10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 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

Commission File Number: 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.)

131 Dartmouth Street, 3rd Floor

Boston, MA

 

02116

(Address of principal executive offices)

 

(Zip Code)

 

(650) 503-9095

(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 May 10, 2024, the registrant had 82,173,503 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

3

 

 

 

PART I.

FINANCIAL INFORMATION

5

Item 1.

Consolidated Financial Statements (Unaudited)

5

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

5

Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

6

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

7

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

9

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 3.

Defaults Upon Senior Securities

77

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

77

Signatures

79

 

i


 

Summary of the Material Risks Associated with Our Business

 

We have a limited operating history and face significant challenges and expenses as we build our capabilities.
Our business is highly dependent on the success of ADI-001. If we are unable to obtain regulatory approval for ADI-001 in one or more indications and effectively commercialize ADI-001 for the treatment of patients in indications for which we receive approval (if any), our business would be significantly harmed.
Our gamma delta T cell candidates represent a novel approach to the treatment of autoimmune diseases and cancer indications that creates significant challenges for us.
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.
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 not be able to file Investigational New Drug (IND) applications to commence additional clinical trials on the timelines we expect, and even if we are able to, the U.S. Food and Drug Administration (FDA) may not permit us to proceed.
We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.
The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and may be small.
Although we have commenced manufacturing operations at our manufacturing facility, we currently depend on the ability of our third-party suppliers and manufacturers with whom we contract to perform adequately, particularly with respect to the timely production and delivery of our product candidates, including ADI-001. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
We will need substantial additional financing to develop our product candidates and implement our operating plans. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
A variety of risks associated with conducting research and clinical trials abroad and marketing our product candidates internationally could materially adversely affect our business.
Global conflicts may increase the likelihood of supply interruptions which could impact our ability to find the materials we need to make our product candidates.
Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our common stock.
If our collaboration with Regeneron Pharmaceuticals, Inc. (Regeneron) is terminated, or if Regeneron materially breaches its obligations thereunder, our business, prospects, operating results, and financial condition would be materially harmed.
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.
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.
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.
The trading price of our common stock is highly volatile, which could result in substantial losses for purchasers of our common stock. Securities class action or other litigation involving our company or members of our management team could also substantially harm our business, financial condition and results of operations.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
We currently have a limited number of authorized shares of common stock available for future issuance and submitted a proposal for approval at our 2024 Annual Meeting of Stockholders (2024 Annual Meeting) to increase the number of shares authorized under our certificate of incorporation. An inability to secure the requisite stockholder approval of this proposal at

1


 

our 2024 Annual Meeting could materially and adversely impact our ability to obtain future financing, engage in strategic transactions, issue equity compensation and fund our operations.

 

 

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 timing of and our ability to execute our clinical trials for ADI-001 in autoimmune indications and non-Hodgkin’s lymphoma (NHL), including the ability to successfully complete our Phase 1 clinical trial in NHL and initiate a Phase 1 clinical trial in lupus nephritis (LN) and additional potential autoimmune indications;
our expectations regarding our additional internal gamma delta T cell therapy programs in preclinical development, including ADI-270, and our ability to develop other product candidates in our research pipeline;
our expectations regarding the availability, timing and announcement of data from our Phase 1 clinical trials for ADI-001;
our expectations for ADI-270 as a treatment for renal cell carcinoma (RCC) and other CD70+ solid tumor and hematological malignancies;
our expectations regarding discussions with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) of a potential path to support Biologics License Application (BLA) and Marketing Authorization Application (MAA) for our product candidates;
the anticipated timing of our submission of Investigational New Drug (IND) applications or equivalent regulatory filings and initiation of future clinical trials, including the timing of the anticipated results;
our expectations regarding the impact of unstable market and economic conditions, including impacts of inflation and adverse developments affecting the financial services industry, on our business, results of operations or financial conditions;
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 expectations regarding the manufacturing of our product candidates and any products for which we receive regulatory approval by us or by our third-party suppliers;
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 current and 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;
developments relating to our competitors and our industry;
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 and cash equivalents;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

3


 

our ability to maintain effective internal control over financial reporting;
the impact of government laws and regulations;
potential stockholder approval of an amendment to our certificate of incorporation to increase the number of authorized shares; 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.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this Quarterly Report on Form 10-Q, and we believe these industry publications and third-party research, surveys and studies are reliable.

4


 

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited).

ADICET BIO, INC.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

247,589

 

 

$

159,711

 

Prepaid expenses and other current assets

 

 

2,761

 

 

 

2,561

 

     Total current assets

 

 

250,350

 

 

 

162,272

 

Property and equipment, net

 

 

25,407

 

 

 

26,777

 

Operating lease right-of-use asset

 

 

16,647

 

 

 

17,424

 

Other non-current assets

 

 

691

 

 

 

822

 

     Total assets

 

$

293,095

 

 

$

207,295

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,542

 

 

$

2,625

 

Accrued and other current liabilities

 

 

11,597

 

 

 

13,441

 

Operating lease liability

 

 

3,322

 

 

 

3,221

 

Total current liabilities

 

 

17,461

 

 

 

19,287

 

Operating lease liability, net of current portion

 

 

16,714

 

 

 

17,703

 

Other non-current liabilities

 

 

116

 

 

 

130

 

Total liabilities

 

 

34,291

 

 

 

37,120

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; none issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 82,169,503 and 43,270,386 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

8

 

 

 

4

 

Additional paid-in capital

 

 

667,584

 

 

 

550,943

 

Accumulated deficit

 

 

(408,788

)

 

 

(380,772

)

Total stockholders’ equity

 

 

258,804

 

 

 

170,175

 

Total liabilities and stockholders’ equity

 

$

293,095

 

 

$

207,295

 

 

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

5


 

ADICET BIO, INC.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

23,897

 

 

 

26,756

 

General and administrative

 

 

6,974

 

 

 

6,566

 

Total operating expenses

 

 

30,871

 

 

 

33,322

 

Loss from operations

 

 

(30,871

)

 

 

(33,322

)

Interest income

 

 

2,918

 

 

 

2,666

 

Interest expense

 

 

(2

)

 

 

(19

)

Other expense, net

 

 

(61

)

 

 

(206

)

Loss before income tax provision

 

 

(28,016

)

 

 

(30,881

)

Income tax provision

 

 

 

 

 

 

Net loss

 

$

(28,016

)

 

$

(30,881

)

Net loss per share, basic and diluted

 

$

(0.35

)

 

$

(0.72

)

Weighted-average common shares used in computing net loss per share, basic and diluted

 

 

79,071,652

 

 

 

42,955,688

 

 

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

6


 

ADICET BIO, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid In

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2023

 

 

43,270,386

 

 

$

4

 

 

$

550,943

 

 

$

(380,772

)

 

$

170,175

 

Issuance of common stock upon exercise of stock options

 

 

88,283

 

 

 

 

 

 

189

 

 

 

 

 

 

189

 

Issuance of common stock upon vesting of restricted stock

 

 

148,980

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for taxes

 

 

(67,813

)

 

 

 

 

 

(141

)

 

 

 

 

 

(141

)

Issuance of common stock pursuant to at-the-market offering, net of issuance costs of $0.6 million

 

 

6,350,000

 

 

 

1

 

 

 

19,265

 

 

 

 

 

 

19,266

 

Issuance of common stock and pre-funded warrants pursuant to underwritten public offering, net of issuance costs of $6.3 million

 

 

32,379,667

 

 

 

3

 

 

 

91,649

 

 

 

 

 

 

91,652

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,679

 

 

 

 

 

 

5,679

 

Net income

 

 

 

 

 

 

 

 

 

 

 

(28,016

)

 

 

(28,016

)

Balance at March 31, 2024

 

 

82,169,503

 

 

$

8

 

 

$

667,584

 

 

$

(408,788

)

 

$

258,804

 

 

 

 

7


 

ADICET BIO, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid In

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

42,954,820

 

 

$

4

 

 

$

530,448

 

 

$

(238,114

)

 

$

292,338

 

Issuance of common stock upon exercise of stock options

 

 

713

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Issuance of common stock upon vesting of restricted stock

 

 

3,205

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for taxes

 

 

(1,307

)

 

 

 

 

 

(10

)

 

 

 

 

 

(10

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,765

 

 

 

 

 

 

4,765

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(30,881

)

 

 

(30,881

)

Balance at March 31, 2023

 

 

42,957,431

 

 

$

4

 

 

$

535,206

 

 

$

(268,995

)

 

$

266,215

 

 

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

8


 

ADICET BIO, INC.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(28,016

)

 

$

(30,881

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,651

 

 

 

1,254

 

Noncash lease expense

 

 

777

 

 

 

561

 

Stock-based compensation expense

 

 

5,679

 

 

 

4,765

 

Amortization of deferred debt issuance costs

 

 

39

 

 

 

17

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(200

)

 

 

214

 

Other non-current assets

 

 

92

 

 

 

84

 

Accounts payable

 

 

(208

)

 

 

(2,333

)

Operating lease liability

 

 

(888

)

 

 

2,474

 

Accrued and other current and non-current liabilities

 

 

(1,775

)

 

 

(249

)

Net cash used in operating activities

 

 

(22,849

)

 

 

(24,094

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(239

)

 

 

(1,915

)

Net cash used in investing activities

 

 

(239

)

 

 

(1,915

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock pursuant to at-the-market offering, net of issuance costs

 

 

19,266

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrants pursuant to underwritten public offering, net of issuance costs

 

 

91,652

 

 

 

 

Proceeds from exercise of stock options

 

 

189

 

 

 

3

 

Taxes withheld and paid related to net share settlement of equity awards

 

 

(141

)

 

 

(10

)

Net cash provided by (used in) financing activities

 

 

110,966

 

 

 

(7

)

Net change in cash and cash equivalents

 

 

87,878

 

 

 

(26,016

)

Cash and cash equivalents at the beginning of period

 

 

159,711

 

 

 

257,656

 

Cash and cash equivalents, at the end of period

 

$

247,589

 

 

$

231,640

 

Supplemental cash flow information

 

 

 

 

 

 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and accrued expenses

 

$

320

 

 

$

1,081

 

 

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

9


 

ADICET BIO, INC.

Notes to Interim Consolidated Financial Statements (Unaudited)

1. Organization and Nature of the Business

Adicet Bio, Inc. (formerly resTORbio, Inc. (resTORbio), together with its subsidiaries, the Company) is a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for autoimmune diseases and cancer. The Company is advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CARs), to facilitate durable activity in patients.

Adicet Bio, Inc. (when referred to prior to the merger, Former Adicet) was incorporated in November 2014 in Delaware. On September 15, 2020, Former Adicet completed a merger (Merger) with resTORbio, pursuant to which Former Adicet merged with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing its name to “Adicet Therapeutics, Inc.” (Adicet Therapeutics). In connection with the Merger, the Company changed its name from “resTORbio, Inc.” to “Adicet Bio, Inc.” The Company’s principal executive offices are located in Boston, Massachusetts. The Company also has offices in Redwood City, California.

Adicet Bio Israel Ltd. (formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of the Company and is located in Haifa, Israel. Adicet Israel was founded in 2006. During 2019, the Company consolidated its operations, including research and development activities, in the United States and as a result, substantially reduced its operations in Israel.

Liquidity

The Company has incurred significant net operating losses and negative cash flows from operations and has an accumulated deficit of $408.8 as of March 31, 2024. The Company has historically financed its operations primarily through a collaboration and licensing arrangement, public and private placements of equity securities and debt, and cash received in the Merger with resTORbio. To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from product sales. Management expects operating losses and negative cash flows to continue for the foreseeable future, until such time, if ever, that it can generate significant sales of its product candidates currently in development.

On March 12, 2021, the Company entered into a Capital On Demand™ Sales Agreement (the JonesTrading Sales Agreement) with JonesTrading Institutional Services LLC, as sales agent, to provide for the offering, issuance and sale of up to an aggregate amount of $75.0 million of shares of common stock from time to time in “at-the-market” (ATM) offerings. In August 2022, pursuant to the JonesTrading Sales Agreement and subject to the limitations thereof, the Company sold an aggregate of 2,611,723 shares of common stock at $17.23 per share resulting in net proceeds to the Company of $43.4 million after deducting sales agent commissions and expenses. In November 2022, the Company filed a new prospectus supplement to the 2021 Shelf Registration Statement for the offer and sale of up to $100.0 million of shares of common stock from time to time through the sales agent, which includes the $30.0 million of shares of common stock not sold under the original prospectus and up to an additional $70.0 million of shares of common stock (the JonesTrading ATM Program). In January 2024, the Company raised aggregate net proceeds of approximately $19.3 million through the JonesTrading ATM Program. In March 2024, the Company terminated the JonesTrading ATM Program.

On January 22, 2024, Adicet entered into an Underwriting Agreement (the Underwriting Agreement) with Jefferies LLC (Jefferies) and Guggenheim Securities, LLC (the Underwriters) related to an underwritten public offering (the Offering) of 27,054,667 shares (the Shares) of common stock of the Company, par value $0.0001 per share (the Common Stock), and, in lieu of Common Stock to an investor, pre-funded warrants (the Pre-Funded Warrants) to purchase 8,445,333 shares of Common Stock (the Warrant Shares). The Shares were sold at a public offering price of $2.40 per share and the Pre-Funded Warrants were sold at a public offering price of $2.3999 per underlying share, which represents the per share public offering price of each share of common stock minus the $0.0001 per share exercise price for each pre-funded warrant. The purchase price paid by the Underwriters to the Company was $2.256 per Share and $2.2559 per Pre-Funded Warrant, representing a discount to the Underwriters of 6.0%. In addition, the Company granted the Underwriters an option exercisable for 30 days from the date of the Underwriting Agreement to purchase, at the public offering price less underwriting discounts and commissions, up to an additional 5,325,000 shares of Common Stock. On January 23, 2024, the Underwriters exercised this option in full. The Company received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.7 million. The Company may receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.

In March 2024, the Company entered into an Open Market Sales AgreementSM (the Jefferies Sales Agreement) with Jefferies to sell shares of its Common Stock from time to time, through an ATM equity offering program under which Jefferies will act as sales agent or principal. As of March 31, 2024, no shares of common stock have been sold under the Jefferies Sales Agreement.

10


 

The Company expects that its cash and cash equivalents, including the proceeds raised through the JonesTrading ATM Program and the Offering, will be sufficient to fund its forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of these unaudited interim consolidated financial statements.

All of the Company’s revenue to date has been generated from a collaboration and license agreement (the Regeneron Agreement) with Regeneron Pharmaceuticals, Inc, (Regeneron). The Company does not expect to generate any significant product revenue until it obtains regulatory approval of and commercializes any of the Company’s product candidates or enters into additional collaborative agreements with third parties, and it does not know when, or if, either will occur. The Company expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of, and seeks regulatory approvals for, its product candidates and begins to commercialize any approved products. The Company is subject to all of the risks typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings, collaborative or other arrangements with corporate or other sources of financing. Adequate funding may not be available to the Company on acceptable terms or at all. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and the Company’s ability to pursue its business strategies. Although the Company continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the United States of America (United States GAAP or GAAP).

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to the significant accounting policies during the three months ended March 31, 2024.

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements as of March 31, 2024, and for the three months ended March 31, 2024, have been prepared by the Company, pursuant to the rules and regulations of the SEC, for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2024 and consolidated results of operations for the three months ended March 31, 2024 and 2023 and consolidated cash flows for the three months ended March 31, 2024 and 2023 have been made. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company’s cash and cash equivalents are held at two financial institutions in the U.S. and one

11


 

financial institution in Israel and such amounts may, at times, exceed insured limits. The Company invests its cash equivalents in treasury securities. The Company limits its credit risk associated with cash equivalents by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments. The Company has not experienced any losses on its deposits of cash and cash equivalents to date.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and adopted by the Company as of the specified effective date, unless otherwise discussed below.


Accounting Pronouncements Not Yet Adopted

In September 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and usefulness of income tax disclosures. This amendment requires public issuers to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income, or loss, by the applicable statutory income tax rate. Additionally, this amendment requires issuers to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes as well as the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). For SEC filers, this ASU is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact the adoption that this ASU will have on its consolidated financial statements and related disclosures.

3. Fair Value Measurements

The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three level of inputs that may be used to measure fair value, as follows:

Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

12


 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury securities (1) (2)

 

$

200,000

 

 

$

 

 

$

 

 

$

200,000

 

Total fair value of assets

 

$

200,000

 

 

$

 

 

$

 

 

$

200,000

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Treasury securities (1) (2)

 

$

115,143

 

 

$

 

 

$

 

 

$

115,143

 

Total fair value of assets

 

$

115,143

 

 

$

 

 

$

 

 

$

115,143

 

 

(1)
Included in cash and cash equivalents in the consolidated balance sheets.
(2)
Treasury securities are included within Level 1 of the fair value hierarchy because they are actively traded and valued using quoted market prices.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid insurance

 

$

795

 

 

$

1,014

 

Prepaid software subscription and licensing fees

 

 

686

 

 

 

582

 

Prepaid maintenance

 

 

339

 

 

 

373

 

Prepaid employee benefits

 

 

292

 

 

 

 

Prepayments to CROs and CDMOs

 

 

36

 

 

 

53

 

Prepaid professional services

 

 

 

 

 

82

 

Other prepaid expenses and current assets

 

 

613

 

 

 

457

 

Total prepaid expenses and other current assets

 

$

2,761

 

 

$

2,561

 

 

5. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

Useful life
(in years)

 

March 31,
2024

 

 

December 31,
2023

 

Leasehold improvements

 

Lesser of useful life or lease term

 

$

26,643

 

 

$

26,643

 

Laboratory equipment

 

3

 

 

13,346

 

 

 

13,165

 

Furniture and fixtures

 

3

 

 

951

 

 

 

951

 

Construction in progress

 

 

 

366

 

 

 

265

 

Computer equipment

 

3

 

 

189

 

 

 

189

 

Software

 

3

 

 

411

 

 

 

411

 

 

 

 

 

 

41,906

 

 

 

41,624

 

Less: Accumulated depreciation and amortization

 

 

 

 

(16,499

)

 

 

(14,847

)

Property and equipment, net

 

 

 

$

25,407

 

 

$

26,777

 

 

13


 

Depreciation and amortization expense was $1.7 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively.

6. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued compensation

 

$

4,117

 

 

$

6,514

 

Accrued CDMO costs

 

 

5,991

 

 

 

5,679

 

Accrued professional services

 

 

826

 

 

 

625

 

Accrued other research and development expenses

 

 

277

 

 

 

354

 

Accrued CRO costs

 

 

383

 

 

 

257

 

Accrued other liabilities

 

 

3

 

 

 

12

 

Total accrued and other liabilities

 

$

11,597

 

 

$

13,441

 

 

7. Term Loan

On April 28, 2020, the Company entered into a Loan and Security Agreement (the Loan Agreement) as amended on July 8, 2020, September 14, 2020, September 15, 2020, October 21, 2021 (the 2021 Loan Amendment), December 2, 2022 (the 2022 Loan Amendment) and May 30, 2023 with Banc of California (formerly known as Pacific Western Bank) to finance leasehold improvements for the facilities in Redwood City, CA and other purposes permitted under the Loan Agreement. Under the 2021 Loan Amendment, Banc of California will provide one or more Term Loans (as defined in the 2021 Loan Amendment), as well as Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate. Non-Formula Ancillary Services are defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services. Per the terms of the Loan Agreement, the aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not less than $1.0 million.

On March 13, 2023, the Company and Banc of California executed a letter agreeing that, notwithstanding the covenants included in the 2022 Loan Amendment, until June 30, 2023 (i) the Company and its subsidiaries will not be required to maintain the lesser of $200 million or seventy percent (70%) of its combined balances in demand deposit accounts, money market funds and/or insured cash sweep (ICS) accounts with Banc of California and (ii) the Company must maintain its combined balances at Banc of California or its affiliates, including Pacific Western Asset Management (the Letter).

On May 30, 2023, the Company further amended its Loan Agreement with Banc of California (the 2023 Loan Amendment). Pursuant to the 2023 Loan Amendment, the Company must maintain the lesser of (i) $35.0 million or (ii) all of the Company’s combined balances in demand deposit accounts, money market accounts, and/or insured cash sweep accounts with Banc of California. If the Company’s total cash and investments drop to less than $35.0 million, the 2023 Loan Amendment permits the Company to maintain cash and/or investments in one or more accounts outside of Banc of California up to a total of $2.5 million.

As of March 31, 2024, the Company had $12.7 million available under the Loan Agreement. Additionally, as of March 31, 2024, the Company was in compliance with such covenants as stated in the 2023 Loan Amendment and had no indebtedness outstanding under the Loan Agreement. In April 2024, the Term Loans under the Loan Agreement expired. The Non-Formula Ancillary Services, which shall not exceed $5.5 million in the aggregate, remain available under the Loan Agreement as of the date of this Quarterly Report on Form 10-Q.

8. Third Party Agreements

Regeneron

On July 29, 2016, the Company entered into a license and collaboration agreement with Regeneron, which was amended in April 2019, with such amendment becoming effective in connection with Regeneron’s investment in the Company’s Series B redeemable convertible preferred stock private placement transaction in July 2019 (as amended, the Regeneron Agreement).

14


 

Financial Terms. The Company received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron Agreement and an aggregate of $20.0 million of additional payments for research funding from Regeneron as of March 31, 2024. In addition, Regeneron may have to pay the Company additional amounts in the future consisting of up to an aggregate of $80.0 million of option exercise fees, as specified in the Regeneron Agreement. Per the terms of the agreement, Regeneron must pay the Company high single digit royalties as a percentage of net sales for immune cell products (ICPs) to targets for which it has exclusive rights, and low single digit royalties as a percentage of net sales on any non-ICP product comprising a targeting moiety generated by the Company through the use of Regeneron’s proprietary mice. The Company must pay Regeneron mid-single to low double digit, but less than teens, of royalties as a percentage of net sales of ICPs to targets for which the Company has exercised exclusive rights, and low to mid-single digit of royalties as a percentage of net sales of targeting moieties generated from the Company’s license to use Regeneron’s proprietary mice. Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or twelve (12) years from first commercial sale. No royalties have been earned or paid under the Regeneron Agreement through March 31, 2024.

On January 28, 2022, Regeneron exercised its option to license the exclusive, worldwide rights to ADI-002, an allogeneic gamma delta CAR T cell therapy directed against Glypican-3, pursuant to the Regeneron Agreement. In conjunction with the exercise of the option, Regeneron paid an exercise fee of $20.0 million to the Company on January 28, 2022, and the Company completed the transfer of the associated license rights to Regeneron during the first quarter of 2022. The $20.0 million option exercise fee, plus $5.0 million of revenue recognized relating to the combined performance obligation, resulted in an aggregate of $25.0 million recorded as revenue for the year ended December 31, 2022. The Company's obligations under the combined performance obligation were completed during the year ended December 31, 2022.

Regeneron is responsible, at its sole cost, for all development, manufacturing and commercialization of ADI-002 and must pay the Company high single digit royalties as a percentage of any net sales of ADI-002 for a period commencing on the first commercial sale until the longer of (i) the expiration or invalidity of the licensed patent rights or (ii) a low double digit amount of years from first commercial sale.

Twist Bioscience

In March 2021, the Company entered into an Antibody Discovery Agreement (the Twist Agreement) with Twist Bioscience Corporation (Twist). Under the terms of the Twist Agreement, Twist will utilize its proprietary platform technology to assist the Company with the discovery of novel antibodies related to target antigens selected by the Company. The Company maintains the sole and exclusive rights to any program antibodies discovered under the Twist Agreement and has the right to patent, assign, license or transfer any work product under the agreement. Furthermore, the Company has the right to sublicense its rights to program antibodies to third parties. The Company may terminate the Twist Agreement at any time, with or without cause, upon a specified period advance written notice.

Per the terms of the agreement, the Company will pay Twist an upfront, non-refundable project initiation fee, a technology access fee, as well as a project fee for each project entered into under the agreement. Additionally, the Company will pay fees for development and regulatory milestones in the tens of millions of dollars and low single digit royalties on net sales to Twist for programs initiated under the agreement. In November 2022, the Company entered into an amendment to the Twist Agreement (the Twist Amendment). The Twist Amendment updates the language associated with Twist's audit rights as well as the amounts associated with technology access fees.

On a cumulative basis as of March 31, 2024, the Company has incurred and expensed $1.0 million related to project initiation fees, technology access fees and projects fees as research and development expense related to this agreement.

9. Commitments and Contingencies

Operating Leases

The Company leases office and laboratory space in Redwood City, California, and Boston, Massachusetts.

Redwood City

In 2018, Adicet Therapeutics executed a non-cancelable lease agreement, as amended in 2022, pursuant to which the Company leases office and laboratory facility at 1000 Bridge Parkway and a portion of 1200 Bridge Parkway in Redwood City, California (the Redwood City Lease).

15


 

On January 9, 2023, Adicet Therapeutics entered into a third lease amendment with Westport Office Park, LLC (the Third Amendment). The Third Amendment further amends the Redwood City Lease and increases the tenant improvement allowance as of January 1, 2023 by an additional $3.0 million. The Company fully utilized the allowance for the continued buildout of office and laboratory space at 1000 Bridge Parkway in 2023. Per the terms of this amendment, this additional allowance will be repaid through equal monthly payments of principal amortization and interest on a monthly basis over the term of the lease at an interest rate of eight percent (8%) per annum. The Company received the allowance on February 21, 2023 and increased the operating lease liability accordingly.

On August 7, 2023, Adicet Therapeutics entered into a fourth lease amendment with Westport Office Park, LLC (the Fourth Amendment). The Fourth Amendment amends the period over which the tenant improvement allowance received in the Third Amendment will be amortized and identifies the monthly amortization payable by the Company.

On September 1, 2023, Adicet Therapeutics amended its letter of credit with Westport Office Park, LLC. The amendment reduced the amount of the letter of credit associated with 1000 Bridge Parkway by $2.1 million resulting in an updated letter of credit amount of $2.1 million.

Boston

In 2018, the Company entered into a lease agreement, as amended in 2019, for office space at 500 Boylston St, Boston, Massachusetts (500 Boylston Lease). Under the terms of the 500 Boylston Lease, the Company was permitted to assign, sublease or transfer this lease, with the consent of the landlord.

On July 19, 2021, the Company entered into a sublease agreement with RFS OPCO LLC (Sublessee), whereby the Company agreed to sublease to Sublessee all of the 9,501 rentable square feet of 500 Boylston St. The expected undiscounted cash flows to be received from the sublease as of March 31, 2024 is as follows (in thousands):

 

 

March 31,
2024

 

2024

 

$

541

 

2025

 

 

736

 

2026

 

 

438

 

2027 and thereafter

 

 

 

Total

 

$

1,715

 

Further, the Company remains liable for the remaining lease payments under the 500 Boylston Lease, totaling $1.5 million, which is included in the future minimum lease payments table below.

The future minimum lease payments under all non-cancelable operating lease obligations as of March 31, 2024 were as follows (in thousands):

 

 

March 31,
2024

 

2024

 

 

3,774

 

2025

 

 

4,662

 

2026

 

 

4,009

 

2027

 

 

3,714

 

2028 and thereafter

 

 

8,376

 

Total undiscounted lease payments

 

 

24,535

 

Less: imputed interest

 

 

(4,499

)

Total operating lease liability

 

 

20,036

 

Less: current portion

 

 

(3,322

)

Operating lease liability, net of current maturities

 

$

16,714

 

 

16


 

The following table presents the operating lease cost and information related to the operating lease right-of-use assets, net and operating lease liabilities for the quarter ended March 31, 2024 (in thousands):

 

Three Months Ended

 

 

 

March 31, 2024

 

Lease Cost

 

 

 

Operating lease cost

 

$

1,139,001

 

Short-term lease cost

 

 

29,571

 

Sublease income

 

 

(181,765

)

Total lease cost

 

$

986,807

 

Other Information

 

 

 

Operating cash flows used for lease liabilities

$

(888

)

Weighted-average remaining lease term - operating leases

 

 

5.5

 

Weighted-average discount rate - operating leases

 

 

7

%

 

10. Stockholders' Equity

Common Stock

The Company’s Certificate of Incorporation, as amended, authorized the Company to issue 150,000,000 shares of common stock, par value $0.0001 per share, as of March 31, 2024.

Common stockholders are entitled to dividends if and when declared by the board of directors of the Company subject to the prior rights of the preferred stockholders. As of March 31, 2024, no dividends on common stock had been declared by the board of directors.

The Company has the following shares of common stock reserved for future issuance:

 

 

March 31,
2024

 

 

December 31,
2023

 

Stock options and restricted stock units available for future grant

 

 

800,665

 

 

 

2,473,485

 

Stock options issued and outstanding

 

 

12,712,774

 

 

 

9,383,105

 

Unvested restricted stock units

 

 

791,420

 

 

 

454,200

 

Common stock warrants issued and outstanding

 

 

8,445,333

 

 

 

 

Total common stock reserved

 

 

22,750,192

 

 

 

12,310,790

 

 

On January 22, 2024, the Company entered into the Underwriting Agreement with Jefferies and Guggenheim Securities, LLC, as representatives of the Underwriters, related to the Offering of 32,379,667 shares of our common stock, which included 5,325,000 shares sold and issued upon the exercise in full by the Underwriters of their option to purchase additional shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 8,445,333 shares of common stock. The pre-funded warrants were sold at a public offering price of $2.3999 per pre-funded warrant, which represents the per share public offering price of each share of common stock minus the $0.0001 per share exercise price for each pre-funded warrant. The pre-funded warrants do not have an expiration date and are exercisable at any time. The pre-funded warrants are classified as equity within the Company's unaudited consolidated balance sheet. The Company received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.7 million. The Company may receive nominal proceeds, if any, from the exercise of the pre-funded warrants.

The following provides a roll forward of outstanding pre-funded warrants to purchase common stock as of March 31, 2024:

17


 

Issuance Date

 

Number of Shares of Common Stock Issuable

 

 

Weighted Average Exercise Price

 

Outstanding, December 31, 2023

 

 

 

 

 

 

Warrants issued

 

 

8,445,333

 

 

 

0.0001

 

Warrants exercised

 

 

 

 

 

 

Warrants forfeited

 

 

 

 

 

 

Outstanding, March 31, 2024

 

 

8,445,333

 

 

 

0.0001

 

 

11. Stock-based Compensation

Stock-based Compensation Expense

Total stock-based compensation expense recognized was as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

2,539

 

 

$

2,207

 

General and administrative

 

 

3,140

 

 

 

2,558

 

Total stock-based compensation

 

$

5,679

 

 

$

4,765

 

Stock Options

A summary of stock option activity for the three months ended March 31, 2024 is set forth below:

 

 

 

Number of
Shares
Underlying
Outstanding
Options

 

 

Weighted
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding, December 31, 2023

 

 

9,383,105

 

 

$

10.64

 

 

 

8.2

 

 

$

45

 

Options granted

 

 

3,565,150

 

 

$

2.61

 

 

 

 

 

 

 

Options exercised

 

 

(88,283

)

 

$

2.14

 

 

 

 

 

 

 

Options forfeited or cancelled

 

 

(147,198

)

 

$

11.23

 

 

 

 

 

 

 

Outstanding, March 31, 2024

 

 

12,712,774

 

 

$

8.44

 

 

 

8.5

 

 

$

400

 

Options exercisable, March 31, 2024

 

 

4,429,344

 

 

$

13.35

 

 

 

7.3

 

 

$

20

 

Vested and expected to vest, March 31, 2024

 

 

12,712,774

 

 

$

8.44

 

 

 

8.5

 

 

$

400

 

The assumptions used in the Black-Scholes option-pricing model to calculate stock-based compensation are as follows:

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Fair value of common stock

 

$2.35 - $3.12

 

$5.76 - $9.15

Expected term (years)

 

6.0 - 6.1

 

6.0 - 6.1

Volatility

 

82.15% - 84.06%

 

83.25% - 86.19%

Risk free rates

 

3.93% - 4.27%

 

3.55% - 4.22%

Dividend rate

 

0.0%

 

0.0%

Restricted Stock Units (RSUs)

The summary of RSU activity and related information for the three months ended March 31, 2024 is set forth below:

 

 

 

Number of Units Outstanding

 

 

Weighted Average
Grant Date Fair Value

 

Outstanding, December 31, 2023

 

 

454,200

 

 

$

7.69

 

RSUs granted

 

 

488,300

 

 

$

2.72

 

RSUs vested

 

 

(148,980

)

 

$

7.62

 

RSUs forfeited

 

 

(2,100

)

 

$

3.12

 

Outstanding, March 31, 2024

 

 

791,420

 

 

$

4.61

 

Option repricing

18


 

On August 8, 2023, the board of directors approved a stock option repricing (the Option Repricing) to be effective on August 14, 2023 (the Effective Date) in accordance with the terms of the Company’s 2015 Stock Incentive Plan (the 2015 Plan) and Second Amended and Restated 2018 Stock Option and Incentive Plan (the 2018 Plan, and together with the 2015 Plan, the Plans). Pursuant to the Option Repricing, the exercise price of each stock option previously granted under the Plans, totaling 6,431,077 options, was amended to reduce the exercise price of such options to $2.14 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on the Effective Date. Under the terms of the Option Repricing, a repriced option will revert to its original exercise price if, prior to the one year anniversary of the Effective Date, (a) the option holder’s employment is terminated by the Company with cause or by the option holder or (b) the option is exercised.

The repriced options otherwise retained their existing terms and conditions as set forth in the Plans and applicable award agreements. The stock option modification resulted in $4.6 million of incremental compensation cost, which was calculated using the Black-Scholes option-pricing model. Of the incremental compensation cost, $0.8 million was recognized in the three months ended March 31, 2024, and $2.2 million will be recognized on the straight-line basis over the remaining vesting period of the repriced options. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss.

12. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net loss - basic and diluted

 

$

(28,016

)

 

$

(30,881

)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

79,071,652

 

 

 

42,955,688

 

Net loss per share, basic and diluted

 

 

(0.35

)

 

 

(0.72

)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the period presented because including them would have been antidilutive:

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

Options to purchase common stock

 

 

12,712,774

 

 

 

8,141,595

 

Unvested restricted stock units

 

 

791,420

 

 

 

647,100

 

Total

 

 

13,504,194

 

 

 

8,788,695

 

 

13. Income Taxes

The Company recognized no income tax expense during the three ended March 31, 2024 and 2023. The Company maintains a full valuation allowance against its deferred tax assets due to the Company’s history of losses as of March 31, 2024.

14. Related Party

As of March 31, 2024, Regeneron owned 883,568 shares of the Company’s common stock. Regeneron became a related party in July 2019 as a result of Series B redeemable convertible preferred stock financing which was subsequently converted into common stock. For the three months ended March 31, 2024, the Company recorded no revenue from the Regeneron Agreement.

19


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, as supplemented by our subsequent filings with the SEC.

Overview

We are a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for autoimmune diseases and cancer. We are advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CARs), to facilitate durable activity in patients.

Our approach to activate, engineer and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows us to generate new product candidates in a rapid and cost-efficient manner. Our allogeneic "off-the-shelf" manufacturing process is designed to allow product from unrelated donors to be stored and sold on demand to treat patients without inducing a graft versus host immune response. This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own T cells, or require significant gene editing to manufacture if the T cells are derived from donors that are unrelated to the patient.

Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is being developed for the potential treatment of autoimmune diseases and relapsed or refractory aggressive B cell non-Hodgkin's lymphoma (NHL). Our pipeline also includes our lead preclinical candidate, ADI-270, an armored gamma delta CAR T cell product candidate designed to address multiple CD70+ solid tumor and hematological malignancies indications, with renal cell carcinoma (RCC) as the initial indication. Our pipeline has several additional internal gamma delta T cell therapy programs in discovery and preclinical development for both hematological malignancies and solid tumors. We expect to continue to develop product candidates in autoimmune diseases and cancer based on our gamma delta T cell platform using either previously validated antigens or those that we identify and target using CAR and other technology. We plan to file one new Investigational New Drug (IND) application every 12-18 months, including an IND for ADI-270 for the treatment of RCC in the second quarter of 2024.

ADI-001

Autoimmune Diseases

In December 2023, the U.S. Food and Drug Administration (FDA) cleared our IND application for ADI-001 in lupus nephritis. Lupus nephritis is a serious complication of systemic lupus erythematosus (SLE) which affects approximately 40% of the estimated 322,000 patients with SLE in the U.S. We expect to initiate a Phase 1 clinical trial of ADI-001 for the treatment of lupus nephritis in the second quarter of 2024 and expand development efforts into one to two additional autoimmune indications in the second and third quarters of 2024, subject to clearance of INDs in those indications. We believe the potential market opportunity for ADI-001 in B cell mediated autoimmune diseases is substantial based on the prevalence in the U.S., EU5, China and Japan of greater than 1.7 million patients with autoimmune diseases where CAR-T cell therapy has demonstrated clinical proof-of-concept, including SLE (which includes lupus nephritis), systemic sclerosis and idiopathic inflammatory myopathies.

We anticipate providing preliminary clinical data from our Phase 1 clinical trial of ADI-001 in lupus nephritis in the fourth quarter of 2024 or first quarter of 2025, subject to study site activation and enrollment, and to begin to provide preliminary clinical data in the additional autoimmune indications starting in the fourth quarter of 2024 or first half of 2025, subject to clearance of INDs in those indications as well as successful site initiation and patient enrollment in the relevant clinical protocols.

Relapsed or Refractory Aggressive B cell NHL

20


 

In March 2021, we initiated the first-in-human Phase 1 (GLEAN) trial to assess safety and efficacy of ADI-001 in patients with relapsed or refractory aggressive B cell NHL. The study includes a dose escalation portion followed by dose expansion cohorts to explore the activity of ADI-001 in multiple subtypes of NHL. In April 2022, the FDA granted fast track designation for ADI-001 for NHL. As of the May 4, 2023 cutoff date, of the 24 evaluable subjects in the GLEAN trial, 18 had large B cell lymphoma (LBCL), five had mantle cell lymphoma (MCL), and one patient had follicular lymphoma. Most patients were heavily pre-treated, with a median four lines of prior therapy, and twelve patients (50%) had previously progressed following CAR T cell therapy. Despite the advanced nature of patients at baseline, we observed a high complete response (CR) rate and favorable durability in MCL patients. Across all doses of MCL patients, we observed an 80% (4/5 patients) overall response rate (ORR), an 80% CR rate (4/5 patients) and a 60% CR rate (3/5 patients) at six months. As of May 4, 2023, the safety profile of ADI-001 was generally favorable, with no significant risk of cytokine release syndrome (CRS), immune effector cell-associated neurotoxicity syndrome (ICANS), or T cell malignancy observed. In November 2023, we initiated an expansion cohort, EXPAND, in post-CAR T LBCL. In January 2024, we announced our decision to deprioritize enrolling LBCL patients in the GLEAN trial in order to focus on advancing MCL enrollment.

We expect to provide a clinical update from the Phase 1 study in NHL patients which will include efficacy data, including six-month CR rate, and safety data from additional MCL patients in the second half of 2024. Subject to clinical data and regulatory feedback, in the first half of 2025, we plan to define the regulatory path for a potentially pivotal Phase 2 study for ADI-001 in MCL and provide a further clinical update in the second half of 2025.

ADI-270

ADI-270 is an investigational allogeneic gamma delta CAR T cell therapy targeting CD70 via the CD27-ligand for the treatment of RCC and with potential in other solid tumor indications. ADI-270 is designed to home to solid tumors, with a highly specific targeting moiety for CD70 and an armoring technology of transforming growth factor beta dominant-negative receptor to address immunosuppressive factors in the tumor microenvironment. Building on gamma delta 1 tissue tropism to solid tumors and three mechanisms of anti-tumor activity (CAR, innate and adaptive), CAR gamma delta 1 T cells may be well positioned to address solid tumors. We plan to file an IND application for ADI-270 in RCC in the second quarter of 2024 and provide clinical data in the first half of 2025, subject to regulatory clearance and study initiation activities. We are also considering potential expansion into additional CD70+ tumor indications in the first half of 2025, with potential clinical data from such studies in the second half of 2025, subject to regulatory clearance and study initiation activities.

Recent Developments

Underwritten Public Offering

On January 22, 2024, we entered into an Underwriting Agreement (the Underwriting Agreement) with Jefferies LLC (Jefferies) and Guggenheim Securities, LLC, as representatives of the underwriters (the Underwriters), related to an underwritten public offering (the Offering) of 32,379,667 shares of our common stock, which included 5,325,000 shares sold and issued upon the exercise in full by the Underwriters of their option to purchase additional shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 8,445,333 shares of common stock. The shares of common stock were sold at a public offering price of $2.40 per share and the pre-funded warrants were sold at a public offering price of $2.3999 per pre-funded warrant, which represents the per share public offering price of each share of common stock minus the $0.0001 per share exercise price for each pre-funded warrant. The purchase price paid by the Underwriters to us was $2.256 per share and $2.2559 per pre-funded warrant, representing a discount to the Underwriters of 6.0%. We received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.7 million. We may receive nominal proceeds, if any, from the exercise of the pre-funded warrants.

At-the-Market (ATM) Offering

In January 2024, we sold an aggregate of 6,350,000 shares of common stock in a series of sales in accordance with our ATM offering program (JonesTrading ATM Program) with JonesTrading Institutional Services LLC (JonesTrading), at an average price of $3.13 per share, for aggregate net proceeds of approximately $19.3 million, after deducting sales agent commissions, but before deducting any expenses related to such sales.

On March 13, 2024, we delivered written notice to our Sales Agent to terminate our Capital on DemandTM Sales Agreement (the JonesTrading Sales Agreement) with JonesTrading, effective as of March 15, 2024, pursuant to Section 12(b) thereof. We are not subject to any termination penalties related to the termination of the JonesTrading Sales Agreement. Prior to termination, $64.9 million of shares had been sold and $80.1 million of shares remained available for sale pursuant to the JonesTrading Sales Agreement.

21


 

On March 22, 2024, we entered into an Open Market Sales AgreementSM (the Jefferies Sales Agreement) with Jefferies to sell shares of our common stock, from time to time, through an ATM equity offering program under which Jefferies will act as sales agent or principal (the Jefferies ATM Program). As of March 31, 2024, no shares of common stock have been sold under the Jefferies Sales Agreement.

Financial Operations Overview

Revenue

We have no products approved for commercial sale and do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for our product candidates, which we expect will not be for at least several years, if ever.

Expenses

Research and Development

Research and development expenses, which consist primarily of costs incurred in connection with the development of our product candidates, are expensed as incurred. Research and development expenses consist primarily of:

employee related costs, including salaries, benefits and stock-based compensation expenses for research and development employees;
costs incurred under agreements with consultants, CDMOs and contract research organizations (CROs);
lab materials, supplies and maintenance of equipment used for research and development activities; and
allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support services.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses are not tracked by product candidate, and we believe the allocation of such costs would be arbitrary and would not provide a meaningful assessment as we have used our employee and infrastructure resources across multiple product candidate research and development programs.

We are focusing substantially all of our resources on the development of our product candidates. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

the scope, rate of progress and expense of clinical trials and other research and development activities;
clinical trial results;
uncertainties in clinical trial enrollment rate or design;
significant and changing government regulation;
the timing and receipt of any regulatory approvals;
the FDA’s or other regulatory authority’s influence on clinical trial design;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
commercializing product candidates, if and when approved, whether alone or in collaboration with others;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for product candidates;

22


 

continued applicable safety profiles of the products following approval; and
retention of key research and development personnel.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.

Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to other rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

General and Administrative

General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead expenses, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase for the foreseeable future due to expenses related to operating as a public company, including expenses related to personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums.

Interest Income

Interest income consists primarily of interest earned on our cash and cash equivalents.

Interest Expense

Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement (as defined in our Liquidity and Capital Resources section below).

Other Expense, Net

Other expense, net primarily consists of state franchise and capital taxes not related to income.

23


 

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

 

 

Three months ended March 31,

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

 

% Change

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,897

 

 

 

26,756

 

 

 

(2,859

)

 

 

(11

%)

General and administrative

 

 

6,974

 

 

 

6,566

 

 

 

408

 

 

 

6

%

Total operating expenses

 

 

30,871

 

 

 

33,322

 

 

 

(2,451

)

 

 

(7

%)

Loss from operations

 

 

(30,871

)

 

 

(33,322

)

 

 

(2,451

)

 

 

(7

%)

Interest income

 

 

2,918

 

 

 

2,666

 

 

 

252

 

 

 

9

%

Interest expense

 

 

(2

)

 

 

(19

)

 

 

(17

)

 

 

(89

%)

Other expense, net

 

 

(61

)

 

 

(206

)

 

 

(145

)

 

 

(70

%)

Loss before income tax benefit

 

 

(28,016

)

 

 

(30,881

)

 

 

(2,865

)

 

 

(9

%)

Income tax provision