10-Q
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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, 2021

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.)

200 Clarendon Street, Floor 6

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 November 9, 2021, the registrant had 31,955,450 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

5

Item 1.

Consolidated Financial Statements (Unaudited)

5

 

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

5

 

Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020

6

 

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020

7

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

9

 

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

42

PART II.

OTHER INFORMATION

45

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

86

Item 4.

Mine Safety Disclosures

86

Item 5.

Other Information

86

Item 6.

Exhibits

87

Signatures

88

 

 

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 regulatory approval for ADI-001 or ADI-002 and effectively commercialize ADI-001 or ADI-002 for the treatment of patients in our targeted 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.
We do not currently operate our own manufacturing facility and 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 and ADI-002. 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.
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 its 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 have 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.

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 our 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 our 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 its direct and indirect subsidiaries, and for periods prior to the Merger, Adicet Therapeutics, Inc. (formerly Adicet Bio, Inc.), and our 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 our Investigational New Drug (IND) application 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 announcements of interim results of our clinical trials;
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;

3


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.

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.

ADICET BIO, INC.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

September 30,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

192,226

 

 

$

84,330

 

Short-term marketable debt securities

 

 

 

 

 

10,284

 

Prepaid expenses and other current assets

 

 

6,799

 

 

 

5,722

 

     Total current assets

 

 

199,025

 

 

 

100,336

 

Property and equipment, net

 

 

11,395

 

 

 

2,790

 

Operating lease right-of-use asset

 

 

20,865

 

 

 

23,066

 

Goodwill

 

 

19,462

 

 

 

20,089

 

In-process research and development

 

 

 

 

 

1,190

 

Restricted cash

 

 

4,527

 

 

 

4,527

 

Other non-current assets

 

 

1,921

 

 

 

1,837

 

     Total assets

 

$

257,195

 

 

$

153,835

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,631

 

 

$

1,552

 

Contract liabilities — related party, current

 

 

10,088

 

 

 

13,980

 

Accrued and other current liabilities

 

 

4,601

 

 

 

5,732

 

Operating lease liability

 

 

712

 

 

 

1,215

 

Total current liabilities

 

 

20,032

 

 

 

22,479

 

Operating lease liability, net of current portion

 

 

19,823

 

 

 

20,424

 

Contingent consideration liability

 

 

 

 

 

980

 

Deferred tax liability

 

 

 

 

 

125

 

Other non-current liabilities

 

 

116

 

 

 

 

Total liabilities

 

 

39,971

 

 

 

44,008

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively; none issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 31,955,050 and 19,677,249 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

3

 

 

 

2

 

Additional paid-in capital

 

 

369,732

 

 

 

216,126

 

Accumulated deficit

 

 

(152,511

)

 

 

(106,325

)

Accumulated other comprehensive income

 

 

 

 

 

24

 

Total stockholders’ equity

 

 

217,224

 

 

 

109,827

 

Total liabilities and stockholders’ equity

 

$

257,195

 

 

$

153,835

 

 

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

5


ADICET BIO, INC.

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenuerelated party

 

$

3,429

 

 

$

3,028

 

 

$

4,262

 

 

$

12,493

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

11,926

 

 

 

8,942

 

 

 

34,285

 

 

 

24,651

 

General and administrative

 

 

5,213

 

 

 

7,741

 

 

 

15,868

 

 

 

17,684

 

Total operating expenses

 

 

17,139

 

 

 

16,683

 

 

 

50,153

 

 

 

42,335

 

Loss from operations

 

 

(13,710

)

 

 

(13,655

)

 

 

(45,891

)

 

 

(29,842

)

Interest income

 

 

4

 

 

 

153

 

 

 

54

 

 

 

704

 

Interest expense

 

 

(50

)

 

 

(50

)

 

 

(151

)

 

 

(84

)

Other income (expense), net

 

 

(246

)

 

 

(1,224

)

 

 

(312

)

 

 

(1,174

)

Loss before income tax expense (benefit)

 

 

(14,002

)

 

 

(14,776

)

 

 

(46,300

)

 

 

(30,396

)

Income tax expense (benefit)

 

 

11

 

 

 

3

 

 

 

(114

)

 

 

(2,676

)

Net loss

 

$

(14,013

)

 

$

(14,779

)

 

$

(46,186

)

 

$

(27,720

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.44

)

 

$

(2.84

)

 

$

(1.54

)

 

$

(8.69

)

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

 

 

31,876,016

 

 

 

5,208,887

 

 

 

29,954,616

 

 

 

3,190,557

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

(114

)

 

 

(24

)

 

 

60

 

Total other comprehensive (loss) income

 

 

 

 

 

(114

)

 

 

(24

)

 

 

60

 

Comprehensive loss

 

$

(14,013

)

 

$

(14,893

)

 

$

(46,210

)

 

$

(27,660

)

 

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

6


ADICET BIO, INC.

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

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
 Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

19,677,249

 

 

$

2

 

 

$

216,126

 

 

$

(106,325

)

 

$

24

 

 

$

109,827

 

Issuance of common stock upon exercise of stock options

 

 

393,991

 

 

 

 

 

 

976

 

 

 

 

 

 

 

 

 

976

 

Issuance of common stock related to financing

 

 

11,729,353

 

 

 

1

 

 

 

143,753

 

 

 

 

 

 

 

 

 

143,754

 

Exercise of warrant

 

 

1,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,043

 

 

 

 

 

 

 

 

 

3,043

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(21,319

)

 

 

 

 

 

(21,319

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

(22

)

Balance at March 31, 2021

 

 

31,802,399

 

 

$

3

 

 

$

363,898

 

 

$

(127,644

)

 

$

2

 

 

$

236,259

 

Issuance of common stock upon exercise of stock options

 

 

39,603

 

 

 

 

 

 

279

 

 

 

 

 

 

 

 

 

279

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,659

 

 

 

 

 

 

 

 

 

2,659

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,854

)

 

 

 

 

 

(10,854

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Balance at June 30, 2021

 

 

31,842,002

 

 

$

3

 

 

$

366,836

 

 

$

(138,498

)

 

$

 

 

$

228,341

 

Issuance of common stock upon exercise of stock options

 

 

113,048

 

 

 

 

 

 

367

 

 

 

 

 

 

 

 

 

367

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,529

 

 

 

 

 

 

 

 

 

2,529

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,013

)

 

 

 

 

 

(14,013

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

31,955,050

 

 

$

3

 

 

$

369,732

 

 

$

(152,511

)

 

$

 

 

$

217,224

 

 

 

7


ADICET BIO, INC.

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, 2019

 

 

12,048,698

 

 

$

114,083

 

 

 

 

2,155,578

 

 

$

 

 

$

9,258

 

 

$

(69,647

)

 

$

23

 

 

$

(60,366

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,486

)

 

 

 

 

 

(4,486

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

19,947

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

299

 

 

 

 

 

 

 

 

 

299

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

(15

)

Balance at March 31, 2020

 

 

12,048,698

 

 

$

114,083

 

 

 

 

2,175,525

 

 

$

 

 

$

9,599

 

 

$

(74,133

)

 

$

8

 

 

$

(64,526

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,455

)

 

 

 

 

 

(8,455

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

3,101

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

351

 

 

 

 

 

 

 

 

 

351

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

189

 

 

 

189

 

Balance at June 30, 2020

 

 

12,048,698

 

 

$

114,083

 

 

 

 

2,178,626

 

 

$

 

 

$

9,957

 

 

$

(82,588

)

 

$

197

 

 

$

(72,434

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,779

)

 

 

 

 

 

(14,779

)

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

 

 

(12,048,698

)

 

 

(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

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

 

(114

)

Balance at September 30, 2020

 

 

 

 

$

 

 

 

 

19,589,637

 

 

$