195 as of September 30, 2020

   and December 31, 2019, respectively

 

 

 

 

 

114,083

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of

   September 30, 2020 and December 31, 2019; none issued and

   outstanding as of September 30, 2020 and December 31, 2019.

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 and 140,200,938

   shares authorized as of September 30, 2020 and December 31,

   2019, respectively; 19,589,637 and 2,155,578 shares issued and

   outstanding as of September 30, 2020 and December 31, 2019,

   respectively

 

 

1

 

 

 

 

Additional paid-in capital

 

 

214,213

 

 

 

9,258

 

Accumulated deficit

 

 

(97,367

)

 

 

(69,647

)

Accumulated other comprehensive income

 

 

83

 

 

 

23

 

     Total stockholders’ equity (deficit)

 

 

116,930

 

 

 

(60,366

)

     Total liabilities, redeemable convertible preferred stock, and stockholders’

        equity (deficit)

 

$

150,397

 

 

$

81,587

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


ADICET BIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenuerelated party

 

$

3,028

 

 

$

(7,047

)

 

$

12,493

 

 

$

(974

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,942

 

 

 

6,331

 

 

 

24,651

 

 

 

17,168

 

General and administrative

 

 

7,741

 

 

 

1,847

 

 

 

17,684

 

 

 

6,069

 

Total operating expenses

 

 

16,683

 

 

 

8,178

 

 

 

42,335

 

 

 

23,237

 

Loss from operations

 

 

(13,655

)

 

 

(15,225

)

 

 

(29,842

)

 

 

(24,211

)

Interest income

 

 

153

 

 

 

276

 

 

 

704

 

 

 

561

 

Interest expense

 

 

(50

)

 

 

 

 

 

(84

)

 

 

 

Other income (expense), net

 

 

(1,224

)

 

 

171

 

 

 

(1,174

)

 

 

2,091

 

Loss before income tax expense (benefit)

 

 

(14,776

)

 

 

(14,778

)

 

 

(30,396

)

 

 

(21,559

)

Income tax expense (benefit)

 

 

3

 

 

 

 

 

 

(2,676

)

 

 

1

 

Net loss

 

$

(14,779

)

 

$

(14,778

)

 

$

(27,720

)

 

$

(21,560

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(2.84

)

 

$

(6.87

)

 

$

(8.69

)

 

$

(10.10

)

Weighted-average common shares used in computing net loss

   per share attributable to common stockholders, basic and

   diluted

 

 

5,208,887

 

 

 

2,149,986

 

 

 

3,190,557

 

 

 

2,133,645

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable debt securities, net of

   tax

 

 

(114

)

 

 

(5

)

 

 

60

 

 

 

11

 

Total other comprehensive (loss) income

 

 

(114

)

 

 

(5

)

 

 

60

 

 

 

11

 

Comprehensive loss

 

$

(14,893

)

 

$

(14,783

)

 

$

(27,660

)

 

$

(21,549

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


ADICET BIO, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

(Deficit)

 

Balance at December 31, 2019

 

 

97,166,921

 

 

$

114,083

 

 

 

 

2,155,578

 

 

$

 

 

$

9,258

 

 

$

(69,647

)

 

$

23

 

 

$

(60,366

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

19,947

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

299

 

 

 

 

 

 

 

 

 

299

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,486

)

 

 

 

 

 

(4,486

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

(15

)

Balance at March 31, 2020

 

 

97,166,921

 

 

 

114,083

 

 

 

 

2,175,525

 

 

 

 

 

 

9,599

 

 

 

(74,133

)

 

 

8

 

 

 

(64,526

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

3,101

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

351

 

 

 

 

 

 

 

 

 

351

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,455

)

 

 

 

 

 

(8,455

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

189

 

 

 

189

 

Balance at June 30, 2020

 

 

97,166,921

 

 

 

114,083

 

 

 

 

2,178,626

 

 

 

 

 

 

9,957

 

 

 

(82,588

)

 

 

197

 

 

 

(72,434

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

100,092

 

 

 

 

 

 

144

 

 

 

 

 

 

 

 

 

144

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,966

 

 

 

 

 

 

 

 

 

2,966

 

Conversion of shares of redeemable convertible preferred

   stock to shares of common stock in connection with

   the Merger

 

 

(97,166,921

)

 

 

(114,083

)

 

 

 

12,048,671

 

 

 

1

 

 

 

114,082

 

 

 

 

 

 

 

 

 

114,083

 

Exchange of common stock in connection with the

   Merger

 

 

 

 

 

 

 

 

 

5,262,248

 

 

 

 

 

 

84,142

 

 

 

 

 

 

 

 

 

84,142

 

Conversion of redeemable convertible preferred stock

   warrants to common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,922

 

 

 

 

 

 

 

 

 

2,922

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,779

)

 

 

 

 

 

(14,779

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

 

(114

)

Balance at September 30, 2020

 

 

 

 

$

 

 

 

 

19,589,637

 

 

$

1

 

 

$

214,213

 

 

$

(97,367

)

 

$

83

 

 

$

116,930

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


ADICET BIO, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

(Deficit)

 

Balance at December 31, 2018

 

 

40,094,850

 

 

$

38,068

 

 

 

 

2,140,787

 

 

$

1

 

 

$

8,005

 

 

$

(41,509

)

 

$

(13

)

 

$

(33,516

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,131

)

 

 

 

 

 

(4,131

)

Issuance of Series A redeemable convertible

   preferred stock related to TRDF liability

 

 

67,656

 

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise

   of stock options

 

 

 

 

 

 

 

 

 

4,300

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

47

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

251

 

 

 

 

 

 

 

 

 

251

 

Other comprehensive income