10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2022

OR

 

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

 

For the transition period from to

 

Commission File 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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

 

As of November 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

 

 

i


 

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;

ii


 

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.

1


 

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.

2


 

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.

 

3


 

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.

4


 

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