What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-05 · 84 added, 62 removed, 350 unchanged (29% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value information)

21 unchanged sentences

60,000 shares authorized;

outstanding shares were 27,042 at June 30, 2024 and 26,828 at December 31, 2023

outstanding shares were 27,084 at September 30, 2024 and 26,828 at December 31, 2023

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

29 unchanged sentences

Balance at June 30, 2024

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Issuance of common stock under equity plans

BALANCE – September 30, 2024

Stockholders’

6 unchanged sentences

Balance at June 30, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Issuance of common stock under equity plans

BALANCE – September 30, 2023

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEM ENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

Operating activities

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

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

Depreciation and amortization

11 unchanged sentences

Lease liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

Investing activities

3 unchanged sentences

Proceeds from exercise of stock options

Proceeds from the issuance of common stock under equity plans

Proceeds from debt

Payments on debt obligations

3 unchanged sentences

Cash, cash equivalents and restricted cash at end of the period

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental disclosure of cash flow information

11 unchanged sentences

Arcturus Therapeutics Holdings Inc.

(the “Company” or "Arcturus") is a global messenger RNA medicines company focused on the development of infectious disease vaccines and significant addressing unmet medical needs within liver and respiratory rare diseases.

The Company became a clinical stage company during 2020 when it announced that its Investigational New Drug (“IND”) application for ornithine transcarbamylase (“OTC”) deficiency and its Clinical Trial Application (“CTA”) for candidate LUNAR-COV19 were approved by applicable health authorities.

(the “Company” or "Arcturus") is a commercial messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases.

Arcturus became a clinical stage company in 2020 when it announced that its Investigational New Drug (“IND”) application for ornithine transcarbamylase (“OTC”) deficiency and its Clinical Trial Application (“CTA”) for candidate LUNAR-COV19 were approved by applicable health authorities.

In 2023, our COVID-19 vaccine, ARCT-154 (also referred to as KOSTAIVE ® ), received marketing authorization approval in Japan for adults 18 years and older , and in September 2024 KOSTAIVE became the world’s first approved and commercially available self-amplifying RNA (sa-mRNA) vaccine.

Basis of Presentation

16 unchanged sentences

The Company has incurred significant operating losses since its inception.

As of June 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 411.9 million and $ 367.9 million, respectively.

As of September 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 418.8 million and $ 367.9 million, respectively.

The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital.

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations.

From the Company’s inception through June 30, 2024, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements, the sale of capital stock, expense reimbursements from government contracts and proceeds from long-term debt.

At June 30, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 317.2 million.

From the Company’s inception through September 30, 2024, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements, the sale of capital stock, expense reimbursements from government contracts and proceeds from long-term debt.

At September 30, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 294.1 million.

Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued.

12 unchanged sentences

and (v) recognize revenue when, or as, the company satisfies a performance obligation.

The terms of the Company’s revenue agreements include license fees, upfront payments, development or regulatory milestone payments, profit-sharing arrangements, reimbursement for research and development activities, option exercise fees, drug substance and drug product supply fees, consulting and related technology transfer fees and royalties on sales of commercialized products.

The terms of the Company’s revenue agreements include license fees, upfront payments, development and regulatory milestone payments, profit-sharing arrangements, reimbursement for research and development activities, option exercise fees, drug substance and drug product supply fees, consulting and related technology transfer fees and royalties on sales of commercialized products.

The event-based milestone payments represent variable consideration, and the Company uses the most likely amount method to estimate this variable consideration because the Company will either receive the milestone payment or will not, which makes the potential milestone payment a binary event.

35 unchanged sentences

Restricted Cash

Restricted cash includes collateral pledged and held at the Company’s securities accounts pursuant to a security agreement with Wells Fargo Bank, National Association (“Wells Fargo”) (Note 5).

At June 30, 2024 , such collateral amounted to $ 55.0 million.

Restricted cash includes collateral pledged and held in the Company’s securities accounts pursuant to a security agreement with Wells Fargo Bank, National Association (“Wells Fargo”) (Note 5).

At September 30, 2024 , such collateral amounted to $ 55.0 million.

Restricted cash also includes cash required to be set aside as security for lease payments and to maintain a letter of credit for the benefit of the landlord for the Company’s offices.

At June 30, 2024 and 2023 , the Company had restricted cash of $ 1.9 million and $ 2.1 million, respectively, in conjunction with property leases in San Diego, California, and such restriction is expected to be removed at the end of the lease term.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statement of cash flows as of June 30, 2024 and 2023 :

At September 30, 2024 and 2023 , the Company had restricted cash of $ 1.9 million and $ 2.1 million, respectively, in conjunction with property leases in San Diego, California, and such restriction is expected to be removed at the end of the lease term.

At September 30, 2023, non-current restricted cash also includes $ 20.0 million related to the Wells Fargo Loan (Note 5).

(in thousands)

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

Cash and cash equivalents

6 unchanged sentences

Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method.

Dilutive shares of common stock for the three and six months ended June 30, 2024 were comprised of stock options and restricted stock units.

Dilutive shares of common stock for the three and six months ended June 30, 2023 were comprised of stock options.

Dilutive shares of common stock for the three and nine months ended September 30, 2024 were comprised of stock options and restricted stock units.

Dilutive shares of common stock for the three and nine months ended September 30, 2023 were comprised of stock options.

No dividends were declared or paid during the reported periods.

2 unchanged sentences

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the condensed consolidated financial statements and disclosures.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and for interim reporting periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the impact that adoption of ASU 2023-07 will have on our financial statement disclosures.

The Company has entered into license agreements and collaborative research and development arrangements with pharmaceutical and biotechnology companies, as well as consulting, related technology transfer, product revenue and government grant agreements.

5 unchanged sentences

The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics and vaccines.

The following table presents changes during the six months ended June 30, 2024 in the balances of contract assets and liabilities as compared to what was disclosed in the Company’s Annual Report.

The following table presents changes during the nine months ended September 30, 2024 in the balances of contract assets and liabilities as compared to what was disclosed in the Company’s Annual Report.

(in thousands)

December 31, 2023

June 30, 2024

September 30, 2024

Contract Assets:

4 unchanged sentences

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

(in thousands)

9 unchanged sentences

The collaboration plans to advance vaccines against SARS-CoV-2 (COVID-19), influenza, pandemic preparedness as well as three other respiratory infectious diseases.

In September 2024, our COVID-19 vaccine KOSTAIVE ® became the world’s first approved and commercially available self-amplifying RNA (sa-mRNA) vaccine.

The Company received a $ 200.0 million upfront payment and is eligible to receive over $ 1.3 billion in development milestones if all products are registered in the licensed fields and entitled to potentially receive up to $ 3.0 billion in commercial milestones based on “net sale” of vaccines in the various fields.

In addition, the Company is eligible to receive a 40 % net profit share for COVID-19 vaccine products and up to low double-digit royalties for vaccines against flu, pandemic preparedness and three other respiratory pathogens.

During the second quarter of 2024, the Company achieved a $ 17.0 million development milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of June 30, 2024.

During the third quarter of 2024, upon the first commercial sale of KOSTAIVE following regulatory approval in Japan, the Company achieved a $ 25.0 million development milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of September 30, 2024.

In evaluating the CSL Collaboration Agreement in accordance with ASC 606, the Company concluded that CSL Seqirus is a customer.

2 unchanged sentences

For each performance obligation, the Company estimated the standalone selling price based on 1) in the case of the license, the fair value using costs to recreate plus margin method and 2) in the case of research and development services and regulatory activities, cost plus margin for estimated full-time equivalent (“FTE”) costs, direct costs including laboratory supplies, contractors, and other out-of-pocket expenses for research and development services and regulatory activities.

As of June 30, 2024, the transaction price consisted of upfront consideration received and milestones achieved.

Additional variable consideration was not included in the transaction price at June 30, 2024 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.

As of September 30, 2024, the transaction price consisted of upfront consideration received and milestones achieved.

Additional variable consideration was not included in the transaction price at September 30, 2024 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.

The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price.

2 unchanged sentences

Any consideration related to sales-based royalties will be recognized when the amounts are probable of non-reversal, provided that the reported sales are reliably measurable and the Company has no remaining promised goods/services, as they are constrained and therefore have also been excluded from the transaction price.

The revenue recognized in the second quarter of 2024 relates to the license delivered, milestones achieved and services performed through June 30, 2024.

Total deferred revenue as of June 30, 2024 and December 31, 2023 for the CSL Collaboration Agreement was $ 53.7 million and $ 87.1 million, respectively.

The revenue recognized in the third quarter of 2024 relates to the license delivered, milestones achieved and services performed through September 30, 2024.

Total deferred revenue as of September 30, 2024 and December 31, 2023 for the CSL Collaboration Agreement was $40.3 million and $ 87.1 million, respectively.

During 2023, the Company also received an advance payment of $ 23.6 million for the manufacturing and supply of ARCT-154 drug product.

2 unchanged sentences

The Company recognized $ 18.0 million in revenue related to this customer option during the second quarter of 2024.

No amount related to this customer option remained in deferred revenue as of June 30, 2024.

No amount related to this customer option remained in deferred revenue as of September 30, 2024.

During 2023, the Company entered into an amendment to the CSL Collaboration Agreement, pursuant to which the Company agreed to sponsor and conduct a Phase 1 clinical study in the influenza field.

3 unchanged sentences

Therefore the Company concluded the promise to sponsor and conduct the Phase 1 clinical study is a separate contract and the sole performance obligation under the new arrangement.

During the quarter ended June 30, 2024 , the Company recognized $ 3.0 million related to the performance obligation and the remaining amount of $ 9.8 million is included in deferred revenue.

During the quarter ended September 30, 2024 , the Company recognized $ 4.0 million related to the performance obligation and the remaining amount of $ 5.9 million is included in deferred revenue.

During the fourth quarter of 2023, the Company received an advance payment of $ 5.3 million from CSL Seqirus for manufacturing activities related to COVID-19 vaccine product.

During the first quarter of 2024, the Company received an additional advance payment of $ 5.1 million from CSL Seqirus for manufacturing activities related to COVID-19 vaccine product.

concluded that the promise to perform manufacturing activities is a customer option as part of the CSL Collaboration Agreement and is accounted for as a separate contract.

The advance payments are included in deferred revenue as of June 30, 2024 and will be recognized as revenue when the vaccine product is transferred to CSL Seqirus.

The Company concluded that the promise to perform manufacturing activities is a customer option as part of the CSL Collaboration Agreement and is accounted for as a separate contract.

The Company recognized $ 5.3 million in revenue related to this customer option during the third quarter of 2024 upon the transfer of vaccine product to CSL Seqirus.

The remaining $ 5.1 million is included in deferred revenue as of September 30, 2024 and will be recognized as revenue when the remaining vaccine product is transferred to CSL Seqirus.

In March 2024, the Company entered into an amendment to the CSL Collaboration Agreement, pursuant to which the parties agreed to, among other things, adjust (i) the development plans for certain product candidates, (ii) various development milestones related to such product candidates, (iii) provisions of the CSL Collaboration Agreement related to specific royalty payments, (iii) provisions of the CSL Collaboration Agreement related to distributors, and (iv) proprietary payment calculations related to the foregoing.

6 unchanged sentences

The costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s condensed consolidated statements of operations and comprehensive income (loss).

The Company rec ognized $ 3.9 million and $ 1.0 million o f revenue during the three months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the remaining available funding net of revenue e arned was $ 44.5 million.

As of September 30, 2024, the remaining available funding net of revenue e arned was $ 41.6 million.

Fair Value Measurements

5 unchanged sentences

Unobservable inputs in which little or no market data exists and are therefore determined using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

The carrying value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to their relative short maturities.

As of June 30, 2024 and December 31, 2023 , all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy.

The carrying value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to their relatively short maturities.

As of September 30, 2024 and December 31, 2023 , all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy.

The fair value of these financial instruments was measured based on quoted prices.

2 unchanged sentences

(in thousands)

June 30, 2024

September 30, 2024

December 31, 2023

6 unchanged sentences

Property and equipment, net

Depreciation and amortization expense was $ 0.9 mi llion and $ 1.8 million for the three and six months ended June 30, 2024, respectively, and $ 0.7 m illion and $ 1.3 million for the three and six months ended June 30, 2023, respectively.

Depreciation and amortization expenses were $ 0.9 mi llion and $ 2.7 million for the three and nine months ended September 30, 2024, respectively, and $ 0.8 m illion and $ 2.1 million for the three and nine months ended September 30, 2023, respectively.

Construction in progress is primarily comprised of research equipment not yet placed in service.

1 unchanged sentence

(in thousands)

June 30, 2024

September 30, 2024

December 31, 2023

13 unchanged sentences

There is no penalty for terminating the facility prior to the maturity date of the Note.

As collateral, the Company has agreed to pledge $ 55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

As collateral, the Company has agreed to pledge $ 55.0 million in cash to be held in the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

In June 2024, Arcturus Therapeutics and Wells Fargo entered into an amendment to the Note, whereby the term of the Note was extended by one year to April 2026.

No borrowings were outstanding as of June 30, 2024 .

No borrowings were outstanding as of September 30, 2024 .

Stockholders’ Equity

Net Loss per Share

Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2024 as they were anti-dilutive totaled 1.1 million and 1.3 million, respectively, and 1.0 million and 0.8 million for the three and six months ended June 30, 2023, respectively.

Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three and nine months ended September 30, 2024 as they were anti-dilutive totaled 0.7 million and 1.1 million, respectively, and 1.2 million and 0.8 million for the three and nine months ended September 30, 2023, respectively.

Sales Agreement

3 unchanged sentences

In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 200,000,000 from time to time through Cantor, Wells Fargo Securities, or William Blair, each acting as the Company's sales agent.

During the period ended June 30, 2024 the Company did no t offer or sell any shares of common stock pursuant to the Sales Agreement.

During the period ended September 30, 2024 the Company did no t offer or sell any shares of common stock pursuant to the Sales Agreement.

Share-Based Compensation Expense

In June 2024 at the Company’s 2024 Annual Meeting of Stockholders (the "2024 Annual Meeting"), the stockholders of the Company appro ved an amendment to the Company’s 2019 Omnibus Equity Incentive Plan (as amended, the “2019 Plan”) which, among other things, increased the aggregate number of shares authorized for use in making awards to eligible persons under the 2019 Plan by 2,000,000 shares, for a total of up to 10,750,000 shares available for issuance.

As of June 30, 2024 , following the 2024 Annual Meeting, a total of 2,236,360 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

As of September 30, 2024 , a total of 2,203,234 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

In October 2021, the Company adopted the 2021 Inducement Equity Incentive Plan which covers the award of up to 1,000,000 shares of common stock (the “2021 Plan”) effective as of October 15, 2021.

1 unchanged sentence

In April 2022, the compensation committee of the Company’s board of directors approved a proposal to reduce the total number of shares available for future issuance under the 2021 Plan to 130,000 .

As of June 30, 2024 , a total of 124,697 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

As of September 30, 2024, a tota l of 124,697 s hares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

Stock Options

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023 was as follows:

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023 was as follows:

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

(in thousands)

4 unchanged sentences

The primary difference between the effective tax rate and the federal statutory tax rate is due to federal and state income tax expense offset by valuation allowance on the Company's deferred tax assets.

For the three and six months ended June 30, 2024, the Company recorded $ ( 0.2 ) million and $ 0.2 million of income tax expense, respectively.

For the three and six months ended June 30, 2023, the Company recorded $ 0.6 million and $ 0.7 million of income tax expense, respectively.

No tax benefit was provided for losses incurred in United States because those losses are offset by a full valuation allowance.

For the three months ended September 30, 2024, the Compa ny recorded $ 0.2 million of income tax benefit and for the nine months ended September 30, 2024 , the Company recorded no inco me tax benefit.

For the three and nine months ended September 30, 2023, the Company recorded $ 0.9 million and $ 1.6 million of income tax expense, respectively.

Commitments and Contingencies

2 unchanged sentences

Pursuant to the amendment, CFF increased the amount it will award to advance LUNAR-CF to $ 24.6 million from approximately $ 15.6 million and the Company agreed to incur at least $ 15.0 million toward activities under the research plan.

Total contra expense of $ 0.8 million was recognized during the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2023, the Company recognized no contra expense

related to the agreement.

As of June 30, 2024 and December 31, 2023, $ 6.9 million and $ 7.6 million, respectively, remained in accrued liabilities.

Total expense of $ 0.3 million was recognized during the three months ended September 30, 2024.

Total contra expense of $ 0.5 million was recognized during the nine months ended September 30, 2024.

For both the three and nine months ended September 30, 2023, the Company recognized contra expense of $ 1.8 million.

As of September 30, 2024 and December 31, 2023, $ 7.1 million and $ 7.6 million, respectively, remained in accrued liabilities.

In October 2017, the Company entered into a non-cancellable operating lease agreement for office space adjacent to its previously occupied headquarters.

9 unchanged sentences

In January 2024, the Company vacated this office space with no intention of operating out of the location in the future.

Because Arcturus was still engaged in the lease for the property and obligated to make the remaining lease payment through March 31, 2025, the Company recorded an impairment loss in the amount of $ 1.3 million during the three months ended March 31, 2024, as it would not receive any future economic benefit from the lease.

In July 2024, the Company terminated the existing lease agreement, in accordance with its terms, thereby ending their contractual obligation to pay for premise.

The Company was still engaged in the lease for the property and obligated to make the remaining lease payments through March 31, 2025, and therefore recorded an impairment loss in the amount of $ 1.3 million during the three months ended March 31, 2024, as there was no future economic benefit from the lease.

In July 2024, the Company terminated the existing lease agreement, in accordance with its terms, thereby ending their contractual obligation to pay for the premises.

As a result, no lease liability remains as of September 30, 2024.

In September 2021, the Company entered into a third non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters, and such lease term commenced during the second quarter of 2022.

8 unchanged sentences

The Company uses its incremental borrowing rate to calculate the present value of the lease payments, as the implicit rate in the lease is not readily determinable.

As of June 30, 2024, the remaining payments of the operating lease liability were as follows:

As of September 30, 2024, the remaining payments of the operating lease liability were as follows:

(in thousands)

Remaining Lease Payments

2024 (remainder of year)

Total remaining lease payments

4 unchanged sentences

Operating lease costs consist of the fixed lease payments included in operating lease liability and are recorded on a straight-line basis over the lease term s.

Operating lease costs were $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2024, respectively, and $ 1.4 million and $ 2.8 million for the three and six months ended June 30, 2023, respectively.

Operating lease costs were $ 1.3 million and $ 4.1 million for the three and nine months ended September 30, 2024, respectively, and $ 1.4 million and $ 4.2 million for the three and nine months ended September 30, 2023, respectively.

Related Party Transactions

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements