SENSEI BIOTHERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
In this section, we discuss our financial condition, changes in financial
condition and results of our operations for the year ended
Overview
We are an immuno-oncology company focused on the discovery and development of next-generation therapeutics for cancer patients. Through our TMAb™ (Tumor Microenvironment Activated Biologics) platform, we are developing highly selective therapeutics designed to disable immunosuppressive signals or activate immunostimulatory signals selectively in the tumor microenvironment to unleash T cells against tumors. Our strategy is to generate novel product candidates that incorporate next-generation technologies or approaches using our robust set of R&D capabilities. We plan to efficiently develop these product candidates by incorporating state-of-the-art biomarker approaches and mechanistic understanding into clinical trial designs targeted to well-defined patient populations.
Our Pipeline
We currently have three investigational product candidates in various stages of early development:
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SNS-101 is our conditionally active monoclonal antibody targeting the immune
checkpoint VISTA (V-domain Ig suppressor of T-cell activation). In
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SNS-102 is our conditionally active monoclonal antibody targeting VSIG4 (V-Set and Immunoglobulin Domain Containing 4), an immune checkpoint often expressed on macrophages. We have identified eight parental pH-sensitive VSIG4 antibodies, which have undergone further lead optimization and are currently being characterized. We expect to select a product candidate in 2023.
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SNS-103 is our conditionally active monoclonal antibody targeting ENTPDase1 (ecto-nucleoside triphosphate diphosphohydrolase-1), also known as CD39. We have identified eight parental pH-selective CD39 antibodies, and a lead antibody set is currently undergoing further optimization. We expect to select a product candidate in 2023.
Upon successful candidate selection for SNS-102 and SNS-103, we expect to initiate IND-enabling studies for at least one product candidate. We have also initiated early discovery efforts for a potential fourth TMAb product candidate that is being designed to activate immunostimulatory signals.
We do not have any product candidates approved for sale, have not generated any
revenue from product sales, and do not expect to generate any revenue from
product sales for at least the next several years. We have largely funded our
operations with proceeds from the sale of convertible preferred stock, common
stock and convertible debt. Through the date of this Report, we have raised an
aggregate of
We have incurred significant operating losses over the last several years. Our
net loss was
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prepare to submit INDs and then initiate clinical development of product candidates, including SNS-101;
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continue the research and development of our other product candidates;
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• invest in our TMAb platform; •
seek to discover and develop additional product candidates or acquire or in-license drugs, product candidates or technologies;
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seek regulatory approvals for any product candidates that successfully complete clinical trials;
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ultimately establish a sales, marketing and distribution infrastructure and scale up manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval;
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manufacture our product candidates or otherwise secure the clinical and commercial supply of our product candidates;
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hire additional research and development and selling, general and administrative personnel;
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maintain, expand and protect our intellectual property portfolio; and
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incur additional costs associated with operating as a public company.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses and negative cash flows for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other increased costs associated with being a public company. In addition, if we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product.
Components of Our Results of Operations
Operating Expenses
Research and Development Expense
Our research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. These expenses include:
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expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and planned clinical trials;
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the cost of manufacturing our product candidates including the potential cost of contract manufacturing organizations, or CMOs, that manufacture product for use in our preclinical studies and planned clinical trials and perform analytical testing, scale-up and other services in connection with our development activities;
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the cost of outsourced professional scientific development services;
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employee-related expenses, including salaries, benefits and stock-based compensation for employees engaged in the research and development function;
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expenses relating to regulatory activities, including filing fees paid to regulatory agencies;
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fees for maintaining licenses and other amounts due under our third party licensing agreements;
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laboratory materials and supplies used to support our research activities; and
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allocated expenses for utilities and other facility-related costs.
We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.
Our direct external research and development expenses consist primarily of external costs, such as fees paid to CROs, CMOs, research/testing laboratories and outside consultants in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate these costs to specific product candidates because many of them are deployed across several of our development programs and, as such, are not separately classified. We use internal resources primarily to conduct research and manage our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple development programs and, therefore, we do not track their costs by program and, as such, are not separately classified. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase
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significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our preclinical studies and planned clinical trials, and prepare regulatory filings for our product candidates.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
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the scope, progress, outcome and costs of our preclinical studies, our current product candidates and any other product candidates we may acquire or develop;
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manufacturing of our product candidates or making arrangements with potential third-party manufacturers for both clinical and commercial supplies of these product candidates;
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successful patient enrollment in, and the initiation, duration and completion of clinical trials;
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the cost of gaining regulatory approvals for our product candidates, subject to the successful outcome of ongoing and future clinical trials; and
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the extent of any required post-marketing approval commitments to applicable regulatory authorities.
Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our planned clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and significant additional development costs.
General and Administrative Expense
General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for legal, auditing and tax services, and insurance costs.
We anticipate that our general and administrative expenses will increase as a
result of increased payroll, expanded infrastructure and higher consulting,
legal and tax-related services associated with maintaining compliance with
Nasdaq listing and
Other Income (Expense)
Our other income (expense) consists of realized gain or loss on short-term investments, gain on debt extinguishments, accretion expense on short-term investments and interest expense.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.
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Comparison of Years Ended
The following sets forth our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, (in thousands) 2022 2021 Change Operating expenses: Research and development$ 30,383 $ 21,662 $ 8,721 General and administrative 19,805 15,820 3,985 Total operating expenses 50,188 37,482 12,706 Loss from operations (50,188 ) (37,482 ) (12,706 ) Total other income 1,600 688 912 Net loss$ (48,588 ) $ (36,794 ) $ (11,794 )
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Other Income
Other income was
Liquidity and Capital Resources
Sources of Liquidity
We have not generated any product revenue and have incurred net losses and
negative cash flows from our operations. As of
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Cash Flows
The following table summarizes our sources and uses of cash for each of the periods below:
Year Ended December 31,
(in thousands) 2022 2021
Net cash used in operating activities $ (39,026 ) $ (30,259 ) Net cash provided by (used in) investing activities 49,949 (143,118 ) Net cash (used in) provided by financing activities
(287 ) 163,940
Net increase (decrease) in cash and cash equivalents
Operating Activities
During the year ended
Investing Activities
During the year ended
Financing Activities
During the year ended
Material Cash Requirements
Our material cash requirements will have an impact on our future liquidity. Our material cash requirements represent material expected or contractually committed future payment obligations. We believe that we will be able to fund these obligations through cash from our existing balances of cash, cash equivalents and marketable securities.
Operating Leases
We have operating lease arrangements for our corporate offices, lab facilities
and an executive residence. As part of our adoption of Accounting Standards
Codification ("ASC") 842, we recorded operating right-of-use assets and
operating lease liabilities for these agreements. As of
Finance Leases
We lease research equipment, furniture and a vehicle under finance leases. As
part of our adoption of ASC 842, we recorded financing right-of-use assets and
financing lease liabilities for these leases as of
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In the biopharmaceutical industry, it can take a significant amount of time and capital resources to successfully complete all stages of research and development and commercialize a product candidate. The ultimate length of time and spend required cannot be accurately estimated as it varies substantially according to the type, complexity, novelty and intended use of a product candidate. Please see the "Funding Requirements" section below for further details.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to continue to incur significant costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. The timing and amount of our operating expenditures will depend largely on:
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the initiation, progress, timing, costs and results of current and future preclinical studies and clinical trials for our current and future product candidates;
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the cost and timing of the manufacture of additional clinical trial material as well as any costs related to the scale-up of manufacturing activities;
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the costs to seek regulatory approvals for any product candidates that successfully complete clinical trials;
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the extent to which we or any third-party service providers on whom we rely experience delays or interruptions to preclinical studies and clinical trials, or to our supply chain due to the COVID-19 pandemic;
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the need to hire additional clinical, quality assurance, quality control and other scientific personnel;
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the number and characteristics of product candidates that we develop or may in-license;
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the outcome, timing and cost of meeting and maintaining compliance with regulatory requirements;
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the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
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the terms of any collaboration agreements we may choose to enter into, including the achievement of milestones or occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time;
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the cost associated with the expansion of our operational, financial and management systems and increased personnel, including personnel to support our operations as a public company; and
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the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products, if approved, on our own.
We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements at least into the second half of 2025. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
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the scope, progress, results and costs of product discovery, preclinical studies and clinical trials;
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the scope, prioritization and number of our research and development programs;
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the costs, timing and outcome of regulatory review of our product candidates;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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the extent to which we acquire or in-license other product candidates and technologies;
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the costs of securing manufacturing arrangements for commercial production;
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the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates; and
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the impact of the COVID-19 pandemic and the corresponding responses of businesses and governments.
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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Estimates
This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which are prepared in accordance with US GAAP. The preparation of our financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.
We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are described in Note 2 to our annual financial statements beginning on page F-1 of this Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.
We incur expenses associated with preclinical development and clinical trials. Accounting for preclinical or clinical activities relating to work performed by CROs and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. We estimate costs of research and development activities conducted by service providers, which include, the conduct of sponsored research, preclinical studies and contract manufacturing activities. The diverse nature of services being provided under CRO and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain clinical activities complicates the estimation of accruals for services rendered by CROs and other vendors in connection with clinical trials. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in the accrued and other current liabilities or prepaid expenses on the balance sheets and within research and development expense on the consolidated statements of operations. We determine the estimated costs through discussions with the internal personnel and external service providers as to the progress, or stage of completion of the services and the agreed-upon fees to be paid for such services. This process involves a thorough review of open contracts and evaluation by internal personnel to identify services received that have been performed for us and estimating the associated cost incurred for these services for which we have not yet been invoiced or otherwise notified of the actual cost. In estimating the duration of a clinical study, we evaluate the start-up, treatment and wrap-up periods, compensation arrangements and services rendered attributable to each clinical trial and fluctuations are regularly tested against payment plans and trial completion assumptions.
Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that may be used to conduct and manage clinical trials on our behalf. We determine the estimated costs through discussions with internal personnel and external service providers as to the progress, or stage of completion of the services and the agreed-upon fees to be paid for such services. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.
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Stock-Based Compensation
We measure all stock-based awards granted based on their estimated fair value on the date of the grant and recognize the corresponding compensation expense for those awarded to employees and directors over the requisite service period, which is generally the vesting period of the respective award, and for those awarded to nonemployees over the period during which services are rendered by nonemployees until completed. We have typically issued stock options and warrants with service-based vesting conditions and we record the expense for these awards using the straight-line method.
We estimate the fair value of each stock option grant using the Black-Scholes
option-pricing model, which uses as inputs the closing price of our common stock
and assumptions we make for the volatility of our common stock, the expected
term of our stock options and warrants, the risk-free interest rate for a period
that approximates the expected term of our stock options and warrants and our
expected dividend yield. The fair value of our stock options and warrants on the
date of grant, prior to
Recent Accounting Pronouncements
See Note 2 in our annual financial statements included elsewhere in this Report for a description of recent accounting pronouncements applicable to our financial statements. Other than as disclosed in our financial statements, we do not expect that any recently issued accounting standards will have a material impact on our financial statements or will otherwise apply to our operations.
Emerging Growth Company and Smaller Reporting Company Status
We qualify as an EGC, as defined in the JOBS Act. As an EGC, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We may take advantage of these exemptions until the last day of the fiscal year
following the fifth anniversary of our initial public offering or such earlier
time that we are no longer an emerging growth company. We would cease to be an
EGC earlier if we have more than
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an EGC. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies.
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates is less than
If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to EGCs, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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