UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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TABLE OF CONTENTS
2
General information
In this Quarterly Report on Form 10-Q (“Quarterly Report”), “Adaptimmune,” the “Group,” the “Company,” “we,” “us” and “our” refer to Adaptimmune Therapeutics plc and its consolidated subsidiaries, except where the context otherwise requires.
Information Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” or the negative of these words or other comparable terminology.
Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors of this Quarterly Report and under Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources.
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | | $ | | ||
Marketable securities - available-for-sale debt securities | | | ||||
Accounts receivable, net of allowance for expected credit losses of $ | | | ||||
Other current assets and prepaid expenses | | | ||||
Total current assets | | | ||||
Restricted cash | | | ||||
Operating lease right-of-use assets, net of accumulated amortization of $ | | | ||||
Property, plant and equipment, net of accumulated depreciation of $ | | | ||||
Intangible assets, net of accumulated amortization of $ | | | ||||
Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Operating lease liabilities, current | | | ||||
Accrued expenses and other current liabilities | | | ||||
Restructuring provision | | | ||||
Deferred revenue, current | | | ||||
Total current liabilities | | | ||||
Operating lease liabilities, non-current | | | ||||
Deferred revenue, non-current | | | ||||
Other liabilities, non-current | | | ||||
Total liabilities | | | ||||
Stockholders’ equity | ||||||
Common stock - Ordinary shares par value £ | | | ||||
Additional paid in capital | | | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Accumulated deficit | ( | ( | ||||
Total stockholders' equity | | | ||||
Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
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ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
| Three months ended | ||||||
March 31, | |||||||
| 2023 |
| 2022 | ||||
Revenue | $ | | $ | | |||
Operating expenses | |||||||
Research and development |
| ( |
| ( | |||
General and administrative |
| ( |
| ( | |||
Total operating expenses | ( |
| ( | ||||
Operating profit/(loss) |
| |
| ( | |||
Interest income |
| |
| | |||
Other (expense) income, net |
| ( |
| | |||
Profit/(loss) before income tax expense |
| |
| ( | |||
Income tax expense |
| ( |
| ( | |||
Net profit/(loss) attributable to ordinary shareholders | $ | | $ | ( | |||
Net profit/(loss) per ordinary share | |||||||
Basic | | ( | |||||
Diluted | $ | 0.00 | $ | (0.05) | |||
Weighted average shares outstanding: | |||||||
Basic |
| |
| | |||
Diluted | 1,000,276,615 | 940,029,247 |
See accompanying notes to unaudited condensed consolidated financial statements.
5
ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/LOSS
(In thousands)
Three months ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Net profit/(loss) | $ | | $ | ( | |
Other comprehensive income/(loss), net of tax | |||||
Foreign currency translation adjustments, net of tax of $ | ( | | |||
Foreign currency gains (losses) on intercompany loan of a long-term investment nature, net of tax of $ | | ( | |||
Unrealized holding gains (losses) on available-for-sale debt securities, net of tax of $ | | ( | |||
Total comprehensive profit/(loss) for the period | $ | | $ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
6
ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
(In thousands, except share data)
Accumulated | |||||||||||||||||
Additional | other | Total | |||||||||||||||
Common | Common | paid in | comprehensive | Accumulated | stockholders' | ||||||||||||
| stock |
| stock |
| capital |
| (loss) / gain |
| deficit | equity | |||||||
Balance as of January 1, 2023 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Net profit |
| — |
| — |
| — |
| — | | | |||||||
Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||
Issuance of shares upon exercise of stock options |
| |
| |
| |
| — | — |
| | ||||||
Issuance of shares upon completion of public offering, net of issuance costs | | | | — | | ||||||||||||
Share-based compensation expense |
| — |
| — |
| |
| — | — |
| | ||||||
Balance as of March 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
7
ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
(In thousands, except share data)
Accumulated | |||||||||||||||||
Additional | other | Total | |||||||||||||||
Common | Common | paid in | comprehensive | Accumulated | stockholders’ | ||||||||||||
stock | stock | capital | (loss) / gain | deficit | equity | ||||||||||||
Balance as of January 1, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Net loss |
| — | — | — | — | ( | ( | ||||||||||
Other comprehensive gain | — | — | — | | — | | |||||||||||
Issuance of shares upon exercise of stock options |
| | | | — | — | | ||||||||||
Share-based compensation expense |
| — | — | | — | — | | ||||||||||
Balance as of March 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
8
ADAPTIMMUNE THERAPEUTICS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended | ||||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Cash flows from operating activities | ||||||
Net profit/(loss) | $ | | $ | ( | ||
Adjustments to reconcile net profit/(loss) to net cash used in operating activities: | ||||||
Depreciation | | | ||||
Amortization | | | ||||
Share-based compensation expense | | | ||||
Unrealized foreign exchange losses/(gains) | | ( | ||||
Amortization on available-for-sale debt securities | | | ||||
Other | | | ||||
Changes in operating assets and liabilities: | ||||||
Decrease/(increase) in receivables and other operating assets | | ( | ||||
Increase in payables and other current liabilities | | | ||||
Decrease in deferred revenue | ( | ( | ||||
Net cash used in operating activities | ( | ( | ||||
Cash flows from investing activities | ||||||
Acquisition of property, plant and equipment | ( | ( | ||||
Acquisition of intangible assets | ( | — | ||||
Maturity or redemption of marketable securities | | | ||||
Investment in marketable securities | — | ( | ||||
Net cash provided by/(used in) investing activities | | ( | ||||
Cash flows from financing activities | ||||||
Proceeds from issuance of common stock from offerings, net of commissions and issuance costs | | — | ||||
Proceeds from exercise of stock options | | | ||||
Net cash provided by financing activities | | | ||||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | | ( | ||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | | ( | ||||
Cash, cash equivalents and restricted cash at start of period | | | ||||
Cash, cash equivalents and restricted cash at end of period | $ | | $ | | ||
See accompanying notes to unaudited condensed consolidated financial statements.
9
ADAPTIMMUNE THERAPEUTICS PLC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — General
Adaptimmune Therapeutics plc is registered in England and Wales. Its registered office is 60 Jubilee Avenue, Milton Park, Abingdon, Oxfordshire, OX14 4RX, United Kingdom. Adaptimmune Therapeutics plc and its subsidiaries (collectively “Adaptimmune” or the “Company”) is a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to people with cancer. We are a leader in the development of T-cell therapies for solid tumors. The Company’s proprietary platform enables it to identify cancer targets, find and develop cell therapy candidates active against those targets and produce therapeutic candidates for administration to patients.
The Company is subject to a number of risks similar to other biopharmaceutical companies in the early stage of clinical development including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical programs or clinical programs, the need to obtain marketing approval for its cell therapies, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of its cell therapies, the need to develop a reliable commercial manufacturing process, the need to commercialize any cell therapies that may be approved for marketing, and protection of proprietary technology. If the Company does not successfully commercialize any of its cell therapies, it will be unable to generate product revenue or achieve profitability. The Company had an accumulated deficit of $
Note 2 — Summary of Significant Accounting Policies
(a) Basis of presentation
The condensed consolidated financial statements of Adaptimmune Therapeutics plc and its subsidiaries and other financial information included in this Quarterly Report are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.
The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2023 (the “Annual Report”). The balance sheet as of December 31, 2022 was derived from audited consolidated financial statements included in the Company’s Annual Report but does not include all disclosures required by U.S. GAAP. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. The interim results are not necessarily indicative of results to be expected for the full year.
(b) Use of estimates in interim financial statements
The preparation of interim financial statements, in conformity with U.S. GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are made in various areas, including in relation to valuation allowances relating to deferred tax assets, revenue recognition, and estimation of the incremental borrowing rate for operating leases. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.
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(c) Fair value measurements
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The hierarchy defines three levels of valuation inputs:
Level 1 - Quoted prices in active markets for identical assets or liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 - Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability
The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of marketable securities, which are measured at fair value on a recurring basis is detailed in Note 6, Fair value measurements.
(d) Significant concentrations of credit risk
The Company held cash and cash equivalents of $
The Company had
Management analyses current and past due accounts and determines if an allowance for credit losses is required based on collection experience, credit worthiness of customers and other relevant information. The process of estimating the uncollectible accounts involves assumptions and judgments and the ultimate amounts of uncollectible accounts receivable could be in excess of the amounts provided.
The Company does not hold cash deposits or securities with Silicon Valley Bank.
(e) New accounting pronouncements
Adopted in the current period
Measurement of credit losses on financial instruments
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit losses, which replaces the incurred loss impairment methodology for financial instruments in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted the guidance in the fiscal year beginning January 1, 2023. The guidance must be adopted using a modified-retrospective approach and a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. There was no material impact from the adoption of the guidance on the Company’s Consolidated financial statements.
11
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08 – Business Combinations (Topic 805)- Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in and inconsistency related to the following: (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU resolve this inconsistency by requiring that an entity (acquirer) recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606, in contrast to current GAAP which requires that assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities, are measured at fair value as of the acquisition date. The Company adopted the guidance in the fiscal year beginning January 1, 2023. The amendments in this ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Adoption of the new standard had no impact on the Company’s Consolidated financial statements upon transition.
Note 3 — Revenue
The Company had
Revenue comprises the following categories (in thousands):
Three months ended | ||||||
| March 31, | |||||
| 2023 |
| 2022 | |||
Development revenue |
| $ | |
| $ | |
| $ | |
| $ | |
Deferred revenue decreased by $
As of December 31, 2022, there was deferred revenue of $
The aggregate amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the agreements as of March 31, 2023 was $
The Genentech Collaboration and License Agreement
The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the Genentech agreement as of March 31, 2023 was $
The Company expects to satisfy the performance obligations relating to the initial ‘off-the-shelf’ collaboration targets and the personalized therapies as development progresses and recognizes 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. The Company expects to satisfy the performance obligations relating to the material rights to designate additional ‘off-the-shelf’ collaboration targets from the point that the options are exercised and then as development progresses, in line with the initial ‘off-the-shelf’ collaboration targets, or at the point in time that the rights expire. The Company expects to satisfy the performance obligations relating to the material rights to extend the
12
research term from the point that the options are exercised and then over the period of the extension, or at the point in time that the rights expire.
The Astellas Collaboration Agreement
The Company and Universal Cells mutually agreed to terminate the Astellas Collaboration Agreement as of March 6, 2023 (the “Termination Date”). In connection with the termination, all licenses and sublicenses granted to either party pursuant to the Collaboration Agreement ceased as of the Termination Date. There were no termination penalties in connection with the termination, however the Company is still entitled to receive reimbursement for research and development work performed up to and including a period of 30 days after the Termination Date.
The Company originally satisfied the performance obligations relating to the
The termination was accounted for as a contract modification on a cumulative catch-up basis. No performance obligations were identified as a result of the modification as there were no further goods or services to be provided by the Company and the modification resulted in the remaining unsatisfied and partially satisfied performance obligations under the collaboration becoming fully satisfied. The aggregate transaction price of the contract modification was $
The GSK Collaboration and License Agreement
The GSK Collaboration and License Agreement consisted of multiple performance obligations, including the development of a third target, which was the only performance obligation for which revenue was recognised in 2022.
The collaboration was terminated by GSK in October 2022 (effective December 23, 2022). A further amendment to the collaboration agreement was entered into on December 19, 2022 for the deletion of certain provisions relating to GSK’s post termination manufacturing and supply obligations and payment of £
A further Termination and Transfer Agreement was entered into on April 6, 2023. As this occurred after March 31, 2023, there was no impact on the Consolidated financial statements in the three months ended March 31, 2023, see Note 15 for further details.
Note 4 — Profit / Loss per share
The following tables reconcile the numerator and denominator in the basic and diluted profit/(loss) per share computation (in thousands):
Three months ended | ||||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Numerator for basic and diluted profit/(loss) per share | ||||||
Net profit/(loss) attributable to ordinary shareholders |
| $ | |
| $ | ( |
Net profit/(loss) attributable to ordinary shareholders used for basic and diluted profit/(loss) per share | | ( |
13
Three months ended | ||||
March 31, | ||||
| 2023 |
| 2022 | |
Denominator for basic profit/(loss) per share - Weighted average shares outstanding |
| |
| |
Effect of dilutive securities: | ||||
Employee stock options |
| |
| — |
Denominator for diluted profit/(loss) per share |
| |
| |
The dilutive effect of
Note 5 — Accumulated other comprehensive loss
The Company reports foreign currency translation adjustments and the foreign exchange gain or losses arising on the revaluation of intercompany loans of a long-term investment nature within Other comprehensive (loss) income. Unrealized gains and losses on available-for-sale debt securities are also reported within Other comprehensive (loss) income until a gain or loss is realized, at which point they are reclassified to Other (expense) income, net in the Condensed Consolidated Statement of Operations.
The following tables show the changes in Accumulated other comprehensive (loss) income (in thousands):
Accumulated | Accumulated | Total | |||||||
foreign | unrealized | accumulated | |||||||
currency | gains (losses) on | other | |||||||
| translation |
| available-for-sale | comprehensive | |||||
adjustments | debt securities | (loss) income | |||||||
Balance at January 1, 2023 |
| $ | | $ | ( | $ | ( | ||
Foreign currency translation adjustments | ( | — | ( | ||||||
Foreign currency gains on intercompany loan of a long-term investment nature, net of tax of $ | | — | | ||||||
Unrealized holding gains on available-for-sale debt securities, net of tax of $ | — | | | ||||||
Balance at March 31, 2023 | $ | ( | $ | ( | ( | ||||
Accumulated | Accumulated | Total | |||||||
foreign | unrealized | accumulated | |||||||
currency | gains (losses) on | other | |||||||
| translation |
| available-for-sale | comprehensive | |||||
adjustments | debt securities | (loss) income | |||||||
Balance at January 1, 2022 |
| $ | ( | $ | ( | ( | |||
Foreign currency translation adjustments | | — | | ||||||
Foreign currency losses on intercompany loan of a long-term investment nature, net of tax of $ | ( | — | ( | ||||||
Unrealized holding losses on available-for-sale debt securities, net of tax of $ | — | ( | ( | ||||||
Balance at March 31, 2022 | $ | ( | $ | ( | ( |
14
Note 6 — Fair value measurements
Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement criteria as of March 31, 2023 are as follows (in thousands):
Fair value measurements using | ||||||||||||
March 31, | Level 1 | Level 2 | Level 3 | |||||||||
| 2023 |
|
|
| ||||||||
Assets classified as cash equivalents: | ||||||||||||
U.S. Treasury securities | $ | | $ | — | $ | | $ | — | ||||
Assets classified as available-for-sale debt securities: | ||||||||||||
Corporate debt securities | $ | | $ | | $ | — | $ | — | ||||
Agency bonds |
| | — | | — | |||||||
| $ | | $ | |
| $ | |
| $ | — |
The Company estimates the fair value of available-for-sale debt securities with the aid of a third party valuation service, which uses actual trade and indicative prices sourced from third-party providers on a daily basis to estimate the fair value. If observed market prices are not available (for example securities with short maturities and infrequent secondary market trades), the securities are priced using a valuation model maximizing observable inputs, including market interest rates.
Note 7 — Marketable securities – available-for-sale debt securities
As of March 31, 2023, the Company has the following investments in marketable securities (in thousands):
Gross | Gross | Aggregate | ||||||||||||
Remaining | Amortized | unrealized | unrealized | estimated | ||||||||||
| contractual maturity |
| cost |
| gains |
| losses |
| fair value | |||||
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
| ||||
Corporate debt securities |
| Less than | $ | | $ | — | $ | ( | $ | | ||||
Agency bonds | | — | ( | | ||||||||||
Corporate debt securities | | — | ( | | ||||||||||
|
| $ | | $ | — | $ | ( | $ | |
The aggregate fair value (in thousands) and number of securities held by the Company (including those classified as cash equivalents) in an unrealized loss position as of March 31, 2023 and December 31, 2022 are as follows:
March 31, 2023 | December 31, 2022 | |||||||||||||||||
| Fair market value of investments in an unrealized loss position | Number of investments in an unrealized loss position | Unrealized losses | Fair market value of investments in an unrealized loss position | Number of investments in an unrealized loss position | Unrealized losses | ||||||||||||
Marketable securities in a continuous loss position for 12 months or longer: | ||||||||||||||||||
Corporate debt securities | $ | | | $ | ( | $ | | | $ | ( | ||||||||
Agency bond | | | ( | | | ( | ||||||||||||
Marketable securities in a continuous loss position for less than 12 months: | ||||||||||||||||||
Corporate debt securities |
| $ | — |
| — | $ | — |
| $ | |
| |
| $ | ( | |||
| $ | |
| | $ | ( |
| $ | |
| |
| $ | ( |
15
As of March 31, 2023, no allowance for expected credit losses has been recognized in relation to securities in an unrealized loss position. This is because the impairments are not severe, do not represent a significant proportion of the total fair market value of the investments and all securities have an investment-grade credit rating. Furthermore, the Company does not intend to sell the debt securities in an unrealized loss position, believes that it has the ability to hold the debt securities to maturity, and it is currently unlikely that the Company will be required to sell these securities before the recovery of the amortized cost.
Note 8 — Other current assets
Other current assets consisted of the following (in thousands):
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Research and development credits receivable |
| $ | | $ | | |
Prepayments |
| | | |||
Clinical materials |
| | | |||
VAT receivable | | | ||||
Other current assets |
| | | |||
$ | | $ | |
Note 9 — Operating leases
The Company has operating leases in relation to property for office, manufacturing and research facilities.
On March 21, 2023, the Company entered into an agreement to extend a manufacturing facility agreement that contains an embedded lease that was accounted for under ASC 842 Leases. The effect of the modification was an extension of the lease term and a corresponding increase in contractual lease payments for the extended term. Upon modification, the lease liability has been remeasured using the current estimate of the Company’s incremental borrowing rate. The effect of the modification was to increase the lease liability and the corresponding right-of-use asset by $
The following table shows the weighted-average remaining lease term and the weighted-average discount rate as at March 31, 2023 and 2022:
March 31, | |||||||
2023 | 2022 | ||||||
Weighted-average remaining lease term - operating leases | |||||||
Weighted-average discount rate - operating leases |
16
The maturities of operating lease liabilities as of March 31, 2023 are as follows (in thousands):
| Operating leases | ||
2023 |
| $ | |
2024 |
| | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
after 2027 |
| | |
Total lease payments | | ||
Less: Imputed interest | ( | ||
Present value of lease liability | $ | |
The maximum lease term without activation of termination options is to 2041.
Note 10 — Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Accrued clinical and development expenditure | $ | | $ | | ||
Accrued employee expenses | | | ||||
Other accrued expenditure | | | ||||
Other |
| |
| | ||
$ | | $ | |
Note 11 — Contingencies and commitments
Universal Cells Research, Collaboration and License Agreement and Co-development and Co-commercialization agreement
On November 25, 2015, the Company entered into a Research, Collaboration and License Agreement relating to gene editing and Human Leukocyte Antigen (“HLA”) engineering technology with Universal Cells, Inc. (“Universal Cells”). The Company paid an upfront license and start-up fee of $
The agreement was amended and re-stated as of January 13, 2020, primarily to reflect changes to the development plan agreed between the parties. The agreement was further amended as of July 22, 2022, primarily to make certain changes to development milestones and to agree on the status thereof, as agreed between the parties. Following the amendment, milestone payments of $
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This Agreement was terminated by notice on January 27, 2023, effective 30 days following receipt of notice of termination. As a result of termination, all licenses between the parties to the Agreement will cease and each party is required to return all confidential information of the other party.
Astellas Collaboration Agreement
Under the Astellas Collaboration Agreement, described further in Note 3, if Adaptimmune had unilaterally developed a product with technology contributed by Astellas, Astellas could have been eligible to receive milestones and royalties relating to future commercialization and sales. As a result of the termination of the collaboration, Astellas no longer has the right to receive these milestones or royalties in future.
MD Anderson Strategic Alliance
On September 26, 2016, the Company announced that it had entered into a multi-year strategic alliance with The University of Texas MD Anderson Cancer Center (“MD Anderson”) designed to expedite the development of T-cell therapies for multiple types of cancer. The Company and MD Anderson are collaborating on a number of studies including clinical and preclinical development of the Company’s SPEAR T-cell therapies and will collaborate on future clinical stage first and second generation SPEAR T-cell therapies across a number of cancers.
Under the terms of the agreement, the Company committed at least $
The agreement may be terminated by either party for material breach by the other party. Individual studies may be terminated for, amongst other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical site with oversight of the clinical study, requests termination of any study. Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.
Note 12 — Share-based compensation
The share-based compensation expense decrease is driven largely by additional forefeitures of $
Three months ended | ||||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Research and development | $ | | $ | | ||
General and administrative |
| |
| | ||
$ | | $ | |
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The following table shows information about share options and options which have a nominal exercise price (similar to restricted stock units (RSUs)) granted:
Three months ended | ||||||
March 31, | ||||||
2023 |
| 2022 | ||||
Number of options over ordinary shares granted | ||||||
Weighted average fair value of ordinary shares options | $ | $ | ||||
Number of additional options with a nominal exercise price granted | ||||||
Weighted average fair value of options with a nominal exercise price | $ | $ |
Note 13 — Stockholders’ equity
On August 10, 2020 the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) (the “Sales Agreement”) under which we may from time to time issue and sell American Depositary Shares (“ADSs”) representing our ordinary shares through Cowen in at-the-market (“ATM”) offerings for an aggregate offering price of up to $
On April 8, 2022 the Company entered into a new sales agreement with Cowen (the “2022 Sales Agreement”) under which we may from time to time issue and sell ADSs representing our ordinary shares through Cowen in ATM offerings for an aggregate offering price of up to $
Note 14 – Restructuring
On November 8, 2022, the Company announced that in order to extend the Company’s cash runway from early 2024 into early 2025, it was re-focusing the business on core programs and deprioritizing non-core programs and undertaking a restructuring of the Company including a headcount reduction to be completed in the first quarter of 2023.
The redundancy process was completed in the first quarter of 2023 with a reduction of approximately
The amounts incurred in relation to the redundancy programme are as follows:
One-time | |||||||||
Contractual | employee | Total | |||||||
termination | termination | restructuring | |||||||
benefits | benefits | costs | |||||||
Cumulative amount incurred to December 31, 2022 | $ | | $ | | $ | | |||
Amount incurred in the three months ended March 31, 2023 | | | | ||||||
Total amount expected to be incurred and cumulative amount incurred to March 31, 2023 | $ | | $ | | $ | |
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The table below is a summary of the changes in the restructuring provision in the consolidated balance sheets in the three months ended March 31, 2023:
One-time | |||||||||
Contractual | employee | Total | |||||||
termination | termination | restructuring | |||||||
| benefits | benefits | provision | ||||||
Provision at January 1, 2023 | $ | | $ | | $ | | |||
Costs incurred and charged to General and administrative expenses | | | | ||||||
Costs paid during the period | ( | ( | ( | ||||||
Adjustments to the liability | | ( | | ||||||
Effect of foreign exchange rates | | | | ||||||
Provision at March 31, 2023 | $ | — | $ | | $ | |
The costs incurred during the period includes the element of one-time employee termination benefits that was recognized over the remaining period of employee service. The costs incurred during the period also include an addition to the provision for costs incurred relating to termination benefits paid to the former Chief Commercial Officer, who left employment with the Company in the first quarter of 2023.
Note 15 – Subsequent events
GSK Termination and Transfer Agreement
On April 11, 2023, the Company announced the entry of the Company and GSK into a Termination and Transfer Agreement (the “Termination and Transfer Agreement” as per Note 3) regarding the return of rights and materials comprised within the PRAME and NY-ESO cell therapy programs. The parties will work collaboratively to ensure continuity for patients in ongoing lete-cel clinical trials forming part of the NY-ESO cell therapy program. In addition, under the Termination and Transfer Agreement, Adaptimmune will receive an upfront amount and milestone payments totaling £
TCR2 Therapeutics Inc. Merger Agreement
On March 6, 2023 the Company announced entry into a definitive agreement under which it will combine with TCR² Therapeutics Inc. (TCR²) in an all-stock transaction to create a preeminent cell therapy company focused on treating solid tumors. The transaction is expected to close in Q2 2023, subject to the receipt of approvals by Adaptimmune shareholders and TCR2 stockholders and satisfaction or waiver of other closing conditions. Following the closing of the transaction we currently estimate that the cash runway of the combined company will extend into early 2026. In the event that the transaction does not close we currently estimate that our cash runway would extend into early 2025.
As the transaction is not expected to close until Q2 2023, an estimate of the other financial effects of this event on the Company cannot yet be made.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited 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 ended December 31, 2022, included in our Annual Report on Form 10-K that was filed with the SEC on March 6, 2023. 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 and our Annual Report on Form 10-K for the year ended December 31, 2022, 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 T-cell therapies for solid tumors and have reported clinical responses in multiple solid tumor indications.
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 therapy candidates include genetically engineered T-cell receptors (“TCRs”) and HLA-independent TCRs (“HiTs”) where surface proteins are targeted independently of the peptide-HLA complex. Our cell therapies are currently manufactured on an autologous or per patient basis and we have a proprietary preclinical allogeneic platform for the development of “off the shelf” cell therapies.
Our MAGE-A4 cell therapy franchise includes T-cell therapy products targeting solid tumor indications in which the MAGE-A4 antigen is expressed, with compelling responses seen in head and neck, esophagogastric junction (“EGJ”), urothelial and ovarian indications. Filing of a Biologics License Application (BLA) for the lead product (afamitresgene autoleucel or “afami-cel”) in synovial sarcoma has been initiated with the U.S. Food and Drug Administration (“FDA”), with completion of the filing targeted for mid-2023.
Clinical programs with our MAGE-A4 targeted cell therapies are as follows:
● | SPEARHEAD-1 Phase 2 Trial with afami-cel (ADP-A2M4): A registration directed Phase 2 clinical trial is ongoing in synovial sarcoma in which the MAGE-A4 antigen is expressed. Enrollment in Cohorts 1 and 2 are complete. An overall response rate (ORR) of approximately 39% in heavily pre-treated patients with synovial sarcoma and a median duration of response of around 12 months was announced at the Connective Tissue Oncology Society (CTOS) in November 2022. |
● | SURPASS-3 Phase 2 Trial with ADP-A2M4CD8. A Phase 2 trial for people with platinum resistant ovarian cancer is initiating in 2023. We have received RMAT designation (Regenerative Medicine Advanced Therapy designation) for ADP-A2M4CD8 for the treatment of this indication from the FDA. In the Phase 1 SURPASS trial an ORR of 43% in ovarian cancer was reported in November 2022. The Phase 2 trial will evaluate ADP-A2M4CD8 in both monotherapy and in combination with a checkpoint inhibitor, nivolumab, in ovarian cancer. |
● | SURPASS Phase 1 Trial with ADP-A2M4CD8: Enrollment is ongoing in a Phase 1 trial for ADP-A2M4CD8, focusing on treatment of patients with head and neck and urothelial cancers in which the MAGE-A4 antigen is expressed. Across all indications and as of November 23, 2022, the trial has an overall response rate of 37%. In the focus areas of ovarian, urothelial and head and neck cancers the response rate is 75% in patients with 3 or fewer prior lines of therapy (9 out of 12 patients). The trial includes a combination cohort where participants receive a combination of ADP-A2M4CD8 together with a checkpoint inhibitor (nivolumab). Two new cohorts in urothelial and head and neck cancers for patients with fewer lines of therapy and in combination with standard of care in those settings is initiating. |
Outside of the MAGE-A4 franchise, we have a preclinical program for T-cell therapies directed to the PRAME target which is expressed in a broad range of tumors. Dependent on the data arising from the preclinical program, the first cell therapy targeting PRAME is anticipated to be IND-ready by the end of 2023. The PRAME program was previously part of a prior collaboration with GSK.
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We are also developing allogeneic or “off-the-shelf” cell therapies utilizing a proprietary allogeneic platform. The platform utilizes cells derived from Induced Pluripotent Stem Cells (“iPSCs”), which can be gene-edited to express our engineered TCRs or other constructs and then differentiated into the required end cell type, for example T-cells. The platform is applicable to all of our cell therapies. We have a strategic collaboration with Genentech Inc. (“Genentech”). The collaboration with Genentech covers the research and development of “off-the-shelf” cell therapies for up to five shared cancer targets (“off-the-shelf” products) and the development of a novel allogeneic personalized cell therapy platform.
We have several development and research collaborations. A prior collaboration with GSK terminated in December 2022. On April 11, 2023, we announced the entry into a Termination and Transfer Agreement with GSK (the “Termination and Transfer Agreement”) regarding the return of rights and materials comprised within the PRAME and NY-ESO cell therapy programs. The parties will work collaboratively to ensure continuity for patients in ongoing lete-cel clinical trials forming part of the NY-ESO cell therapy program. In addition, under the Termination and Transfer Agreement, Adaptimmune will receive an upfront amount and milestone payments totaling £30 million in relation to the transfer of the clinical trials for the NY-ESO cell therapy program. A prior Co-development and Co-commercialization agreement (the “Astellas Collaboration Agreement”) with Universal Cells, Inc., a wholly-owned subsidiary of Astellas Pharma Inc. (“Universal Cells”) under which we collaborated with Universal Cells to research, develop, and commercialize certain cellular therapy products directed to certain targets was mutually agreed to terminate as of March 6, 2023. Termination does not impact the development of our allogeneic cell lines for our internal allogeneic programs or for our collaboration with Genentech Inc. The parties previously terminated an Amended and Restated Research Collaboration and License Agreement, dated January 13, 2020, effective February 26, 2023.
On March 6, 2023 we announced entry into a definitive agreement under which we will combine with TCR² Therapeutics Inc. (“TCR2”) in an all-stock transaction to create a preeminent cell therapy company focused on treating solid tumors. The combination provides extensive advantages for clinical development and product delivery supported by complementary technology platforms. The lead clinical franchises for the combined company will utilize engineered T-cell therapies targeting MAGE-A4 and mesothelin. These targets are expressed on a broad range of solid tumors and are supported by early- and late-stage clinical data. The combined company also has a preclinical pipeline of additional target opportunities with development initially focused on PRAME and CD70. The merger agreement was unanimously approved by the boards of directors of both companies. Following the closing of the transaction, Adaptimmune shareholders will own approximately 75% of the combined company and TCR2 stockholders will own approximately 25% of the combined company. The agreement contains customary representations, warranties and covenants given by us and TCR2. The agreement also contains customary pre-closing covenants, including covenants by each of the parties relating to conduct of their respective business prior to the closing of the transaction. The transaction is expected to close in Q2 2023, subject to the receipt of approvals by Adaptimmune shareholders and TCR2 stockholders and satisfaction or waiver of other closing conditions. Following the closing of the transaction we currently estimate that the cash runway of the combined company will extend into early 2026.
Financial Operations Overview
Revenue
The Company had two contracts with customers in the three months ended March 31, 2023: the Astellas Collaboration Agreement and the Genentech Collaboration Agreement. A previous collaboration, the GSK Collaboration and License Agreement, was terminated on October 24, 2022 (effective December 23, 2022).
The Astellas Collaboration Agreement
In January 2020, the Company entered into a collaboration agreement with Astellas. The Company received $50.0 million as an upfront payment after entering into the agreement. Under the agreement the parties would agree on up to three targets and would co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas would 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 of Adaptimmune, allogeneic T-cell therapy candidates directed to two targets selected by Astellas. Astellas would have sole rights to develop and commercialize products resulting from these two targets.
The agreement consisted 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 was recognized as the development of products directed to the targets progressed up until
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completion of a Phase 1 trial. The revenue allocated to each of the research licenses for the targets being independently developed by Astellas was to be recognized when the associated license commenced, which was upon designation of a target by Astellas.
The Company and Universal Cells mutually agreed to terminate the Astellas Collaboration Agreement as of March 6, 2023 (the “Termination Date”). In connection with the termination, all licenses and sublicenses granted to either party pursuant to the Collaboration Agreement ceased as of the Termination Date. There were no termination penalties in connection with the termination, however the Company is still entitled to receive reimbursement for research and development work performed up to and including a period of 30 days after the Termination Date.
The termination was accounted for as a contract modification and the modification resulted in the remaining unsatisfied and partially satisfied performance obligations under the collaboration becoming fully satisfied. The aggregate transaction price of the contract modification was $42,365,000, which was primarily comprised of deferred income relating to the third co-development target and the two independent targets, and was recognized in full in March 2023.
The Genentech Collaboration Agreement
On September 3, 2021, Adaptimmune Limited, a wholly owned subsidiary of Adaptimmune Therapeutics Plc, entered into a Strategic Collaboration and License Agreement with Genentech, Inc. (“Genentech”) and F. Hoffman-La Roche Ltd. The collaboration has two components:
1) | development of allogeneic T-cell therapies for up to five shared cancer targets |
2) | development of personalized allogeneic T-cell therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with such therapies being administered to the same patient. |
The parties will collaborate to perform a research program, initially during an eight-year period (which may be extended for up to two additional two-year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell therapies, following which Genentech will determine whether to further develop and commercialize such therapies. The Company received an upfront payment of $150 million in October 2021 and a $20 million milestone payment in December 2022.
The Company identified the following performance obligations under the agreement: (i) research services and rights granted under the licenses for each of the initial “off-the-shelf” collaboration targets, (ii) research services and rights granted under the licenses for the personalized therapies, (iii) material rights relating to the option to designate additional “off-the-shelf” collaboration targets and (iv) material rights relating to the two options to extend the research term. The revenue allocated to the initial “off-the-shelf” collaboration targets and the personalized therapies is recognized as development progresses. The revenue allocated to the material rights to designate additional ‘off-the-shelf’ collaboration targets is recognized from the point that the options are exercised and then as development progresses, in line with the initial “off-the-shelf” collaboration targets, or at the point in time that the rights expire. The revenue from the material rights to extend the research term is recognized from the point that the options are exercised and then over the period of the extension, or at the point in time that the options expire.
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; |
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● | costs to develop manufacturing capability at our U.S. facility for manufacture 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; |
● | costs of developing assays and diagnostics; |
● | an allocation of indirect costs clearly related to research and development; |
● | amortization and depreciation of property, plant and equipment and intangible assets used to develop our cells therapies; and |
● | share-based compensation expenses. |
These expenses are partially offset by:
● | reimbursable tax and expenditure credits from the U.K. government. |
Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from the U.K. government.
As a company that carries out extensive research and development activities, we benefit from the U.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, decreasing to 18.6% after April 1, 2023. 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%, decreasing to 12.1% after April 1, 2023. 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 by Adaptimmune 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 the U.K. research and development expenditure credit scheme (the “RDEC Scheme”). Under the RDEC Scheme tax relief is given at 13% of allowable R&D costs, which may result in a payable tax credit at an effective rate of approximately 10.5% of qualifying expenditure for the three months ended March 31, 2023. The RDEC Scheme tax relief rate is scheduled to increase to 20% after April 1, 2023, which may result in a payable tax credit at an effective rate of 15%
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; |
● | future clinical trial results; |
● | significant and changing government regulation; |
● | the timing and receipt of any regulatory approvals; and |
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