Caribou Biosciences, Inc 10-Q for FY2021 Q2
Caribou Biosciences, Inc. (CRBU)
About this 10-Q
Caribou Biosciences, Inc filed this 10-Q on September 2, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- Net loss
- $14.31M
- compared with a net loss of $1.87M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
(Address of principal executive offices) |
(Zip Code) |
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 |
|
|
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.
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).
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 |
|
☐ |
|
|
|
|
|||
|
☒ |
|
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 August 31, 2021, the registrant had
Table of Contents
|
|
Page |
PART I. |
1 |
|
Item 1. |
1 |
|
|
1 |
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
|
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
3 |
|
4 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
Item 3. |
38 |
|
Item 4. |
38 |
|
PART II. |
39 |
|
Item 1. |
39 |
|
Item 1A. |
39 |
|
Item 2. |
39 |
|
Item 6. |
40 |
|
41 |
||
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
ASSETS |
|
|
|
|
|
|
||
CURRENT ASSETS: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable |
|
|
|
|
|
|
||
Contract assets ($ |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
INVESTMENTS IN EQUITY SECURITIES |
|
|
|
|
|
|
||
PROPERTY AND EQUIPMENT—NET |
|
|
|
|
|
|
||
OTHER ASSETS |
|
|
|
|
|
|
||
TOTAL ASSETS |
|
$ |
|
|
$ |
|
||
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
||
CURRENT LIABILITIES: |
|
|
|
|
|
|
||
Accounts payable ($ |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Promissory note — PPP Loan |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
LONG-TERM LIABILITIES |
|
|
|
|
|
|
||
Deferred revenue, net of current portion ($ |
|
|
|
|
|
|
||
Deferred rent and lease incentive liability |
|
|
|
|
|
|
||
Promissory note — PPP Loan, net of current portion |
|
|
|
|
|
|
||
Success payments liability |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
(Note 9) |
|
|
|
|
|
|
||
CONVERTIBLE PREFERRED STOCK, par value $ |
|
|
|
|
|
|
||
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
||
Common stock, par value $ |
|
|
|
|
|
|
||
Additional paid-in-capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ deficit |
|
|
( |
) |
|
|
( |
) |
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Licensing and collaboration revenue ($ |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of equity securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Gain on extinguishment of PPP Loan |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net loss before provision for income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Benefit from income taxes |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Net loss and comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average common shares outstanding, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(Unaudited)
(in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Total |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Stockholders’ |
|
|||||||
|
|
Convertible Preferred Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
(Accumulated |
|
|
Equity |
|
|||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit) |
|
|
(Deficit) |
|
|||||||
BALANCE—December 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
Issuance of Series C convertible preferred stock, net of issuance costs of $ |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Issuance of common stock on exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net loss and comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
BALANCE—March 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Repayment of loan issued by stockholder |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Issuance of common stock on exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Net loss and comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
BALANCE—June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
BALANCE—December 31, 2019 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net loss and comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
BALANCE—March 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Issuance of restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance of common stock on exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Net loss and comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
BALANCE—June 30, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Loss on disposal of fixed assets |
|
|
|
|
|
|
||
Change in fair value of equity securities |
|
|
|
|
|
|
||
Non-cash consideration for licensing and collaboration revenue |
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Change in fair value of success payments liability |
|
|
|
|
|
|
||
Acquired in-process research and development |
|
|
|
|
|
|
||
Extinguishment of PPP Loan |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
( |
) |
|
Contract assets |
|
|
|
|
|
|
||
Other receivables |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
( |
) |
|
Deferred revenue, current and long-term |
|
|
|
|
|
( |
) |
|
Deferred rent and lease incentive liability |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred tax liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from sale of equity securities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Payments to acquire in-process research & development |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
( |
) |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Issuance of Series C convertible preferred stock |
|
|
|
|
|
- |
|
|
Proceeds from common stock options exercised |
|
|
|
|
|
|
||
Repayment of promissory note |
|
|
|
|
|
- |
|
|
Principal payments for capital lease |
|
|
( |
) |
|
|
( |
) |
Proceeds from PPP Loan |
|
|
|
|
|
|
||
Payment of deferred issuance costs |
|
|
( |
) |
|
|
- |
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
|
|
|
|
( |
) |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — BEGINNING OF PERIOD |
|
|
|
|
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — END OF PERIOD |
|
$ |
|
|
$ |
|
||
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
- |
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ON THE BALANCE SHEET |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Purchases of property and equipment accrued |
|
$ |
|
|
$ |
- |
|
|
Deferred issuance costs related to initial public offering accrued |
|
$ |
|
|
$ |
- |
|
|
Acquired in-process research and development accrued |
|
$ |
|
|
$ |
- |
|
|
Extinguishment of PPP Loan |
|
$ |
|
|
$ |
- |
|
|
Non-cash consideration in exchange for licensing and collaboration revenue |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of the Business, Organization, and Liquidity
Business and Organization
Caribou Biosciences, Inc. (the “Company” or “we”) is a clinical-stage CRISPR genome-editing biotechnology company. We are developing an internal pipeline of off-the-shelf chimeric antigen receptor (“CAR”) T cell (“CAR-T”) and CAR-natural killer cell (“CAR-NK”) therapies. The Company was incorporated in October 2011 as a Delaware corporation and is headquartered in Berkeley, California. The Company has four wholly-owned subsidiaries: Antler Holdco, LLC, incorporated in Delaware in April 2019; Microbe Holdco, LLC, incorporated in Delaware in June 2020; Arboreal Holdco, LLC, incorporated in Delaware in November 2020; and Biloba Holdco, LLC, incorporated in Delaware in April 2021. Another subsidiary, Caribou Therapeutics Holdco, LLC, was incorporated in Delaware in July 2014 and dissolved in December 2020. The Company’s wholly-owned subsidiaries hold interests in our equity investments and do not have operating activities.
Initial Public Offering
On July 22, 2021, the Company’s registration statement on Form S-1 (File No. 333-257604) relating to our initial public offering (“IPO”) of common stock became effective. The IPO closed on July 27, 2021, at which time we issued
In connection with the completion of our IPO, on July 27, 2021, the Company’s certificate of incorporation was amended and restated to provide for
Forward Stock Split
In July 2021, our board of directors (the “Board”) approved an amendment to the Company’s certificate of incorporation to effect a forward split of shares of our outstanding common stock at a ratio of
Liquidity
We have incurred net operating losses and negative cash flows from operations since our inception and we had an accumulated deficit of $
2. Summary of Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in Note 2 to the annual consolidated financial statements for the years ended December 31, 2019 and 2020 included in the Company’s final prospectus for our IPO (“Final Prospectus”) filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”), with the Securities and Exchange Commission (the “SEC”) on July 23, 2021, except as noted below.
5
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Caribou Biosciences, Inc. and its wholly owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements included in our Final Prospectus, except as noted below.
In the opinion of our management, the information furnished in these condensed consolidated financial statements reflects all adjustments, all of which are of a normal and recurring nature necessary for a fair presentation of the financial position and results of operations for the reported interim periods. We consider events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements; and the reported amounts of revenue, income, and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, common stock valuation, stock-based compensation expense, accrued expenses related to research and development activities, valuation of success payments liability, and income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.
Segments
We operate and manage our business as
Concentrations of Credit Risk and Other Uncertainties
Financial instruments that potentially subject us to concentration of credit risk consisted of cash and cash equivalents, accounts receivable, contract assets, other receivables, and investments in equity securities. Substantially all our cash and cash equivalents are deposited in accounts at one financial institution, and account balances may at times exceed federally insured limits. We believe the financial institution to be of high credit quality.
Licensees that represent 10% or more of our revenues and accounts receivable and contract assets are as follows:
|
|
Revenue |
|
|
Revenue |
|
|
Accounts Receivable and |
|
|||||||||||||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
As of |
|
|
As of |
|
||||||||||||
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||
Licensee A |
|
|
% |
|
|
|
* |
|
|
% |
|
|
|
* |
|
|
% |
|
|
% |
||||
Licensee B |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
% |
|
Licensee C, related party |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
% |
|
Licensee D |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
% |
|
Licensee E |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
% |
|
|
|
* |
|
Licensee F, related party |
|
|
|
* |
|
|
% |
|
|
|
* |
|
|
% |
|
|
|
* |
|
|
|
* |
||
Licensee G |
|
|
% |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Licensee H |
|
|
% |
|
|
|
* |
|
|
% |
|
|
|
* |
|
|
|
* |
|
|
|
* |
||
Licensee I |
|
|
|
* |
|
|
|
* |
|
|
% |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Total |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||||
*Less than 10%
6
We monitor economic conditions to identify facts or circumstances that may indicate that any of our accounts receivable are not collectible and if the contract assets should be impaired.
Restricted Cash
We define restricted cash as cash and cash equivalents that cannot be withdrawn or used for general operating activities. Our restricted cash consists of a letter of credit with a financial institution in connection with our workers’ compensation insurance, which renews annually. As of June 30, 2021, we had less than $
Deferred Issuance Costs
Issuance costs, consisting of legal, accounting, audit, and filing fees relating to in-process equity financings, including the IPO, are capitalized. Deferred issuance costs are offset against offering proceeds upon the completion of an equity financing or an offering. In the event an equity financing or an offering is terminated or delayed, deferred issuance costs will be expensed immediately as a charge to general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2021, we capitalized deferred issuance costs in the amount of $
Patent Costs
We expense costs for filing, prosecuting, and maintaining patents and patent applications, including certain of the patents and patent applications that we license from third parties, as incurred, and classify such costs as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. In addition, we are entitled to receive reimbursement of a portion of the filing, prosecution, and maintenance costs for certain patents and patent applications from third parties. We accrue for these reimbursements as the respective expenses are incurred and classify such reimbursements as a reduction of general and administrative expenses. During the three months ended June 30, 2021 and 2020, we incurred gross patent costs of $
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) or other standard-setting bodies and adopted by us as of the specified effective date.
New Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. We may elect not to apply Topic 842 to short-term leases with a term of 12 months or less. This ASU is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the impact of adoption of this update on the condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The updated guidance replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. This ASU is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, and interim reporting periods within fiscal years beginning after December 15, 2023. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact of adoption of this update on the condensed consolidated financial statements.
7
3. Fair Value Measurements and Fair Value of Financial Instruments
The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
Our financial instruments consisted of Level 1 and Level 3. Level 1 financial instruments are comprised of money market mutual funds. Level 3 financial instruments are comprised of success payments liability related to the Exclusive License Agreement (the “MSKCC Agreement”), dated November 13, 2020, by and between us and Memorial Sloan Kettering Cancer Center (“MSKCC”).
The following table sets forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
|
|
Fair Value Measurements at June 30, 2021 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market investments (included in cash and cash equivalents) |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Success payments liability |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
|
|
Fair Value Measurements at December 31, 2020 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market investments (included in cash and cash equivalents) |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Success payments liability |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
The following table sets forth a summary of the changes in the fair value of our Level 3 financial liability (in thousands):
|
|
Success Payments |
|
|
Balance at December 31, 2020 |
|
$ |
|
|
Change in fair value |
|
|
|
|
Balance at June 30, 2021 |
|
$ |
|
|
8
We recorded $
We utilize a Monte Carlo simulation model that requires significant estimates and assumptions in determining the estimated MSKCC success payments liability under the MSKCC Agreement and associated expense at each balance sheet date. The assumptions used to calculate the fair value of the success payments are subject to a significant amount of judgment including the expected volatility, estimated term, and estimated number and timing of valuation measurement dates.
Our liability for the MSKCC success payments is carried at fair value and changes are recognized as expense until the success payments liability is paid or expires (Note 4). The Monte Carlo simulation methodology models the future movement of stock prices based on several key variables.
|
|
As of |
|
|
As of |
|
||
Fair value of common stock |
|
$ |
|
|
$ |
|
||
Risk free interest rate |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Probability |
|
|
|
|
||||
Expected term (years) |
|
|
|
|
||||
The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption and the historical and implied volatility of our stock. The risk-free interest rate, expected volatility, and expected term assumptions depend on the estimated timing of our phase 1 clinical trial and U.S. Food and Drug Administration (“FDA”) approval of a particular product candidate. In addition, we incorporated the estimated number and timing of valuation measurement dates in the calculation of the success payments liability.
A small change in the assumptions and other inputs, such as the fair value of our common stock, may have a relatively large change in the estimated valuation and associated liability and expense.
The carrying value of the promissory note approximates its fair value (Note 8).
4. Significant Agreements
The Regents of the University of California/University of Vienna
We entered into an Exclusive License Agreement, dated April 16, 2013, as amended, (the “UC/Vienna Agreement”) with The Regents of the University of California (“UC”) and the University of Vienna (“Vienna”) (together, “UC/Vienna”) wherein UC/Vienna granted us an exclusive worldwide license, with the right to sublicense, in all fields to the foundational CRISPR-Cas9 patent family co-owned by UC, Vienna, and Dr. Emmanuelle Charpentier (the “CVC IP”). Dr. Charpentier has not granted us any rights, either directly or indirectly. The UC/Vienna Agreement continues until the last-to-expire patent or last-to-be-abandoned patent application licensed under the UC/Vienna Agreement; provided, however, that UC/Vienna may terminate the UC/Vienna Agreement upon the occurrence of certain events and we may terminate the UC/Vienna Agreement at our sole discretion upon written notice. Without patent term adjustment or patent term extension, the CVC IP will expire in 2033. The UC/Vienna Agreement includes certain diligence milestones that we must meet. For products and services sold by us that are covered by the CVC IP, we will owe low- to mid-single-digit percent royalties on net sales, subject to a minimum annual royalty. Prior to such time that we are selling products, we owe UC/Vienna an annual license maintenance fee. We may owe UC/Vienna up to $
9
research, bioproduction, cell lines, and microbial applications that include the CVC IP as well as other Cas9 intellectual property owned or controlled by us. We are obligated to reimburse UC for its prosecution and maintenance costs of the CVC IP.
For the three months ended June 30, 2021 and 2020, we paid UC $
For the three months ended June 30, 2021 and 2020, we reimbursed UC $
On December 15, 2016, we entered into a Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement (“IMA”) relating to the CVC IP. Under the IMA, CRISPR Therapeutics AG (“CRISPR”) reimburses us
Memorial Sloan Kettering Cancer Center
On November 13, 2020, we entered into the MSKCC Agreement under which we exclusively licensed know-how, biological materials, and intellectual property relating to humanized single-chain variable fragments targeting CD371 for use in T cells, NK cells, and genome-edited induced pluripotent stem cells for allogeneic CD371-targeted cell therapy (our CB-012 product candidate). We paid an upfront payment of $
MSKCC is entitled to certain success payments in the event that our common stock fair value increases by certain multiples of increasing value based on a comparison of the fair market value of our common stock compared with the split-adjusted initial stock price of our Series B convertible preferred stock financing of $
The following table summarizes MSKCC success payments amounts:
Multiple of initial share price at issuance |
|
|
|
|
|
|
||||||
Success payment(s) (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
We may terminate the MSKCC Agreement upon 90 calendar days’ prior written notice. MSKCC may terminate in the event of our uncured material breach, bankruptcy, or criminal activity. In the event that MSKCC materially breaches the MSKCC Agreement in certain circumstances (e.g., granting a third party a license in our field), then during the time of such uncured breach, MSKCC will not be entitled to receive any success payments or any change of control payment.
10
As of June 30, 2021, the estimated fair value of the total success payments obligation to MSKCC was $
Intellia Therapeutics, Inc.
On July 16, 2014, we entered into a License Agreement, as amended (the “Intellia License Agreement”) and a Services Agreement (the “Intellia Services Agreement”) with Intellia, LLC, to which Intellia Therapeutics, Inc. (“Intellia”) is a successor in interest. Under the Intellia License Agreement, we granted Intellia an exclusive worldwide license, with the right to sublicense, to certain CRISPR-Cas9 technology for a defined field of human therapeutics. Intellia granted us an exclusive worldwide license, with the right to sublicense, to its CRISPR-Cas9 technology for all fields outside of the defined field of human therapeutics, including a license to certain of Intellia’s future CRISPR-Cas9 intellectual property until our direct or indirect ownership percentage dropped below
On June 16, 2021, we and Intellia entered into a leaseback agreement (the “Leaseback Agreement”), which resolved the arbitration dispute between the parties (Note 9). Pursuant to the Leaseback Agreement, in exchange for Intellia’s grant to us of an exclusive license to certain intellectual property relating to CRISPR-Cas9, including Cas9 chRDNAs, for use solely in the manufacture of our CB-010 product candidate, we agreed to make certain payments to Intellia. We accrued $
Pioneer Hi-Bred International, Inc. (now Corteva Agriscience)
On July 13, 2015, we and Pioneer Hi-Bred International, Inc. (“Pioneer”) (now Corteva Agriscience), then a DuPont company (“DuPont”), entered into an Amended and Restated Collaboration and License Agreement, as amended (the “Pioneer Agreement”). Under the terms of the Pioneer Agreement, we and Pioneer cross-licensed CRISPR intellectual property portfolios. Pioneer granted us an exclusive worldwide license, with the right to sublicense, to its CRISPR intellectual property in the field of research tools, as well as a non-exclusive worldwide license to such intellectual property in human and animal therapeutics, industrial biotechnology, certain agriculture segments, and other fields; and we granted Pioneer an exclusive worldwide license, with the right to sublicense, to our CRISPR intellectual property in a defined field of agriculture relating to specified row crops, as well as a non-exclusive worldwide license to such intellectual property in other agricultural applications, industrial biotechnology, nutrition and health, and other fields. The Pioneer Agreement continues until the expiration, abandonment, or invalidation of the last patent or patent application within the licensed intellectual property; provided, however, that the parties may terminate the Pioneer Agreement by mutual consent or either party may unilaterally terminate the Pioneer Agreement in the event of an uncured breach of a payment obligation, bankruptcy, or failure to maintain or own licensed intellectual property by the other party in the event the non-breaching party is materially adversely affected by such failure. We are obligated to pay low-single-digit percent royalties to Pioneer for the sales of our products in the research tools field as well as certain sublicensing revenue in that field. We are eligible to receive milestone payments from Pioneer in the event certain regulatory and commercial milestones are met, for a total of up to $
11
Under the Pioneer Agreement, we and Pioneer also entered into a
In December 2020, we and Pioneer entered into an amendment to the Pioneer Agreement under which Pioneer assigned to us the chRDNA patent family developed under the research collaboration, and we paid Pioneer an upfront payment of $
During the six months ended June 30, 2021, we incurred $
Genus plc
On May 12, 2016, we entered into a Research Collaboration and License Agreement, as amended (the “Genus Agreement”) with Genus plc (“Genus”) under which we granted Genus an exclusive worldwide license to certain CRISPR-Cas9 technology for the introduction of genetic traits into cattle and pigs raised to produce protein primarily for human consumption; provided, however, that at the end of the
Under the Genus Agreement, we and Genus entered into a
Related Party Private Company
On May 15, 2020, we entered into an Exclusive License Agreement, as amended, with a related party private company (the “Private Company License Agreement”), under which we granted the private company an exclusive worldwide license under certain intellectual property rights and know-how in a defined field.
We are eligible to receive milestone payments for licensed products following the first commercial sale of each such licensed product in each of the United States and the first European country in which each such licensed product is sold by the private company. The private company may select one of several milestone payment amounts for each licensed product, which then dictates the applicable royalty rate for net sales of licensed products. We are also eligible to receive a percentage of sublicensing revenues earned by the private company.
The Private Company License Agreement will continue in force and effect until the expiration, abandonment, or invalidation of the last patent or patent application within the licensed patent rights. The Private Company License Agreement may be terminated during the term by either party for an uncured material breach or bankruptcy. Additionally, the private company may terminate the Private Company License Agreement upon 90 days’ written notice to us.
As consideration for the exclusive license, the private company issued to us
12
and six months ended June 30, 2020.
On May 15, 2020, we entered into a separate option agreement under which we granted the private company a
AbbVie Manufacturing Management Unlimited Company
On February 9, 2021, we entered into a Collaboration and License Agreement (the “AbbVie Agreement”) with AbbVie Manufacturing Management Unlimited Company (“AbbVie”). The collaboration is based on the selection and use of targets under programs (each, a “Program Slot”) (which may include one target or, for a dual CAR-T product, two targets), to develop collaboration CAR-T products (and corresponding licensed products). For each of AbbVie’s two Program Slots (or up to four Program Slots, if AbbVie elects to expand the number as discussed below), we will collaborate to identify and develop one or more collaboration allogeneic CAR-T products directed toward the single cancer target or target combination chosen by AbbVie and as described in an applicable research plan, utilizing our Cas12a chRDNA genome-editing and cell therapy technologies. We granted AbbVie an exclusive (even as to us), royalty-bearing, worldwide license, with the right to grant sublicenses, under our Cas12a chRDNA and cell therapy intellectual property (as well as certain genome-editing technology that we may gain rights to in the future) and intellectual property that may be developed under the collaboration, solely for AbbVie to develop, commercialize, manufacture, and otherwise exploit the collaboration CAR-T products in the field of human diagnostics, prophylactics, and therapeutics. Under the terms of the AbbVie Agreement, we will conduct certain preclinical research, development, and manufacturing activities under the collaboration, including certain activities for the manufacture and supply of licensed product for AbbVie’s phase 1 clinical studies, and AbbVie will reimburse us for all such activities (including reimbursement for time spent our employees at a designated FTE rate). The duration of the collaboration is not fixed. Under the terms of the AbbVie Agreement, AbbVie has selected its initial targets and has reserved six additional targets, which may be used or substituted into the two Program Slots or used for the third or fourth Program Slots if AbbVie expands the number of Program Slots during the collaboration.
During the collaboration, AbbVie may expand from two Program Slots to a total of four Program Slots by paying us an additional $
The term of the AbbVie Agreement will continue in force and effect until the date of expiration of the last royalty term of the last country in which a licensed product is exploited. On a licensed product-by-licensed product and country-by-country basis, the royalty term is the period of time beginning on the first commercial sale of a licensed product in a country and ending on the latest of (a) the expiration, invalidation, revocation, cancellation, or abandonment date of the last patent that includes a valid claim that claims (i) the collaboration CAR-T product in such licensed product or (ii) the method of making the collaboration CAR-T product in such licensed product (in the case of (ii), only for so long as no biosimilar product is commercially available in such country), in such country; (b) 10 years from the first commercial sale of such licensed product in such country; and (c) expiration of regulatory exclusivity for such licensed product in such country. The AbbVie Agreement may be terminated during the term by either party for an uncured material breach or bankruptcy. Additionally, AbbVie may terminate the AbbVie Agreement, in its entirety or on a licensed product-by-licensed product basis, effective immediately upon written notice to us, if AbbVie in good faith believes that it is not advisable for AbbVie to continue to exploit the collaboration CAR-T products or licensed products as a result of a perceived serious safety issue. AbbVie may also terminate the AbbVie Agreement in its entirety, or, for any or no reason, upon 90 days’ prior written notice to us.
The transaction price in the AbbVie Agreement associated with the two Program Slots consists of the $
13
our participation in the joint governance committee are not capable of being distinct from the preclinical research, development, and manufacturing activities and therefore are combined into one performance obligation. We recognize revenue based on the measure of progress using an estimated cost-based input method each reporting period.
We received an upfront cash payment of $
5. Revenue
Disaggregation of Revenue
We disaggregate revenue by geographical market based on the location of research and development activities of our licensees and collaborators.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rest of world |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the three months ended June 30, 2021, $
During the three months ended June 30, 2020, $
During the six months ended June 30, 2021, $
During the six months ended June 30, 2020, $
Contract Balances
Accounts receivable relate to our right to consideration for performance obligations completed (or partially completed) for which we have an unconditional right to consideration. Our accounts receivable balances represent amounts that are billed to licensees with invoices outstanding as of the period end.
Contract assets are rights to consideration in exchange for a license that we have transferred to a customer when such right is conditional on something other than the passage of time. Our contract asset balances represent royalties and milestones that are unbilled as of the period end.
Contract liabilities consist of deferred revenue and relate to amounts invoiced to or advance consideration received from customers, which precede our satisfaction of the associated performance obligation(s). Our deferred revenue primarily results from upfront payments received relating to performance obligations that are satisfied over time related to the AbbVie Agreement. The remaining deferred revenue relates to upfront payments received under license agreements that also include non-refundable annual license fees, which are accounted for as material rights for license renewals and are recognized at the point in time the annual license fee is paid by the licensee and the renewal period begins.
14
The following table presents changes in our contract assets and liabilities during the six months ended June 30, 2021 (in thousands):
|
|
Balance at |
|
|
Additions |
|
|
Deductions |
|
|
Balance at |
|
||||
Accounts receivable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contract assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unbilled accounts receivable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contract liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred revenue, current and long-term |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Unbilled accounts receivable decreased during the six months ended June 30, 2021 primarily due to billing of earned royalties accrued as of December 31, 2020.
Deferred revenue increased during the six months ended June 30, 2021 primarily due to recognition of $
During the six months ended June 30, 2021 and 2020, we recognized $
Transaction Prices Allocated to the Remaining Performance Obligations
Remaining unsatisfied performance obligations represent in aggregate the amount of a transaction price that has been allocated to performance obligations not delivered, or only partially undelivered, as of the end of the reporting period. The value of transaction prices allocated to remaining unsatisfied performance obligations as of June 30, 2021 was approximately $
Capitalized Contract Acquisition Costs and Fulfillment Cost
We did not incur any expenses to obtain license and collaboration agreements and costs to fulfill those contracts do not generate or enhance our resources. As such, no costs to obtain or fulfill a contract have been capitalized in any period.
6. Balance Sheet Items
Other receivables consisted of the following at June 30, 2021 and December 31, 2020, respectively (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Patent cost reimbursements |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Prepaid expenses and other current assets consisted of the following at June 30, 2021 and December 31, 2020, respectively (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Prepaid income taxes |
|
$ |
|
|
$ |
|
||
Prepaid contract manufacturing and clinical costs |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
15
Property and equipment, net, consisted of the following at June 30, 2021 and December 31, 2020, respectively (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Furniture and equipment |
|
$ |
|
|
$ |
|
||
Computer equipment |
|
|
|
|
|
|
||
Lab equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Total property and equipment, gross |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expenses related to property and equipment were $
Accrued expenses and other current liabilities consisted of the following at June 30, 2021 and December 31, 2020, respectively (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Accrued patent expenses |
|
$ |
|
|
$ |
|
||
Accrued legal expenses |
|
|
|
|
|
- |
|
|
Income taxes payable |
|
|
|
|
|
|
||
Accrued sublicensing fees |
|
|
|
|
|
|
||
Accrued licensing fees |
|
|
|
|
|
- |
|
|
Accrued employee compensation and related expenses |
|
|
|
|
|
|
||
Accrued research and development expenses |
|
|
|
|
|
|
||
Credit card liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
7. Related Party Transactions
Related Party Private Company
On May 15, 2020, we received
Amended and Restated Collaboration and License Agreement with Pioneer
As of June 30, 2020, DuPont held a greater than
Scientific Advisory Board Payments
Dr. Jennifer A. Doudna, a co-founder and significant shareholder of the Company, received compensation for participating on our scientific advisory board (the “SAB”). During the three and six months ended June 30, 2021 and 2020, we paid Dr. Doudna less than $
16
Officer Promissory Note
In November 2018, the Company’s President and Chief Executive Officer entered into a promissory note with us for $
8. Promissory Note
On May 6, 2020, we entered into a promissory note with WebBank (the “Lender”) pursuant to the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) for a total amount of $
The PPP Loan had a
We did not provide any collateral or guarantees for the PPP Loan, nor did we pay any facility charge to obtain the PPP Loan. The PPP Loan provided for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations, and material adverse effects. We could prepay the principal of the PPP Loan at any time without incurring any prepayment charges.
A PPP loan can be partially or fully forgiven if a borrower complies with the provisions of the CARES Act, including the use of PPP loan proceeds for payroll costs, rent, utilities, and certain other expenses, and at least
9. Commitments and Contingencies
Facility Lease Agreements
We
We record rent expense on a straight-line basis over the term of the leases. For tenant improvement allowances funded by landlord incentives, we record a deferred lease incentive liability in accrued expenses and other liabilities and amortize the deferred lease incentive liability as a reduction to rent expense on the condensed consolidated statements of operations and comprehensive loss over the term of the applicable lease. As of June 30, 2021 and December 31, 2020, we recorded $
17
As of June 30, 2021, future minimum lease payments under the leases are as follows (in thousands):
Remainder of 2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
Rent expense was $
Capital Lease
We have accounted for certain leased equipment as a capital lease due to the ownership of such equipment transferring to us at the end of the lease term. As of June 30, 2021, the capital lease obligation was repaid in full and we did
Research and Development Agreements
We enter into various agreements in the ordinary course of business, such as those with suppliers, contract research organizations, contract manufacturing organizations, clinical trial sites, and the like. These agreements provide for termination at the request of either party with less than one-year notice and are, therefore, cancellable contracts and, if cancelled, are not anticipated to have a material effect on the condensed consolidated financial condition, results of operations, or cash flows.
Guarantees and Indemnifications
In the normal course of business, we enter into agreements that contain a variety of representations and provide for certain indemnifications. Our exposure under these agreements is unknown because any such claims may be made against us in the future. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. As of June 30, 2021 and December 31, 2020, we do not have any material indemnification claims that were probable or reasonably possible and consequently have not recorded related liabilities.
Intellia Arbitration
On October 16, 2018, Intellia initiated an arbitration proceeding with JAMS (the “Intellia Arbitration”) asserting that we had violated the terms and conditions of the Intellia License Agreement. The Intellia Arbitration involved whether two patent families relating, respectively, to CRISPR-Cas9 chRDNAs and Cas9 scaffolds are included in the Intellia License Agreement. On September 19, 2019, the parties received an interim award from the arbitration panel ruling that the two patent families are included in the Intellia License Agreement, but the arbitration panel granted us an exclusive leaseback to Cas9 chRDNAs under economic terms to be negotiated by the parties. On February 6, 2020, the arbitration panel clarified that the leaseback relates solely to our CB-010 program and instructed the parties to negotiate economic terms based on a leaseback of that scope (Note 4). On June 16, 2021, the parties entered into the Leaseback Agreement, which resolved the dispute and, on July 21, 2021, the arbitration panel dismissed the Intellia Arbitration with prejudice.
18
10. Convertible Preferred Stock
The authorized, issued, and outstanding shares of the convertible preferred stock and liquidation preferences as of June 30, 2021, are as follows (in thousands, except for share amounts):
Series |
|
Authorized |
|
|
Outstanding |
|
|
Liquidation |
|
|
Carrying |
|
||||
Series A |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Series A-1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series B |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series C |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
The authorized, issued, and outstanding shares of the convertible preferred stock and liquidation preferences as of December 31, 2020 are as follows (in thousands, except for share amounts):
Series |
|
Authorized |
|
|
Outstanding |
|
|
Liquidation |
|
|
Carrying |
|
||||
Series A |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Series A-1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series B |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
The rights, preferences, and privileges of the Series A, Series A-1, Series B, and Series C convertible preferred stock as of June 30, 2021 and December 31, 2020, were as follows:
Dividends
We may not declare, pay, or set aside any dividends on shares of any other class or series of our capital stock other than dividends on shares of our common stock payable in shares of common stock, unless the holders of the convertible preferred stock then outstanding first receive, or simultaneously receive, in order of priority first to Series C convertible preferred stock holders, then to Series B convertible preferred stock holders, then to Series A convertible preferred stock holders and the Series A-1 preferred convertible stock holders on a pari passu basis, and finally to common stock.
Conversion
Convertible preferred stock is convertible, at the option of the holder, at any time, into fully paid, non-assessable shares of common stock at an initial conversion ratio of
19
Voting Rights
The holders of convertible preferred stock are entitled to that number of votes on all matters presented to stockholders equal to the number of shares of common stock then-issuable upon conversion of such preferred stock.
Liquidation
In the event of any sale of substantially all of the assets, a merger, or a liquidation, dissolution, or winding up of the Company, as defined in the Company’s certificate of incorporation, the holders of Series A, Series A-1, Series B, and Series C convertible preferred stock will be entitled to receive in preference to the holders of common stock an amount per share equal to the original issue price of $
Redemption
Our convertible preferred stock is not redeemable at the option of the holder thereof. Upon the occurrence of certain change in control events that are outside of our control, including liquidation, sale, or transfer, holders of the convertible preferred stock can effectively cause redemption for cash. As a result, we classified the convertible preferred stock as mezzanine equity on the condensed consolidated balance sheets as the stock is contingently redeemable.
11. Common Stock
Common stockholders are entitled to dividends when and if declared by the Board and after any convertible preferred share dividends are fully paid.
Common stock reserved for future issuance, on an as converted basis, consists of the following:
|
|
As of |
|
|
As of |
|
||
Preferred stock, issued and outstanding |
|
|
|
|
|
|
||
Stock options, issued and outstanding |
|
|
|
|
|
|
||
Stock options, authorized for future issuance |
|
|
|
|
|
|
||
Restricted stock awards |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
12. Stock Option Plans
In 2012, we adopted a 2012 Stock Option and Issuance Plan (the “2012 Plan”), which allowed for the granting of incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), and restricted stock awards (“RSAs”) to our employees, directors, and consultants. We granted a total
Stock options under the 2013 Plan may be granted at prices no less than
20
25% of the option vesting after a
As of June 30, 2021, a total of
The following table summarizes stock option activity for employees and non-employees during the six months ended June 30, 2021:
|
|
Shares Available |
|
|
Stock Options |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
|||||
|
|
|
|
|
(Aggregate Intrinsic Value in thousands) |
|
||||||||||||||
Outstanding at December 31, 2020 |
|
|
|
|
|
|
|
$ |
|
|
|
|
$ |
|
||||||
Addition—Option pool |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Options granted |
|
|
( |
) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options exercised |
|
|
- |
|
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Options cancelled or forfeited |
|
|
|
|
|
( |
) |
|
$ |
|
|
- |
|
|
|
|
||||
Outstanding at March 31, 2021 |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Addition—Option pool |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Options granted |
|
|
( |
) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options exercised |
|
|
- |
|
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Options cancelled or forfeited |
|
|
|
|
|
( |
) |
|
$ |
|
|
- |
|
|
|
|
||||
Exercisable at June 30, 2021 |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Vested and expected to vest at June 30, 2021 |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
We have recorded stock-based compensation expenses related to employee and non-employee stock options granted in the condensed consolidated statements of operations and comprehensive loss as follows for the three and six months ended June 30, 2021 and 2020 (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock-based compensation expenses related to employees were $
Grant Date Fair Value
During the three months ended June 30, 2021, we granted
21
During the three months ended June 30, 2020, we granted
We estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following assumptions for the three and six months ended June 30, 2021 and 2020:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||
Volatility |
|
|
|
|
||||||
Expected term (in years) |
|
|
|
|
||||||
Risk free interest rate |
|
|
|
|
||||||
Expected dividend yield |
|
|
|
|
||||||
As of June 30, 2021, there was $
13. 401(k) Savings Plan
In 2017, we established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended. Our 401(k) plan is available to all employees and allows participants to defer a portion of their annual compensation on a pretax basis subject to applicable laws. We also provide a
14. Income Taxes
15. Net Loss Per Share
The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding used to compute net loss per share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all common stock equivalents outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows as of June 30, 2021 and December 31, 2020:
|
|
As of |
|
|
As of |
|
||
Convertible preferred stock |
|
|
|
|
|
|
||
Stock options outstanding |
|
|
|
|
|
|
||
Common shares subject to nonrecourse notes |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
22
16. Subsequent Events
In July 2021, our Board approved an amendment to the Company’s certificate of incorporation to effect a forward split of shares of our outstanding common stock at a ratio of
On July 27, 2021, we closed our IPO, at which time we issued
On August 9, 2021, the underwriters exercised their option to purchase an additional
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2020 included in our final prospectus (the “Final Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2021 pursuant to Rule 424(b)(4)of the Securities Act of 1933, as amended (the “Securities Act”).
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, future revenue, business strategy, prospects, product candidates, planned and ongoing preclinical studies and clinical trials, results of preclinical studies and clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
As a result of many factors, including risks related to our financial position and our ability to raise additional capital as needed to fund our operations and product candidate development; risks associated with the initiation, cost, timing, progress, and results of current and future research and development programs, preclinical studies, and clinical trials; our ability to obtain and maintain regulatory approval for our product candidates; risks that our product candidates, if approved, may not gain market acceptance due to negative public opinion and increased regulatory scrutiny of cell therapies involving genome editing; our ability to meet future regulatory standards with respect to our products; our ability to establish and/or maintain intellectual property rights covering our product candidates and genome-editing technology; risks of third parties asserting that our product candidates infringe their patents; developments related to our competitors and our industry; our reliance on third parties to conduct our clinical trials and manufacture our product candidates; and the impact of COVID-19 on our business and operations; and other risks are described in greater detail in the section of the Final Prospectus titled “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or may not occur, and actual results could differ materially from those described in or implied by the forward-looking statements contained in the following discussion and analysis. As a result of these risks, you should not place undue reliance on these forward-looking statements. Our company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Overview
We are a clinical-stage biopharmaceutical company dedicated to transforming the lives of patients with devastating diseases by applying our novel CRISPR platform, CRISPR hybrid RNA-DNA (“chRDNA,” pronounced “chardonnay”), toward the development of next-generation, genome-edited cell therapies. Our renowned founders, including a Nobel laureate, are pioneers in CRISPR genome editing. Our chRDNA technology has demonstrated superior specificity and high efficiency in preclinical studies, which enables us to perform multiple, precise genome edits, while maintaining genomic integrity.
We believe that our technology has broad potential to generate gene and cell therapies in oncology and in therapeutic areas beyond oncology, including immune cell therapies, cell therapies derived from genome-edited induced pluripotent stem cells (“iPSCs”), and in vivo genome-editing therapies.
The genome-editing technologies currently used in the allogeneic cell therapy field generally have limited efficiency, specificity, and versatility for performing the multiple, precise genome edits necessary to address insufficient persistence. Our chRDNA technology is designed to address these genome-editing limitations and improve cell therapy activity. By applying this approach to allogeneic cell therapies, we believe we can unlock their full potential by improving upon their effectiveness and durability.
We are initially focused on advancing multiple proprietary allogeneic cell therapies for the treatment of both hematologic malignancies and solid tumors against cell surface targets for which autologous chimeric antigen receptor T cell (“CAR-T”) therapeutics have previously demonstrated clinical proof of concept, including both CD19 and B cell maturation antigen (“BCMA”), as well as new emerging targets. We use our chRDNA technology to enhance, or armor, our cell therapies by creating additional genome edits to improve persistence of antitumor activity.
24
Our lead product candidate, CB-010, is, to our knowledge, the first clinical-stage allogeneic anti-CD19 CAR-T cell therapy with programmed cell death protein 1 (“PD-1”) removed from the CAR-T cell surface by a genome-edited knockout of the PDCD1 gene. We have demonstrated in preclinical models that the PD-1 knockout improves the persistence of antitumor activity by disrupting a pathway that leads to rapid T cell exhaustion. Our ANTLER phase 1 clinical trial for CB-010 is a study in patients with relapsed or refractory B cell non-Hodgkin lymphoma, with initial data expected in 2022. We announced in July 2021 that we had dosed the first patient in this clinical trial.
Our CB-011 product candidate is an allogeneic CAR-T cell therapy that is, to our knowledge, the first anti-BCMA CAR-T cell therapy incorporating an immune cloaking approach that includes both the removal of the endogenous beta-2-microglobulin protein and insertion of a beta-2-microglobulin–human-leukocyte-antigen-E–peptide transgene. This strategy is designed to blunt CAR-T cell rejection by both patient T cells and natural killer (“NK”) cells to enable more durable antitumor activity. CB-011 is in preclinical development for relapsed or refractory multiple myeloma with an investigational new drug (“IND”) filing expected in 2022.
Our CB-012 program is an allogeneic armored CAR-T cell therapy targeting CD371, currently in preclinical development for the treatment of relapsed or refractory acute myeloid leukemia (“AML”), with an IND filing expected in 2023. CD371 is an attractive target for AML due to its expression on myeloid cancer cells, its enrichment on leukemic stem cells, and its absence on hematopoietic stem cells.
We are also developing allogeneic CAR-NK cell therapies derived from genome-edited iPSCs for the treatment of solid tumors. CB-020 is our first CAR-NK product candidate and it will contain genome edits designed to overcome the challenges of targeting solid tumors including trafficking, heterogeneity, and the immunosuppressive tumor microenvironment.
We control a robust patent portfolio protecting our chRDNA technology as well as certain of our allogeneic cell therapy binders.
In February 2021, we entered into a Collaboration and License Agreement (the “AbbVie Agreement”) with AbbVie Manufacturing Management Unlimited Company (“AbbVie”) to develop two new CAR-T cell therapies for AbbVie. We view this collaboration as an external recognition of the potential for our chRDNA genome-editing technology to significantly improve genome-editing specificity and efficiency.
On July 27, 2021, we successfully completed our initial public offering (“IPO”) of common stock. On that date, we issued and sold an aggregate of 19,000,000 shares of our common stock at a price to the public of $16.00 per share for approximately $304.0 million in gross proceeds and approximately $282.7 million in net proceeds after deducting underwriting discounts and commissions and offering expenses. On August 9, 2021, we issued and sold an additional 2,850,000 shares of our common stock pursuant to the underwriters’ full exercise of their over-allotment option to purchase additional shares at the public offering price of $16.00 per share. In total, we received an aggregate of approximately $349.6 million in gross proceeds from the IPO, including the exercise of the underwriters’ over-allotment option, and approximately $321.0 million in net proceeds after deducting underwriting discounts and commissions and offering expenses. In addition, in connection with the closing of our IPO, all outstanding shares of convertible preferred stock automatically converted into 26,234,654 shares of our common stock. Subsequent to the closing of our IPO, there were no shares of preferred stock outstanding.
Since our founding in 2011, we have devoted substantially all of our resources to organizing and staffing, business planning, raising capital, developing our genome-editing platform technologies, developing our product candidates and building our pipeline, creating and maintaining our intellectual property portfolio, and establishing arrangements with third parties for the manufacture of our product candidates. We do not have any products approved for commercial sale and have not generated any revenues from product sales and have incurred net losses since commencement of our operations.
To date, we have primarily funded our operations through revenues from our license agreements, license and collaboration agreements, and a service agreement; the sale of shares of Intellia Therapeutics, Inc. (“Intellia”) common stock that we received as consideration for the License Agreement, dated July 16, 2014, between us and Intellia, LLC (now Intellia Therapeutics, Inc.) (the “Intellia License Agreement”); and the sale of our convertible preferred shares. As of June 30, 2021, we had approximately $129.5 million in cash and cash equivalents. Based on our current operating plan, we expect that our existing cash and cash equivalents, including net cash proceeds from the IPO of approximately $321.0 million received in July and August of 2021, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this Quarterly Report. See “—Liquidity, Capital Resources and Capital Requirements.”
Our net losses for the three months ended June 30, 2021 and 2020 were $14.3 million and $1.9 million, respectively. Our net losses for the six months ended June 30, 2021 and 2020 were $27.5 million and $11.7 million, respectively. We had an accumulated deficit of $58.3 million and $30.9 million as of June 30, 2021 and December 31, 2020, respectively. Our net losses and operating
25
losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of our clinical trials and nonclinical studies and our other research and development expenses. In addition, we will incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory, tax-related, director and officer liability insurance, investor relations, and other expenses that we did not incur as a private company. We anticipate that our expenses will increase substantially if and as we:
We do not own or operate any manufacturing facilities and we outsource a substantial portion of our clinical trial studies to third parties. We use multiple contract manufacturing organizations (“CMOs”) to individually manufacture, under current good manufacturing processes (“cGMP”), the plasmids, chRDNA guides, Cas proteins, and AAV6 vectors used in the manufacture of our CAR-T cells as well as the CAR-T cell therapies. We expect to rely on our CMOs in the future for the manufacturing of our product candidates to expedite readiness for future clinical trials and most of these CMOs have demonstrated capability in preparation of materials for commercialization. Additionally, we may decide to build our own manufacturing facility in the future to provide us greater flexibility and control over our clinical or commercial manufacturing needs.
Because of the numerous risks and uncertainties associated with therapeutic product development, we may never achieve profitability, and unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborations, strategic alliances, and licensing arrangements with third parties. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, 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 capital as and when needed or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.
26
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has caused governments worldwide to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, business shutdowns, and other measures. In response to the COVID-19 pandemic, starting on March 17, 2020, our entire workforce began working remotely pursuant to state, county, and city requirements. Additionally, for the period from April 6, 2020 to May 5, 2020, we reduced the salaries and workload of approximately 50% of our research employees who could not work in the lab during this period. Since May 2020, we have gradually brought back on site all of our research employees whose work must be performed in the lab and most of our non-research employees are currently working partially remotely and partially on site as of August 31, 2021. We have experienced no significant workforce reduction as a result of the COVID-19 pandemic.
We and our CMOs, contract research organizations (“CROs”), clinical trial sites, and other third-party vendors may face disruptions that could delay or otherwise affect our ability to initiate and complete preclinical studies or clinical trials as a result of the COVID-19 pandemic (including the emergence of COVID-19 variants). The COVID-19 pandemic has had an impact on our supply chain, although these issues have been alleviated in recent months. For example, in the early stages of the COVID-19 pandemic, we experienced delays in receiving healthy donor cells used in the manufacture of our CB-010 product candidate. We are currently receiving adequate supplies of donor cells.
Since the start of the COVID-19 pandemic, we have been and will continue to be focused on the safety of our employees. In response to the COVID-19 pandemic, we have instituted on-site protocols and procedures in accordance with guidance provided by the Centers for Disease Control and the State of California and regulations and guidelines promulgated by the County of Alameda and the City of Berkeley. As of August 31, 2021, our on-site employees are required to wear masks at all times when in common areas or in labs or offices with other employees. We have reconfigured several labs to accommodate social distancing. At this point in time, we do not know if or when we will bring our non-on-site functions back on site full-time.
In May 2020, we received a Paycheck Protection Plan (“PPP”) loan from the Small Business Administration (the “SBA”) in the amount of $1.6 million (the “PPP Loan”), which we used exclusively to pay employees’ salaries. In December 2020 we submitted an application to have the PPP Loan forgiven, and on May 22, 2021, the PPP Loan was forgiven in full by the SBA.
To the extent the COVID-19 pandemic adversely affects our business prospects, financial condition, and results of operation, it may also have the effect of exacerbating many of the other risks described or referenced in the section of the Final Prospectus titled “Risk Factors,” such as those relating to the timing and results of our planned and future clinical trials and our financing needs. See the section of the Final Prospectus titled “Risk Factors” for more information regarding the potential adverse impact of the COVID-19 pandemic on our business, results of operations, and financial condition.
Components of Results of Operations
Licensing and Collaboration Revenue
We have not generated any revenue from product sales to date and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval and commercialization, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates if we succeed in obtaining regulatory approval for such product candidates.
To date, all of our revenue consists of licensing and collaboration revenue earned from collaboration and/or licensing agreements entered into with third parties and related parties. Under these agreements, we license rights to certain intellectual property controlled by us. The terms of these arrangements typically include payment to us of one or more of the following: nonrefundable, upfront license fees or exclusivity fees; annual maintenance fees; regulatory and/or commercial milestone payments; research and development payments; and royalties on the net sales of products and/or services. Each of these payments results in licensing and collaboration revenues. Revenues under such licensing and collaboration agreements were $1.5 million and $8.5 million for the three months ended June 30, 2021 and 2020, respectively, and $3.1 million and $10.2 million for the six months ended June 30, 2021 and 2020, respectively. See Note 4 to the condensed consolidated financial statements included elsewhere in this Quarterly Report.
For additional information about our revenue recognition policy related to our licensing and collaboration agreements, see Note 2 to the condensed consolidated financial statements included elsewhere in this Quarterly Report.
27
For the foreseeable future we expect substantially all of our revenue will be generated from licensing and collaboration agreements.
Operating Expenses
Research and Development Expenses
Our research and development expenses consist of internal and external expenses incurred in connection with the development of our product candidates, development of our platform technologies, and our in-licensing and assignment agreements.
External costs include:
Internal costs include:
We expense research and development costs as incurred. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. Payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed. Historically, we have not tracked external costs by clinical program. We intend to separately track certain external costs for each clinical program. However, we do not currently track, and do not intend to track, costs that are deployed across multiple programs.
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 that our research and development expenses will increase substantially for the foreseeable future as we continue to implement our business strategy; advance our CB-010 product candidate through clinical trials and later stages of development; conduct clinical trials for our other product candidates; seek regulatory approvals for any product candidates that successfully complete clinical trials; expand our research and development efforts and incur expenses associated with hiring additional personnel to support our research and development efforts; and seek to identify, in-license, acquire, and/or develop additional product candidates.
The successful development of CB-010, CB-011, CB-012, CB-020, and our other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of preclinical studies, clinical trials, and development of our product candidates will depend on a variety of factors, including:
28
29
The following table summarizes our research and development expenses for the three and six months ended June 30, 2021 and 2020:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
External costs: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition of technology and intellectual property licenses |
|
$ |
2,606 |
|
|
$ |
171 |
|
|
$ |
4,466 |
|
|
$ |
811 |
|
Services provided by third-party CROs, CMOs, and other third parties that conduct preclinical studies and clinical trials on our behalf |
|
|
3,835 |
|
|
|
3,623 |
|
|
|
6,694 |
|
|
|
7,132 |
|
Other research and development expenses |
|
|
1,626 |
|
|
|
716 |
|
|
|
3,660 |
|
|
|
2,007 |
|
Total external costs |
|
|
8,067 |
|
|
|
4,510 |
|
|
|
14,820 |
|
|
|
9,950 |
|
Internal costs: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payroll and personnel expenses |
|
|
2,769 |
|
|
|
1,985 |
|
|
|
5,204 |
|
|
|
4,141 |
|
Facilities and other allocated expenses |
|
|
1,491 |
|
|
|
1,085 |
|
|
|
2,467 |
|
|
|
2,130 |
|
Total external costs |
|
|
4,260 |
|
|
|
3,070 |
|
|
|
7,671 |
|
|
|
6,271 |
|
Total research and development expenses |
|
$ |
12,327 |
|
|
$ |
7,580 |
|
|
$ |
22,491 |
|
|
$ |
16,221 |
|
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs, intellectual property costs, consulting costs, and allocated overhead, including rent, equipment depreciation, and utilities. Personnel costs consist of salaries, benefits, and stock-based compensation for our general and administrative personnel. Intellectual property costs include expenses for filing, prosecuting, and maintaining patents and patent applications, including certain of the patents and patent applications that we license from third parties. We are entitled to receive reimbursement of a portion of the costs for filing, prosecuting, and maintaining certain patents and patent applications from third parties. We accrue for these reimbursements as the respective expenses are incurred and classify such reimbursements as a reduction of general and administrative expenses. During the three months ended June 30, 2021 and 2020, we recorded $2.4 million and $1.1 million, respectively, of patent reimbursements as a reduction to general and administrative expense. During the six months ended June 30, 2021 and 2020, we recorded $4.5 million and $2.2 million, respectively, of patent reimbursements as a reduction to general and administrative expense.
We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates, and additional facility occupancy costs, as well as various incremental costs associated with operating as a public company (including increased legal, audit, and accounting fees, regulatory costs related to maintaining compliance with the rules and regulations of the SEC and the Nasdaq Global Select Market, director and officer liability insurance premiums, investor relations activities, and other accompanying compliance and governance costs). We also expect to increase the size of our administrative function to support the growth of our business.
Other Income (Expense)
Other income (expense) consists primarily of interest income earned on cash and money market funds, interest expense for our capital lease and the promissory note related to our PPP Loan, change in the fair value of Intellia common stock in 2020, and other income from the sale of certain intellectual property rights. During the three and six months ended June 30, 2021 and 2020, other income (expense) consists primarily of interest income earned on cash and money market funds, interest expense on our capital lease, and extinguishment of the promissory note related to our PPP Loan.
30
Results of Operations
Comparison of the Three Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Licensing and collaboration revenue |
|
$ |
1,476 |
|
|
$ |
8,478 |
|
|
$ |
(7,002 |
) |
|
|
-83 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
12,327 |
|
|
|
7,580 |
|
|
|
4,747 |
|
|
|
63 |
% |
General and administrative |
|
|
5,113 |
|
|
|
3,153 |
|
|
|
1,960 |
|
|
|
62 |
% |
Total operating expenses |
|
|
17,440 |
|
|
|
10,733 |
|
|
|
6,707 |
|
|
|
62 |
% |
Loss from operations |
|
|
(15,964 |
) |
|
|
(2,255 |
) |
|
|
(13,709 |
) |
|
|
608 |
% |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
46 |
|
|
|
11 |
|
|
|
35 |
|
|
|
318 |
% |
Interest expense |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
3 |
|
|
|
-60 |
% |
Gain on extinguishment of PPP Loan |
|
|
1,584 |
|
|
|
- |
|
|
|
1,584 |
|
|
|
100 |
% |
Other income |
|
|
25 |
|
|
|
327 |
|
|
|
(302 |
) |
|
|
-92 |
% |
Total other income (expense) |
|
|
1,653 |
|
|
|
333 |
|
|
|
1,320 |
|
|
|
396 |
% |
Net loss before provision for income taxes |
|
|
(14,311 |
) |
|
|
(1,922 |
) |
|
|
(12,389 |
) |
|
|
645 |
% |
Benefit from income taxes |
|
|
- |
|
|
|
(50 |
) |
|
|
50 |
|
|
|
-100 |
% |
Net loss and comprehensive loss |
|
$ |
(14,311 |
) |
|
$ |
(1,872 |
) |
|
$ |
(12,439 |
) |
|
|
664 |
% |
Licensing and Collaboration Revenue
Licensing and collaboration revenue decreased $7.0 million, or 83%, to $1.5 million for the three months ended June 30, 2021 from $8.5 million for the three months ended June 30, 2020. This decrease was primarily due to decreases of $7.5 million related to an Exclusive License Agreement entered into with a related party private company, as amended (the “Private Company License Agreement”) during the corresponding 2020 period, and $0.3 million related to completion of work under a Research Collaboration and License Agreement with Genus plc, as amended (the “Genus Agreement”), partially offset by increases of $0.5 million due to recognition of revenue under the AbbVie Agreement and $0.3 million related to other license agreements with various licensees.
The following table summarizes our revenue by licensee for the three months ended June 30, 2021 and 2020:
|
|
Three Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
AbbVie |
|
$ |
507 |
|
|
$ |
— |
|
Genus |
|
|
- |
|
|
|
281 |
|
Related party private company |
|
|
- |
|
|
|
7,500 |
|
Other licensing agreements |
|
|
969 |
|
|
|
697 |
|
Total licensing revenue |
|
$ |
1,476 |
|
|
$ |
8,478 |
|
Research and Development Expenses
Research and development expenses increased $4.7 million, or 63%, to $12.3 million for the three months ended June 30, 2021 from $7.6 million for the three months ended June 30, 2020. This increase was primarily related to increases of $1.9 million in costs associated with our intellectual property license and assignment agreements, $0.9 million related to the purchase of materials related to our preclinical programs, $0.8 million in payroll and personnel related expenses, $0.5 million due to the change in fair value of the MSKCC success payments liability, $0.4 million in facilities and other allocated expenses, and $0.2 million in external clinical trial-related activities and contract manufacturing activities for our product candidates.
31
General and Administrative Expenses
General and administrative expenses increased $2.0 million, or 62%, to $5.1 million for the three months ended June 30, 2021 from $3.2 million for the three months ended June 30, 2020. This increase was primarily related to increases of $1.1 million in recruiting and personnel costs, $0.4 million in legal and accounting services, $0.3 million in facilities and maintenance expenses, and $0.1 million in costs of prosecuting and maintaining patents licensed from third parties.
Other Income (Expense)
Interest income increased by less than $0.1 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
Interest expense decreased by less than $0.1 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
Other income of $0.3 million for the three months ended June 30, 2020 was related to earned sale and assignment of patents and patent applications, which was not an ordinary business activity.
The PPP Loan was forgiven in May 2021, and we recognized gain on the PPP Loan extinguishment of $1.6 million for the three months ended June 30, 2021. No such gain was recognized for the three months ended June 30, 2020.
Income Tax
No income tax benefit or expense was recognized for the three months ended June 30, 2021. An income tax benefit of less than $0.1 million was recognized for the three months ended June 30, 2020, which was due primarily to the recognition of net operating loss carrybacks under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which generated a tax refund of taxes paid for the year ended December 31, 2018.
Comparison of the Six Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Licensing and collaboration revenue |
|
$ |
3,062 |
|
|
$ |
10,178 |
|
|
$ |
(7,116 |
) |
|
|
-70 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
22,491 |
|
|
|
16,221 |
|
|
|
6,270 |
|
|
|
39 |
% |
General and administrative |
|
|
9,709 |
|
|
|
6,641 |
|
|
|
3,068 |
|
|
|
46 |
% |
Total operating expenses |
|
|
32,200 |
|
|
|
22,862 |
|
|
|
9,338 |
|
|
|
41 |
% |
Loss from operations |
|
|
(29,138 |
) |
|
|
(12,684 |
) |
|
|
(16,454 |
) |
|
|
130 |
% |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
50 |
|
|
|
153 |
|
|
|
(103 |
) |
|
|
-67 |
% |
Interest expense |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
- |
|
|
|
0 |
% |
Change in fair value of equity securities |
|
|
- |
|
|
|
(733 |
) |
|
|
733 |
|
|
|
-100 |
% |
Gain on extinguishment of PPP Loan |
|
|
1,584 |
|
|
|
- |
|
|
|
1,584 |
|
|
|
100 |
% |
Other income |
|
|
42 |
|
|
|
348 |
|
|
|
(306 |
) |
|
|
-88 |
% |
Total other income (expense) |
|
|
1,668 |
|
|
|
(240 |
) |
|
|
1,908 |
|
|
|
-795 |
% |
Net loss before provision for income taxes |
|
|
(27,470 |
) |
|
|
(12,924 |
) |
|
|
(14,546 |
) |
|
|
113 |
% |
Benefit from income taxes |
|
|
- |
|
|
|
(1,252 |
) |
|
|
1,252 |
|
|
|
-100 |
% |
Net loss and comprehensive loss |
|
$ |
(27,470 |
) |
|
$ |
(11,672 |
) |
|
$ |
(15,798 |
) |
|
|
135 |
% |
Licensing and Collaboration Revenue
Licensing and collaboration revenue decreased $7.1 million, or 70%, to $3.1 million for the six months ended June 30, 2021 from $10.2 million for the six months ended June 30, 2020. The decrease in licensing and collaboration revenue for the six months ended June 30, 2021 was primarily due to decreases of $7.5 million related to the Private Company License Agreement and $0.8
32
million related to completion of work under the Genus Agreement, partially offset by increases of $0.5 million due to recognition of revenue under the AbbVie Agreement and $0.7 million related to other license agreements with various licensees.
The following table summarizes our revenue by licensee for the six months ended June 30, 2021 and 2020:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
AbbVie |
|
$ |
507 |
|
|
$ |
— |
|
Genus |
|
|
- |
|
|
|
844 |
|
Related party private company |
|
|
- |
|
|
|
7,500 |
|
Other licensing agreements |
|
|
2,555 |
|
|
|
1,834 |
|
Total licensing revenue |
|
$ |
3,062 |
|
|
$ |
10,178 |
|
Research and Development Expenses
Research and development expenses increased $6.3 million, or 39%, to $22.5 million for the six months ended June 30, 2021 from $16.2 million for the six months ended June 30, 2020. This increase was primarily related to increases of $2.5 million in costs associated with our intellectual property license and assignment agreements, $1.7 million related to the purchase of materials for our preclinical programs, $1.2 million due to the change in fair value of the MSKCC success payments liability, $1.1 million in payroll and personnel related expenses, and $0.3 million in facilities and other allocated expenses, partially offset by a decrease of $0.4 million in external clinical trial-related activities and contract manufacturing activities for our product candidates.
General and Administrative Expenses
General and administrative expenses increased $3.1 million, or 46%, to $9.7 million for the six months ended June 30, 2021 from $6.6 million for the six months ended June 30, 2020. This increase was primarily related to increases of $1.4 million in recruiting and personnel costs, $0.7 million in costs of prosecuting and maintaining patents licensed from third parties, $0.5 million in expenses related to accounting and financial services, and $0.4 million in facilities and other allocated expenses.
Other Income (Expense)
Interest income decreased by $0.1 million, or 67%, to less than $0.1 million for the six months ended June 30, 2021 from $0.2 million for the six months ended June 30, 2020. This decrease was primarily as a result of a decrease in average cash balances in our interest-bearing money market accounts and a decrease in average interest rates.
Interest expense has not changed for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.
We recognized a $0.7 million change in fair value of our equity investment in Intellia common stock during the six months ended June 30, 2020. We sold Intellia common shares during the three months ended March 31, 2020, and there were no changes in fair value of other equity securities during the six months ended June 30, 2021. We have not held any Intellia shares since March 31, 2020.
Other income of $0.3 million for the six months ended June 30, 2020 was related to earned sale and assignment of patents and patent applications, which was not an ordinary business activity.
The PPP Loan was forgiven in May 2021, and we recognized a gain on the loan extinguishment of $1.6 million for the six months ended June 30, 2021. No such gain was recognized for the six months ended June 30, 2020.
Income Taxes
No income tax benefit or expense was recognized for the six months ended June 30, 2021. An income tax benefit of $1.3 million was recognized for the six months ended June 30, 2020, which was due primarily to the recognition of net operating loss carrybacks under the CARES Act, which generated a tax refund of taxes paid for the year ended December 31, 2018.
33
Liquidity, Capital Resources, and Capital Requirements
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations through the sale of Series A, A-1, B, and C convertible preferred stock that generated approximately $150.1 million in aggregate net proceeds. We have also received approximately $88.4 million in net proceeds from the sale of Intellia common stock received under the Intellia License Agreement. Additionally, we received approximately $72.7 million from licensing agreements, licensing and collaboration agreements, a service agreement, patent assignments, and government grants, including $30.0 million that was received from AbbVie under the AbbVie Agreement.
As of June 30, 2021, we had cash and cash equivalents of $129.5 million. In March 2021, we received net proceeds of $108.8 million from our Series C convertible preferred stock financing and $30.0 million from AbbVie under the AbbVie Agreement. In July and August 2021 we received aggregate net proceeds of approximately $321.0 million from our IPO. We will continue to be dependent upon equity financing, debt financing, and/or other forms of capital raises at least until we are able to generate significant positive cash flows from our operations. We have no ongoing material financing commitments, such as lines of credit or guarantees that are expected to affect our liquidity over the next five years.
Based on our current operating plan, we expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this Quarterly Report. We have based these estimates on our current assumptions that may require future adjustments based on our ongoing business decisions.
Funding Requirements
Our primary use of cash is to fund operating expenses and research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses, and prepaid expenses.
Our future funding requirements will depend on many factors, including the following:
34
Furthermore, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.
If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our preclinical studies, clinical trials, research and development programs, or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, and licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in dilution to our stockholders. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams, or research programs or grant licenses on terms that may not be favorable to us.
Cash Flows
Comparison of the Six Months Ended June 30, 2021 and 2020
The following summarizes our cash flows for the periods indicated:
|
|
Six Months Ended |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
Cash provided by (used in) operating activities |
|
$ |
3,837 |
|
|
$ |
(16,448 |
) |
Cash provided by (used in) investing activities |
|
|
(506 |
) |
|
|
6,967 |
|
Cash provided by financing activities |
|
|
110,286 |
|
|
|
1,541 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
113,617 |
|
|
$ |
(7,940 |
) |
Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities was $3.8 million for the six months ended June 30, 2021 and net cash used in operating activities was $16.4 million for the six months ended June 30, 2020.
Cash provided by operating activities in the six months ended June 30, 2021 was primarily due to our net loss for the year of $27.5 million adjusted by non-cash charges of $2.0 million and net changes in our net operating assets and liabilities of $29.3 million. Our non-cash charges were comprised of a change in the fair value of success payments liability of $1.2 million, $1.0 million of acquired in-process research development accrued at period end, $0.9 million of stock-based compensation, and $0.5 million of depreciation and amortization expense, which were offset by the PPP Loan extinguishment gain upon the loan forgiveness of $1.6 million. The changes in our net operating assets and liabilities were due to increases of $31.8 million in deferred revenue, $1.0 million in accounts payable, $1.0 million in accrued expenses and other current liabilities, $0.7 million in deferred rent and lease incentive liability, and a decrease of $0.5 million in contract assets, offset by increases of $3.9 million in other receivables and $1.8 million in prepaid expenses and other current assets.
Cash used in operating activities in the six months ended June 30, 2020 was primarily due to our net loss for the year of $11.7 million adjusted by non-cash charges of $5.4 million and net changes in our net operating assets and liabilities of $0.6 million. Our
35
non-cash charges were comprised of a change in the fair value of equity securities of $0.7 million, $0.5 million of stock-based compensation, $0.5 million of depreciation and amortization expense, and $0.4 million of acquired in-process research and development, which were offset by receipt of non-cash consideration for licensing and collaboration revenue in the amount of $7.5 million. The changes in our net operating assets and liabilities were primarily due to decreases of $1.6 million in prepaid expenses and other current assets, $0.5 million in other receivables, $0.4 million in contract assets, and an increase of $0.3 million in accounts payable, partially offset by decreases of $0.9 million in accrued expenses and other current liabilities, $0.6 million in deferred revenue, $0.5 million in other liabilities, and $0.3 million in deferred tax liabilities.
Cash Provided by (Used in) Investing Activities
During the six months ended June 30, 2021, net cash used in investing activities was $0.5 million and during the six months ended June 30, 2020, cash provided by investing activities was $7.0 million.
Cash used by investing activities for the six months ended June 30, 2021 was primarily due to our purchases of property and equipment of $0.5 million.
Cash provided by investing activities for the six months ended June 30, 2020 was primarily due to our receipt of $7.7 million in proceeds from the sale of our investment in Intellia common stock, offset by purchases of property and equipment of $0.3 million and cash paid for acquisition of in-process research and development of $0.4 million.
Cash Provided by Financing Activities
During the six months ended June 30, 2021 and 2020, cash provided by financing activities was $110.3 million and $1.5 million, respectively.
Cash provided by financing activities for the six months ended June 30, 2021 was primarily due to our receipt of net proceeds from the issuance of Series C convertible preferred stock in the amount of $108.8 million, proceeds from the exercise of our common stock options of $1.1 million, and repayment of the promissory note issued to the Company’s President and Chief Executive Officer in the amount of $1.2 million, partially offset by principal payments for a capital lease of $0.1 million and payment of deferred issuance costs of $0.7 million.
Cash provided by financing activities for the six months ended June 30, 2020 was primarily due to our receipt of proceeds from the PPP Loan in the amount of $1.6 million, offset by principal payments for a capital lease of $0.1 million.
Contractual Obligations and Commitments
The following summarizes our contractual obligations as of June 30, 2021:
|
|
Less Than |
|
|
|
|
|
Due by Period |
|
|
More Than |
|
|
|
|
|||||
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Operating leases (1) |
|
$ |
3,432 |
|
|
$ |
7,192 |
|
|
$ |
7,901 |
|
|
$ |
24,959 |
|
|
$ |
43,484 |
|
Total obligation (2) |
|
$ |
3,432 |
|
|
$ |
7,192 |
|
|
$ |
7,901 |
|
|
$ |
24,959 |
|
|
$ |
43,484 |
|
36
Other Contractual Obligations
We enter into contracts in the normal course of business with suppliers, CMOs, CROs, clinical trial sites, and the like.
These agreements provide for termination at the request of either party with less than one-year notice and, therefore, we believe that our non-cancelable obligations under these agreements are not material and they are not included in the table above.
We have not included milestones, royalty, or other payments due under our existing license agreements in the table above due to the uncertainty of the occurrence of the events requiring payment under those agreements.
We entered into an Exclusive License Agreement with MSKCC in November 2020, under which we exclusively licensed certain know-how, materials, and intellectual property in a specified field related to our CB-012 program. We are obligated to make success payments to MSKCC of up to $35.0 million if our stock price increases by certain multiples of increasing value based on a comparison of the fair market value of our common stock compared with $5.1914 per share, which is the split-adjusted initial price at which our Series B convertible preferred stock was sold, as adjusted for any future stock splits, during a specified time interval. The relevant time interval commences when the first patient is dosed with our CB-012 product candidate in the first phase 1 clinical trial and ends upon the earlier of the third anniversary of approval of our, or our affiliates’ or licensees’, biologics license application by the FDA for our CB-012 product candidate or 10 years from the date the first patient was dosed with CB-012 in the first phase 1 clinical trial. Additionally, if we undergo a change of control during the specified time interval, a change of control payment may be owed, depending upon the increase in our stock price due to the change of control and also to what extent success payments have already been paid. In no event will the combination of success payments and the change of control payment exceed $35.0 million. The relevant time period during which MSKCC is eligible for success payments and a change of control payment has not yet commenced. As of June 30, 2021 and December 31, 2020, the timing and likelihood of triggering success payments are uncertain and therefore any related payments are not included in the tables above.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under applicable SEC rules.
Critical Accounting Policies and Significant Judgments and Estimates
Our critical accounting policies are disclosed in our audited consolidated financial statements for the year ended December 31, 2020, and the related notes included in the Final Prospectus. Since the date of such financial statements, there have been no material changes to our significant accounting policies other than those described in Note 2 of the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Recently Issued Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for more information regarding recently issued accounting pronouncements.
Indemnification Agreements
As permitted under Delaware General Corporation Law and in accordance with our amended and restated bylaws, we indemnify our executive officers and directors for certain events or occurrences while the executive officer or director is or was serving in such capacity. We are also party to indemnification agreements with our executive officers and directors. We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of June 30, 2021.
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt
37
out of the extended transition period provided in the JOBS Act. As a result, the condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company. As described in “Recently adopted accounting pronouncements” in the condensed consolidated financial statements included elsewhere in this Quarterly Report, we early adopted multiple accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is allowed by the accounting standard.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities.
We had cash and cash equivalents of $129.5 million as of June 30, 2021, which consisted of bank deposits and money market mutual funds. The primary objective of our investment activities is to preserve capital to fund our operations while earning a low-risk return. Because our money market mutual funds are short-term in duration, we believe that our exposure to interest rate risk is not significant, and a hypothetical 1% change in market interest rates during any of the periods presented would not have had a significant impact on the total value of our portfolio.
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with vendors that are located outside of the United States and our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Inflation generally affects us by increasing our cost of labor and research and development costs. We do not believe that inflation had a material effect on our business, results of operations, or financial condition during the three and six months ended June 30, 2021 and 2020.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of June 30, 2021, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of June 30, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2021, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Regardless of the outcome, litigation can have a material adverse effect on us because of defense and settlement costs, diversion of management resources, and other factors. We are not currently a party to any legal proceeding, the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition.
Intellia Arbitration
On October 16, 2018, Intellia initiated an arbitration proceeding (the “Intellia Arbitration”) with JAMS asserting that we had violated the terms and conditions of the Intellia License Agreement. The Intellia Arbitration involved whether two patent families relating, respectively, to CRISPR-Cas9 chRDNA guides and Cas9 scaffolds, are included in the Intellia License Agreement. On September 19, 2019, we received an interim award from the arbitration panel determining that the two patent families are included in the Intellia License Agreement, but the panel granted us an exclusive leaseback to Cas9 chRDNA guides under economic terms to be negotiated by the parties. On February 6, 2020, the arbitration panel clarified that the leaseback relates solely to our CB-010 product candidate, and instructed the parties to negotiate economic terms based on a leaseback of that scope. On June 16, 2021, we entered into a leaseback agreement with Intellia, which resolved the dispute, and, on July 21, 2021, the arbitration panel dismissed the Intellia Arbitration with prejudice. See Note 4 to the condensed consolidated financial statements included elsewhere in this Quarterly Report.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors previously disclosed in the Final Prospectus. The risks described in the Final Prospectus are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities for the Three Months Ended June 30, 2021
The following list sets forth information regarding all unregistered securities sold by us during the three months ended June 30, 2021:
The issuances of the above securities were exempt either pursuant to Rule 701 under the Securities Act, as transactions pursuant to compensatory benefit plans, or pursuant to Section 4(a)(2) of the Securities Act, as transactions by an issuer not involving a public offering.
Use of Proceeds from our IPO
On July 22, 2021, our Registration Statement on Form S-1 (File No. 333-257604) relating to our IPO of our common stock was declared effective by the SEC. On July 22, 2021, we filed a second Registration Statement on Form S-1 (File No. 333-258105) pursuant to Rule 462(b) of the Securities Act, which was effective immediately upon filing.
On July 27, 2021, we closed our IPO and issued and sold 19,000,000 shares of our common stock at a price to the public of $16.00 per share, and on August 9, 2021 we issued and sold an additional 2,850,000 shares of our common stock pursuant to the underwriters’ full exercise of their over-allotment option to purchase additional shares, at the public offering price of $16.00 per share,
39
for aggregate gross proceeds of $349.6 million. BofA Securities, Inc., Citigroup Global Markets Inc., and SVB Leerink LLC acted as joint book-running managers for the IPO and as representatives of the underwriters.
The net proceeds from the IPO to us, after deducting underwriting discounts and commissions and offering expenses of $28.6 million, were $321.0 million. No IPO expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates. We are holding a significant portion of the balance of the net proceeds from our IPO in money market mutual funds. There has been no material change in our planned use of the net proceeds from our IPO described in the Final Prospectus.
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
10.1† |
|
|
10.2† |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
* |
Filed herewith. |
† |
Indicates certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10). |
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Caribou Biosciences, Inc. |
|
|
|
|
|
Date: September 2, 2021 |
|
By: |
/s/ Rachel E. Haurwitz |
|
|
|
Rachel E. Haurwitz President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: September 2, 2021 |
|
By: |
/s/ Jason V. O'Byrne |
|
|
|
Jason V. O’Byrne |
|
|
|
Chief Financial Officer (Principal Financial Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rachel E. Haurwitz, certify that:
Date: September 2, 2021 |
|
By: |
/s/ Rachel E. Haurwitz |
|
|
|
Rachel E. Haurwitz |
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jason V. O’Byrne, certify that:
Date: September 2, 2021 |
|
By: |
/s/ Jason V. O'Byrne |
|
|
|
Jason V. O’Byrne |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Caribou Biosciences, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 2, 2021 |
|
By: |
/s/ Rachel E. Haurwitz |
|
|
|
Rachel E. Haurwitz |
|
|
|
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Caribou Biosciences, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 2, 2021 |
|
By: |
/s/ Jason V. O'Byrne |
|
|
|
Jason V. O’Byrne |
|
|
|
Chief Financial Officer |