GRITSTONE BIO, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with the condensed consolidated financial
statements and notes thereto included elsewhere in this report and our audited
financial statements and related notes thereto included as part of our Annual
Report on Form 10K for the year ended
Overview
We are a biotechnology company developing targeted immunotherapies for cancer and infectious disease. Our approach seeks to generate a prophylactic or therapeutic immune response by leveraging insights into the immune system's ability to recognize and destroy diseased cells by targeting select antigens. We initially focused on harnessing the natural power of a patient's own immune system to recognize short tumor-specific peptide sequences presented on cancer cells, referred to as tumor-specific neoantigens, or TSNA, in order to destroy tumor cells. More recently, we extended our programs to include viral antigens displayed on the surface of virus-infected cells. Our programs are built on two key pillars - first, our proprietary Gritstone EDGE artificial intelligence platform, which enables us to identify antigens that can be recognized by the immune system with a high degree of accuracy; and, second, a potent immunotherapy platform, which we have engineered to deliver the selected antigens and drive the patient's immune system to attack and destroy tumors or virally-infected cells.
We initiated the Phase 2 portion of our Phase 1/2 first-in-human clinical trial
of our personalized immunotherapy product candidate, GRANITE, and the Phase 2
portion of our Phase 1/2 clinical trial of our "off-the-shelf" immunotherapy
product candidate, SLATE (also targeting TSNA), in the fourth quarter of 2020,
both for the treatment of several common solid tumors and evaluation in
combination with immune checkpoint blockade. In these studies, patients have
received our immunotherapy product candidates, which have shown acceptable
tolerability at doses tested as of
We have funded our operations to date primarily through private placements of our convertible preferred stock, the sale of our common stock in public offerings and under our ATM Offering Program, private placements of our common stock and pre-funded warrants, as well as proceeds from our collaboration arrangements. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. The GRANITE, SLATE, BiSAb and CORAL programs will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. In addition, we expect to incur additional costs associated with operating as a public company. We also do not yet have a sales organization or commercial infrastructure and, accordingly, we will incur significant expenses to develop a sales organization or commercial infrastructure in advance of generating any commercial product sales. As a result, we will need substantial additional capital to support our operating activities.
26
--------------------------------------------------------------------------------
We currently anticipate that we will seek to fund our operations through equity or debt financings or other sources, such as potential collaboration agreements with third parties. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the current COVID-19 pandemic and associated economic uncertainty and potential local and/or global economic recession. If sufficient funds on acceptable terms are not available when needed, we will be required to significantly reduce our operating expenses and delay, reduce the scope of, or eliminate one or more of our development programs. See "Liquidity and Capital Resources" below and Note 2 to the unaudited condensed consolidated financial statements and related notes included elsewhere for additional information.
Manufacturing is a vital component of personalized immunotherapy, and we have
invested significantly in our manufacturing facility, which opened in
Since we commenced operations in
In
In
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials, slowing or halting enrollment in existing trials and restricting the on-site monitoring of clinical trials. The Company's operations have not been materially impacted by the COVID-19 pandemic. However, we have experienced slowing of patient recruitment and sample collection in our ongoing clinical trials. Additionally, as a result of the COVID-19 pandemic, competition for potential patients in our trials may be further exaggerated as a result of multiple clinical site closures. To date, the COVID-19 pandemic has not materially affected our supply
27
--------------------------------------------------------------------------------
chain or production schedule, but further escalation of the health crisis has the potential to cause delays in our supply chain and manufacturing operations, which could materially adversely impact our business.
We have not experienced any disruptions in our supply chain necessary to conduct our ongoing clinical trials.
In response to the pandemic, and in alignment with public health guidance
designed to slow the spread of COVID-19, we implemented a reduced onsite
staffing model and transitioned to a remote work plan for all employees other
than those providing essential services, such as our manufacturing and
laboratory staff. For our onsite employees, we have implemented heightened
health and safety measures designed to comply with applicable federal, state and
local guidelines in response to the COVID-19 pandemic. We are further supporting
all of our employees by leveraging virtual meeting technology and encouraging
employees to follow local health authority guidance. While reopening plans have
progressed in
Components of Our Operating Results
Collaboration Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from product sales for the foreseeable future. For the
three months ended
In the future, we will continue to recognize revenue from the bluebird Collaboration Agreement and the Gilead Collaboration Agreement and may generate revenue from product sales or other collaboration agreements, strategic alliances and licensing arrangements. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of license fees, milestones, reimbursement of costs incurred and other payments and product sales, to the extent that any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Operating Expenses
Research and Development Expenses
Since our inception, we have focused significant resources on our research and development activities, including conducting preclinical studies, manufacturing development efforts and related development activities for our product candidates.
Research and development activities account for a significant portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:
• External research and development expenses, including:
• Expenses incurred under arrangements with third parties, including
clinical research organizations, or CROs, preclinical testing
organizations, CMOs, academic and non-profit institutions and
consultants;
• Fees related to our license agreements;
28
--------------------------------------------------------------------------------
• Internal research and development expenses, including:
• Headcount related expenses, including salaries, payroll taxes,
benefits, non-cash stock-based compensation and travel, for employees
contributing to research and development activities, including the
costs associated with the development of our EDGE platform; and
• Other expenses, which include direct and allocated expenses for
laboratories, facilities and other costs.
In
Pursuant to our 2020 Genevant License Agreement, Genevant granted us exclusive
license rights under certain intellectual property related to Genevant's LNP
technology for a single indication, and we agreed to pay Genevant an initial
payment of
Pursuant to our 2021 Genevant License Agreement, we obtained a nonexclusive
license to Genevant's LNP technology to develop and commercialize
self-amplifying RNA, or SAM, vaccines against SARS-CoV-2, the virus that causes
COVID-19. Under the 2021 Genevant License Agreement, we made a
We expect our research and development expenses to increase substantially in the future as we continue to advance our product candidates into and through clinical studies and pursue regulatory approval. Conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming and such clinical studies generally become larger and more costly to conduct as they advance into later stages. The successful development of our product candidates is highly uncertain. The actual probability of success for our product candidates may be affected by a variety of risks and uncertainties associated with drug development, including those set forth in the section entitled "Risk Factors" included in Part II, Section 1A and elsewhere in this report.
The following table summarizes our research and development expenses by program
and category (in thousands):
Three Months Ended March 31
2021 2020
GRANITE program external expenses $ 2,564 $ 2,205
SLATE program external expenses 1,102 2,051
BiSAb program external expenses 717 621
CORAL program external expenses 730 -
Other program external research and
development expenses 7,498 5,631
Personnel-related expenses (1) 8,035 7,861
Other unallocated research and development
expenses 4,210 4,099
Total research and development expenses $ 24,856 $ 22,468
(1) Personnel-related expenses include stock-based compensation expense of
million and
2021 and 2020.
We do not track internal related expenses on a program-by-program basis because our research and
29
--------------------------------------------------------------------------------
development employees and infrastructure resources are utilized across our development programs.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and
related costs, including payroll taxes, benefits, non-cash stock-based
compensation and travel. Other general and administrative expenses include legal
costs of pursuing patent protection of our intellectual property, and
professional service fees for auditing, tax and general legal services. We
expect our general and administrative expenses to continue to increase in the
future as we expand our operating activities and prepare for potential
commercialization of our current and future product candidates, increase our
headcount and support our operations as a public company, including increased
expenses related to legal, accounting, regulatory and tax-related services
associated with maintaining compliance with requirements of the Nasdaq Global
Select Market and the
Interest Income, Net
Interest income, net, consists primarily of interest income and investment income earned on our cash, cash equivalents and marketable securities.
Results of Operations
Comparison of the Three Months Ended
The following table sets forth the significant components of our results of
operations (in thousands):
Three Months Ended March 31,
2021 2020 Change
Revenues:
Collaboration and license revenues $ 39,693 $ 1,262 $ 38,431
Total revenues 39,693 1,262 38,431
Operating expenses:
Research and development 24,856 22,468 2,388
General and administrative 6,941 5,465 1,476
Total operating expenses 31,797 27,933 3,864
Income (loss) from operations 7,896 (26,671 ) 34,567
Interest income, net 27 465 (438 )
Net income (loss) $ 7,923 $ (26,206 ) $ 34,129 Collaboration and License Revenues
Collaboration and license revenues from our collaboration arrangements were
Research and Development Expenses
Research and development expenses were
30
--------------------------------------------------------------------------------
The increase of
General and Administrative Expenses
General and administrative expenses were
Interest Income, Net
Interest income, net was immaterial for the three months ended
Liquidity and Capital Resources
Sources of Liquidity
From our inception through
In
In
In
In
As of
Additionally, we do not expect positive cash flows from operations in the foreseeable future. Historically, we have incurred operating losses as a result of ongoing efforts to develop our cancer immunotherapy candidates,
31
--------------------------------------------------------------------------------
including conducting ongoing research and development, clinical and preclinical studies and providing general and administrative support for these operations. We expect to continue to incur net operating losses for at least the next several years as we advance the SLATE, GRANITE, BiSAb and CORAL programs and any future product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, continue our research and development efforts and invest in our manufacturing facility.
Future Funding Requirements
We do not have any products approved for sale, and we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current and future product candidates and/or enter into additional significant collaboration agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our current and future product candidates, and begin to commercialize any approved products. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we expect to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of revenue from the commercialization of our tumor-specific immunotherapy product candidates or from additional significant collaboration or license agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity offerings or debt financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and prospects.
Since our inception, we have incurred significant losses and negative cash flows
from operations. We have an accumulated deficit of
• the scope, progress, results and costs of developing our tumor-specific
immunotherapy product candidates, and conducting preclinical studies
and clinical trials, including our Phase 1/2 clinical trial of GRANITE,
which we initiated in the fourth quarter of 2018;
• the scope, progress, results and costs of conducting studies and
clinical trials for our SLATE product candidate series, including the
Phase 1/2 clinical trial for SLATE, which we initiated in the third
quarter of 2019;
• the scope, progress, results, and costs of conducting drug discovery,
preclinical studies and clinical trials for our BiSAb program;
32
--------------------------------------------------------------------------------
• potential delays in our ongoing clinical trials as a result of the
COVID-19 pandemic;
• the timing of, and the costs involved in, obtaining regulatory
approvals for our tumor-specific immunotherapy product candidates;
• the number and characteristics of any additional product candidates we
develop or acquire;
• the timing and amount of any milestone, royalty or other payments we
are required to make pursuant to any current or future collaboration or
license agreements;
• the cost of manufacturing our tumor-specific immunotherapy product
candidates we successfully commercialize, including the cost of scaling
up our internal manufacturing operations;
• the cost of building a sales force in anticipation of product
commercialization;
• the cost of commercialization activities, including building a
commercial infrastructure, marketing, sales and distribution costs;
• our ability to maintain existing, and establish new, strategic
collaborations, licensing or other arrangements and the financial terms
of any such agreements, including the timing and amount of any future
milestone, royalty or other payments due under any such agreement;
• any product liability or other lawsuits related to our products;
• the costs to attract, hire and retain skilled personnel;
• the costs associated with being a public company;
• the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing our intellectual property portfolio; and
• the timing, receipt and amount of sales of any future approved
products, if any.
A change in the outcome of any of these or other variables with respect to the development of any of our current and future 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 need additional funds to meet operational needs and capital requirements associated with such operating plans.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands):
Three Months Ended March 31,
2021 2020
Cash provided by (used in) operating activities
14,774
Cash provided by financing activities 17,395 5,655
Net decrease in cash and cash equivalents
Cash Provided by (Used in) Operating Activities
During the three months ended
33
--------------------------------------------------------------------------------
million in accounts payable and
During the three months ended
Cash Provided by (Used in) Investing Activities
During the three months ended
During the three months ended
Cash Provided by Financing Activities
During the three months ended
During the three months ended
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements, as defined under
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as ofMarch 31, 2021 (in thousands): Payments Due by Period Less than 1-3 3-5 More than Total 1 Year Years Years 5 Years
Operating leases (1)
(1) See Note 6 to our condensed consolidated financial statements.
We are party to license agreements pursuant to which we have in-licensed various
intellectual property rights. The license agreements obligate us to make certain
milestone payments related to achievement of specified events, as well as
royalties in the low-single digits based on sales of licensed products. In
34
--------------------------------------------------------------------------------
these agreements as the amounts, timing and likelihood of such payments are not known. See Note 8 to our condensed consolidated financial statements for additional information.
In
In
We enter into contracts in the normal course of business with CROs for clinical trials and CMOs for clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, which generally provide for termination within 30 days of notice, and therefore are cancelable contracts and not included in the table above.
Critical Accounting Policies and Use of Estimates
This discussion and analysis of financial condition and results of operation is
based on our unaudited condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
There have been no changes to our critical accounting policies since we filed
our Annual Report on Form 10-K for the year ended
Recent Accounting Pronouncements
Refer to "Note 2. Summary of Significant Accounting Policies" in the notes to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10Q, for a discussion of recent accounting pronouncements.
35
--------------------------------------------------------------------------------
© Edgar Online, source
