SEC Filing | Arcturus Therapeutics, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38942

ARCTURUS THERAPEUTICS HOLDINGS INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		32-0595345
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
10628 Science Center Drive, Suite 250 San Diego, California		92121
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 900-2660

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ARCT

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2022, the registrant had 26,492,869 shares of voting common stock outstanding.

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		33

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this quarterly report, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the documents incorporated by reference herein may contain express or implied “forward-looking statements” within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part II, Item 1A, “Risk Factors” in this quarterly report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Forward-looking statements in this quarterly report include, but are not limited to, statements about:

•

our compliance, and ability to remain in compliance, with the stringent requirements of our current and potential government contracts, including our arrangements with the Biomedical Advanced Research and Development Authority, a division of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services and the Department of Defense;

•

the status, success and benefits of our arrangements with private and governmental entities, some of which are subject to termination for convenience by our counterparties;

•

regulatory filings, submissions and notices related to our commercial arrangements, including those made to the U.S. Federal Trade Commission and Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

•

the potential effects and benefits of our technologies and product candidates on their own and in comparison to technologies, drugs or courses of treatment currently available or that may be developed by competitors;

•

the likelihood that clinical data will be sufficient for regulatory approval;

•

the anticipated timing for receipt of data or results of a study or clinical trial, including the anticipated data for our ARCT-810 trial;

•

the likelihood or timing of any regulatory approval;

•

the potential administration regimen or dosage, or ability to administer multiple doses of, any of our product candidates;

•

our plans to research, develop and commercialize our product candidates;

•

our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

•

our ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to, our product candidates;

•

the rate and degree of market acceptance of our product candidates;

•

the success of competing therapies that are or may become available;

•

our ability to obtain and maintain intellectual property protection for our product candidates;

•

interactions with regulatory authorities in the United States and foreign countries;

•

our ability to attract and retain experienced and seasoned scientific and management professionals to lead the Company;

•

our strategic alliance partners’ election to pursue development and commercialization of any programs or product candidates that are subject to our collaboration and license agreements with such partners;

•

the anticipated benefits and success of our collaboration agreement with CSL Seqirus related to the licensure of our STARR™ mRNA technology and LUNAR® lipid-mediated delivery, including our timely receipt of upfront and potential royalty and other payments thereunder;

•

our ability to attract collaborators with relevant development, regulatory and commercialization expertise;

•

future activities to be undertaken by our strategic alliance partners, collaborators and other third parties;

•

our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;

•

our ability to avoid, settle or be victorious at costly litigation with shareholders, former executives or others, should these situations arise;

•

our ability to obtain and deploy funding for our operations and to efficiently use our financial and other resources;

•

our ability to continue as a going concern; and

•

the accuracy of our estimates regarding future expenses, future revenues, capital requirements and need for additional financing.

These and other forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. In addition, historic results of scientific research, preclinical and clinical trials do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted in the same manner due to additional research, preclinical and clinical trial results or otherwise. The forward-looking statements contained in this quarterly report are subject to risks and uncertainties, including those discussed in our other filings with the United States Securities and Exchange Commission, or the Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof unless specifically stated otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2022			December 31, 2021
(in thousands, except par value information)	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	237,676		$	370,492
Accounts receivable		2,044			3,367
Prepaid expenses and other current assets		6,960			5,102
Total current assets		246,680			378,961
Property and equipment, net		11,347			5,643
Operating lease right-of-use asset, net		33,519			5,618
Equity-method investment		—			515
Non-current restricted cash		2,081			2,077
Total assets	$	293,627		$	392,814
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	17,962		$	10,058
Accrued liabilities		25,529			23,523
Current portion of long-term debt		27,702			22,474
Deferred revenue		4,656			43,482
Total current liabilities		75,849			99,537
Deferred revenue, net of current portion		5,179			19,931
Long-term debt, net of current portion		32,038			40,633
Operating lease liability, net of current portion		31,218			4,502
Other non-current liabilities		3,676			—
Total liabilities	$	147,960		$	164,603
Stockholders’ equity
Common stock, $0.001 par value; 60,000 shares authorized; issued and outstanding shares were 26,492 at September 30, 2022 and 26,372 at December 31, 2021		26			26
Additional paid-in capital		601,129			575,675
Accumulated deficit		(455,488	)		(347,490	)
Total stockholders’ equity		145,667			228,211
Total liabilities and stockholders’ equity	$	293,627		$	392,814

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

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share data)	2022			2021			2022			2021
Revenue	$	13,369		$	2,437		$	45,706		$	6,565
Operating expenses:
Research and development, net		37,688			45,398			120,770			141,127
General and administrative		12,488			10,860			34,211			30,645
Total operating expenses		50,176			56,258			154,981			171,772
Loss from operations		(36,807	)		(53,821	)		(109,275	)		(165,207	)
Gain (loss) from equity-method investment		—			(250	)		(515	)		670
Gain from foreign currency		1,862			506			3,237			923
Finance expense, net		(321	)		(519	)		(1,445	)		(1,397	)
Net loss	$	(35,266	)	$	(54,084	)	$	(107,998	)	$	(165,011	)
Net loss per share, basic and diluted	$	(1.33	)	$	(2.05	)	$	(4.09	)	$	(6.27	)
Weighted-average shares outstanding, basic and diluted		26,467			26,338			26,423			26,302
Comprehensive loss:
Net loss	$	(35,266	)	$	(54,084	)	$	(107,998	)	$	(165,011	)
Comprehensive loss	$	(35,266	)	$	(54,084	)	$	(107,998	)	$	(165,011	)

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

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders’
(in thousands)	Shares		Amount		Capital		Deficit			Equity
BALANCE – December 31, 2021		26,372	$	26	$	575,675	$	(347,490	)	$	228,211
Net loss		—		—		—		(51,169	)		(51,169	)
Share-based compensation expense		—		—		7,371		—			7,371
Issuance of common stock upon exercise of stock options		35		—		336		—			336
BALANCE – March 31, 2022		26,407	$	26	$	583,382	$	(398,659	)	$	184,749
Net loss		—		—		—		(21,563	)		(21,563	)
Share-based compensation expense		—		—		7,274		—			7,274
Issuance of common stock upon exercise of stock options		27		—		257		—			257
BALANCE – June 30, 2022		26,434	$	26	$	590,913	$	(420,222	)	$	170,717
Net loss		—		—		—	$	(35,266	)		(35,266	)
Share-based compensation expense		—		—		9,436		—			9,436
Issuance of common stock upon exercise of stock options		36		—		369		—			369
Issuance of common stock under equity plans		22		—		411		—			411
BALANCE – September 30, 2022		26,492	$	26	$	601,129	$	(455,488	)	$	145,667

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

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY – (Continued)

(unaudited)


					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders’
(in thousands)	Shares		Amount		Capital		Deficit			Equity
BALANCE – December 31, 2020		26,192	$	26	$	540,343	$	(143,816	)	$	396,553
Net loss		—		—		—		(56,346	)		(56,346	)
Issuance of common stock related to acquired in-process research and development		75		—		5,000		—			5,000
Share-based compensation expense		—		—		6,987		—			6,987
Issuance of common stock upon exercise of stock options		52		—		413		—			413
BALANCE – March 31, 2021		26,319	$	26	$	552,743	$	(200,162	)	$	352,607
Net loss		—		—		—		(54,581	)		(54,581	)
Share-based compensation expense		—		—		7,540		—			7,540
Issuance of common stock upon exercise of stock options		8		—		82		—			82
BALANCE – June 30, 2021		26,327	$	26	$	560,365	$	(254,743	)	$	305,648
Net loss		—		—		—		(54,084	)		(54,084	)
Share-based compensation expense		—		—		6,870		—			6,870
Issuance of common stock upon exercise of stock options		9		—		177		—			177
Issuance of common stock under equity plans		13		—		515		—			515
BALANCE – September 30, 2021		26,349	$	26	$	567,927	$	(308,827	)	$	259,126

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

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended September 30,
(in thousands)	2022			2021
OPERATING ACTIVITIES:
Net loss	$	(107,998	)	$	(165,011	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		976			883
Share-based compensation expense		24,081			21,397
Acquired in-process research and development expense		—			5,000
Loss (gain) from equity-method investment		515			(670	)
Foreign currency transaction gain		(2,976	)		(923	)
Other non-cash expenses		3,899			2,477
Changes in operating assets and liabilities
Accounts receivable		1,323			110
Prepaid expense and other assets		(1,858	)		(2,302	)
Accounts payable		5,335			(2,569	)
Accrued liabilities		2,015			13,569
Deferred revenue		(53,578	)		35,493
Net cash used in operating activities		(128,266	)		(92,546	)
INVESTING ACTIVITIES:
Acquisition of property and equipment		(3,919	)		(2,288	)
Net cash used in investing activities		(3,919	)		(2,288	)
FINANCING ACTIVITIES:
Proceeds from debt		—			46,599
Proceeds from exercise of stock options		962			672
Proceeds from the issuance of common stock under equity plans		411			515
Payments on debt obligations		(2,000	)		—
Net cash used in (provided by) financing activities		(627	)		47,786
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(132,812	)		(47,048	)
Cash, cash equivalents and restricted cash at beginning of the period		372,569			463,002
Cash, cash equivalents and restricted cash at end of the period	$	239,757		$	415,954


	Nine Months Ended September 30,
	2022	2021
Supplemental disclosure of cash flow information