ADAPTIMMUNE THERAPEUTICS PLC The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the year endedDecember 31, 2019 , included in our Annual Report on Form 10-K that was filed with theSEC onFebruary 27, 2020 . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company focused on providing novel
cell therapies to people with cancer. We are a leader in the development of
engineered T-cell therapies for solid tumors. Our proprietary platform enables
us to identify cancer targets, find and develop cell therapy candidates active
against those targets and produce therapeutic candidates for administration to
patients. Our cell therapies include Specific Peptide Enhanced Affinity Receptor
("SPEAR") T-cells, which use genetically engineered T-cell receptors, and
HLA-independent TCRs (HiTs) that recognize targets independently of the HLA
profile of the tumor cell. Using our SPEAR T-cells, we aim to become the first
company to have a TCR T-cell approved for the treatment of solid tumor
indication.
As the COVID-19 pandemic continues, we remain focused on ensuring the safety of
our workforce and continuing, where possible, to safely treat patients with our
cell therapies. We continue to work with our clinical sites to ensure that
patients are treated as soon as clinical sites are able to do so. Our facilities
in the United States ("U.S.") and the United Kingdom ("U.K.") remain open to
support manufacturing and delivery of our existing cell therapies as well as
research and development of new cell therapies. Further information on risks
related to COVID-19 is provided in the "Information Regarding Forward-Looking
Statements" and "Risk Factors" sections.
We have clinical trials ongoing with our wholly-owned ADP-A2M4, ADP-A2M4CD8, and ADP-A2AFP SPEAR T-cell therapies.
SPEARHEAD-1 Phase 2 Trial with ADP-A2M4: A Phase 2 clinical trial is underway
in synovial sarcoma and myxoid round cell liposarcoma ("MRCLS") indications.
Subject to the successful conclusion of the SPEARHEAD-1 study, which we aim to
fully enroll during the first half of 2021, and approval of a Biologics License
Application by the FDA, we plan to commercially launch ADP-A2M4 in 2022. Orphan
? Drug designation for ADP-A2M4 for the treatment of soft tissue sarcomas has
been granted in the
Advanced Therapy (RMAT) designation in the
sarcoma and access to the Priority Medicines ("PRIME") Regulatory Support
initiative by theEuropean Medicines Agency ("EMA") for ADP-A2M4 for the treatment of synovial sarcoma.
SPEARHEAD-2 Phase 2 Trial with ADP-A2M4: A Phase 2 trial combining ADP-A2M4
? with pembrolizumab in ten patients with head and neck cancer is underway at
clinical sites in
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SURPASS Phase 1 Trial with ADP-A2M4CD8: Enrollment is ongoing in a Phase 1
trial for a next generation SPEAR T-cell, ADP-A2M4CD8. We are focussing on the
treatment of patients with lung, gastroesophageal, head and neck and bladder
cancers. This next generation SPEAR T-cell utilizes the same engineered T-cell
receptor as ADP-A2M4, but with the addition of a CD8? homodimer. The addition
of the CD8? homodimer has been shown in vitro to increase cytokine release and
SPEAR T-cell potency. As of
? MRCLS, two patients with esophagogastric junction ("EGJ") cancers, one patient
with ovarian cancer, and one patient with head and neck cancer) were treated
with ADP-A2M4 CD8 in the dose escalation phase of the trial. One patient with
EGJ cancer had a partial response and has had progression-free survival for
greater than six months. One patient with head and neck cancer also had a
partial response. All other patients have had best overall response of stable
disease ("SD"). We will update on the dose escalation cohorts of the trial at
the
Based on the responses seen in the Phase 1 clinical trial using ADP-A2M4 and these initial responses seen in the SURPASS trial, we are currently planning to initiate a Phase 2 clinical trial with ADP-A2M4CD8 in gastric, EGJ and esophageal cancers in the first half of 2021.
ADP-A2M4 Pilot Trial: Our Phase 1 clinical trial of ADP-A2M4 in urothelial,
melanoma, head and neck, ovarian, non-small cell lung, esophageal and gastric,
synovial sarcoma and MRCLS cancers has now completed enrollment. A data update
on the trial was presented at ASCO on
promising durability was reported in patients with synovial sarcoma, with a 50%
response rate (eight partial responses in 16 patients treated) reported,
? including an unconfirmed partial response (44% response rate without inclusion
of unconfirmed partial response). Responses were also reported in head and neck
cancer (one confirmed partial response in three patients treated) and lung
cancer (one confirmed partial response in two patients treated), with evidence
of anti-tumor activity in ovarian cancer and bladder cancer. A radiation
sub-study under the Phase 1 clinical trial also continues to enroll patients
and a partial response in rectal mucosal melanoma was reported in the first
patient treated. ADP-A2AFP Phase 1 Trial: We continue dosing patients in our Phase 1, open-label, dose-escalation trial designed to evaluate the safety and
anti-tumor activity of our alpha fetoprotein ("AFP") therapeutic candidate for
the treatment of hepatocellular carcinoma ("HCC"). Data from the trial was
reported at the
patients have been treated with approximately five billion or more transduced
· cells (three in Cohort 3 and one in the expansion phase): One patient was
reported to have had a complete response, one patient had SD, and two patients
were reported to have had progressive disease. Five patients were previously
treated in the first two dose cohorts with doses of 100 million and 1 billion
transduced cells, respectively, and all patients had best responses of SD. A
further cohort has also been initiated for patients with tumors other than HCC
that express the AFP antigen. The first patient treated in that cohort was
assessed by the investigator to have progressive disease.
We have a number of next generation and combination strategies designed to further enhance our SPEAR T-cells in development both internally and in collaboration with third parties. We have two strategic collaboration programs ongoing;
Astellas co-development and co-commercialization: We are collaborating with
Astellas (through its wholly owned subsidiary
? up to three targets with the aim of co-developing T-cell therapy candidates
directed to those targets and utilising our allogeneic platform for
"off-the-shelf" cell therapies.
GSK collaboration: We are collaborating with GSK in relation to the
? development, manufacture and commercialization of TCR therapeutic candidates
for up to five programs. The third target program under the Collaboration and
License Agreement remains ongoing. We continue to invest and expand our manufacturing and research capabilities to facilitate a strong future pipeline of cell therapies, to enhance translational understanding of our cell therapies and to support our target of launching ADP-A2M4 in 2022, including:
? expanding our ability to manufacture cell therapies at our Navy Yard facility
in the
? enhancing commercial resources and activities within the Company ahead of a
targeted launch date in 2022;
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increasing our ability to manufacture vector at our dedicated manufacturing
? space within the Cell and Gene Therapy Catapult Manufacturing Centre at
regulatory authority, the MHRA;
? focussing on development of our allogeneic platform for "off-the-shelf" cell
immunotherapies, including CAR-T and TCR T-cells; and
? expanding the type of cell therapies being developed.
Significant Events in the Three Months Ended
On
Subsequent Events since
On
Financial Operations Overview
Revenue
The Company has two contracts with customers: the GSK Collaboration and License Agreement and the Astellas Collaboration Agreement.
The GSK Collaboration Agreement
The GSK Collaboration and License Agreement consists of multiple performance obligations. GSK nominated its third target under the Collaboration and License Agreement in 2019, and the Company received$3.2 million following the nomination of the target, which is being recognized as revenue as development progresses.
The Astellas Collaboration Agreement
OnJanuary 13, 2020 , the Company entered into a collaboration agreement with Astellas. The Company received$50.0 million as an upfront payment inJanuary 2020 after entering into the agreement. Under the agreement the parties will agree on up to three targets and will co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas will fund co-development up until completion of a Phase 1 trial for products directed to such target. In addition, Astellas was also granted the right to develop, independently ofAdaptimmune , allogeneic T-cell therapy candidates directed to two targets selected by Astellas. Astellas will have sole rights to develop and commercialize products resulting from these two targets. The agreement consists of the following performance obligations: (i) research services and rights granted under the co-exclusive license for each of the three co-development targets and (ii) the rights granted for each of the two independent Astellas targets. The revenue allocated to the co-development targets is recognized as the development of products directed to the targets progresses up until completion of a Phase 1 trial. The revenue allocated to each of the research licenses for the targets being independently developed by Astellas will be recognized when the associated license commences, which is upon designation of a target by Astellas. 20 Table of Contents
Research and Development Expenses
Research and development expenditures are expensed as incurred. Research and development expenses consist principally of the following:
? salaries for research and development staff and related expenses, including
benefits;
? costs for production of preclinical compounds and drug substances by contract
manufacturers;
? fees and other costs paid to contract research organizations in connection with
additional preclinical testing and the performance of clinical trials;
? costs associated with the development of a process to manufacture and supply
our lentiviral vector and cell therapies for use in clinical trials;
? costs to develop manufacturing capability at our
of cell therapies for use in clinical trials;
? costs relating to facilities, materials and equipment used in research and
development;
? costs of acquired or in-licensed research and development which does not have
alternative future use;
? amortization and depreciation of property, plant and equipment and intangible
assets used to develop our cells therapies; and
? share-based compensation expenses;
offset by:
? reimbursable tax and expenditure credits from the
Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from theU.K. government. As a company that carries out extensive research and development activities, we benefit from theU.K. research and development tax credit regime for small and medium sized companies ("SME R&D Tax Credit Scheme"), whereby our principal research subsidiary company,Adaptimmune Limited , is able to surrender the trading losses that arise from its research and development activities for a payable tax credit of up to approximately 33.4% of eligible research and development expenditures. Qualifying expenditures largely comprise employment costs for research staff, consumables and certain internal overhead costs incurred as part of research projects for which we do not receive income. Subcontracted research expenditures are eligible for a cash rebate of up to approximately 21.7%. A large proportion of costs in relation to our pipeline research, clinical trials management and manufacturing development activities, all of which are being carried out byAdaptimmune Limited , are eligible for inclusion within these tax credit cash rebate claims. Expenditures incurred in conjunction with our collaboration agreements are not qualifying expenditures under the SME R&D Tax Credit Scheme but certain of these expenditures can be reimbursed through theU.K. research and development expenditure credit scheme (the "RDEC Scheme"). Under the RDEC Scheme tax relief is given at 12% (up toApril 1, 2020 ) and 13% (afterApril 1, 2020 ) of allowable R&D costs, which may result in a payable tax credit at an effective rate of approximately 10.3% of qualifying expenditure for the year endedDecember 31, 2020 . Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, which depends upon the timing of initiation of clinical trials and the rate of enrollment of patients in clinical trials. The duration, costs, and timing of clinical trials and development of our cell therapies will depend on a variety of factors, including:
? the scope, rate of progress, and expense of our ongoing as well as any
additional clinical trials and other research and development activities;
? uncertainties in clinical trial enrollment rates;
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? future clinical trial results;
? significant and changing government regulation;
? the timing and receipt of any regulatory approvals;
? supply and manufacture of lentiviral vector and cell therapies for clinical
trials; and
? an allocation of indirect costs clearly related to research and development.
For further detail please see Part II - Item 1A Risk Factors - Risks Related to the Development of our cell therapies of this Quarterly Report
A change in the outcome of any of these variables may significantly change the costs and timing associated with the development of that SPEAR T-cell. For example, if the FDA, or another regulatory authority, requires us to conduct clinical trials beyond those that we currently anticipate will be required for regulatory approval, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
Our general and administrative expenses consist principally of:
? salaries for employees other than research and development staff, including
benefits;
? business development expenses, including travel expenses;
? professional fees for auditors, lawyers and other consulting expenses;
? costs of facilities, communication, and office expenses;
? information technology expenses;
? amortization and depreciation of property, plant and equipment and intangible
assets not related to research and development activities; and
? share-based compensation expenses.
Other (Expense) Income, Net
Other (expense) income, net primarily comprises foreign exchange (losses) gains. We are exposed to foreign exchange rate risk because we currently operate in theUnited Kingdom andUnited States . Our revenue from the GSK Collaboration and License Agreement is denominated in pounds sterling and is generated by ourU.K. -based subsidiary, which has a pounds sterling functional currency. As a result, these sales are subject to translation intoU.S. dollars when we consolidate our financial statements. Our expenses are generally denominated in the currency in which our operations are located, which are theUnited Kingdom andUnited States . However, ourU.K. -based subsidiary incurs significant research and development costs inU.S. dollars and, to a lesser extent, Euros. OurU.K. subsidiary has an intercompany loan balance inU.S. dollars payable to the ultimate parent company,Adaptimmune Therapeutics plc . SinceJuly 1, 2019 , the intercompany loan has been considered of a long-term investment nature as repayment is not planned or anticipated in the foreseeable future. It isAdaptimmune Therapeutics plc's intent not to request payment of the intercompany loan for the foreseeable future. The foreign exchange gains or losses arising on the revaluation of intercompany loans of a long-term investment nature are reported within other comprehensive loss. Our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to 22 Table of Contents
meet foreseeable expenses inU.S. dollars and pounds sterling. To date, we have not used hedging contracts to manage exchange rate exposure, although we may do so in the future. Taxation
We are subject to corporate taxation in the
We benefit from reimbursable tax credits in the
Our subsidiary inthe United States has generated taxable profits due to a Service Agreement between ourU.S. andU.K. operating subsidiaries and is subject toU.S. federal corporate income tax of 21%. Due to its activity inthe United States , and the sourcing of its revenue, theU.S. subsidiary is not currently subject to any state or local income taxes. The Company also benefits from theU.S Research Tax Credit and Orphan Drug Credit. In the future, if we generate taxable income in theUnited Kingdom , we may benefit from theUnited Kingdom's "patent box" regime, which would allow certain profits attributable to revenues from patented products to be taxed at a rate of 10%. As we have many different patents covering our products, future upfront fees, milestone fees, product revenues, and royalties may be taxed at this favorably low tax rate.U.K. Value Added Tax ("VAT") is charged on all qualifying goods and services by VAT-registered businesses. An amount of 20% of the value of the goods or services is added to all relevant sales invoices and is payable to theU.K. tax authorities. Similarly, VAT paid on purchase invoices paid byAdaptimmune Limited andAdaptimmune Therapeutics plc is reclaimable from theU.K. tax authorities.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenues and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies considered to be critical to the judgments and estimates used in the preparation of our financial statements are disclosed in the Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.
Allocation of transaction price and determination of costs to complete
Under our revenue generating collaboration agreements, we allocate the aggregate
transaction price to the performance obligations depending on the standalone
selling price of the performance obligations. In determining the best estimate
of the standalone selling price, we considered internal pricing objectives used
in negotiating the contract, together with internal data regarding the cost and
margin of providing services for each deliverable taking into account the
different stage of development of each development program included in the
contract. Assessing the pricing objectives, internal data and the relative
standalone selling price of each performance obligation is highly judgmental and
can have a significant impact on the amount and timing of revenue recognition.
We expect to satisfy the performance obligations relating to the development
activities as development progresses and recognize revenue based on an estimate
of the percentage of completion of the project determined based on the costs
incurred on the project as a percentage of the total expected costs. We consider
that this depicts the progress of the project, where the significant inputs
would be internal project resources and third-party costs. The determination of
the percentage of completion requires management to estimate the
costs-to-complete the project. We make a detailed estimate of the
costs-to-complete, which is re-assessed every reporting period based on the
latest project plan and discussions with project teams. If a change in facts or
circumstances occurs, the estimate will be adjusted and the revenue will be
recognized based on the revised estimate. The difference between the cumulative
revenue recognized based on the previous estimate and the revenue recognized
based on the revised estimate would be recognized as an adjustment to revenue in
the period in which the change in estimate occurs. Identifying the most
appropriate basis on which to recognize revenue and assessing the inputs and
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outputs of the costs-to-complete estimate require significant judgment and may have a significant impact on the amount and timing of revenue recognition. In addition, judgment is required to determine the costs-to-complete at each reporting date, and it is possible that the costs-to-complete in subsequent periods may differ significantly to those initially anticipated.
Results of Operations
Comparison of Three Months Ended
The following table summarizes the results of our operations for the three months endedSeptember 30, 2020 and 2019, together with the changes to those items (in thousands): Three months ended September 30, 2020 2019 Increase/decrease Revenue$ 1,193 $ 237 $ 956 403 % Research and development expenses (24,067) (29,617) 5,550 (19) % General and administrative expenses (13,001) (10,741) (2,260) 21 % Total operating expenses (37,068) (40,358) 3,290 (8) % Operating loss (35,875) (40,121) 4,246 (11) % Interest income 2,147 615 1,532 249 % Other (expense) income, net (1,689) 291 (1,980) (680) % Loss before income taxes (35,417) (39,215) 3,798 (10) % Income taxes (15) (87) 72 (83) % Loss for the period$ (35,432) $ (39,302) $ 3,870 (10) % Revenue
Revenue increased by
We expect that revenues will increase in future periods as the Company increases development activities on the first target under the Astellas Collaboration Agreement.
Research and Development Expenses
Research and development expenses decreased by 19% to
Our research and development expenses comprise the following (in thousands):
Three months ended
September 30,
2020 2019 Increase/decrease
Salaries, materials, consumables, depreciation of
property, plant and equipment and other
employee-related costs(1) $ 15,901 $ 15,465 $ 436 3 %
Subcontracted expenditure 9,636 9,528 108 1 %
Manufacturing facility expenditure 2,079 1,877 202 11 %
Accrued purchase commitments - 5,000 (5,000) (100) %
Share-based compensation expense 1,219 144 1,075 747 %
In-process research and development costs - 2,476 (2,476) (100) %
Reimbursements receivable for research and
development tax and expenditure credits (4,768) (4,873) 105 (2) %
$ 24,067 $ 29,617 $ (5,550) (19) %
(1) These costs are not analyzed by project since employees may be engaged in
multiple projects simultaneously.
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The net decrease in our research and development expenses of $5.6 million for
the three months ended September 30, 2020 compared to the same period in 2019
was primarily due to the following:
a decrease of
the supply of the Dynabeads® CD3/CD28 technology. In the three months ended
? surrounding the utility of the Dynabeads, which was dependent upon then current
clinical trial plans, the Company's clinical pipeline, manufacturing methods
and undetermined future projects, to result in the purchase commitment being
recognized in Research and Development expenses in the period
? an increase of
forfeitures in the three months ended
a decrease of
? a result of entering into a collaboration agreement relating to the development
of next-generation SPEAR T-cell products with
three months ended
Our subcontracted costs for the three months endedSeptember 30, 2020 were$9.6 million , compared to$9.5 million in the same period of 2019. This includes$6.0 million of costs directly associated with our ADP-A2M4, ADP-A2M4CD8, ADP-A2AFP and ADP-A2M10 SPEAR T-cells and$3.6 million of other development costs. Our research and development expenses are highly dependent on the phases and progression of our research projects and will fluctuate depending on the outcome of ongoing clinical trials. We expect that our research and development expenses will increase in future periods as we continue to invest in our translational sciences and other research and development capabilities.
General and Administrative Expenses
General and administrative expenses increased by 21% to$13.0 million for the three months endedSeptember 30, 2020 from$10.7 million in the same period in 2019. Our general and administrative expenses consist of the following: Three months ended September 30, 2020 2019 Increase/decrease Salaries, depreciation of property, plant and equipment and other employee-related costs$ 6,233 $ 6,211 $ 22 - % Other corporate costs 4,707 2,853 1,854 65 % Share-based compensation expense 2,061 1,677 384 23 %$ 13,001 $ 10,741 $ 2,260 21 %
The net increase in our general and administrative expenses of$2.3 million for the three months endedSeptember 30, 2020 compared to the same period in 2019 was primarily due an increase of$1.9 million in other corporate costs, which include professional fees, investment in our IT systems and costs associated with the buildout of our commercial capabilities.
We expect that our general and administrative expenses will increase in the future as we expand our operations and move towards commercial launch.
Other Expense (Income), Net
Other expense (income), net was an expense of$1.7 million for the three months endedSeptember 30, 2020 compared to income of$0.3 million for the three months endedSeptember 30, 2019 . Other expense (income), net primarily relates to unrealized foreign exchange gains and losses on cash, cash equivalents and on intercompany loans held inU.S. dollars by ourU.K. subsidiary, other than those of a long-term investment nature, where repayment is not planned or anticipated in the foreseeable. 25 Table of Contents Income Taxes
Income taxes decreased to a charge of
Comparison of Nine Months Ended
The following table summarizes the results of our operations for the nine months ended Septmeber 30, 2020 and 2019, together with the changes to those items
(in
thousands):
Nine months ended
September 30,
2020 2019 Increase/decrease
Revenue $ 2,456 $ 394 $ 2,062 523 %
Research and development expenses (65,791) (77,147) 11,356 (15) %
General and administrative expenses (32,557) (32,662) 105 (0) % Total operating expenses (98,348) (109,809) 11,461 (10) % Operating loss (95,892) (109,415) 13,523 (12) % Interest income 4,024 2,324 1,700 73 % Other expense, net (1,501) (556) (945) 170 % Loss before income taxes (93,369) (107,647) 14,278 (13) % Income taxes (110) (154) 44 (29) % Loss for the period$ (93,479) $ (107,801) $ 14,322 (13) % Revenue
Revenue increased by
We expect that revenues will increase in future periods as the Company increases development activities on the first target under the Astellas Collaboration Agreement.
Research and Development Expenses
Research and development expenses decreased by 15% to
Our research and development expenses comprise the following (in thousands):
Nine months ended
September 30,
2020 2019 Increase/decrease
Salaries, materials, equipment, depreciation of
property, plant and equipment and other
employee-related costs(1) $ 46,192 $ 48,872 $ (2,680) (5) %
Subcontracted expenditure 24,234 25,554 (1,320) (5) %
Manufacturing facility expenditure 5,133 5,221 (88) (2) %
Accrued purchase commitments - 5,000 (5,000) (100) %
Share-based compensation expense 3,126 2,951 175 6 %
In-process research and development costs 784 4,463 (3,679) (82) %
Reimbursements receivable for research and
development tax and expenditure credits (13,678) (14,914) 1,236 (8) %
$ 65,791 $ 77,147 $ (11,356) (15) %
(1) These costs are not analyzed by project since employees may be engaged in
multiple projects simultaneously.
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The net decrease in our research and development expenses of$11.4 million for the nine months endedSeptember 30, 2020 compared to the same period in 2019 was primarily due to the following:
a decrease in salaries, materials, consumables, depreciation of property, plant
? and equipment and other employee-related costs of
to lower consumables costs and a reduction in travel costs as a result of
COVID-19 delays;
? a reduction in subcontracted expenditure of
delays brought about by COVID-19;
a decrease of
the supply of the Dynabeads® CD3/CD28 technology. In the nine months ended
? surrounding the utility of the Dynabeads, which was dependent upon then current
clinical trial plans, the Company's clinical pipeline, manufacturing methods
and undetermined future projects, to result in the purchase commitment being
recognized in Research and Development expenses in the period
a decrease of
result of our entering into a collaboration agreement relating to the
development of next-generation SPEAR T-cell products with Alpine Immune
?
30, 2019, offset by work performed by
under our amended existing agreement with
ended
a decrease in reimbursements receivable for research and development tax and
? expenditure credits of
in expenditure in the nine months ended
Our subcontracted costs for the nine months endedSeptember 30, 2020 were$24.2 million , compared to$25.6 million in the same period of 2019. This includes$15.2 million of costs directly associated with our ADP-A2M4, ADP-A2M4CD8, ADP-A2AFP and ADP-A2M10 SPEAR T-cells and$9.0 million of other development costs. Our research and development expenses are highly dependent on the phases and progression of our research projects and will fluctuate depending on the outcome of ongoing clinical trials. We expect that our research and development expenses will increase in future periods as we continue to invest in our translational sciences and other research and development capabilities.
General and Administrative Expenses
General and administrative expenses were$32.6 million for the nine months endedSeptember 30, 2020 compared to$32.7 million in the same period in 2019. Our general and administrative expenses consist of the following: Nine months ended September 30, 2020 2019 Increase/decrease Salaries, depreciation of property, plant and equipment and other employee-related costs$ 17,992 $ 19,784 $ (1,792) (9) % Other corporate costs 11,535 8,239 3,296 40 % Share-based compensation expense 4,226 5,545 (1,319) (24) % Reimbursements (1,196) (906) (290) 32 %$ 32,557 $ 32,662 $ (105) - %
The net decrease in our general and administrative expenses of$0.1 million for the nine months endedSeptember 30, 2020 compared to the same period in 2019 was primarily due to the following:
a decrease of
? equipment and other employee-related costs, which is mainly driven by reduced
travel costs due to COVID-19 and other staff-related costs
an increase of
? professional fees, investment in our IT systems and costs associated with the
buildout of our commercial capabilities; and
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? a decrease of
forfeitures.
We expect that our general and administrative expenses will increase in the future as we expand our operations and move towards commercial launch.
Other Expense, Net
Other expense, net was$1.5 million for the nine months endedSeptember 30, 2020 compared to$0.6 million for the nine months endedSeptember 30, 2019 . Other expense, net primarily relates to unrealized foreign exchange gains and losses on cash, cash equivalents and on intercompany loans held inU.S. dollars by ourU.K. subsidiary, other than those of a long-term investment nature, where repayment is not planned or anticipated in the foreseeable. FromJuly 1, 2019 , the intercompany loan between the parent company,Adaptimmune Therapeutics Plc and its subsidiary,Adaptimmune Limited , has been considered of a long-term investment nature as repayment is not planned or anticipated in the foreseeable future. It isAdaptimmune Therapeutics plc's intent not to request payment of the intercompany loan for the foreseeable future. The foreign exchange gains or losses arising on the revaluation of intercompany loans of a long-term investment nature are reported within other comprehensive loss.
Income Taxes
Income taxes decreased to a charge of
Liquidity and Capital Resources
Sources of Funds
Since our inception, we have incurred significant net losses and negative cash flows from operations. We financed our operations primarily through sales of equity securities, cash receipts under our collaboration arrangements and research and development tax and expenditure credits. From inception through toSeptember 30, 2020 , we have raised:
? including
?
?
credits and receipts from the
We use a non-GAAP measure, Total Liquidity, which is defined as the total of cash and cash equivalents and marketable securities, to evaluate the funds available to us in the near-term. A description of Total Liquidity and reconciliation to cash and cash equivalents, the most directly comparableU.S. GAAP measure, are provided below under "Non-GAAP measures". As ofSeptember 30, 2020 , we had cash and cash equivalents of$78.5 million and Total Liquidity of$399.9 million . We regularly assess Total Liquidity against our activities and make decisions regarding prioritization of those activities and deployment of Total Liquidity. We believe that our Total Liquidity will be sufficient to fund our operations, based upon our currently anticipated research and development activities, planned capital spending, and planned commercialization costs into 2022. This belief is based on estimates that are subject to risks and uncertainties and may change if actual results differ
from
management's estimates.
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Cash Flows
The following table summarizes the results of our cash flows for the nine months
ended
Nine months ended
September 30,
2020 2019
Net cash used in operating activities $ (24,375) $ (99,979)
Net cash (used in) provided by investing activities (286,532) 71,262 Net cash provided by financing activities
339,929 366
Cash, cash equivalents and restricted cash 82,907 43,727 Operating Activities
Net cash used in operating activities was$24.4 million for the nine months endedSeptember 30, 2020 compared to$100.0 million for the nine months endedSeptember 30, 2019 . The net cash used in operating activities has been significantly reduced by the receipt of the$50.0 million upfront payment from Astellas inJanuary 2020 and a reduction in operating expenditure due to COVID-19. Net cash used in operating activities of$24.4 million for the nine months endedSeptember 30, 2020 comprised a net loss of$93.5 million , offset by non-cash items of$14.9 million and a net cash inflow of$54.2 million from changes in operating assets and liabilities. The non-cash items consisted primarily of depreciation expense on plant and equipment of$5.2 million , share-based compensation expense of$7.4 million , amortization of$0.7 million and other items of$2.8 million . This was partially offset by unrealized foreign exchange gains of$1.1 million . Investing Activities Net cash used in investing activities was$286.5 million for the nine months endedSeptember 30, 2020 compared to net cash provided by investing activities of$71.3 million for the nine months endedSeptember 30, 2019 . The net cash (used in) provided by investing activities for the respective periods consisted of:
? purchases of property and equipment of
nine months ended
purchases of intangible assets of
? relating to development of internal-use software for the nine months ended
cash outflows from investment in marketable securities of
? respectively, and cash inflows from maturity or redemption of marketable
securities of
The Company invests surplus cash and cash equivalents in marketable securities. In the nine months endedSeptember 30, 2019 , the investments in marketable securities were reduced to fund the Company's ongoing operations. In the nine months endedSeptember 30, 2020 , the Company increased its investments in marketable securities with proceeds from its public offerings.
Financing Activities
Net cash provided by financing activities was$339.9 million and$0.4 million for the nine months endedSeptember 30, 2020 and 2019, respectively. For the nine months endedSeptember 30, 2020 , the net cash provided by financing activities consisted of net proceeds from public offerings of$334.4 million , and proceeds from share option exercises of$5.5 million . The net cash provided by financing activities in the nine months endedSeptember 30, 2019 consisted of proceeds from share option exercises. 29 Table of Contents Non-GAAP Measures
Total Liquidity (a non-GAAP financial measure)
Total Liquidity (a non-GAAP financial measure) is the total of cash and cash equivalents and marketable securities. Each of these components appears in the condensed consolidated balance sheet. TheU.S. GAAP financial measure most directly comparable to Total Liquidity is cash and cash equivalents as reported in the condensed consolidated financial statements, which reconciles to Total Liquidity as follows (in thousands): September 30, December 31, 2020 2019 Cash and cash equivalents $ 78,466$ 50,412 Marketable securities - available-for-sale debt securities 321,442 39,130 Total Liquidity$ 399,908 $ 89,542 We believe that the presentation of Total Liquidity provides useful information to investors because management reviews Total Liquidity as part of its management of overall liquidity, financial flexibility, capital structure and leverage. The definition of Total Liquidity includes investments, which are highly-liquid and available to use in our current operations, such as marketable securities.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of
theSEC . Contractual Obligations
For a discussion of our contractual obligations, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K.
Safe Harbor
See the section titled "Information Regarding Forward-Looking Statements" at the beginning of this Quarterly Report.
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