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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 March 31, 2023

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: 001-38663

 

Gritstone bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4859534

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

5959 Horton Street, Suite 300

Emeryville, California

94608

(Address of Principal Executive Offices)

(Zip Code)

(510) 871-6100

(Registrant’s Telephone Number, Including Area Code)

 

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, $0.0001 par value per share

 

GRTS

 

The Nasdaq Global Select Market

 

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 May 8, 2023, there were 88,913,562 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 


 

Gritstone bio, Inc.

Table of Contents

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements (unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022

 

4

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

 

40

Item 4.

 

Controls and Procedures

 

40

 

 

 

 

 

PART II. OTHER INFORMATION

 

42

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 3.

 

Defaults Upon Senior Securities

 

44

Item 4.

 

Mine Safety Disclosures

 

44

Item 5.

 

Other Information

 

44

Item 6.

 

Exhibits

 

45

 

 

 

 

 

SIGNATURES

 

47

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gritstone bio, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share

amounts and par value)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

47,128

 

 

$

55,498

 

Marketable securities

 

 

98,680

 

 

 

116,389

 

Restricted cash

 

 

2,077

 

 

 

3,977

 

Prepaid expenses and other current assets

 

 

6,880

 

 

 

7,014

 

Total current assets

 

 

154,765

 

 

 

182,878

 

Long-term restricted cash

 

 

5,290

 

 

 

5,290

 

Property and equipment, net

 

 

20,365

 

 

 

21,335

 

Lease right-of-use assets

 

 

15,615

 

 

 

17,481

 

Deposits and other long-term assets

 

 

13,917

 

 

 

9,739

 

Long-term marketable securities

 

 

 

 

 

4,031

 

Total assets

 

$

209,952

 

 

$

240,754

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,975

 

 

$

8,694

 

Accrued compensation

 

 

4,697

 

 

 

8,215

 

Accrued liabilities

 

 

3,123

 

 

 

4,124

 

Accrued research and development expenses

 

 

3,448

 

 

 

3,343

 

Lease liabilities, current portion

 

 

4,628

 

 

 

5,294

 

Deferred revenue, current portion

 

 

2,801

 

 

 

5,131

 

Total current liabilities

 

 

24,672

 

 

 

34,801

 

Other liabilities, noncurrent

 

 

251

 

 

 

150

 

Lease liabilities, net of current portion

 

 

14,575

 

 

 

15,673

 

Debt, noncurrent

 

 

29,576

 

 

 

19,349

 

Total liabilities

 

 

69,074

 

 

 

69,973

 

Commitments and contingencies (Notes 6, 8 and 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized;
   
no shares issued and outstanding at March 31, 2023 and
   December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares authorized
   at March 31, 2023 and December 31, 2022;
87,848,417 and
   
86,894,901 shares issued and outstanding at March 31, 2023 and
   December 31, 2022, respectively

 

 

22

 

 

 

22

 

Additional paid-in capital

 

 

695,961

 

 

 

691,910

 

Accumulated other comprehensive loss

 

 

(52

)

 

 

(80

)

Accumulated deficit

 

 

(555,053

)

 

 

(521,071

)

Total stockholders’ equity

 

 

140,878

 

 

 

170,781

 

Total liabilities and stockholders’ equity

 

$

209,952

 

 

$

240,754

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


 

Gritstone bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

Collaboration and license revenues

 

$

542

 

 

$

4,745

 

Grant revenues

 

 

1,901

 

 

 

2,446

 

Total revenues

 

 

2,443

 

 

 

7,191

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

30,514

 

 

 

28,199

 

General and administrative

 

 

6,745

 

 

 

7,955

 

Total operating expenses

 

 

37,259

 

 

 

36,154

 

Loss from operations

 

 

(34,816

)

 

 

(28,963

)

Interest income

 

 

1,678

 

 

 

71

 

Interest expense

 

 

(844

)

 

 

(24

)

Net loss

 

 

(33,982

)

 

 

(28,916

)

Other comprehensive loss:

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

28

 

 

 

(318

)

Comprehensive loss

 

$

(33,954

)

 

$

(29,234

)

Net loss per share, basic and diluted

 

$

(0.30

)

 

$

(0.34

)

Weighted-average number of shares used in
   computing net loss per share, basic and diluted

 

 

114,423,000

 

 

 

86,277,599

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


 

Gritstone bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Three Months Ended March 31, 2023:

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

86,894,901

 

 

$

22

 

 

$

691,910

 

 

$

(80

)

 

$

(521,071

)

 

$

170,781

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

 

 

 

28

 

Issuance of common stock upon restricted stock units vesting

 

 

345,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments related to shares withheld for vested restricted stock units

 

 

 

 

 

 

 

 

(742

)

 

 

 

 

 

 

 

 

(742

)

Issuance of common stock under at the market, ("ATM") equity offering program, net of issuance costs of $58

 

 

607,853

 

 

 

 

 

 

1,902

 

 

 

 

 

 

 

 

 

1,902

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,891

 

 

 

 

 

 

 

 

 

2,891

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,982

)

 

 

(33,982

)

Balance at March 31, 2023

 

 

87,848,417

 

 

$

22

 

 

$

695,961

 

 

$

(52

)

 

$

(555,053

)

 

$

140,878

 

Three Months Ended March 31, 2022:

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

69,047,878

 

 

$

20

 

 

$

617,523

 

 

$

(73

)

 

$

(401,384

)

 

$

216,086

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(318

)

 

 

 

 

 

(318

)

Issuance of common stock upon restricted stock units vesting

 

 

215,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments related to shares withheld for vested restricted stock units

 

 

 

 

 

 

 

 

(890

)

 

 

 

 

 

 

 

 

(890

)

Issuance of common stock for warrant
   exercises

 

 

3,442,567

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Issuance of common stock upon exercise of
   stock options

 

 

73,713

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

64

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,131

 

 

 

 

 

 

 

 

 

3,131

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,916

)

 

 

(28,916

)

Balance at March 31, 2022

 

 

72,779,508

 

 

$

20

 

 

$

619,862

 

 

$

(391

)

 

$

(430,300

)

 

$

189,191

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

3


 

Gritstone bio, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(33,982

)

 

$

(28,916

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,799

 

 

 

1,589

 

Net amortization of premiums and discounts on marketable securities

 

 

(973

)

 

 

196

 

Amortization of debt discount and issuance costs

 

 

342

 

 

 

 

Stock-based compensation

 

 

2,891

 

 

 

3,131

 

Non-cash operating lease expense

 

 

2,243

 

 

 

2,332

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

134

 

 

 

(3,273

)

Deposits and other long-term assets

 

 

(4,177

)

 

 

787

 

Accounts payable

 

 

327

 

 

 

1,861

 

Accrued compensation

 

 

(3,518

)

 

 

(2,640

)

Accrued and other non-current liabilities

 

 

(869

)

 

 

121

 

Accrued research and development expenses

 

 

105

 

 

 

(105

)

Lease liability

 

 

(2,082

)

 

 

(2,034

)

Deferred revenue

 

 

(2,330

)

 

 

(6,500

)

Net cash used in operating activities

 

 

(40,090

)

 

 

(33,451

)

Investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(15,874

)

 

 

(28,342

)

Maturities of marketable securities

 

 

38,614

 

 

 

37,788

 

Purchase of property and equipment

 

 

(1,567

)

 

 

(1,812

)

Net cash provided by investing activities

 

 

21,173

 

 

 

7,634

 

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock from ATM equity offering
     program

 

 

1,960

 

 

 

 

Proceeds from long-term debt, net of debt discount and issuance costs

 

 

9,977

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options, warrants, and other

 

 

 

 

 

98

 

Payments of financing costs

 

 

(2,489

)

 

 

(69

)

Payments of financing lease

 

 

(59

)

 

 

(56

)

Tax payments related to shares withheld for vested restricted stock units

 

 

(742

)

 

 

(890

)

Net cash provided by (used in) financing activities

 

 

8,647

 

 

 

(917

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(10,270

)

 

 

(26,734

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

64,765

 

 

 

110,577

 

Cash, cash equivalents and restricted cash at end of period

 

$

54,495

 

 

$

83,843

 

Supplemental disclosures of non-cash investing and financing
   information

 

 

 

 

 

 

Property and equipment purchases accrued but not yet paid

 

$

407

 

 

$

1,182

 

Remeasurement of operating lease right-of-use asset for lease modification

 

$

 

 

$

228

 

Cash paid for interest on debt

 

$

436

 

 

$

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


 

Gritstone bio, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Description of Business

Gritstone bio, Inc. (“Gritstone” or “the Company”) is a clinical stage biotechnology company developing targeted immunotherapies for cancer and infectious disease. The Company was incorporated in the state of Delaware in August 2015, and is based in Emeryville, California and Cambridge, Massachusetts, with a manufacturing facility in Pleasanton, California. The Company operates in one segment.

Liquidity

The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had net losses of $34.0 million and $28.9 million for the three months ended March 31, 2023 and 2022, respectively. Cash used by operating activities was $40.1 million and $33.5 million during the three months ended March 31, 2023 and 2022, respectively. The Company had an accumulated deficit of $555.1 million and $521.1 million as of March 31, 2023 and December 31, 2022, respectively. To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from sales of commercial products. Management expects operating losses to continue for the foreseeable future. The Company has funded its operations to date primarily through private placements of its convertible preferred stock, the sale of common stock in public offerings and under its “at the market” offering programs, the private placement of common stock and pre-funded warrants, and through proceeds received from its collaboration arrangements. As of March 31, 2023, the Company had cash, cash equivalents and marketable securities of $145.8 million, which the Company believes will be sufficient to fund its planned operations for a period of at least twelve months following the filing date of this report.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited and are comprised of the consolidation of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method.

The accompanying interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting.

The interim condensed consolidated financial statements are unaudited and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation for interim reporting. The results of operations for any interim period are not necessarily indicative of results of operations for any future period.

Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent

5


 

liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Fair Value of Financial Instruments

U.S. GAAP establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

Fair value is established as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, an established three-tier fair value hierarchy distinguishes between the following:

Level 1 inputs are quoted prices in active markets that are accessible at the market date for identical assets or liabilities.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the assets or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value instrument.

The carrying amounts reflected on the condensed consolidated balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued compensation and accrued liabilities approximate their fair values due to their short-term nature.

Debt Issuance Costs and Debt Discounts

Debt issuance costs include legal fees, accounting fees and other direct costs incurred in connection with the execution of the Company’s debt financing. Debt discounts represent costs paid to the lenders. Debt issuance costs and debt discounts are deducted from the carrying amount of the debt liability and are amortized to interest expense over the term of the related debt using the effective interest method.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and marketable securities. Cash, cash equivalents and marketable securities are invested through banks and other financial institutions in the United States. Such deposits may be in excess of federally insured limits. The Company maintains cash equivalents and marketable securities with various high-credit-quality and capitalized financial institutions. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the condensed consolidated balance sheets. As of March 31, 2023, the Company has no off-balance sheet concentrations of credit risk.

6


 

Other Risks and Uncertainties

The Company is subject to a number of risks similar to those of other clinical-stage biotechnology companies, including dependence on key individuals; the need to develop commercially viable therapeutics; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products. The Company currently depends on third-party suppliers for key materials and services used in its research and development manufacturing process and is subject to certain risks related to the loss of these third-party suppliers or their inability to supply the Company with adequate materials and services. Further, the Company is subject to broad market risks and uncertainties resulting from recent events, such as the COVID-19 pandemic, the Russian invasion of Ukraine, inflation, rising interest rates and recession risks, as well as supply chain and labor shortages.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents, which consist primarily of highly liquid investments with original maturities of three (3) months or less when purchased, are stated at fair value. These assets include investments in money market funds that invest in U.S. Treasury obligations and certificates of deposit, which are stated at fair value.

The Company has issued letters of credit under certain lease agreements that have been collateralized by cash deposits for an equal amount and are recorded within short-term restricted cash and deposits and other long-term assets on the condensed consolidated balance sheets based on the term of the underlying lease. Additionally, the Company’s restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) Funding Agreement, dated as of August 14, 2021 (the “CEPI Funding Agreement”) and the Gates Foundation Grant Agreement (see Note 9). The Company will utilize the CEPI and Gates Foundation funds as it incurs expenses for services performed under the agreements.

The following table provides a reconciliation of cash, cash equivalents and short-term and long-term restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

47,128

 

 

$

55,498

 

Restricted cash

 

 

2,077

 

 

 

3,977

 

Long-term restricted cash

 

 

5,290

 

 

 

5,290