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By Michael Kim
NASDAQ:ADAP
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Post-market close on 11/13/24, Adaptimmune (NASDAQ:ADAP) reported 3Q24 earnings results. ADAP reported a net loss of $17.6 million for 3Q24, or $(0.01) per diluted ordinary share versus our $(0.03) estimate. Relative to our model, the EPS beat was largely a function of higher revenue (mostly driven by a catch-up adjustment related to the termination of a collaboration agreement), partially offset by less favorable non-operating trends.
After updating our model for 3Q24 actuals, we are refreshing our 2024 and 2025 EPS estimates from $(0.04)/$(0.10) to $(0.03)/$(0.08). Our revisions primarily reflect: 1) the 3Q24 EPS beat; 2) a slightly more muted revenue outlook for 4Q24 and 2025 given a flatter trajectory for Tecelra uptake/sales; and 3) meaningfully lower operating expenses in light of anticipated cost savings.
We are lowering our price target to $2.25 reflecting management’s decision to suspend clinical trials with uza-cel for the treatment of platinum-resistant ovarian cancer. Stepping back, our price target is based on our DCF model incorporating Tecelra economics in addition to probability-weighted cash flows for lete-cel. Importantly, our valuation work does not incorporate PRAME or CD70 – both targeting much larger indications, but not as far along the development curve.
We highlight the following key takeaways:
1. Streamlining the business: In conjunction with quarterly earnings results, management announced a new strategic plan/vision for the company centered on streamlining operations to focus on Adaptimmune’s sarcoma franchise. More specifically, senior executives are focusing resources on optimizing commercialization efforts for Tecelra and lete-cel, while narrowing R&D and capital allocations to programs with the highest returns on capital. As part of the restructuring, the decision was made to wind down clinical trials investigating uza-cel for the treatment of platinum-resistant ovarian cancer.
Next, management outlined a plan to realize approximately $300 million in aggregate cost savings starting in 2025 and continuing through 2028. Much of the savings will come from a 33% reduction in headcount in 1Q25, with further contributions from a reduced footprint, as well as lower development and manufacturing costs. As a result of the lower cost structure and accelerating sales, senior executives expect to reach breakeven on a cash flow basis at some point in 2027.
Finally, anticipated cost savings over the next few years dramatically reduces the need for incremental financing. Current liquidity ($186.1 million as of September 30, 2024 inclusive of cash and cash equivalents in addition to available-for-sale marketable securities) and funds related to recent loan and collaboration agreements are likely sufficient to fund operations through Tecelra ramp up and the launch of lete-cel. Additionally, senior officials can opt to tap the company’s $200 million at-the-market (ATM) facility ($156 million available as of 9/30/24), as needed