Sangamo Therapeutics, Inc 10-K for FY2021
Sangamo Therapeutics, Inc (SGMOQ)
10-K
2022-02-24
For: 2021-12-31
View Original
Added on
April 10, 2026
About this 10-K
Sangamo Therapeutics, Inc filed this 10-K on February 24, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $110.7M
- down 6.3% from $118.19M a year earlier
- Net loss
- $178.29M
- compared with a net loss of $121M a year earlier
- Diluted EPS
- -$1.23
- compared with -$0.90 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________________________
Form 10-K
_______________________________________________________________________________________________
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2021
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: 000-30171
_______________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(510 ) 970-6000
(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 | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
______________________________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant based upon the closing sale price of the common stock on June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter), as reported on the Nasdaq Global Select Market was $1,733,656,253 . For purposes of this calculation, directors and executive officers of the registrant have been deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 22, 2022, a total of 145,968,135 shares of common stock, $0.01 par value per share were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to our future events, including our anticipated operations, research, development, manufacturing and commercialization activities, clinical trials, operating results and financial condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements about:
•our strategy;
•anticipated research and development of product candidates and potential commercialization of any resulting approved products;
•the initiation, scope, rate of progress, enrollment, anticipated results and timing of our preclinical studies and clinical trials and those of our collaborators or strategic partners;
•the therapeutic and commercial potential of our product candidates, including the durability of therapeutic effects;
•the therapeutic and commercial potential of technologies used by us in our product candidates, including our gene therapy and cell therapy technologies, zinc finger protein technology platform, zinc finger nucleases and zinc finger protein transcription factors;
•our ability to establish and maintain collaborations and strategic partnerships and realize the expected benefits of such arrangements, including our ability to find a potential new collaboration partner for the SAR445136 program;
•anticipated revenues from existing and new collaborations and the timing thereof;
•our estimates regarding the impact of the evolving COVID-19 pandemic on our business and operations and the business and operations of our collaborators, including clinical trials and manufacturing, and our ability to manage such impacts;
•our research and development and other expenses;
•our ability to obtain adequate preclinical and clinical supplies of our product candidates from current and potential new suppliers and manufacturers or from our own in-house manufacturing facilities;
•the ability of Sangamo and our collaborators and strategic partners to obtain and maintain regulatory approvals for product candidates, including the ability to proceed with clinical trials following the imposition of regulatory holds on our clinical trials, and the timing and costs associated with obtaining regulatory approvals;
•our ability to comply with, and the impact of, regulatory requirements, obligations and restrictions on our business and operations;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, including our ability to obtain and maintain rights to the technologies required to develop and commercialize our product candidates;
•competitive developments, including the impact on our competitive position of rival products and product candidates and our ability to meet competition from rival products and product candidates;
•our estimates regarding the sufficiency of our cash resources and our expenses, capital requirements and need for additional financing, and our ability to obtain additional financing;
•our ability to manage the growth of our business;
•our projected operating and financial performance;
•our operational and legal risks; and
•our plans, objectives, expectations and intentions and any other statements that are not historical facts.
In some cases, you can identify forward-looking statements by terms such as: “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10‑K. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report on Form 10‑K.
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SUMMARY OF RISK FACTORS
Our business involves significant risks. Below is a summary of the material risks that our business faces, which makes an investment in our common stock speculative and risky. This summary does not address all these risks. These risks are more fully described below under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Before making investment decisions regarding our common stock, you should carefully consider these risks. The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. In such event, the market price of our common stock could decline, and you could lose all or part of your investment. There are also additional risks not described below that are either not presently known to us or that we currently deem immaterial, and these additional risks could also materially impair our business, operations or market price of our common stock.
•We are a clinical-stage biotechnology company with no approved products or product revenues. Our success depends substantially on clinical trial results demonstrating safety and efficacy of our product candidates to the satisfaction of regulatory authorities. Obtaining positive clinical trial results and regulatory approvals is expensive, lengthy, challenging and unpredictable and may never occur for any product candidates.
•Many of our product candidates are based on novel zinc finger protein technologies that have yet to yield any approved commercially viable therapeutic products.
•We have incurred significant operating losses since inception and anticipate continued losses for the foreseeable future. We may never become profitable.
•We require significant additional capital to fund our operations and continue operating as a viable business. This additional capital may not be available to us on favorable terms or at all.
•We rely heavily on collaborations with larger biopharmaceutical companies to generate revenues and develop, obtain regulatory approvals for and commercialize many of our product candidates. If conflicts arise with our collaborators or if the collaborations terminate for any reason, our revenues and product development efforts would be negatively impacted.
•Biotechnology and genomic medicine are highly competitive businesses. Our competitors may develop rival technologies and products that are superior to or are commercialized more quickly than our technologies and product candidates.
•Manufacturing genomic medicines is complex, expensive, highly regulated and risky. We currently rely heavily on third‑party manufacturers and have limited experience manufacturing products ourselves. Manufacturing challenges may result in unexpected costs, supply interruptions and harm and delay to our product development efforts.
•Even if we obtain regulatory approvals for our product candidates, our approved products may not gain market acceptance among physicians and patients and adequate coverage and reimbursement from third-party payors and may not demonstrate commercial viability.
•We may not be able to obtain, maintain and enforce necessary and desirable intellectual property protections for our technologies and product candidates in all desired jurisdictions, which could adversely affect the value of our technologies and our product development efforts and could increase the risks of costly, lengthy and distracting litigation with unpredictable results.
•Third parties, who may or may not be competitors, may allege that we are infringing, misappropriating, or otherwise practicing in an unauthorized manner their patents or other proprietary rights. Such allegations may result in infringement actions, other misappropriation actions or threats of such actions, all of which could increase the risks of costly, lengthy and distracting litigation with unpredictable results.
•Our success depends on hiring, integrating and retaining additional highly qualified skilled employees and retaining current key executives and employees, which may be challenging given that competition for these individuals is intense.
•The ongoing and evolving COVID-19 pandemic could continue to adversely impact our business and operations and the business and operations of our collaborators, manufacturers and other business partners. If such impacts become material, our revenues and product development efforts could be negatively impacted.
•The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of any investment in our common stock.
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PART I
ITEM 1 – BUSINESS
OVERVIEW
We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates leveraging our novel science and our in-house manufacturing capabilities.
Our Product Candidates
Today, we are in the clinic with first-generation gene therapy and autologous cell therapy candidates. Our long-term development strategy is to focus on leveraging our optimized zinc finger, or ZF, technology, a differentiated tool that we are using to develop next-generation genomic medicines, including allogeneic cell therapies and in vivo genome engineering therapies.
Our current clinical-stage product candidates are:
•Isaralgagene civaparvovec, also known as ST-920, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, is currently being evaluated in our Phase 1/2 STAAR clinical study, and we have initiated plans for a Phase 3 clinical trial;
•SAR445136, our zinc finger nuclease, or ZF nuclease, gene-edited cell therapy product candidate for the treatment of sickle cell disease, or SCD, is currently being evaluated in our Phase 1/2 PRECIZN-1 clinical study. We are developing SAR445136 with our collaborator Sanofi S.A., or Sanofi, through June 28, 2022, at which time SAR445136 will become a product candidate wholly-owned by Sangamo;
•TX200, our wholly-owned Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy product candidate for the prevention of immune-mediated rejection in HLA-A2 mismatched kidney transplantation, is currently being evaluated in our Phase 1/2 STEADFAST clinical study; and
•Giroctocogene fitelparvovec, also known as SB-525, is a gene therapy product candidate for the treatment of moderately severe to severe hemophilia A and is the subject of the registrational Phase 3 AFFINE clinical trial. We are developing giroctocogene fitelparvovec with our collaborator Pfizer Inc., or Pfizer.
Our preclinical development is focused in two innovative priority areas: (i) CAR-Treg cell therapies for autoimmune disorders and (ii) genome engineering for neurological diseases. Indications for our preclinical programs include neurodevelopmental disorders, cancer, inflammatory bowel disease, or IBD, tauopathies and neurodegenerative diseases such as amyotrophic lateral sclerosis, or ALS, multiple sclerosis, or MS, and Huntington’s disease, some of which we are developing with our collaborators Biogen MA, Inc. and Biogen International GmbH, which we refer to together as Biogen, Novartis Institutes for BioMedical Research, Inc., or Novartis, Pfizer, and Takeda Pharmaceutical Company Limited, or Takeda.
Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our ZF technology platform. They leverage our collaborators’ therapeutic and clinical expertise and commercial resources with the goal to bring our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZF technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately $815.0 million in upfront licensing fees, milestone payments and proceeds from sales of our common stock to collaborators and have the right to earn up to $6.7 billion in future milestone payments from our collaborations, in addition to potential product royalties.
Our Novel Science
We are a leader in the research and development of zinc finger proteins, or ZFPs, which are abundantly occurring human proteins that have evolved to regulate the genome through interactions with DNA and regulatory proteins. We have developed and optimized a proprietary synthetic ZF technology platform with potential clinical utility in (i) genome editing and genome regulation, which we refer to together as genome engineering, and (ii) gene-edited cell therapy, which we refer to as cell therapy.
Our strategy is to translate our differentiated and versatile ZF technology platform to product candidates with best- or first-in-class clinical potential. For example, ZFPs can be engineered to make ZF nucleases, which are proteins that can be used to edit genomes by specifically modifying DNA sequences by knocking in or knocking out select genes. ZFPs can also be engineered to make zinc finger protein transcription factors, or ZFP-TFs, which are proteins that can be used to regulate genomes by selectively increasing or decreasing gene expression.
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In the process of developing these genome engineering technologies, we have additionally accrued significant scientific, manufacturing and development capabilities, as well as related know-how, that are broadly applicable to the field of gene therapy, which we have used to develop our gene therapy product candidates.
Finally, we have also leveraged our ZF technology platform and technologies obtained through acquisitions to become a leader in researching and developing CAR-Treg product candidates for the treatment of autoimmune and inflammatory diseases in broad patient populations, including kidney transplant rejection, MS and IBD. CAR-Tregs are considered to have enhanced suppressive function over polyclonal Tregs due to the antigen-specificity introduced by the CAR.
Our In-house Manufacturing
We believe that our in-house manufacturing capacity provides us a competitive advantage. We currently operate an adeno-associated virus, or AAV, manufacturing facility in our Brisbane, California headquarters and cell therapy manufacturing facilities in Brisbane, California and Valbonne, France. Our manufacturing strategy is to provide greater flexibility, quality and control by building a balanced and necessary capacity achieved through our in-house manufacturing and contract manufacturing organization, or CMO, partnerships, investing in manufacturing processes and analytics and developing a strong supply chain.
Business Updates
Isaralgagene civaparvovec - Fabry Disease
In February 2022, we presented updated preliminary clinical data from our Phase 1/2 STAAR study evaluating isaralgagene civaparvovec, or ST-920, our wholly‑owned gene therapy product candidate for the treatment of Fabry disease, a rare inherited metabolic disease. A summary of the data presented is below.
•STAAR is an ongoing Phase 1/2 multicenter, open-label, dose-ranging clinical study designed to assess the safety and tolerability of a single infusion of isaralgagene civaparvovec in Fabry disease patients ≥ 18 years of age. Patients are infused intravenously with a single dose and followed for 52 weeks. A separate long-term follow-up study is underway to monitor the patients treated in this study for up to five years following treatment. The study design provides for at least two subjects to be dosed in each dose cohort, with a potential expansion in each cohort. Patients who are on stable enzyme replacement therapy, or ERT, may withdraw ERT after treatment in a controlled and monitored fashion at the discretion of the patient and the investigator.
•The dose escalation phase includes males with classic Fabry disease. The study is expected to be subsequently expanded to treat females, as well as patients with Fabry-associated cardiac or renal disease. The study’s primary endpoint is incidence of treatment-emergent adverse events. Additional safety evaluations include routine hematology, chemistry and liver tests; vital signs; electrocardiogram; echocardiogram; serial alpha-fetoprotein testing and magnetic resonance imaging, or MRI, of liver to monitor for potential formation of any liver mass. Secondary endpoints include change from baseline at specific time points over the one-year study period in alpha‑galactosidase A, or α‑Gal A, activity, globotriaosylceramide, or Gb3, and lyso‑Gb3 levels in plasma; frequency of ERT infusion; changes in renal function, cardiac function and left ventricular mass, measured by cardiac MRI and rAAV2/6 vector clearance. Key exploratory endpoints include quality of life, Fabry symptoms and neuropathic pain scores; and immune response to AAV6 capsid and α‑Gal A.
•As of the November 9, 2021 cutoff date, five patients, ranging in age from 22 to 48 years, were treated with isaralgagene civaparvovec. Two patients were treated in Cohort 1 at the dose of 0.5e13 vg/kg, two patients were dosed in Cohort 2 at the dose of 1e13 vg/kg and one patient was dosed in Cohort 3 at the dose of 3e13 vg/kg. As of the cutoff date, the first treated patients had been followed for at least 52 weeks and the most recently treated patient had been followed for three weeks. A sixth patient, the second patient in Cohort 3, was dosed following the cutoff date.
•As of the November 9, 2021 cutoff date, isaralgagene civaparvovec continued to be generally well tolerated across the three dose cohorts in the five treated patients. One patient each in Cohorts 1, 2 and 3 exhibited treatment-related adverse events for a total of eleven events, which were all graded as mild (Grade 1). No treatment-related serious adverse events were reported. Prophylactic steroids were not required per the study protocol, and as of the cutoff date, no patients had exhibited liver enzyme elevations necessitating steroid treatment.
•Results of plasma α‑Gal A activity as of the cutoff date for the first four patients treated in the first two dose cohorts are shown in the figure below. All four patients exhibited above normal levels of α‑Gal A activity by week 12 following treatment through 25 weeks for the most recently treated patient and 52 weeks for the first two patients treated. α-Gal A activity ranged from a 3-fold to 15-fold increase above mean normal activity levels as of
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the last date of measurement. For the two patients on ERT, α‑Gal A activity measured at ERT trough was 15-fold above mean normal at week 52 (Cohort 1) and 10-fold above mean normal at week 25 (Cohort 2). Withdrawal from ERT has been completed for one of these patients and is planned for the other patient on ERT, based on the stability of their α‑Gal A activity following treatment. For the two ERT pseudo-naïve patients, α‑Gal A activity was 3-fold above mean normal at week 52 (Cohort 1) and 4-fold above mean normal at week 40 (Cohort 2). The first patient in Cohort 3 exhibited α‑Gal A activity within mean normal range by week 2.
•In the one patient with the highest elevated levels pre-treatment, plasma lyso-Gb3 levels decreased by approximately 40% from baseline within ten weeks after dosing through week 36. The other three patients, with lower baseline levels of lyso-Gb3, maintained steady lyso-Gb3 levels through the cutoff date.
•Several of the patients reported subjective improvements in quality-of-life measures as of the cutoff date. Three of the five patients exhibited improvements in anhidrosis (inability to sweat) or hypohidrosis (reduced ability to sweat), a primary and common Fabry disease symptom. Cardiac MRI findings stabilized following treatment in two patients.
Phase 1/2 STAAR Study: Plasma α‑Gal A activity
Biomarker results are presented from the four patients in the first two dose cohorts (0.5e13 vg/kg and 1.0e13 vg/kg) as of the cutoff date of November 9, 2021.
(*) Fold change was calculated at last measured time point. α‑Gal A activity was measured using a 3-hour reaction time and presented in nmol/h/mL. For Patients 1 and 4 this was sampled at ERT trough. Normal range and mean were determined based on healthy male individuals.
(†) Patient was withdrawn from ERT at week 24.
The sixth patient in the STAAR study, who is the second patient in Cohort 3, was dosed after the cutoff date. We expect to provide updated data in the second half of 2022. Based on the Phase 1/2 data, we have initiated Phase 3 planning.
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SAR445136 - Sickle Cell Disease
In December 2021, we and Sanofi presented updated preliminary proof-of-concept clinical data from our Phase 1/2 PRECIZN‑1 study evaluating SAR445136, our ZF nuclease gene-edited cell therapy product candidate for the treatment of sickle cell disease. Nine patients were enrolled as of the data cutoff date of September 22, 2021. Of the eight patients who completed mobilization and apheresis as of the cutoff date, five achieved successful target yields of HSPCs whereas two patients failed to mobilize and one patient discontinued due to intercurrent cholangitis. Four of the five patients achieving successful target yields of HSPCs had been infused with SAR445136 as of the cutoff date. Baseline patient characteristics of these four patients are in Table 1 below. As of the September 22, 2021 cutoff date, the most recently treated patient in the PRECIZN‑1 Phase 1/2 study had been followed for 26 weeks and the longest-treated patient had been followed for 91 weeks. None of the four treated patients required blood transfusions post engraftment. Total hemoglobin stabilized by week 26 after treatment with SAR445136 in all four patients. Fetal hemoglobin level increased from 0.1-11% at screening to 14-39% by week 26 in all four patients and was 38% in the longest-treated patient at 91 weeks (see Figure 1 below). Percent F cells increased to 64-96% by 39 weeks of follow-up in all four patients, persisting at 99% in the patient with 91 weeks of follow-up. SAR445136 had on-target BCL11A gene modification (61-78%) in all four patients. As of the cutoff date, SAR445136 was generally well tolerated, and there were no adverse events assessed as related to SAR445136. Most adverse events reported in the screening, mobilization, apheresis and conditioning periods were SCD-related events. The investigator reported two serious adverse events of sickle cell anemia with a vaso‑occlusive crisis, or VOC, as related to plerixafor, and one serious adverse event of nausea as related to busulfan. Most adverse events reported after infusion of SAR445136 were related to busulfan. The investigator reported one serious adverse event of sickle cell anemia with a VOC nine months after infusion in one patient, and no other SCD‑related events were reported in the four patients post-infusion. See Figure 2 below for VOCs reported before and after infusion of SAR445136. Additional data from this study are expected to be presented at a medical meeting in 2022.
Table 1: Baseline Characteristics and Clinical History
(*) Hydroxyurea, RBC = Red Blood Cell
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Figure 1: Total Hb and Hb Fractionation in All Patients After SAR445136 Infusion
HbA = Adult hemoglobin, HbA2 = Variant adult hemoglobin, HbF = Fetal hemoglobin, HbS = Sickle hemoglobin
Figure 2: Number of VOCs Reported Pre- and Post- SAR445136 Infusion
VOC = Vaso-Occlusive Crisis
We expect that the next four patients treated in the study will be dosed with a product candidate manufactured using improved methods, which has been shown in internal experiments to increase long-term progenitor cells. We expect to complete dosing of these patients in the third quarter of this year.
In January 2022, we announced that Sanofi will be transitioning its rights and obligations related to SAR445136 to us as of June 28, 2022. This transition follows Sanofi’s notice of termination for convenience of the collaboration and license agreement between Sanofi and Sangamo to develop genomic medicines for hemoglobinopathies. Sanofi has elected to transition the SAR445136 program to us following a recent change in Sanofi’s strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. We and Sanofi are collaborating on an orderly transition, while we explore options to advance the program, including seeking a potential new collaboration partner. We expect the Phase 1/2 PRECIZN‑1 study of SAR445136 to be completed as planned and that Sanofi will continue to pay the costs of the Phase 1/2 PRECIZN‑1 study until the termination date of June 28, 2022, as contemplated by the collaboration and license agreement.
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TX200 – HLA-A2 Mismatched Kidney Transplant Rejection
We have enrolled the first patient into our Phase 1/2 STEADFAST clinical study evaluating TX200, our wholly owned autologous CAR-Treg cell therapy product candidate to prevent immune-mediated rejection in HLA‑A2 mismatched kidney transplantation from a living donor, and we expect to dose this patient soon. We expect to dose the second patient in this study by the middle of 2022. We continue to open study sites and screen patients.
Giroctocogene Fitelparvovec - Hemophilia A
In December 2021, we and Pfizer presented updated follow-up data from the Phase 1/2 Alta study of giroctocogene fitelparvovec, our investigational gene therapy for the treatment of moderately severe to severe hemophilia A. Eleven male patients participated in the study overall, with five patients in the 3e13-vg/kg highest dose cohort. See Table 1 below for baseline patient demographics. As of the October 1, 2021 cutoff date, all five patients in the highest dose cohort had completed at least 104 weeks of follow-up. The results showed that, at 104 weeks, the five patients in the high dose cohort had mean factor VIII, or FVIII, activity of 25.4% of normal as measured by chromogenic clotting assay at the central laboratory. Maintenance of FVIII activity in the mild range (>5%) or greater improves outcomes for patients with severe hemophilia A.
In the highest dose cohort, mean annualized bleeding rate, or ABR, was zero in the first year post-infusion and was 1.4 throughout the total duration of follow-up as of the cutoff date. In this highest dose cohort, two patients experienced bleeding events necessitating treatment with exogenous FVIII, all occurring after week 69 post-infusion: one patient experienced 8 bleeding events (5 traumatic, 2 spontaneous, 1 unknown) and one patient experienced one bleeding event in a target joint, circumstances unknown. No participants in the highest dose cohort have resumed prophylaxis as of the cutoff date.
As of the October 1, 2021 cutoff date, six of the eleven patients had experienced treatment-related adverse events, including four of the five patients in the highest dose cohort. The most commonly reported treatment-related adverse events included elevated liver enzymes and infusion-related reactions: increased alanine aminotransferase, or ALT (5/11 (45.5%) overall; 3/5 (60.0%) in the highest dose cohort), increased aspartate aminotransferase, or AST (3/11 (27.3%) overall; 2/5 (40.0%) in the highest dose cohort), pyrexia (3/11 (27.3%) overall; 3/5 (60.0%) in the highest dose cohort), and tachycardia (2/11 (18.2%) overall; 2/5 (40.0%) in the highest dose cohort). Treatment-related serious adverse events were reported in one patient in the highest dose cohort who experienced grade 3 hypotension and fever with onset approximately six hours after giroctocogene fitelparvovec infusion; the events fully resolved with treatment and did not delay post-infusion discharge the next day. See Table 2 below for more details on treatment-related adverse events. Additionally, as of the cutoff date, no confirmed FVIII inhibitor development occurred, and no thrombotic events, neoplastic events, abnormal alfa-fetoprotein and/or liver masses were reported. Additional follow-up is required to assess durability of therapeutic effect and other long-term effects of giroctocogene fitelparvovec, such as impact on overall patient liver health.
Table 1: Baseline Participant Demographics
Data cut: October 1, 2021, Max = Maximum, Min = Minimum, SD = Standard Deviation, vg = vector genomes
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Table 2: Treatment-Related Adverse Events
Data cut: October 1, 2021
(a) One patient experienced grade 3 hypotension that was considered related to study drug and resolved with treatment
AE = Adverse Event, ALT = Alanine Transaminase, AST = Aspartate Aminotransferase, vg = vector genomes
Table 3: FVIII Activity in Cohort 4 (3e13 vg/kg)
Latest available FVIII values from October 1, 2021 data cut, FVIII = Factor VIII, vg = vector genomes
In November 2021, following the observation of FVIII levels greater than 150% in some treated patients, we and Pfizer announced that Pfizer voluntarily paused screening and dosing of additional patients in the Phase 3 AFFINE clinical trial of giroctocogene fitelparvovec to implement a protocol amendment to provide clinical management guidance for elevated FVIII levels. Subsequently, on November 3, 2021, the U.S. Food and Drug Administration, or FDA, informed Pfizer that this trial had been placed on clinical hold while the protocol amendment and associated documents are reviewed.
Pfizer has announced that it is in the process of submitting the protocol amendment and associated documents to health authorities in the countries where the trial is being conducted and preparing responses to the FDA clinical hold, and in February 2022, Pfizer announced that it hopes to obtain agreements to resume the AFFINE trial and to begin to reopen trial sites in the first half of 2022.
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AFFINE is a global Phase 3, open-label, multicenter, single arm trial evaluating the efficacy and safety of a single infusion of giroctocogene fitelparvovec in more than 60 adult (ages 18-64 years) male patients with moderately severe to severe hemophilia A. The primary endpoint is impact on ABR through 12 months following treatment with giroctocogene fitelparvovec, compared to ABR on FVIII replacement therapy collected in the Phase 3 lead-in study period. The Phase 3 study is over 50% enrolled, and enrollment in the Phase 3 lead-in study is completed. We and Pfizer anticipate pivotal data readouts for this trial to be based on a full analysis of all study participants, when the first 50 patients are twelve months past reaching a steady-state of FVIII expression. We have the potential to earn up to $245 million in future milestone payments plus tiered royalties of 14%-20% on potential future product sales.
OUR TECHNOLOGY
Our strategy is to translate our differentiated and versatile ZF technology platform to create product-candidates with best- or first-in-class clinical potential. We believe that the versatility and flexibility of our technology platforms enable us to design therapeutic approaches to resolve the underlying genetic or cellular causes of disease, using whichever technology is best suited to deliver that treatment. Our current innovative areas of focus in preclinical studies include genome regulation with our ZF technology platform in the central nervous system, or CNS, diseases and CAR-Treg cell therapy for autoimmune diseases.
ZFPs: Naturally Occurring Sequence Specific DNA Binding Proteins in Humans
ZFPs are naturally-occurring sequence-specific DNA-binding proteins in humans that recognize and bind to a specific DNA sequence within or near a particular gene and causes expression of that gene to be “turned on” (activated) or “turned off” (repressed). ZFPs are the most common class of such naturally-occurring proteins in a wide range of organisms from yeast to humans. Functional domains may be added to ZFPs that enable genome editing (with enzymes such as nucleases or integrases) or genome regulation (with activators and repressors) at a specific genomic site determined by the ZFP DNA‑binding domain.
Figure 1: Schematic of the two-domain structure of a zinc finger DNA-binding domain and its functional domain
Consistent with the structure of natural ZFPs, we take a modular approach to the design of the proteins that we engineer. The DNA-recognition part of our engineered proteins is typically composed of four to six zinc fingers. Each individual finger recognizes and binds to a three or four base-pair sequence of DNA and multiple fingers can be linked together to form a zinc finger array that recognizes longer stretches of DNA, thereby improving specificity. By modifying the amino acid sequence of ZFPs, we can engineer novel zinc finger arrays capable of recognizing the unique DNA sequences of a chosen genomic target.
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Figure 2: Schematic of a ZFP and a zinc finger array composed of 6 ZFPs
The engineered DNA-binding zinc finger array is then linked to a functional domain. The DNA-binding zinc finger array brings this functional domain to the target of interest. Our ability to use our highly specific ZFPs to precisely target a DNA sequence to a gene of interest provides us with a range of genome editing and genome regulation functionalities that can be applied to multiple cell types.
Figure 3: Examples of genome engineering tools that can be offered by our ZF platform
Our engineered zinc fingers can be attached to a cleavage domain of a restriction endonuclease, an enzyme that cuts DNA, creating a ZF nuclease. When a pair of ZF nucleases binds DNA in the correct orientation and spacing, a cut is introduced into the DNA sequence between the ZF binding sites. DNA binding by both ZF nucleases is necessary for cleavage, and the two halves of the endonuclease must be present in the correct orientation to interact with one another in order to mediate DNA cleavage. This break in the DNA triggers a natural process of DNA repair within the cell. This endogenous DNA repair process may be harnessed to achieve one of several outcomes that may be therapeutically useful (Figure 2). If cells are treated with ZF nucleases alone, the repair process joins the two ends of the broken DNA together and frequently results in the
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loss (deletion) or addition (insertion) of a small amount of genetic material at the site of the break. These insertions and deletion events are collectively known as “indels.” These disrupt the target DNA sequence and result in the expression of a truncated or non-functional protein from the targeted gene, effectively “knocking out” the gene function. ZF nuclease-mediated genome editing can be used to disrupt genes that are involved in disease pathology. We are using ZF nuclease-mediated genome editing of the BCL11A erythroid specific enhancer, or ESE, in hematopoietic stem progenitor cells, or HSPCs, as the basis of a potential long-lasting and once only treatment for SCD (SAR445136).
In contrast, if cells with a mutation in a particular gene are treated not only with ZF nucleases, but also with an additional DNA sequence that encodes the correct gene sequence (referred to as a “donor” DNA) and with ZF nucleases that recognize and bind to sequences flanking the mutation, the cell’s repair machinery can use the donor DNA as a template to correct the mutated gene. This ZF nucleases-mediated gene correction enables the corrected gene to be expressed in its natural chromosomal context and may provide a novel approach for the precise repair of DNA sequence mutations responsible for certain monogenic diseases. In addition to providing a donor sequence that encodes a complete gene, a new copy of a gene can also be precisely added into the genome at a specific location. The ability to precisely place a gene-sized segment of DNA specifically into a pre-determined location in the genome broadens the range of mutations of a gene that can be corrected in a single step. It also reduces the insertional mutagenesis concerns associated with traditional integrating gene replacement approaches such as lentiviruses, in which the insertion of a new corrective copy of the gene typically occurs at random locations in the genome.
We are also evaluating ZF transcription factors, which have the potential to regulate the expression of a target gene (Figure 4). For instance, coupling an activation domain to a zinc finger will cause a target gene to be expressed at increased levels, relative to an untreated cell. Alternatively, a repression domain causes the gene to be downregulated or completely turned off. ZF transcription factors can also be designed to selectively repress expression of a mutant allele while allowing for the expression of the healthy allele. We have several preclinical programs evaluating the potential of ZF transcription factors that have been designed to down regulate the expression of genes as potential treatments for CNS diseases, including a collaboration agreement with Biogen for tauopathies and Parkinson’s disease, a collaboration with Takeda, for Huntington’s disease and a collaboration with Pfizer for ALS. We also have a preclinical collaboration with Novartis evaluating the potential of ZF transcription factors to upregulate expression of genes as a potential treatment for autism spectrum disorders and intellectual disability.
Figure 4: ZF transcription factors have the potential to regulate the expression of a target gene
ZF Platform Provides Opportunity to Develop a New Class of Human Therapeutics
We believe that our ZF platform provides a unique and proprietary basis for a broad new class of drugs that have differentiated technical advantages over small-molecule drugs, protein pharmaceuticals, RNA-based therapeutics, conventional gene therapy approaches and other gene and genome editing platforms, potentially enabling us to develop therapies that address
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a broad range of unmet medical needs. We notably believe that our ZF genomic medicines have the potential to transform treatment strategies for severe diseases from symptom management to lasting cures.
We can generate highly specific ZF nucleases for genome editing and ZF transcription factors for genome regulation using a range of proprietary methods. We are developing delivery strategies to administer these therapeutics, including using mRNA, AAV, adenovirus, plasmid, lipid nanoparticles and direct injection into brain tissue or into the cerebrospinal fluid. As more genes and DNA sequences are linked to specific diseases, we believe that the clinical breadth and scope of our ZF therapeutic reagents will continue to expand.
CAR-Tregs Have Potential to Address Autoimmune and Inflammatory Diseases
A key area of focus in our preclinical pipeline is our CAR-Treg programs we are studying in autoimmune and inflammatory diseases. Tregs are a type of white blood cell and act as the key regulators of the immune system. Their natural role is to maintain immune homeostasis and prevent undesirable immune reactions to autoantigens (autoimmunity) or to antigens that are normally tolerated (food antigens, inhaled antigens, contact antigens and bacterial flora antigens). Tregs play the role of ‘peacekeepers’ containing other T cells before they become harmful to the organism, ensuring the immune system does not mistakenly attack healthy organs while still protecting the body from harm, e.g., from viruses and bacteria.
We are genetically re-programming Tregs ex vivo to add a CAR to give Tregs the ability to target a specific protein, called an antigen. CAR-Tregs are thus re-programmed to recognize and accumulate in specific tissues where the antigen is being expressed and an immune-mediated disorder is occurring. Our preclinical research shows that CAR-Tregs can inhibit overactive immune cells within the body. Moreover, they have the potential to induce long-term immune tolerance – a state of non-reactivity by the immune system to a particular auto-antigen. We aim to develop therapies that can induce and restore immune tolerance to address a wide range of inflammatory and autoimmune diseases.
CARs are composed of three main parts (see Figure 5):
•The extracellular section is composed of a single chain variable fragment, or scFv, typically derived from a monoclonal antibody and designed to recognize the target antigen, and a spacer or hinge to add spatial flexibility.
•The transmembrane domain anchors the CAR in the plasma membrane.
•The intracellular section, made of signaling and co-stimulatory domains, transmits an intracellular signal upon recognition of the antigen by the scFv.
Figure 5: Schematic of CAR-Treg cell recognizing antigen on tissue cell
We carefully select the CAR target antigen for each autoimmune or inflammatory indication. Our CAR-Treg cells are designed to be active only at the site of inflammation, ensuring specific and selective action. For instance, for a CNS disease such as MS, we want to make sure that the target antigen is localized in the CNS. The target antigen may in some instances be linked to the disease etiology.
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A major feature of Tregs is that they can act via multiple mechanisms to mediate suppression. Their mechanism of action can be mediated upon cell contact, through soluble factors, metabolism disruption and/or cytolysis.
•Following IV administration, CAR-Tregs are expected to migrate toward inflamed tissues due to Tregs’ natural ability to migrate towards inflammatory tissues.
•Subsequently, CAR-Treg are expected to bind to their specific antigen, leading to the proliferation and activation of CAR-Treg cells.
•This activation is expected to allow Tregs to exert their natural anti-inflammatory and immuno-suppressive activities, acting through multiple molecular and cellular targets.
Figure 6: Expected mechanism of action of CAR-Tregs
Our most advanced CAR-Treg product candidate, TX200, is being studied for the prevention of immune-mediated rejection following HLA-A2 mismatched kidney transplantation from a living donor. TX200 is an autologous CAR-Treg cell therapy product candidate. An autologous cell therapy is made using cells from the same person as the recipient of the cells, as shown on Figure 7.
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Figure 7: Schematic of our autologous CAR-Treg approach
In TX200, the patient’s Tregs are collected before transplant, genetically engineered with a CAR, and then injected back into the same patient. As a result of this detailed process, we expect dosing of patients will occur several months after their enrollment. The CAR in TX200 is designed to recognize the HLA-A2 protein present on the transplanted kidney.
The first patient has been enrolled in our STEADFAST clinical study, which we expect will help us understand how CAR-Tregs work in humans and may provide broader proof of concept for genetically modified cell therapy using Tregs.
We are convinced of the fundamental impact of our CAR-Treg approach and are initiating the next step with the goal of making the approach available to a larger group of patients. Accordingly, we are developing ZF nuclease-edited allogeneic Treg therapies. Allogeneic cell therapies are donor derived, made using cells from a different person to the recipient of the cells, as opposed to autologous cell therapies. We believe that allogeneic therapies are the future of cell therapy and will overcome the challenges of autologous approaches such as scale and manufacturing. If we are able to demonstrate proof‑of‑concept of autologous TX200, we anticipate follow-on allogeneic programs. There is tremendous potential from there to go into many other large autoimmune indications such as rheumatoid arthritis or diabetes.
Gene Therapy Introduces Genes into a Patient’s Cells to Treat Genetic Diseases
In the process of developing our ZFP technologies, we have refined our understanding of gene therapies. Gene therapy is the treatment of disease by delivery of a new gene into a patient’s cells to replace an incorrect or damaged gene. Most often, gene therapy works by introducing a corrected copy of a defective gene into the patient’s cells, without removing or modifying DNA. The goal of gene therapy is to treat, or potentially cure, a genetic disease by adding back a normal copy of the gene responsible for the disease.
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In gene therapy, we can deliver a therapeutic gene by engineering a deactivated virus to deliver DNA for a human therapeutic protein rather than viral proteins. One virus that is commonly used in gene therapy is adeno-associated virus, or AAV. AAV is a naturally occurring virus that infects humans but is not known to cause disease. Engineered AAV has been used as a delivery method for gene therapy in many clinical trials in the U.S. and Europe and has been found thus far to be generally well-tolerated without major side effects. A gene encoding a therapeutic protein can be packaged into AAV and delivered to cells in tissues such as the liver, the eye, the brain or the heart. Once inside the cell, the gene is unpacked from the virus coat, or capsid, and can then enable that cell to make the therapeutic protein. AAV can be manufactured at a large enough scale for use as a human therapeutic.
Figure 8: Our gene therapy technology
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THERAPEUTIC PRODUCTS IN DEVELOPMENT
Proprietary Programs
Isaralgagene civaparvovec - Fabry Disease
Isaralgagene civaparvovec is our gene therapy product candidate being developed for the treatment of Fabry disease, a rare inherited metabolic disease. STAAR is an ongoing Phase 1/2 multicenter, open-label, dose-ranging clinical study designed to assess the safety and tolerability of a single infusion of isaralgagene civaparvovec in Fabry disease patients ≥ 18 years of age. Patients are infused intravenously with a single dose and followed for 52 weeks. A separate long-term follow-up study is underway to monitor the patients treated in this study for up to five years following treatment. The study design provides for at least two subjects to be dosed in each dose cohort, with a potential expansion in each cohort. Patients who are on stable enzyme replacement therapy, or ERT, may withdraw ERT after treatment in a controlled and monitored fashion at the discretion of the patient and the investigator.
The dose escalation phase includes males with classic Fabry disease. The study is expected to be subsequently expanded to treat females, as well as patients with Fabry-associated cardiac or renal disease. The study’s primary endpoint is incidence of treatment-emergent adverse events. Additional safety evaluations include routine hematology, chemistry and liver tests; vital signs; electrocardiogram; echocardiogram; serial alpha-fetoprotein testing and magnetic resonance imaging, or MRI, of liver to monitor for potential formation of any liver mass. Secondary endpoints include change from baseline at specific time
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points over the one-year study period in α‑Gal A activity, Gb3 and lyso‑Gb3 levels in plasma; frequency of ERT infusion; changes in renal function, cardiac function and left ventricular mass, measured by cardiac MRI and rAAV2/6 vector clearance. Key exploratory endpoints include quality of life, Fabry symptoms and neuropathic pain scores; and immune response to AAV6 capsid and α‑Gal A.
The goal of the study is to abrogate the need for ERT with a recombinant AAV2/6 vector encoding cDNA for human α‑Gal A, resulting in long-term expression of α‑Gal A. As a liver-directed gene therapy, isaralgagene civaparvovec is designed to be delivered by a one-time IV infusion that does not require any preconditioning regimen for patients. We believe isaralgagene civaparvovec has the potential to deliver efficacy with preserved renal function and reduced cardiac morbidity and neuropathy.
For recent updates on isaralgagene civaparvovec, please see Business Updates above.
CAR-Treg Cell Therapy - TX200 - HLA-A2 Mismatched Kidney Transplant Rejection
TX200 is our autologous HLA-A2 specific CAR-Treg cell therapy product candidate that we have developed for the prevention of immune mediated rejection following HLA-A2 mismatched renal transplantation. We are currently evaluating TX200 in our Phase 1/2 STEADFAST clinical study. We believe the STEADFAST study will be critical for our understanding of CAR-Treg pharmacology and biology in patients as well as establishing process development and manufacturing know-how.
TX200 has been developed for patients with end-stage renal disease or ESRD, receiving a kidney transplant, where the recipient of the kidney is HLA-A2 negative and the donor is HLA-A2 positive. A kidney transplant is considered the best treatment option for ESRD, the last stage of chronic kidney disease, when a person’s kidneys are no longer working. HLA mismatch is the initial and most important barrier to successful transplantation after ABO blood types incompatibility, and approximately 21-26% of transplanted organs are HLA-A2 mismatched. In the case of an HLA-A2 positive kidney transplanted into an HLA-A2 negative patient, the recipient’s immune system can recognize this mismatch and, without long-term immunosuppressive medication, will attack the new kidney carrying the HLA-A2 protein, leading to graft rejection. A lifetime of immunosuppressive therapy is associated with significant morbidity and mortality, including the development of systemic infection, malignancy and cardiovascular disease, the leading cause of death in this patient population. Therefore, the induction of immunological tolerance defined a stable and acceptable graft function without the need for immunosuppression remains a key priority in this field of medicine.
TX200 is composed of autologous Treg cells engineered to express an HLA-A2 CAR, allowing them to localize to the renal graft and activate upon recognition of the HLA-A2 antigen. We believe that TX200 has the potential to prevent kidney rejection by binding to the HLA-A2 positive kidney and inducing immune tolerance.
Similar to other genetically engineered cell therapy approaches, patients undergo a leukapheresis procedure, from which their Treg cells are isolated and engineered then cryopreserved. The HLA-A2 negative patient subsequently undergoes transplantation surgery to receive a kidney from their HLA-A2 positive living donor. Following a recovery period, the transplant recipient receives their personalized TX200 drug candidate. As a result of this detailed process, we expect dosing of patients to occur several months after study initiation and patient enrollment.
Our goal is that TX200 establishes the foundation for a portfolio of CAR-Tregs for major autoimmune indications. We believe that allogeneic therapies are the future of cell therapy and will overcome the challenges of autologous approaches such as scale and manufacturing. If we are able to demonstrate proof-of-concept of autologous TX200, we will continue to advance our kidney transplant allogeneic program which is currently in preclinical development.
For recent updates on TX200, please see Business Updates above.
CAR-Treg Cell Therapy - IBD
We continue to advance preclinical development of our wholly-owned CAR-Treg program to treat IBD. IBD covers debilitating disorders that involve chronic inflammation of the digestive tract, including ulcerative colitis and Crohn's disease. Our product candidate to treat IBD is composed of allogeneic Treg cells engineered to express a CAR designed to recognize an antigen relevant to IBD, so that it allows resulting CAR-Treg cells to localize and activate in the gut.
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In October 2021, we presented the first preclinical data from our allogeneic IL23R-CAR-Treg product candidate in a poster at the European Society of Gene and Cell Therapy (ESGCT) Annual Congress. In this poster, we discussed our choice for the CAR target and the selection of the CAR scFv (antigen-recognition part). We showed in vitro results demonstrating that our IL23R-CAR-Treg product candidate binds to IL23R, gets activated upon binding to IL23R, and then shows an efficient suppressive function. Our in vivo data in two IBD mouse models confirmed these findings, showing that our product-candidate migrates to the site of inflammation and becomes activated after target encounter, resulting in a significant improvement of the overall disease score. Overall, our data suggest that engineered IL23R-CAR-Tregs have the potential to be a promising product‑candidate for treating Crohn’s Disease. Furthermore, we believe their mode of action could also pave the way for treating other IBD and chronic autoimmune pathologies involving IL23R.
Our IL23R CAR-Treg candidate for Crohn's disease
CAR-Treg Cell Therapy - MS
We continue to advance preclinical development of our wholly-owned CAR-Treg program to treat MS, an autoimmune disease of the CNS. Similar to our IBD program, our product candidate to treat MS is composed of allogeneic Treg cells engineered to express a CAR designed to recognize an antigen relevant to MS, so that resulting CAR-Tregs can localize and activate in the CNS.
Genome Engineering - Prion Disease
We continue to advance our wholly-owned preclinical genome engineering program in prion disease, a fatal and incurable neurodegenerative disease caused by the misfolding of the prion protein encoded by the gene PRNP.
Partnered Programs
SAR445136 - Sickle Cell Disease
We and Sanofi are currently evaluating SAR445136, our ZF nuclease gene-edited cell therapy product candidate for SCD in the Phase 1/2 PRECIZN-1 study.
SAR445136 involves genome editing of a patient’s own hematopoietic stem progenitor cells using non-viral delivery of our ZF nuclease technology designed to induce the synthesis of fetal hemoglobin. This is achieved by gene-edited knock out of the erythroid specific enhancer of the BCL11a gene, which encodes a strong repressor of the gamma globin gene. In SCD, increased fetal hemoglobin synthesis may provide the patient with functional hemoglobin and help downregulate the abnormal sickle hemoglobin that results in painful sickle cell crises and other disease feature.
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Our ZF cell therapy approach to treat SCD
In January 2022, we announced that Sanofi will be transitioning its rights and obligations related to SAR445136 to us as of June 28, 2022. Sanofi has elected to transition the SCD program to us following a recent change in Sanofi’s strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies We and Sanofi are collaborating on an orderly transition, while we explore options to advance the program, including seeking a potential new collaboration partner. We expect the Phase 1/2 PRECIZN-1 study of SAR445136 to be completed as planned and that Sanofi will continue to pay the costs of the Phase 1/2 PRECIZN-1 study until the termination date of June 28, 2022, as contemplated by the collaboration and license agreement between Sangamo and Sanofi.
For recent updates on SAR445136, please see Business Updates above.
Giroctocogene Fitelparvovec - Hemophilia A
We and Pfizer continue to develop giroctocogene fitelparvovec, or SB-525, which is currently the subject of our registrational Phase 3 AFFINE clinical trial as an investigational gene therapy for moderately severe to severe hemophilia A. Under our collaboration agreement with Pfizer, we conducted the Phase 1/2 Alta clinical study and certain manufacturing activities, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization, including the Phase 3 AFFINE clinical trial.
AFFINE is a global Phase 3, open-label, multicenter, single arm trial evaluating the efficacy and safety of a single infusion of giroctocogene fitelparvovec in more than 60 adult (ages 18-64 years) male patients with moderately severe to severe hemophilia A. The primary endpoint is impact on annual bleed rate, or ABR, through 12 months following treatment with giroctocogene fitelparvovec, compared to ABR on FVIII replacement therapy collected in the Phase 3 lead-in study period. The Phase 3 study is over 50% enrolled, and enrollment in the Phase 3 lead-in study is completed.
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Based on initial results from the Alta study, the FDA granted regenerative medicine advanced therapy, or RMAT, designation to giroctocogene fitelparvovec. RMAT designation is granted to regenerative medicine therapies intended to treat, modify, reverse, or cure a serious condition, for which preliminary clinical evidence indicates that the medicine has the potential to address an unmet medical need. The RMAT designation includes all the benefits of the fast track and breakthrough therapy designation programs, including early interactions with the FDA. The FDA also granted giroctocogene fitelparvovec Orphan Drug and Fast Track designation, and the European Medicines Agency, or EMA, granted it Orphan Medicinal Product designation.
For recent updates on giroctocogene fitelparvovec, please see Business Updates above.
KITE-037 - Cancer
We and Kite Pharma, Inc., or Kite, a wholly-owned subsidiary of Gilead Sciences, Inc., continue to develop cell therapies to treat cancer using our research to design ZF nucleases and viral vectors to disrupt and insert select genes in T cells and natural killer cells, or NK-cells, including the insertion of genes that encode CARs, T cell receptors, or TCRs, and NK-cell receptors, or NKRs, directed to mutually agreed targets. Kite is responsible for all clinical development, manufacturing, marketing and commercialization. In May 2021, we announced that as part of their recent portfolio review, Kite made a decision not to submit an investigational new drug application, or IND, for KITE-037 at that time. The development program for KITE-037 remains active, and we and Kite are working closely towards the development of one or more new product candidates.
ST-501 - Tauopathies, ST-502 - Synucleinopathies and Type 1 Myotonic Dystrophy (DM1)
We and Biogen continue to develop preclinical genome engineering therapies, including our ST-501 product candidate to treat tauopathies, our ST-502 product candidate to treat synucleinopathies including Parkinson’s disease and a product candidate targeting DM1, a neuromuscular disease. Biogen has also selected an undisclosed fourth neurological disease gene target under our collaboration agreement, and we have begun early research activities on therapies addressing this target. Under our collaboration agreement with Biogen, it has exclusive rights to nominate up to eight additional targets over a target selection period of five years. This collaboration leverages ZF transcription factors to aim to modulate the expression of key genes involved in neurological diseases.
In March 2021, we published preclinical data in Science Advances, showing that tau-targeted ZF-transcription factors selectively reduced tau messenger RNA and proteins by 50% to 80% out to 11 months without detectable off-target events.
In the first half of 2021, we presented preclinical data at the 15th International Conference on Alzheimer’s and Parkinson’s Diseases (AD/PD) and at the American Society of Gene & Cell Therapy (ASGCT) Annual Meeting, showing that alpha synuclein-targeted ZF-transcription factors could significantly repress human alpha synuclein and were well tolerated in vivo.
Genome Engineering - Autism Spectrum Disorder and Neurodevelopmental Disorders
We and Novartis continue to develop preclinical genome engineering therapies for three neurodevelopmental targets, including genes linked to autism spectrum disorder and intellectual disability. The collaboration leverages our ZF‑transcription factors to aim to upregulate the expression of key genes involved in neurodevelopmental disorders.
Genome Engineering - ALS and Frontotemporal Lobar Degeneration
We and Pfizer continue to develop preclinical genome engineering product candidates that use allele-specific ZF‑transcription factors to treat ALS and frontotemporal lobar degeneration, or FTLD, linked to mutations in the C9ORF72 gene. The most frequent genetic cause of ALS is the expansion of hexanucleotide repeats, or G4C2 repeats, in the first intron of the C9ORF72 gene. Our approach is to design ZF‑transcription factors to repress specifically pathogenic gene expression from the disease allele, while preserving expression of the healthy allele.
In September 2020, we completed our research obligations associated with this collaboration, which required us to identify, characterize and preclinically develop ZF‑transcription factors satisfying pre-agreed criteria. Pfizer is now responsible for subsequent research and development activities as well as subsequent development, manufacturing, marketing and commercialization.
In May 2021, we presented preclinical data at the ASGCT Annual Meeting, showing that ZF‑transcription factors were capable of selectively repressing the expression of both disease sense and antisense isoforms over a wide dose range while preserving the expression of normal isoform in patient‑derived neural cells. No detectable off-target gene regulation was observed.
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Takeda – Huntington’s Disease
We and Takeda continue to develop potential preclinical genome engineering product candidates to treat Huntington’s Disease that use a ZF-transcription factor designed to differentially down regulate the mutated disease-causing huntingtin gene, or HTT gene, while preserving the expression of the normal version of the gene.
For more information on the collaborations underlying these partnered programs, see “—Collaborations” below.
Legacy Clinical Research Programs
We have stopped development of the following clinical research programs. We continue to perform the appropriate long-term follow-up and closeout activities of the legacy studies in accordance with the study protocols.
ST-400 - Beta Thalassemia
In November 2021, we and Sanofi announced that we made a business decision to cease development of the beta thalassemia indication in order to focus resources on the sickle cell disease program. Five patients were dosed in the Phase 1/2 Thales study, an open-label, single arm clinical study to evaluate the safety and efficacy of ST-400. Results were last presented at American Society for Hematology Annual Meeting and Exposition 2021.
SB-728 - Human Immunodeficiency Virus, or HIV
SB-728 was one of the first clinical candidates to use an early generation of our ZF nuclease-mediated genome editing technology. We conducted several clinical studies evaluating SB-728, demonstrating the safety of the platform and showing immune responses from a subset of patients, however the studies did not meet our clinical expectations and we have stopped development in HIV.
SB-913 - MPS II
In January 2021, we announced that we have stopped development of SB-913, our ZF nuclease genome editing product candidate for the treatment of Mucopolysaccharidosis Type II, or MPS II. While the Phase 1/2 CHAMPIONS study evaluating SB-913 demonstrated the first molecular evidence of genome editing, the study did not meet our clinical expectations. Research is ongoing to improve the potency and delivery of our ZF nuclease for genome editing, which we believe will optimize the platform for therapeutic effect.
SB-318 - MPS I and SB-FIX - Hemophilia B
We have stopped development of SB-318 and SB-FIX, genome editing product candidates for the treatment of MPS I and hemophilia B, respectively.
COLLABORATIONS
We have entered into strategic collaborations with larger biopharmaceutical companies for several of our therapeutic programs and other partnerships for several non-therapeutic applications of our technology. We will continue to pursue further collaborations when appropriate to fund internal research and development activities and to assist in product development, manufacturing, regulatory approval and commercialization. Decisions to collaborate or not will be based on review of our internal resources, institutional knowledge and commercial considerations.
Novartis
In July 2020, we entered into a collaboration and license agreement with Novartis for the research, development and commercialization of gene regulation therapies to treat three neurodevelopmental disorders. Under the agreement, we granted to Novartis an exclusive, royalty bearing and worldwide license, under our relevant patents and know-how, to develop, manufacture and commercialize certain of our ZF-transcription factors targeted to three undisclosed genes that are associated with neurodevelopmental disorders, including autism spectrum disorder and intellectual disability. We perform early research activities over the collaboration period for each gene target and manufacture the ZF-transcription factors required for such research, costs of which are funded by Novartis. Novartis is responsible for additional research activities, IND-enabling studies, clinical development, regulatory approvals, manufacturing of preclinical, clinical and approved products, and global commercialization. Subject to certain exceptions set forth in the agreement, we are prohibited from developing, manufacturing or commercializing any therapeutic product targeting any of the three genes that are the subject of the collaboration. Novartis also has the option to license certain of our proprietary AAVs for the sole purpose of developing, manufacturing and commercializing licensed products arising from the collaboration.
Under the agreement, Novartis paid us a $75.0 million upfront license fee payment in August 2020. In addition, we are eligible to earn from Novartis up to $420.0 million in development milestones and up to $300.0 million in commercial
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milestones. We are also eligible to earn from Novartis tiered high single-digit to sub-teen double-digit royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, loss of market exclusivity and payments made under certain licenses for third-party intellectual property. The agreement continues, on a product-by-product and country-by-country basis, until the expiration of the applicable royalty term. Novartis has the right to terminate the agreement, in its entirety or on a target-by-target basis, for any reason after a specified notice period. Each party has the right to terminate the agreement on account of the other party’s bankruptcy or material, uncured breach.
Biogen
In February 2020, we entered into a global licensing collaboration agreement with Biogen for the research, development and commercialization of gene regulation therapies for the treatment of neurological diseases which became effective in April 2020. Our collaboration aims to leverage our proprietary ZFP technology delivered via AAV to modulate expression of key genes involved in neurological diseases. Concurrently with the execution of the collaboration agreement, we also entered into a stock purchase agreement with Biogen MA, Inc., pursuant to which Biogen MA, Inc. purchased 24,420,157 shares of our common stock, or the Biogen Shares, for an aggregate purchase price of $225.0 million.
Under the collaboration agreement, Biogen paid us an upfront license fee payment of $125.0 million. We are also eligible to earn research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if Biogen selects all of the targets allowed under the agreement and all the specified milestones set forth in the agreement are achieved, which includes up to $925.0 million in pre-approval milestone payments and up to $1.5 billion in first commercial sale and other sales-based milestone payments. In addition, we are also eligible to receive tiered high single-digit to sub-teen royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Under the collaboration agreement, we granted to Biogen an exclusive, royalty bearing and worldwide license, under our relevant patents and know-how, to develop, manufacture and commercialize certain ZFP and/or AAV-based products directed to up to twelve neurological disease gene targets selected by Biogen. Biogen has already selected four of these: our ST-501 product candidate to treat tauopathies, our ST-502 product candidate to treat synucleinopathies including Parkinson’s disease, a third product candidate targeting DM1, a neuromuscular disease, and a fourth undisclosed neurological disease gene target. Biogen has exclusive rights to nominate up to eight additional targets over a target selection period of five years. For each gene target selected by Biogen, we perform early research activities, costs for which are shared by the companies, aimed at the development of the combination of proprietary CNS delivery vectors and ZF-transcription factors targeting therapeutically relevant genes. Biogen then assumes responsibility and costs for the IND-enabling studies, clinical development, related regulatory interactions, and global commercialization. We are primarily responsible for Good Manufacturing Practice, or GMP, manufacturing activities for the initial clinical studies for the first three products of the collaboration and plan to leverage our in-house manufacturing capacity. Biogen is responsible for GMP manufacturing activities beyond the first clinical study for each of the first three products. Subject to certain exceptions set forth in the collaboration agreement, we are prohibited from developing, manufacturing or commercializing any therapeutic product directed to the targets selected by Biogen.
The collaboration agreement continues, on a product-by-product and country-by-country basis, until the expiration of the applicable royalty term. Biogen has the right to terminate the collaboration agreement, in its entirety or on target-by-target basis, for any reason after a specified notice period. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach. In addition, we may terminate the collaboration agreement if Biogen challenges any patents licensed by us to Biogen.
Pursuant to the terms of the stock purchase agreement, Biogen has agreed not to, without our prior written and subject to specified conditions and exceptions, directly or indirectly acquire shares of our outstanding common stock, seek or propose a tender or exchange offer or merger between the parties, solicit proxies or consents with respect to any matter, or undertake other specified actions related to the potential acquisition of additional equity interests in us. Subject to customary exceptions, such standstill restrictions expire on the earlier of the three-year anniversary of the effectiveness of the Biogen collaboration agreement and the date that Biogen beneficially owns less than 5% of our common stock.
The stock purchase agreement also provides that until the first anniversary of the effectiveness of the Biogen collaboration agreement, Biogen must hold and not sell any of the Biogen Shares and from the first anniversary through the second anniversary, Biogen must hold and not sell at least 50% of the Biogen Shares, in addition to being subject to certain volume limitations. The stock purchase agreement further provides that, subject to certain limitations, upon Biogen’s request, we must register for resale any of the Biogen Shares on a registration statement to be filed with the SEC, until such time as all remaining Biogen Shares may be sold pursuant to Rule 144 promulgated under the Securities Act during any 90-day period.
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In addition, Biogen has agreed that, excluding specified extraordinary matters, it must vote the Biogen Shares in accordance with our recommendation and has granted us an irrevocable proxy with respect to the foregoing. Such voting provisions expire on the earlier of (i) the two-year anniversary of the effectiveness of the Biogen collaboration agreement, (ii) the date that Biogen beneficially owns less than 5% of our common stock and (iii) the date the Biogen collaboration agreement is terminated; provided, however, that in no event shall such expiration date be prior to the one-year anniversary of the effectiveness of the Biogen collaboration agreement.
Kite
In February 2018, we entered into a collaboration and license agreement with Kite, which became effective in April 2018 and was amended and restated in September 2019, for the research, development and commercialization of engineered cell therapies for cancer. Kite is responsible for all clinical development and commercialization of any resulting products.
Subject to the terms of this agreement, we granted Kite an exclusive, royalty-bearing, worldwide, sublicensable license, under our relevant patents and know-how, to develop, manufacture and commercialize, for the purpose of treating cancer, specific cell therapy products that may result from the research program and that are engineered ex vivo using selected ZF nuclease and AAVs developed under the research program, to express CARs, TCRs or NKRs directed to candidate targets.
During the research program term and subject to certain exceptions, except pursuant to this agreement, we are prohibited from researching, developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a target expressed on or in a human cancer cell. After the research program term concludes and subject to certain exceptions, except pursuant to this agreement, we are prohibited from developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a candidate target.
We received a $150.0 million upfront payment from Kite when the agreement became effective in April 2018. In addition, Kite reimburses our direct costs to conduct the joint research program, and Kite is responsible for all subsequent development, manufacturing and commercialization of any licensed products. We are also eligible to earn contingent development- and sales-based milestone payments that could total up to $3.0 billion if all the specified milestones set forth in this agreement are achieved. Of this amount, approximately $1.3 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones, and approximately $1.8 billion relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. Each development- and sales-based milestone payment is payable (i) only once for each licensed product, regardless of the number of times that the associated milestone event is achieved by such licensed product, and (ii) only for the first 10 times that the associated milestone event is achieved, regardless of the number of licensed products that may achieve such milestone event. In addition, we are entitled to receive escalating, tiered royalty payments with a percentage in the single digits based on potential future annual worldwide net sales of licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Kite has the right to terminate this agreement, in its entirety or on a per licensed product or per candidate target basis, for any reason after a specified notice period. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach.
Pfizer
We have two separate collaboration agreements with Pfizer:
Giroctocogene Fitelparvovec Collaboration
In May 2017, we entered into an exclusive, global collaboration and license agreement with Pfizer for the research, development and commercialization of giroctocogene fitelparvovec, also known as SB-525, our gene therapy product candidate for hemophilia A, and closely related products, which we amended in December 2019.
Under this agreement, we were responsible for conducting the Phase 1/2 clinical study and certain manufacturing activities for giroctocogene fitelparvovec, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization of giroctocogene fitelparvovec. We may also collaborate in the research and development of additional AAV-based gene therapy products for hemophilia A.
We received an upfront license fee of $70.0 million, achieved a $25.0 million milestone in December 2019 upon completion of the transfer of the IND for giroctocogene fitelparvovec to Pfizer, and achieved a $30.0 million milestone in October 2020 upon the dosing of the first patient in our pivotal Phase 3 AFFINE trial. We are eligible to earn further
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development milestone payments on the achievement of specified clinical development, intellectual property, regulatory and first commercial sale milestones for giroctocogene fitelparvovec and potentially other products. The total amount of potential clinical development, intellectual property, regulatory, and first commercial sale milestone payments, assuming the achievement of all specified milestones in this agreement, is $475.0 million, which includes up to $300.0 million for giroctocogene fitelparvovec and up to $175.0 million for other products that may be developed under the agreement, subject to reduction on account of payments made under certain licenses for third‑party intellectual property. In addition, Pfizer agreed to pay us royalties for each potential licensed product developed under the agreement that are an escalating tiered, double-digit percentage of the annual net sales of such product and are subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third‑party intellectual property.
Subject to the terms of the agreement, we granted Pfizer an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, to use certain technology controlled by us for the purpose of developing, manufacturing and commercializing giroctocogene fitelparvovec and related products. Pfizer granted us a non-exclusive, worldwide, royalty free, fully paid license, with the right to grant sublicenses, to use certain manufacturing technology developed under the agreement and controlled by Pfizer to manufacture our products that utilize the AAV delivery system. During a specified period, neither we nor Pfizer are permitted to clinically develop or commercialize, outside of the collaboration, certain AAV-based gene therapy products for hemophilia A.
Unless earlier terminated, the agreement has a term that continues, on a per product and per country basis, until the later of (i) the expiration of patent claims that cover the product in a country, (ii) the expiration of regulatory exclusivity for a product in a country, and (iii) 15 years after the first commercial sale of a product in a country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. Upon termination for any reason, the license granted by us to Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec and related products automatically terminate. Upon termination by us for cause or by Pfizer in any country or countries, Pfizer is required to automatically grant us an exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec in the terminated country or countries.
C9ORF72 Collaboration
In December 2017, we entered into a separate exclusive, global collaboration and license agreement with Pfizer for the development and commercialization of potential gene therapy products that use ZF-transcription factors to treat ALS and FTLD linked to mutations of the C9ORF72 gene. Pursuant to this agreement, we agreed to work with Pfizer on a research program to identify, characterize and preclinically develop ZF-transcription factors that bind to and specifically reduce expression of the mutant form of the C9ORF72 gene.
We received a $12.0 million upfront payment from Pfizer and achieved a $5.0 million milestone payment in September 2020 associated with the completion of all of our research activities for the C9ORF72 collaboration. We are eligible to earn up to $60.0 million in development milestone payments from Pfizer contingent on the achievement of specified preclinical development, clinical development and first commercial sale milestones, and up to $90.0 million commercial milestone payments if annual worldwide net sales of the licensed products reach specified levels. In addition, Pfizer will pay us royalties based on an escalating tiered, mid- to high-single digit percentage of the annual worldwide net sales of the licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third‑party intellectual property. Each party is responsible for the cost of its performance of the research program. Pfizer is operationally and financially responsible for subsequent development, manufacturing and commercialization of the licensed products.
Subject to the terms of the agreement, we granted Pfizer an exclusive, worldwide, royalty-bearing, license under our relevant patents and know-how to develop, manufacture and commercialize gene therapy products that use resulting ZF-transcription factors that satisfy pre-agreed criteria. During a specified period, neither we nor Pfizer will be permitted to research, develop, manufacture or commercialize outside of the collaboration any ZFPs that specifically bind to the C9ORF72 gene.
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Unless earlier terminated, the agreement has a term that continues, on a per licensed product and per country basis, until the later of (i) the expiration of patent claims that cover the licensed product in a country, (ii) the expiration of regulatory exclusivity for a licensed product in a country, and (iii) 15 years after the first commercial sale of a licensed product in a major market country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. The agreement will also terminate if we are unable to identify any lead candidates for development within a specified period of time or if Pfizer elects not to advance a lead candidate beyond a certain development milestone within a specified period of time. Upon termination for any reason, the license granted by us to Pfizer to develop, manufacture and commercialize licensed products under the agreement will automatically terminate. Upon termination by us for cause or by Pfizer without cause for any licensed product or licensed products in any country or countries, we will have the right to negotiate with Pfizer to obtain a non-exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize the licensed product or licensed products in the terminated country or countries.
Following termination by us for Pfizer’s material breach, either party will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time.
Sanofi
In January 2014, we entered into an exclusive worldwide collaboration and license agreement with Biogen MA, Inc., who subsequently assigned it to Bioverativ Inc., who was then subsequently acquired by Sanofi to develop therapeutics for hemoglobinopathies. Under the agreement, we were originally jointly conducting two research programs: a beta thalassemia program, which was discontinued in the third quarter of 2021, and a program which resulted in the development of SAR445136, a ZF nuclease, gene-edited cell therapy product candidate for the treatment of SCD, which remains active.
Under the SCD program, we and Sanofi were jointly responsible for research and development activities prior to filing of an IND, but Sanofi is now responsible for subsequent worldwide clinical development, manufacturing and commercialization of licensed products developed under the agreement. Subject to the terms of the agreement, we have granted Sanofi an exclusive, royalty-bearing license, with the right to grant sublicenses, to use certain ZFP and other technology controlled by us for the purpose of researching, developing, manufacturing and commercializing licensed products developed under the agreement. We have also granted Sanofi a non-exclusive, worldwide, royalty-free, fully paid license, with the right to grant sublicenses, under our interest in certain other intellectual property developed pursuant to the agreement. During the term of the agreement, we are not permitted to research, develop, manufacture or commercialize, outside of the agreement, certain gene therapy products that target genes relevant to the licensed products.
Under the agreement, we received an upfront license fee of $20.0 million, achieved a $6.0 million milestone in August 2019 upon dosing of the third subject in the beta thalassemia Phase 1/2 clinical trial and achieved a $7.5 million milestone in December 2019 upon dosing of the first subject in the Phase 1/2 PRECIZN‑1 clinical study evaluating SAR445136.
In January 2022, we announced that Sanofi will be transitioning its rights and obligations related to SAR445136 to us as of June 28, 2022. This transition follows Sanofi’s notice of termination for convenience of the collaboration and license agreement between Sanofi and Sangamo. Sanofi has elected to transition the SAR445136 program to us following a recent change in Sanofi’s strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. We and Sanofi are collaborating on an orderly transition, while we explore options to advance the program, including seeking a potential new collaboration partner. We expect the Phase 1/2 PRECIZN‑1 study of SAR445136 to be completed as planned and that Sanofi will continue to pay the costs of the Phase 1/2 PRECIZN‑1 study until the termination date of June 28, 2022, as contemplated by the collaboration and license agreement
Takeda
In January 2012, we entered into a collaboration and license agreement with Shire International GmbH, a wholly-owned subsidiary of Takeda, which we amended and restated in September 2015, to research, develop and commercialize human therapeutics and diagnostics for monogenic diseases based on our ZFP technology. We received an upfront license fee of $13.0 million in 2012 and achieved a $1.0 million milestone in 2014. Pursuant to the amended and restated agreement, Takeda has an exclusive, worldwide license to ZFP therapeutics for treating Huntington’s disease.
Under the amended and restated agreement, Takeda has full control over, and full responsibility for the costs of, the Huntington’s disease program, subject to certain obligations, including the obligation to retain us to perform ZFP design, optimization and assessment services and to reimburse us for the costs of such services. Takeda does not have any milestone payment obligations but is required to pay single digit percentage royalties to us, up to a specified maximum cap, on the commercial sales of ZFP therapeutic products for Huntington’s disease. During the term of the amended and restated agreement, we are not permitted to research, develop or commercialize, outside of the agreement, certain products that target the HTT gene.
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Under the amended and restated agreement, we have full control over, and full responsibility for the costs of, the hemophilia A and B programs returned to us by Takeda, subject to certain diligence obligations. We also granted Takeda a right of first negotiation to obtain a license to such programs under certain circumstances. We are required to pay single digit percentage royalties to Takeda, up to a specified maximum cap, on commercial sales of therapeutic products from the programs returned to us by Takeda. We will be required to pay Takeda this single digit percentage royalty, subject to the maximum royalty cap, on any commercial sales of giroctocogene fitelparvovec, our gene therapy product candidate for the treatment of moderately severe to severe hemophilia A that we are developing with our collaborator Pfizer, if giroctocogene fitelparvovec receives regulatory approvals and is commercialized.
The amended and restated agreement may be terminated by (i) us or Takeda, in whole or in part, for the uncured material breach of the other party, (ii) us or Takeda for the bankruptcy or other insolvency proceeding of the other party and (iii) Takeda, in its entirety, effective upon at least 90 days’ advance written notice.
Other Partnerships
In addition to our partnerships for the development of human therapeutic applications, we have also licensed our technology in several other areas, such as plant agriculture and research reagents, including the production of transgenic animals and cell-line engineering. These license partners include Corteva AgriScience, formerly known as Dow AgroSciences LLC, or DAS, Sigma-Aldrich Corporation (now MilliporeSigma in the United States and Merck KGaA outside the United States), Genentech, Inc., Open Monoclonal Technology, Inc. (now Ligand Pharmaceuticals Inc.) and F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
INTELLECTUAL PROPERTY
Patents, trade secrets, know-how and licensed technologies are important to our business. Our strategy includes filing, obtaining, maintaining, licensing, and when necessary, defending our patents and patent applications to protect technologies, inventions, and improvements to inventions that we consider important for the research, development, and commercialization of our technologies and our product candidates. We have filed numerous patent applications with the U.S. Patent and Trademark Office, or USPTO, and with patent offices in multiple foreign jurisdictions. Our proprietary intellectual property includes methods relating to the design of zinc finger proteins, Transcription Activator-Like Effector, or TALE, proteins and Clustered Regularly Interspaced Short Palindromic Repeats, or CRISPR/Cas, editing systems, therapeutic applications of genome editing technology, enabling technologies related to our platform and the use of genome editing across a variety of applications. We rely on a combination of patents, copyrights, trademarks, proprietary know-how, continuing technological innovations and trade secret protections, as well as confidentiality agreements, materials transfer agreements, research agreements and licensing agreements, to establish and protect our proprietary rights.
In-licensed Technology
We have exclusively licensed in relevant fields certain intellectual property directed to the design, selection, and use of ZFPs, ZF nucleases and ZF-transcription factors for genome editing and genome regulation from numerous academic institutions. Although no individual in-license is material to our overall protection of our ZFP and ZF nuclease platforms, we believe that these in-licenses, in combination with our own know-how, patent applications and patents, protect us from unauthorized third parties who might try to copy or use our products or technologies.
In addition, with respect to our cell therapy products, our subsidiary, Sangamo France, has a license agreement with the University of British Columbia pursuant to which it exclusively licensed in relevant fields the right to the CAR for use in our TX200 product candidate. This license includes one patent family, which is expected to expire in September 2038, absent any patent term adjustment, or PTA, patent term extension, or PTE, or disclaimers.
Our Intellectual Property
In addition to our in-licensed patent portfolio, we have numerous issued patents and pending patent applications directed to the design, compositions and uses of ZFPs, ZF nucleases, ZF-transcription factors, TALE proteins and CRISPR/Cas editing systems and other technologies related to our programs.
Given our over two-decade history with zinc finger technology, some of the earliest zinc finger patents in our portfolio began expiring in 2015. However, we have continued to build on this patent portfolio and have been issued additional patents and have applications pending that provide protection for our ZFP technology. Additionally, patents that may be issued from our pending applications will extend the patent exclusivity of our patent estate.
We believe that our in-licensed and our owned patents and patent applications, in combination with our know-how and trade secrets, in the aggregate, will provide us with substantial protection of and exclusivity around the commercial development of our gene therapy, cell therapy and genome engineering programs. In this regard, patents issued to us, applied
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for by us, or exclusively and non-exclusively licensed to us, cover our commercially relevant technologies, including the following types of inventions, processes and products:
•ZFP and ZF nuclease design, engineered nucleases, and compositions (multiple patents issued with expected expiration dates ranging from 2029 to 2036), absent any PTA, PTE or disclaimers): These patents cover inventions including DNA target site selection, zinc finger binding domain design, nuclease domain design, linker design, DNA nickases, ZFP libraries databases and methods of construction, as well as methods to increase zinc finger binding specificity (see, e.g., US9982245, US10066242, US10113207);
•ZFP Therapeutics (multiple patents issued with expected expiration dates ranging from 2028 to 2031, absent any PTA, PTE or disclaimers): These patents cover inventions including methods relating to activation and inhibition of endogenous genes, identification of accessible regions within chromatin, including treatment of Huntington’s disease, HIV, cancer therapeutics, modulation of cardiac contractility and methods to regulate the glucocorticoid receptor (see, e.g., US9943565);
•Nuclease Therapeutics (multiple patents issued with expected expiration dates ranging from 2031 to 2036, absent any PTA, PTE or disclaimers): These patents cover inventions including treatments for HIV, beta thalassemia and SCD, hemophilia inherited metabolic diseases, genome editing, Parkinson’s Disease, regulation of the expression of PD1; Immunomodulatory therapeutics; Cystic Fibrosis; CNS disease; Severe combined immunodeficiency, Modified T cells, including HLA knock out and methods of editing stem cells (see, e.g., US9877988, US9963715, US10072066, US10081661, US10143760); and
•Non-Therapeutic Applications of ZFPs and Nucleases (multiple patents issued with expected expiration dates ranging from 2028 to 2035, absent any PTA, PTE or disclaimers): These patents cover inventions including identification of regulatory sequences, analysis of gene regulation, structure and biological function, methods of agricultural biotechnology, methods of altering cellular differentiation state, development of cell lines for improved protein production, methods of transgenic animal development, engineering of stem cells, methods of genome editing (see, e.g., US9890395).
The patent positions of biopharmaceutical companies, including our patent position, are uncertain and involve complex legal and factual questions for which important legal tenets are largely unresolved and are subject to administrative, judicial, and regulatory interpretation and refinement. Obtaining, maintaining, and enforcing patent protection in the U.S. and other countries remains uncertain and depends, in part, upon decisions of the patent offices, courts, administrative bodies and lawmakers in these countries. It is also possible that we may develop proprietary products or technologies in the future that are not patentable. Patent applications may not result in the issuance of patents and the coverage claimed in a patent application may be significantly reduced before a patent is issued. It is possible that, under certain circumstances, patent applications will be rejected and we subsequently abandon them. It is possible that we may decide that an issued patent or pending patent application may provide us with little or no competitive advantage in view of its associated costs, in which case we may abandon or allow to lapse such patent or patent applications. Although we have filed for patents on some aspects of our technology, we cannot provide assurances that patents will be issued as a result of these pending applications or that any patent that has been or may be issued will be upheld. It is possible that our current patents, or patents which we may later acquire, may be successfully challenged, invalidated in whole or in part, or deemed unenforceable. The laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business. We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Competitors may use our technologies in jurisdictions where we have
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not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. Ultimately, patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In some countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
In the future, third parties may assert patent, copyright, trademark, and other intellectual property rights to technologies that are important to our business. The outcome following any potential legal assertions of infringement, invalidity and unenforceability is unpredictable. Any claims asserting that our products infringe or may infringe proprietary rights of third parties, if determined adversely to us, could significantly harm our business. See “Risk Factors—Risks Relating to Our Intellectual Property.”
COMPETITION
We and our biopharmaceutical collaborators are leaders in the research and development of gene therapies, cell therapies and genome engineering therapies using ZFP DNA-binding proteins.
We are aware of several other companies focused on other methods for editing genes and regulating gene expression and a limited number of commercial and academic groups pursuing the development of ZFP genome engineering technologies. The fields of gene therapy, cell therapy and genome engineering are highly competitive, and we expect competition to persist and intensify in the future from a number of different sources, including other biopharmaceutical companies; academic and research institutions; and government agencies that will seek to develop ZFPs as well as technologies that will compete with our ZFP technology platform, such as TALE proteins and the CRISPR-Cas editing system.
Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or commercializing competitive products before we do. If we commence commercial product sales, we may be competing against companies with greater marketing, sales, distribution and manufacturing capabilities, areas in which we have limited or no experience. In addition, any product candidate that we successfully develop may compete with existing products that have long histories of safe and effective use.
Although we are in the clinical development phase of operations and have no current therapeutic product sales, we believe the following companies, products and/or technologies may potentially be competitive with our technology or our product candidates under development:
•Protein pharmaceuticals under development at pharmaceutical and biotechnology companies such as F. Hoffman-LaRoche Ltd., Protalix Biotherapeutics, Inc., Amicus Therapeutics, Inc., Novartis AG, Global Blood Therapeutics, Inc., Vertex Pharmaceuticals, Inc., Biogen, Inc. and numerous other biopharmaceutical firms.
•Gene therapy companies developing gene-based products in clinical trials such as BioMarin Pharmaceutical, Inc., F. Hoffman-LaRoche Ltd. through their wholly-owned subsidiary Spark Therapeutics, Freeline Therapeutics Holdings plc and 4D Molecular Therapeutics, Inc. Other competitors in this category may include PTC Therapeutics, Inc., Taysha Gene Therapies, Inc., uniQure N.V., Ultragenyx Pharmaceutical Inc., Amicus Therapeutics, Inc. and numerous other gene therapy companies.
•Cell therapy companies developing cell-based products, including Vertex Pharmaceuticals and CRISPR Therapeutics AG, Bluebird bio, Inc., Aruvant Sciences, Inc., Editas Medicines, Inc., Graphite Bio, Inc., Beam Therapeutics, Inc., Medeor Therapeutics, Inc., Quell Therapeutics, Inc., Sonoma Biotherapeutics, Inc.,
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AZTherapies, Inc., Reflection Therapeutics, Inc., Abata Therapeutics, Inc., TeraImmune, Inc., GentiBio, Inc. , Kyverna, Inc., Allogene Therapeutics, Inc., Cellectis S.A., Precision BioSciences, Inc., Orchard Therapeutics, Inc. and numerous other cell therapy companies.
•Nuclease and base editing technologies under development for therapeutic applications of genome modification including companies such as Editas Medicine, Inc., CRISPR Therapeutics AG, Caribou Biosciences, Inc., Intellia Therapeutics, Inc. and Beam Therapeutics developing the CRISPR/Cas editing system, Cellectis S.A. developing TALE nucleases and meganucleases, bluebird bio, Inc. developing Homing Endonucleases and MegaTALs and Precision BioSciences, Inc. developing meganucleases and numerous other gene editing companies.
•Antisense therapeutics and RNA interference technology, including RNAi and microRNA, which are technologies that may compete with ours in the development of novel therapeutic products acting through the regulation of gene expression. These technologies are being developed by several companies including Alnylam Pharmaceuticals, Inc., Ionis Pharmaceuticals, Inc., Wave Life Sciences, Inc., Moderna, Inc., Regulus Therapeutics Inc., Voyager Therapeutics, Inc and numerous other companies.
•Small molecules in development from both in-house drug discovery programs of pharmaceutical companies such as Global Blood Therapeutics, Inc., Vertex Pharmaceuticals, Inc., Biogen, Inc. and numerous other companies.
We expect to face intense competition from other companies for collaborative arrangements with biopharmaceutical companies, for establishing relationships with academic and research institutions, for licenses to proprietary technology and for subjects in our clinical trials of treatments for rare diseases. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or products that are more effective or less costly than ours.
Our ability to compete successfully will depend, in part, on our ability to:
•develop safe, efficacious and commercially attractive proprietary products;
•obtain access to gene transfer technology on commercially reasonable terms;
•obtain required regulatory approvals;
•obtain reimbursement for our products in approved indications;
•attract and retain qualified scientific and product development personnel;
•enter into collaborative and strategic partnerships with others, including our competitors, to develop our technology and product candidates;
•obtain and enforce patents, licenses or other proprietary protection for our products and technologies;
•formulate, manufacture, market and sell any product that we develop;
•develop and maintain products that reach the market first and are technologically superior to or are of lower cost than other products in the market; and
•recruit subjects into our clinical trials in a timely fashion.
MANUFACTURING
We currently rely heavily on CMOs to produce our preclinical and clinical product candidates in accordance with FDA and EMA mandated regulations, also known as current Good Manufacturing Practices, or cGMPs. We employ a technical operations staff in the areas of process development, analytical development, quality control, quality assurance, project management, and manufacturing to facilitate appropriate oversight of our CMOs, support of our regulatory filings and execution of clinical trials.
We believe that in-house manufacturing capability can provide a competitive advantage. To this end, we have recently completed and brought online an AAV cGMP manufacturing facility in Brisbane, California designed to manufacture Phase 1/2 clinical study supplies for our gene therapy pipeline, as well as cell therapy manufacturing facilities in Brisbane, California and Valbonne, France.
We intend to continue to rely on CMOs for the manufacture of our product candidates for any Phase 3 clinical trials, and if approved, for commercial supply. We believe this balanced approach to manufacturing, investing in internal capacity and capabilities while strengthening our commitment with external capacity, will enable us to meet our anticipated pipeline needs.
We currently leverage three distinct manufacturing platforms: AAV vector production for our genome engineering and gene therapy product candidates, HSPC modification for some of our cell therapy product candidates and engineered T cell therapies. We use a commercial scale baculovirus manufacturing platform to manufacture AAV vectors for genome editing and
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gene therapy, with each AAV vector packaging a different transgene specific to the target indication or ZF nuclease. The manufacturing process for our HSPC cell therapy product candidates utilizes the patient’s own HSPCs. These HSPCs are transfected using mRNA to produce ZF nucleases that target specific DNA sites, resulting in modified HSPCs. The third platform utilizes our ZF nuclease technology to transform CAR-Tregs for autologous and allogeneic cell therapies. We believe we have capabilities to manufacture regulatory T cells in therapeutic quantities to be used to treat inflammatory and autoimmune disorders.
GOVERNMENT REGULATION
We operate within the heavily regulated biopharmaceutical industry and much of our operations, including nonclinical and clinical trials, development, manufacturing, commercialization, marketing and reimbursement are subject to regulatory approvals. Relevant regulatory authorities include, but are not limited to, the FDA, the EMA, Commission of the European Union, or EU, Member State agencies, including the UK Medicines and Healthcare Products Regulatory Agency, or MHRA.
Product Regulation
In the United States, the FDA regulates biologic products including gene therapy and human cellular therapy products under the Federal Food, Drug, and Cosmetic Act, or the FDCA, the Public Health Service Act, or the PHSA, and regulations and guidance implementing these laws. The FDCA, PHSA and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biologic products. Applications to the FDA are required before conducting human clinical testing of biologic products and in the EU, approval must be obtained from the EMA. FDA approval also must be obtained before marketing of biologic products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals.
U.S. Biologic Products Development Process
Our product candidates must be approved by the FDA before they may be legally marketed in the United States. The process required by the FDA before a biologic product candidate may be marketed in the United States generally involves the following:
•completion of preclinical laboratory tests and in vivo studies in accordance with the FDA’s current Good Laboratory Practice, or GLP, regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations;
•submission to the FDA of an IND application, which allows human clinical trials to begin unless FDA objects within 30 days;
•approval by an independent institutional review board, or IRB, reviewing each clinical site before each clinical trial may be initiated;
•performance of adequate and well-controlled human clinical trials according to the FDA’s Good Clinical Practice, or GCP, regulations, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biologic product candidate for its intended use;
•preparation and submission to the FDA of a biologics license application, or BLA, for marketing approval that includes substantial evidence of safety and efficacy from results of nonclinical testing and clinical trials and payment of user fees, if applicable;
•review of the product by an FDA advisory committee, if applicable;
•satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biologic product candidate is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the biologic product candidate’s identity, safety, strength, quality, potency and purity;
•potential FDA inspection of the nonclinical and clinical trial sites that generated the data in support of the BLA; and
•FDA review and approval, or licensure, of the BLA.
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Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product candidate must undergo preclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vivo studies to assess the potential safety and activity of the product candidate and to establish a rationale for therapeutic use. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.
Concurrent with clinical trials, companies usually must complete additional preclinical testing, that may include animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Human gene transfer protocols are subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level as set forth in National Institutes of Health, or NIH, Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA. However, many companies and other institutions, not otherwise subject to the NIH Guidelines, voluntarily follow them.
The clinical trial sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA also may impose clinical holds on a biologic product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.
EU Drug Development Process
Similar to the United States, the EU regulatory framework sets both EU-wide and national, Member State-specific requirements for the development and approval of medicinal products. Article 8(3) of Directive 2001/83/EC sets out the contents of a marketing authorization, or MA, application and all the information that must be submitted for the evaluation of a medicinal product. Certain preclinical (also termed “non-clinical”) data is required in order to enable clinical trials and later be used in dossier for a marketing authorization application. All studies should take place in accordance with GLP and all applicable EMA, Commission and European Pharmacopoeia guidelines on preclinical studies, including guidance on quality, non-clinical and clinical aspects of medicinal products containing genetically modified cells.
The requisite amount of preclinical data enables the design of a clinical trial, from Phase 1 (first-in-human clinical trials) through to Phases 2 and 3, which are safety and efficacy studies. Similar restrictions and requirements apply as in the United States regarding preclinical data to support trials using viral vectors. The preclinical tests should establish parameters such as toxicity, pharmacodynamics and pharmacokinetic properties, as well as the quality of the gene therapy medicinal products. Due to the particular nature of gene therapy medicinal products, it is recognized that it may not always be possible for the non-clinical safety studies to be in conformity with the principles of GLP and a proper justification should be submitted where a pivotal non-clinical safety study has not been conducted under GLP rules.
Clinical studies are crucial to obtaining the required data and the requirements governing the conduct of clinical trials are further analyzed below.
All medicinal products and advanced therapy medicinal products, or ATMPs, must be manufactured in accordance with the guidelines on GMP and in a GMP licensed facility, which can be subject to GMP inspections.
Human Clinical Trials Under an IND
Clinical trials involve the administration of the biologic product candidate to patients under the supervision of qualified investigators which generally are physicians not employed by, or under, the control of the trial sponsor. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety, including stopping rules that
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assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent.
Further, each clinical trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers items such as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject, or their legal representative, reviews and approves the study protocol, and must monitor the clinical trial until completed.
Human clinical trials typically are conducted in three sequential phases that may overlap or be combined:
•Phase 1. The biologic product candidate initially is introduced into a small number of human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early understanding of its effectiveness. Phase 1 clinical trials of gene and cell therapies are typically conducted in patients rather than healthy volunteers.
•Phase 2. The biologic product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
•Phase 3. Phase 3 clinical trials are commonly referred to as “pivotal” studies, which typically denotes a study which presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a biologic product. In Phase 3 studies, the biologic product candidate is administered to an expanded patient population, generally at multiple geographically dispersed clinical trial sites in adequate and well-controlled clinical trials to generate sufficient data to statistically confirm the efficacy and safety of the product for approval. These clinical trials are intended to establish the overall risk/benefit ratio of the product candidate and provide an adequate basis for product labeling.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. Sometimes approval for a product is conditional upon the completion of post-marketing clinical studies.
During all phases of clinical development, regulatory agencies (such as the FDA, the EMA and other comparable regulatory agencies) require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.
Written IND safety reports must be promptly submitted to the FDA and the investigators for: serious and unexpected adverse events; any findings from other trials, in vivo laboratory tests or in vitro testing that suggest a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life‑threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.
The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable safety risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biologic product candidate has been associated with unexpected serious harm to patients.
The FDA usually recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for up to a 15-year period.
In the EU, clinical trials almost always require approval from a national competent authority of the relevant Member State and an approval from an Ethics Committee. If the medicinal product is considered to be a genetically modified organism, or GMO, then GMO approval must also be obtained. There is no harmonization between Member States regarding the approach to and timelines of GMO approval, which may result in the submission of additional information, which may impact study initiation in a given country.
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The conduct of clinical trials should follow the approved clinical trial protocol and be in accordance with the principles of GCP. Gene therapy medicinal products are in addition subject to the rules of GCP for ATMPs, which outline specific additional safeguards and requirements. Record retention requirements are increased for ATMPs as there are relevant long-term follow-up and human safety and traceability requirements.
Compliance with cGMP Requirements
Manufacturers of biologics must comply with applicable current Good Manufacturing Practices, or cGMP, regulations, including quality control and quality assurance and maintenance of records and documentation. Manufacturers and others involved in the manufacture and distribution of such products also must register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any material changes to the manufacturing equipment, process or location of the approved manufacturing site must be reported to the relevant agency/authority. Establishments may be subject to periodic, unannounced inspections by government authorities (including regulatory agencies) to ensure compliance with cGMP requirements and other laws. Discovery of problems may result in a government entity placing restrictions on a product, manufacturer or holder of an approved BLA, and may extend to requiring withdrawal of the product from the market, issue warning or similar letters or seeking civil, criminal or administrative sanctions against the company. The FDA will not approve a BLA unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specification.
Concurrent with clinical trials, companies develop additional information about the physical and biological characteristics of the product candidate as well as finalize a process for manufacturing the product candidate in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents or of causing other adverse events with the use of biologic products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other requirements, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biologic product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biologic product candidate does not undergo unacceptable deterioration over its shelf life.
For a product candidate that is also a human cellular or tissue product, the FDA also requires compliance with current Good Tissue Practices, or cGTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing.
U.S. Review and Approval Processes
The results of the preclinical tests and clinical trials, together with detailed information relating to the product’s Chemistry, Manufacturing and Controls, or CMC, and proposed labeling, among other things, are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. The PDUFA also imposes an annual program fee for approved biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business or for a product indication for orphan diseases.
The FDA reviews a BLA within 60 days of submission to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In that event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth, substantive review of the BLA.
The FDA reviews the BLA to determine, among other things, whether the proposed product candidate is safe and effective, for its intended use and whether the product candidate is being manufactured in accordance with cGMP to assure and preserve the product candidate’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biologic products or biologic products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy, or REMS, is necessary to assure the safe use of the
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product candidate. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. A REMS could include medication guides, physician communication plans and elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.
Before approving a BLA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product candidate within required specifications. Additionally, before approving a BLA, the FDA typically will inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements.
On the basis of the BLA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the biologic product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter.
If a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biologic product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
The FDA has agreed to specified performance goals in the review of BLAs under the PDUFA. One such goal is to review standard BLAs in 10 months after the FDA accepts the BLA for filing, and priority BLAs in six months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.
EU Review and Approval Process
Before a medicinal product can be placed on the market in the EU, it must have received an MA. This could either be at national or EU level under a mutual recognition, decentralized or centralized procedure. Our product candidates are innovative treatments, which will bear the classification of ATMP. As such, the appropriate authorization procedure is the centralized procedure, which involves an MA being granted by the European Commission following a positive opinion by the EMA. A centralized MA is simultaneously valid in all EU Member States and the European Economic Area, or EEA (Iceland, Liechtenstein and Norway). A centralized MA also results in a single set of product information (patient information leaflet, labelling and summary of product characteristics) for all EU Member States.
The timeline for the grant of a centralized MA since the time of the application is 210 days for the assessment of the application (including “clock stops” for the applicant to prepare answers to the questions from the EMA). The Committee for Medicinal Products for Human Use, or the CHMP, may either provide a positive or negative opinion. Following a positive opinion, the European Commission will usually issue its legally binding MA after 67 days. A negative opinion may be appealed by the applicant who must submit a request for re-examination within 60 days. There is the possibility for accelerated timelines of drug applications for eligible applicants, which can reduce the timeline to 150 days, if the applicant can produce sufficient justification.
If the MA application contains less comprehensive than the required standard as at the time of the application, when there are public health grounds and often in the case of orphan medicinal products, the EMA may recommend to the European Commission that it issues a different type of an MA, as follows: (a) a Conditional MA (valid for one year and renewable), when the medicinal product shows a positive benefit-risk balance and targets an unmet medical need and it is expected that the applicant will be able to provide comprehensive data in due course; or (b) an MA under ‘exceptional circumstances’, when it is not expected that the applicant will be able to provide comprehensive efficacy and safety data (often for very rare indications).
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Manufacturing Regulation in Europe
Various requirements apply to the manufacturing and placing on the EU market of medicinal products. The manufacturing of medicinal products in the EU requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including EU cGMP standards. Similarly, the distribution of medicinal products into and within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU member states. Marketing authorization holders may be subject to civil, criminal or administrative sanctions, including suspension of manufacturing authorization, in case of non-compliance with the EU or EU member states’ requirements applicable to the manufacturing of medicinal products.
Post-approval Requirements
Rigorous and extensive FDA regulation of biologic products continues after approval, particularly with respect to cGMP requirements. Manufacturers are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biologic products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA, together with a release protocol, showing a summary of the history of manufacture of the lot and the results of all tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products before releasing the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency and effectiveness of biologic products. Failure to comply with the FDA’s post-approval regulations can result in withdrawal of product approval and licensure.
A sponsor also must comply with the FDA’s or appropriate national authority’s advertising and promotion requirements, such as the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”). Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Orphan and RMAT Designation
Products that are intended for treating rare conditions that affect fewer than 200,000 people in the U.S., or that affect more than 200,000 persons but are not expected to recover the costs of developing and marketing a treatment drug, may qualify for orphan designation. In the EU, these rare conditions are defined as having a prevalence of no more than five in every 10,000 people in the EU. Once a medicinal product with orphan designation obtains a marketing approval, it can benefit from a marketing exclusivity period in respect of the specific orphan indication for which the drug has been approved for a period of seven years in the U.S. and for up to 10 years in the EU. If the manufacturer is no longer able to assert that the product meets the orphan designation criteria or is not able to provide sufficient quantities, it may lose the orphan market exclusivity.
Regenerative medicine advanced therapy, or RMAT, designation is intended to expedite review of a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, intended to treat, modify, reverse, or cure a serious or life‑threatening disease or condition and for which preliminary clinical evidence indicates the potential to address unmet medical needs for such a disease or condition.
RMAT designation provides potential benefits that include more frequent meetings with the FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review of the related BLA. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. However, RMAT designation does not change the FDA’s standards for product approval. Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges.
Clinical Trial Data Disclosure
Many jurisdictions have mandatory clinical trial information obligations on sponsors. In the EU this is under the Transparency Regulation No. 1049/ 2001, EMA Policy 0043, EMA Policy 0070, as well as the new Clinical Trials Regulation No. 536/2014, all of which impose on sponsors the obligation to make publicly available certain information stemming from clinical studies. In the EU, the transparency framework provides for a wide right for (EU-based at the moment) interested parties to submit an access to documents request to the EMA for information included in the marketing authorization
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application dossier for approved medicinal products. Only very limited information is exempted from disclosure (i.e., commercially confidential information, which is construed increasingly narrowly and protected personal data). It is possible for competitors to access and use this data in their own research and development programs anywhere in the world, once these data are in the public domain.
Regulation of Our Operations
Although we currently do not have any products on the market, we may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation:
•the federal healthcare Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
•federal civil and criminal false claims laws, including the federal False Claims Act, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information held by certain healthcare providers, health plans and healthcare clearinghouses, known as covered entities, and individuals and entities that perform services for them that involve individually identifiable health information, known as business associates as well as covered subcontractors;
•the federal Physician Payments Sunshine Act created under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments and other transfers of value to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members;
•analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, require drug manufacturers to report information related to payments and other transfers of value to other healthcare providers and healthcare entities, marketing expenditures; or drug pricing; and/or ensure the registration of sales personnel; and
•state and foreign laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, imprisonment, suspension or withdrawal of our marketing and commercialization in respect of our commercially approved products, and additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our financial results. Responding to investigations can be time-and resource-consuming and can
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divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. See “Risk Factors—Our current and future relationships with healthcare providers, customers and third-party payors subject us to applicable anti-kickback, fraud and abuse, privacy, data security and other healthcare laws and regulations. If we fail to comply with such regulations, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.”
Healthcare Reform
The U.S. and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably, if approved. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts, which include major legislative initiatives, such as the ACA, to reduce the cost of care through changes in the healthcare system, including limits on the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded health care programs, and increased governmental control of drug pricing. The ACA and its implementing regulations, among other things, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including products similar to our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, created a new Patient Centered Outcomes Research Institute, which provides incentives to programs that increase the federal government’s comparative effectiveness research, established a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, and created a licensure framework for follow-on biologic products.
There have been legal and political challenges to certain aspects of the ACA, as well as efforts to repeal or replace certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the ACA.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2018, will remain in effect through 2031 unless additional Congressional action is taken. However, pursuant to COVID-19 pandemic relief legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, the American Taxpayer Relief Act of 2012, or the ATRA, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, Congress is considering additional health reform measures.
Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. For example, on July 24, 2020 and
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September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. This rule has been delayed by the Biden administration until 2023. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinds the Most Favored Nation model interim final rule. Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. It is unclear whether these or similar measures will be implemented in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
In the United States, the EU and other potentially significant markets for our product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
See “Risk Factors—Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product candidates and affect the prices we may obtain.”
Pricing, Coverage and Reimbursement
Pricing and reimbursement of a therapeutic product will largely determine the affordability of the product, and whether the product is prescribed and supplied to patients and private insurance companies may take into account government reimbursement methodologies. Due to these proposed and enacted laws, as well as other actions, significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval, particularly for novel products. In both domestic and foreign markets, sales and reimbursement of any approved products will depend, in part, on the extent to which third-party payors, such as government health programs, commercial insurance and managed healthcare organizations provide coverage, and establish adequate reimbursement levels, for such products. Third-party payors are increasingly challenging the prices charged for medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Additionally, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. If third-party payors do not consider our products to be cost-effective compared to other therapies, these payors may not cover our products after approved as a benefit under their plans or, if they do, the level of reimbursement may not be sufficient to allow us to sell our products on a profitable basis. See “Risk Factors—Even if we are able to commercialize our product candidates, the products may not receive coverage and adequate reimbursement from third-party payors in the United States and in other countries in which we seek to commercialize our products, which could harm our business.”
In the EU, pricing and reimbursement are the prerogative of Member States. Therefore, the requirements around reimbursement of medicinal products can vary widely. Each Member State can follow its own approach, subject to common rules of transparency, competition, and freedom of trade and movement in the EU. Many Member States, including France, Germany and the United Kingdom, follow a health technology assessment, or HTA, procedure for medicinal products in order to assess the cost-effectiveness of a product which could then be recommended for reimbursement under the national health services. There is increasingly exchange of information concerning HTAs on a voluntary basis among EU Member States. In
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the United Kingdom, the National Institute for Health and Care Excellence is the body which conducts HTAs and issues guidance to be followed by the regional health bodies called clinical commissioning groups.
Environmental Regulation
U.S. federal and state laws regarding safe working conditions, environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. We may incur significant costs to comply with such laws and regulations now or in the future. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and regulations that continued compliance therewith will not have a material effect on our business. We cannot predict, however, how changes in these laws and regulations may affect our future operations.
Privacy Regulation
We are, or may become, subject to numerous privacy and data security laws and regulations in the United States and in other foreign jurisdictions, including, as applicable, the Federal Trade Commission Act, the EU General Data Protection Regulation, or GDPR, the GDPR as it forms part of the United Kingdom’s law by virtue of Section 3 of the European Union (Withdrawal) Act 2018, or UK GDPR, and the California Consumer Privacy Act of 2018, or CCPA.
The collection, use, disclosure, transfer or other processing of personal data regarding individuals in the European Economic Area, or EEA, including personal health data, is subject to the GDPR. The GDPR, which is wide-ranging in scope, imposes several requirements on us relating to, among other things, the control over personal data by individuals to whom the personal data relates, notice we must provide to individuals regarding our processing of their personal data, the documentation we must maintain, the security and confidentiality of the personal data, data breach notification, and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data to countries that the European Commission does not consider to provide an adequate level of privacy and data security (including the United States). While the European Commission recently issued a decision that allows transfers of personal data from the EEA to the United Kingdom to occur without restriction for a period of four years ending June 27, 2025, this decision could be withdrawn or not renewed, which would require us to implement additional mechanisms to continue making such transfers. The GDPR authorizes the imposition of large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenue of the noncompliant company, whichever is greater. The GDPR requirements related to international data transfers apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries such as Sangamo France, including employee information. The GDPR has increased our responsibility and potential liability in relation to personal data that we process compared to prior EU law, particularly in light of our acquisition of Sangamo France, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business.
In the United States, federal, state and local governments have enacted numerous privacy and data security laws, including laws on data breach notification, personal data privacy and consumer protection. For example, the CCPA imposes various obligations, including obligations to provide detailed disclosures in privacy notices and affording California residents certain rights related to their personal data (including the right to delete their personal data and to opt out of the sale of their personal data). The CCPA includes potentially severe statutory damages (up to $7,500 per violation) and a private right of action for data breaches. The California Privacy Rights Act of 2020, or CPRA, effective on January 1, 2023, will significantly expand the CCPA. For example, the CPRA establishes the California Privacy Protection Agency to implement and enforce the new law and impose administrative fines. Other states have enacted similar laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which become effective in 2023.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly. See “Risk Factors—Our current and future relationships with healthcare providers, customers and third-party payors subject us to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations. If we fail to comply with federal, state and foreign laws and regulations, including healthcare, privacy and data security laws and regulations, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.”
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HUMAN CAPITAL MANAGEMENT
Our Mission and Our Employees
At Sangamo, we are committed to translating ground-breaking science into genomic medicines that transform patients’ lives. We are a passionate group of biotechnology professionals based in the United States, France and the United Kingdom with years of experience and technical expertise, committed to developing best-in-class genomic medicines. We embrace collaboration, discipline and efficiency while welcoming fresh ideas and stimulating personal development. We encourage and embrace diversity, equity and inclusion, and believe it enhances our work towards one common goal: to transform the lives of the patients we aim to serve.
We view our employees as one of our most valuable assets in serving our mission. We compete in the highly competitive biotechnology industry, and attracting, retaining and developing a diverse group of talented employees is crucial to our strategy and our ability to compete effectively. We are committed to the development and retention of our workforce to support our research, product development, manufacturing and regulatory efforts and our plans for commercializing our wholly-owned product candidates when approved. There currently is a shortage of skilled individuals with substantial experience discovering, developing and manufacturing genomic medicines, which is likely to continue. As a result, competition for these individuals is intense and the turnover rate can be high. We face substantial competition among numerous biopharmaceutical companies and academic institutions for individuals with these skills.
Our Values
We believe success comes when we align our core values with our mission to deliver genomic medicines that replace today’s symptomatic treatments and transform patients’ lives. Our core values are:
•Doing what’s right for patients:
◦We collaborate with purpose and are driven by results that benefit patients.
◦We strive to put patient safety and quality first.
◦Patient needs drive our sense of urgency to deliver medicines.
◦We embrace our responsibility to pioneer the field of genomic medicine bioethically.
◦We take an inclusive approach to guide our drug development.
•Succeeding through teamwork:
◦We are driven by our shared vision that genomic medicine will transform the lives of patients and the field of healthcare.
◦We are a passionate and dedicated group of individuals who collaborate proactively and openly to execute and progress our business forward.
◦We define our priorities clearly, communicate them, and take collective accountability to deliver results for all stakeholders.
◦We are resilient and determined to succeed together because patients are depending on us.
•Innovating through smart decisions:
◦We courageously, relentlessly, and urgently pursue the journey of innovation to succeed in the field of genomic medicine.
◦We mine scientific possibilities with the goal of unlocking new treatment solutions for serious diseases.
◦We strive to achieve our business goals through agile, inclusive and efficient decision making.
◦We learn and grow from decades of scientific experience to develop therapies at the cutting edge of medicine.
◦We learn from failure, and seek to continuously improve performance, as part of the journey to achieve breakthroughs.
•Fostering belonging:
◦We develop shared goals that create a sense of belonging.
◦We are a company where diverse individuals can flourish, grow and develop their expertise while bringing their authentic selves to work.
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◦We feel connected to our local communities, the environment in which we live and the patient communities we serve.
◦We come together to understand our scientific learnings and progress the evolution of our business.
◦We embrace diversity, equity and inclusion.
◦We are committed to nurturing diverse and inclusive environments to advance healthcare equity.
Our Management of Human Capital
We hired our first Chief People Officer in September 2020 to lead our human resources function and to expand our investments in recruiting, retaining and developing our employees. As of December 31, 2021, our global human resources function was comprised of 10 full time human resources professionals.
As of December 31, 2021, we had 431 full time employees located in the United States, France and the United Kingdom. Of these employees, 341 were located in the United States, primarily in the San Francisco Bay Area, 83 were located in Valbonne, France and the remaining seven were located near London, United Kingdom. Of these employees, 185 were primarily engaged in research and development activities, 163 were primarily engaged in technical operations and manufacturing and 83 were primarily engaged in general and administrative activities. We also engage the services of independent contractors and consultants as needed for special or temporary projects or specific expertise.
To manage our human resources, we track and report internally on key talent metrics including headcount by business unit and country, historical headcount growth, turnover, new hires and terminations, open roles and employee demographics including gender, race and ethnicity. Our senior executives use these metrics to assist with resource planning, recruitment and retention initiatives and the design of our compensation and benefits programs. We share these metrics quarterly with the Compensation Committee of our Board of Directors to assist it in fulfilling its duties to (a) establish our enterprise compensation philosophy, (b) administer our compensation and benefit plans, (c) evaluate the performance of our executive officers and key employees and (d) review and monitor management development and succession plans.
In 2021, we launched our first employee engagement survey. The results of this survey helped us better understand the culture, work dynamics and overall commitment of our employees and to also identify areas of focus that will increase overall employee engagement. We were happy with our participation rate of 79% and over 385 comments, and results demonstrating favorable levels of employee satisfaction.
Our Commitment to Diversity, Equity and Inclusion
We strongly believe in a diverse workplace where all Sangamo employees can thrive in an inclusive environment free from discrimination, harassment, bias and prejudice. We aim to treat all individuals with respect and dignity and to provide all Sangamo employees with equal opportunity and fair treatment based on merit. By embracing diversity and inclusion, we create an organization committed to working together to develop innovative solutions in support of the Sangamo mission consistent with our values. At Sangamo, we cultivate a culture and environment where different backgrounds and perspectives are not only respected and heard, but embraced and celebrated. Not only is a diverse, equitable and inclusive mindset and culture critical to an engaged and committed workplace, but it is also imperative in delivering innovative solutions for our patients.
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Sangamo employee demographics as of December 31, 2021:
Ethnicity data is for U.S. employees only
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We have an active Diversity, Equity and Inclusion, or DEI, working group comprised of a diverse group of employees responsible for designing and implementing specific initiatives to promote greater diversity, equity and inclusion at Sangamo worldwide. In 2021, we launched six employee resource groups, or ERGs, that are led by employees in partnership with an executive sponsor, and we have dedicated budgets for each of these ERGs so that they can make a specific impact in the areas of building and reinforcing community, development and talent attraction. We are working on various partnerships with Life Science Cares, a non-profit organization with a mission of leveraging the resources of life science companies to help reduce the effects of poverty, and our Chief Operating Officer, D. Mark McClung, serves as a board member. We have also participated in the Bloomberg Gender Equality Index to better align our investments and initiatives with our employees.
Our Compensation and Benefits
Given the highly competitive nature of our industry and the importance of recruitment and retention to our success, we strive to provide our employees with what we believe is a very competitive and comprehensive total rewards package of compensation, benefits and services. This package includes at or above-market pay; healthcare benefits for employees and family members; a health savings account for eligible U.S. employees with above market employer contributions; generous paid time off benefits; family leave; bereavement leave; flexible work schedules; contributions to retirement and/or pension plans; a supplemental long term disability plan, mental health benefits and onsite gym access. In addition, we offer a monthly stipend for employees to spend on health and well-being. We also offer every full-time employee globally the benefit of equity ownership in Sangamo through stock option grants and/or restricted stock units. Our U.S. employees are also eligible to participate in an employee stock purchase plan, which offers the opportunity to purchase our common stock at a discount of at least 15%.
Our Efforts to Address the COVID-19 Pandemic
Employee safety and wellbeing is of paramount importance to us in any year and continued to be of particular focus in 2021 in light of the continuing and evolving COVID-19 pandemic. In response to the pandemic, we have supported our employees and government efforts to curb the COVID-19 pandemic through safety and communication efforts and investments, which include:
•Maintaining a COVID-19 task force responsible for establishing COVID-19 health and safety protocols as well as ongoing communication updates to employees;
•Aligning onsite policies to local government guidance and regulations;
•Decreasing density and increasing physical distancing in our facilities for employees working onsite using scheduling adjustments and flexibility;
•Weekly COVID-19 testing for all onsite employees in our U.S. facilities;
•Onsite Booster Clinics for all US employees and their family members;
•Robust cleaning protocols across all locations;
•Provision of masks to all onsite employees and masking requirements aligned to state and local guidelines;
•Rigorous procedures to address actual and suspected COVID-19 cases and potential exposure; and
•Limited domestic and international non-essential travel for all employees.
Environment
Sangamo is headquartered in Brisbane, California, with research facilities in Richmond, California and European facilities in Valbonne, France and the United Kingdom. In house manufacturing operations are located within the Brisbane and Valbonne facilities. Sangamo’s headquarters in Brisbane is LEED certified, meaning it meets the requirements of a green building set by the U.S. Green Building Council.
Trademarks and Tradenames
SANGAMO®, Better Therapeutics By Design®, ZFP Therapeutic® and Engineering Genetic Cures® are our registered trademarks in the United States and Sangamo Therapeutics™ and Pioneering Genetic Cures™ are our trademarks. All other trademarks or trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.
Available Information
Our website is located at www.sangamo.com. This Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on our website as soon as reasonably practicable after we electronically file this
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material with, or furnish it to, the Securities and Exchange Commission, or SEC. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
ITEM 1A – RISK FACTORS
Our business involves significant risks, some of which are described below. Before making investment decisions regarding our common stock, you should carefully consider these risks, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. In such event, the market price of our common stock could decline, and you could lose all or part of your investment. In addition, there are additional risks not described below that either are not presently known to us or that we currently deem immaterial, and these additional risks could also materially impair our business, operations or market price of our common stock.
Risks Relating to Research, Development, Regulatory Approval and Commercialization of Our Product Candidates and Technologies
Our success depends substantially on clinical trial results demonstrating safety and efficacy of our product candidates to the satisfaction of regulatory authorities. We may be unable to obtain positive clinical trial results and regulatory approvals for any of our product candidates.
We are a clinical-stage biotechnology company with no approved products and no product revenues. We have ongoing clinical trials evaluating product candidates that use our platform technologies in gene therapy and cell therapy and we anticipate initiating additional clinical trials in the future on other product candidates. We are substantially dependent on the results of these clinical trials, and there is no guarantee that final results of clinical trials conducted on our product candidates now or in the future will demonstrate the safety and efficacy of any of our product candidates. In addition, none of our product candidates have obtained regulatory approval. Obtaining positive clinical trial results and regulatory approvals is expensive, lengthy, challenging and unpredictable and may never occur for any of our product candidates. If we fail to obtain positive clinical trial results and regulatory approvals for our product candidates, our anticipated revenues from our product candidates and our prospects for profitability would be adversely affected, which would likely cause the market price of our common stock to significantly decline.
Conducting clinical trials and obtaining regulatory approvals is complex and exposes our business to numerous risks, including potential unexpected costs and delays.
We must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates to the satisfaction of regulatory authorities in order to obtain regulatory approvals necessary for commercialization. We have limited experience in conducting later stage clinical trials and may not possess the necessary resources and expertise to complete such trials. Clinical trials are expensive, lengthy and unpredictable. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage. Events that may delay or prevent successful or timely completion of clinical development and regulatory approval include, among others:
•delays in reaching a consensus with regulatory authorities on clinical trial design;
•delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;
•delays in opening clinical trial sites or obtaining required institutional review board, or IRB, or independent ethics committee approval at each clinical trial site, such as the delays we have experienced opening the clinical trial sites in the United Kingdom for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, due to the diversion of healthcare resources to address the ongoing COVID-19 pandemic;
•delays or interruptions in recruiting, screening and enrolling suitable patients to participate in our clinical trials and dosing enrolled patients, such as (i) the delays we have recently experienced and continue to experience in recruiting, screening, enrolling and dosing patients for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec due to challenges related to Brexit as well as the COVID-19 pandemic, including due to patients testing positive for COVID-19, patients reconsidering their participation in the study and the limited number of screening sites, among other reasons and (ii) the pause in dosing of additional patients in the Phase 3 AFFINE trial of giroctocogene fitelparvovec implemented by Pfizer;
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•the imposition of clinical holds by regulatory authorities on our clinical trials or those of our collaborators, such as the clinical hold imposed by the FDA on the Phase 3 AFFINE trial of giroctocogene fitelparvovec;
•delays in clinical trial activities due to the evolving COVID-19 global pandemic and the diversion of healthcare resources to fight the pandemic, including delays associated with certain patients deciding to take COVID-19 vaccines or testing positive for COVID-19 prior to enrollment or dosing in the study, which have previously impacted clinical trial timelines for our Fabry and TX200 programs;
•delays or difficulties we may experience in effecting the transition of our SAR445136 sickle cell disease program from Sanofi to us due to the termination by Sanofi of our collaboration agreement, and delays or difficulties we may experience in enrolling and dosing the final patients in the related Phase 1/2 PRECIZN-1 study;
•failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements;
•failure to perform in accordance with the Good Clinical Practice regulations of the FDA, or applicable regulatory guidelines in the EU and other countries;
•delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites, including delays by third parties with whom we have contracted to perform certain of those functions, or as a result of manufacturing or formulation changes to our product candidates;
•delays in having patients complete participation in a trial or return for post-treatment follow-up;
•clinical trial sites or patients dropping out of a trial;
•selections of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;
•occurrences of serious adverse events or other safety concerns associated with product candidates that are viewed to outweigh their potential benefits, result in approval delays or other regulatory restrictions, or harm our reputation;
•occurrences of serious adverse events or other safety concerns in clinical trials of the same class of agents conducted by other sponsors;
•failures to demonstrate that product candidates are safe and effective for their proposed indication;
•changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
•unexpected costs and expenses and lack of sufficient funding to develop our product candidates; and
•losses of licenses to critical intellectual properties.
We have not yet reached agreement with regulatory authorities on the complete development pathway for certain product candidates, and such authorities have the ability to change decisions or guidance with respect to approvable endpoints, particularly as the technology continues to develop in these areas. For example, we are aware of another company developing a gene therapy to treat hemophilia A that the FDA recommended complete its Phase 3 study and submit two-year follow-up safety and efficacy data on all study participants notwithstanding the company’s contention that it and the FDA had previously agreed on the extent of data necessary to support a biologics license application, or BLA. While we and Pfizer anticipate pivotal data readouts for our Phase 3 AFFINE trial evaluating giroctocogene fitelparvovec to be based on full analyses of all study participants, when the first 50 patients are twelve months past reaching a steady-state of FVIII expression, assuming Pfizer is able to resume dosing of additional patients in this trial, the FDA or other health authorities could determine that we need to treat more patients in this trial than expected or follow patients for longer than expected to generate the required data, or that we need to change the dose level used in the trial to date, any of which could negatively impact the projected timelines for conducting and completing the trial and seeking regulatory approvals for giroctocogene fitelparvovec, which could in turn materially and adversely affect its competitive position and commercial viability and therefore our business, prospects and market price of our stock. In any event, we cannot assure you when dosing of patients in the AFFINE trial will resume, if at all.
Due to the novelty of certain product candidates and their technologies, the endpoints needed to support regulatory approvals will likely be different from those originally anticipated. Any inability to successfully complete preclinical and clinical development of our product candidates, or complete such trials in the timeframes anticipated, could result in additional costs to us or impair our ability to generate revenues from product sales or achieve regulatory and commercialization milestones and royalties, or shorten any periods during which we may have exclusivity.
Even if a product candidate successfully obtains approval from the FDA and comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. Also,
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any regulatory approval of our product candidates, once obtained, may be withdrawn. If we are unable to obtain and maintain regulatory approvals for our product candidates in one or more jurisdictions, or if any approval contains significant limitations, we would not be able to generate anticipated revenues and may struggle to become profitable, which would have an adverse effect on our business operations and financial condition.
Success in research and preclinical studies or early clinical trial results may not be indicative of results obtained in later trials. Likewise, preliminary, initial or interim data from clinical trials may be materially different from final data.
Results from research and preclinical studies or early clinical trials are not necessarily predictive of future clinical trial results, and preliminary, initial and interim results of a clinical trial are not necessarily indicative of final results. Our product candidates may fail to show the desired safety and efficacy in clinical trials despite demonstrating positive results in preclinical studies or having successfully advanced through initial clinical trials or preliminary stages of clinical trials. From time to time, we have and may in the future publish or report preliminary, initial or interim data. Preliminary, initial or interim data from our clinical trials and those of our collaborators may not be indicative of the final results of the trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and/or more patient data become available. In this regard, such data may show initial evidence of clinical benefit, but as patients continue to be followed and more patient data becomes available, there is a risk that any therapeutic effects will not be durable in patients and/or will decrease over time, or cease entirely. Preliminary, initial or interim data also remain subject to audit and verification procedures that may result in the final data being materially different from such preliminary, initial or interim data. As a result, preliminary, initial or interim data should be considered carefully and with caution until the final data are available. For example, there can be no assurance that the FVIII levels shown in the updated data announced in December 2021 by Pfizer and us from the Phase 1/2 Alta study of giroctocogene fitelparvovec will persist in future follow-up or any other data from the Alta study or the Phase 3 AFFINE trial. Mean FVIII levels shown in the Alta study, after an initial peak, have trended downward from the time of treatment through each week of follow up, and could continue to trend downward over time. For this reason and potentially other reasons, giroctocogene fitelparvovec may not ultimately demonstrate a durable, safe and effective clinical benefit to the satisfaction of regulatory authorities in the final results of the Alta study or the Phase 3 AFFINE clinical trial, and even if satisfactory to regulatory authorities, such benefit may not be sufficient to yield a commercially-viable product.
There is no guarantee that any of our pending clinical trials will be successful. Many of our product candidates currently use our ZFP technology platform, including ZF nuclease and ZPT-TF technologies, which has not yet yielded any approved therapeutic products. Moreover, many of our product candidates are preclinical and have never demonstrated any clinical benefit. In addition, our viral delivery systems continue to evolve and have not been used in any approved products. If our product candidates using our ZFP technology platform and viral delivery systems are not able to demonstrate the safe, effective and durable results we are hoping to see in clinical trials, we may be forced to suspend or terminate development of some or all of our product candidates or seek alternative technologies to develop or deliver product candidates.
In addition, there is a high failure rate for product candidates proceeding through clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. Any such setbacks could adversely affect our business, financial condition, results of operations and prospects.
Our product candidates are subject to a lengthy and unpredictable regulatory approval process in each jurisdiction where approval is sought.
A regulatory authority such as the FDA or the EMA must approve any human therapeutic product before it can be marketed in the jurisdiction it governs. The process for receiving regulatory approval is lengthy and unpredictable, and a product candidate may not withstand the rigors of testing under the process. Before commencing clinical trials in humans in the United States, we must submit an IND to the FDA. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the EU, for example, a clinical trial authorization, or CTA, must be submitted for each clinical protocol to each country’s national health authority and an independent ethics committee. Only after an IND becomes effective and/or the applicable CTA has been accepted may clinical trials begin. See “Business—Government Regulation” for details regarding the regulatory approval processes applicable to our product candidates. While there is some overlap, the regulatory requirements to conduct clinical trials and seek marketing approval vary by jurisdiction. There is no guarantee that the safety studies and other data generated will be sufficient to permit us to conduct clinical trials in all jurisdictions where planned, or once generated, that such clinical trial data will be sufficient to obtain marketing approval in all jurisdictions in which we intend to seek such approval. If we are not able to obtain the necessary regulatory approvals to conduct our clinical trials and commercialize our product candidates, or if such approvals are delayed or suspended, our business, prospects and market price of our common stock would be adversely affected.
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We may not be able to identify, qualify and enroll sufficient patients for our clinical trials or complete our clinical trials in a timely manner, which could delay or prevent us from proceeding with the development of our product candidates.
Identifying, qualifying and enrolling patients in clinical trials of our product candidates, and completing these clinical trials, is critical to our success. Patient enrollment and trial completion is affected by factors including:
•size of the patient population and process for identifying patients;
•design of the trial protocol;
•eligibility and exclusion criteria;
•perceived risks and benefits of the product candidate under study;
•perceived risks and benefits of genomic approaches to treatment of diseases;
•availability of competing therapies and clinical trials;
•potential additional delays related to the evolving COVID-19 global pandemic and the diversion of healthcare resources to fight the pandemic, including the decision of certain patients to take COVID-19 vaccines and certain patients testing positive for COVID-19 prior to enrolling or dosing in the study;
•delays or interruptions related to voluntary pauses of our clinical trials or those of our collaborators, such as the voluntary pause in enrolling and dosing additional patients in the Phase 3 AFFINE trial of giroctocogene fitelparvovec;
•the imposition of clinical holds by regulatory authorities on our clinical trials or those of our collaborators, such as the clinical hold imposed by the FDA on the Phase 3 AFFINE trial of giroctocogene fitelparvovec, and the potential inability of Sangamo and our collaborators to lift clinical holds imposed by regulatory authorities in a timely manner or on acceptable terms, or at all;
•the transition of our SAR445136 sickle cell disease program from Sanofi to us due to the termination by Sanofi of our collaboration agreement, and delays or difficulties we may experience in enrolling and dosing the final patients in the related Phase 1/2 PRECIZN-1 study;
•severity of the disease under investigation;
•availability of genetic testing for potential patients;
•proximity and availability of clinical trial sites for prospective patients;
•required and desired characteristics of patients;
•ability to obtain and maintain patient consent;
•risk that enrolled patients will drop out before completion of the trial;
•patient referral practices of physicians; and
•ability to monitor patients adequately during and after treatment.
The timing of our clinical trials depends on our ability to recruit patients to participate as well as completion of required follow-up periods. There are also a number of other product candidates in development by our competitors, who compete for the same limited patient populations. If we are not able to enroll the necessary number of patients in a timely manner, we may not be able to complete our clinical trials on our desired timelines or at all, which could negatively impact the competitive position and commercial viability of our product candidates or delay or reduce the product revenues, milestone payments or royalty payments we expect to earn from our product candidates. For example, we have experienced delays and challenges in recruiting, screening, enrolling and dosing patients for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, due to challenges related to Brexit as well as the COVID-19 pandemic, patients testing positive for COVID-19, patients reconsidering their participation in the study and the limited number of screening sites, among other reasons. Our Phase 1/2 STEADFAST clinical study evaluating TX200 has experienced similar delays and challenges. In addition, we and Pfizer also announced that some of the patients treated in the Phase 3 AFFINE trial of giroctocogene fitelparvovec have experienced FVIII activity greater than 150% following treatment, and that Pfizer decided to voluntarily pause screening and dosing of additional patients in this trial to implement a proposed protocol amendment intended to provide guidelines for the clinical management of elevated FVIII levels. Subsequent to the voluntary pause, the FDA put this trial on clinical hold. While Pfizer has announced that it is in the process of submitting the protocol amendment and associated documents to health authorities in the countries where the trial is being conducted and preparing responses to the FDA clinical hold, and that it hopes to obtain agreements to resume the AFFINE trial and to begin to reopen trial sites in the first half of 2022, we cannot assure you that the proposed protocol amendments and associated documents will be accepted by the FDA and other health authorities or implemented in a timely
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manner, or at all, or that the trial or dosing of new patients in the trial will resume promptly upon implementation of the proposed protocol amendments, or at all. Continued delays or additional pauses to the Phase 3 AFFINE trial, or the inability to otherwise cause the health authorities to permit the trial to resume on acceptable terms, or at all, could negatively impact the projected timelines for conducting and completing the trial and seeking regulatory approvals for giroctocogene fitelparvovec, which could in turn materially and adversely affect giroctocogene fitelparvovec’s competitive position and commercial viability and therefore our business, prospects and market price of our common stock.
In addition, if fewer patients are willing to participate in our clinical trials because of negative publicity from adverse events related to genomic medicines, competitive clinical trials for similar patient populations or for other reasons, the timelines for conducting clinical trials of our product candidates may be delayed. These delays could result in increased costs, limitation or termination of clinical trials, and delays in product development timelines. If we are forced to expand to additional jurisdictions to address these challenges, it could impose additional costs, delays and risks. If we are not successful in conducting our clinical trials as planned, it would have an adverse effect on our business, financial condition, results of operations, prospects and market price of our common stock.
We may encounter difficulties in advancing product candidates from research programs to preclinical and clinical development.
We intend to advance our product candidates from research programs through preclinical development and to submit new INDs, CTAs and equivalent filings in other jurisdictions necessary to conduct human clinical trials evaluating our product candidates. The preparation and submission of applications to conduct clinical trials requires us to conduct rigorous and time-consuming preclinical testing and studies and prepare documentation relating to, among other things, the toxicity, safety, manufacturing, chemistry and clinical protocols of our product candidates. We may experience unforeseen difficulties that could delay or otherwise prevent us from executing this strategy successfully. For example, we may encounter problems in the manufacturing of a product candidates and may fail to demonstrate consistency in the formulation of a product candidate. Our preclinical tests may produce negative or inconclusive results, which may lead us to decide, or which may lead regulators to require us, to conduct additional preclinical testing. If we cannot obtain positive results in preclinical testing, we may decide to abandon a product candidate altogether. In addition, our ability to complete and submit such applications to conduct clinical trials may depend on the support of our collaborators and the timely performance of their obligations under relevant collaboration agreements. If our collaborators are not able to perform such obligations or if they choose to slow down or delay the development of a product candidate, we may not be able to submit the clinical trial applications on a timely basis or at all. Furthermore, the submission of applications to conduct clinical trials involves significant cost and labor, and we may not have sufficient resources and personnel to complete the filing of all intended applications, which may force us to scale back the number of applications or forego potential applications that we believe are promising. Any delay, suspension or reduction of our efforts to pursue our preclinical and clinical development strategy could have an adverse effect on our business and cause the market price of our common stock to decline.
Special regulatory designations, such as RMAT or orphan drug designations, may not be available for our product candidates or may not lead to a faster development or regulatory review or approval process.
We have received RMAT designation for our product candidate to treat severe hemophilia A. Additionally, some of our product candidates, including our product candidate to treat Fabry disease, have also been granted Orphan Drug Designation by the FDA, and some have also been designated Orphan Medicinal Products by the EMA. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as orphan drugs. For additional information regarding these special regulatory designations, see “Business—Government Regulation.”
If we request such designations for our other current or future product candidates, there can be no assurances that the FDA or the EMA will grant any of our product candidates such designations. Additionally, such designations do not guarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, those product candidates, nor does it limit the ability of any regulatory agency to grant such designations to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval. Such designations can also be revoked. RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges. Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the approved indications or commercial potential, or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied
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caused these conditions, particularly as many of the diseases we are studying have complex comorbidities. If clinical experience indicates that a product candidate has side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would severely harm our business, prospects, operating results and financial condition.
There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia and death seen in other trials using other genomic therapies. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of significantly delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration that, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of the treatment.
Even if our product development efforts are successful and even if the requisite regulatory approvals are obtained, our products may not gain market acceptance among physicians, patients, healthcare payors and the medical community.
Even if we obtain regulatory approval for any of our product candidates that we may develop or acquire in the future, the approved product may not gain market acceptance among physicians, healthcare payors, patients or the medical community. Market acceptance of approved products depends on a number of factors, including:
•the efficacy and safety of the product as demonstrated in clinical trials;
•the clinical indications and patient populations for which the product is approved;
•acceptance by physicians, treatment centers and patients of the product as a safe and effective treatment;
•the adoption of novel genomic therapies by physicians, hospitals and third-party payors;
•the potential and perceived advantages of the product over alternative treatments;
•the safety of the product seen in a broader patient group, including its use outside the approved indications;
•any restrictions on product use together with other medications;
•the prevalence and severity of any side effects;
•product labeling or product insert requirements of the FDA or other regulatory authorities;
•the timing of market introduction of the product as well as competitive products;
•the development of manufacturing and distribution processes for the product;
•the cost of treatment in relation to alternative treatments;
•the availability of coverage and adequate reimbursement and the willingness of patients to pay out-of-pocket in the absence of coverage or inadequacy of reimbursement by third-party payors and government authorities;
•relative convenience and ease of administration; and
•the effectiveness of our sales and marketing efforts and those of our collaborators.
If any of our product candidates are approved but fail to achieve market acceptance among physicians, patients, healthcare payors or treatment centers, we will not be able to generate significant revenues from the approved product, which would compromise our ability to become profitable.
Even if we are able to commercialize any approved products, such products may not receive coverage and adequate reimbursement from third-party payors in the United States and in other countries in which we seek to commercialize them, which could harm our business.
Our ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels, which can affect demand for, or the price of, any approved product. Given the nature of the product candidates that we are developing, some patients may require treatment only one-time (e.g., single dose administration), and there is substantial uncertainty about the pricing structure for such products, and the level of coverage and reimbursement that will be available for a shift to single-dose treatment as compared to chronic therapy over a patient’s lifetime. If other companies establish a new pricing structure or business model, including payment based on demonstration of long-term efficacy, our ability to price or obtain reimbursement for our products may be adversely affected. If such pricing structure or
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business model do not adequately fund the costs of our research and development, manufacturing and commercialization efforts, our business may be adversely affected.
In addition to uncertainty about the potential pricing structure for certain of our product candidates, cost containment is a recurrent trend in the healthcare industry. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for certain medications. We cannot be sure that coverage and adequate reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. If reimbursement is not available or is available only at limited levels, we may be unable to successfully commercialize any product candidate for which we obtain regulatory approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have an adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product candidates and affect the prices we may obtain.
The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug products vary widely from country to country. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities and affect our ability to successfully sell any product candidates for which we obtain regulatory approval. Also, there has been heightened governmental scrutiny recently over biopharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for biopharmaceutical products. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, have been designed to encourage importation from other countries and bulk purchasing. For a discussion of health reform activity and the current pricing framework, see “Business—Government Regulation—Healthcare Reform” and “Business—Government Regulation—Pricing, Coverage and Reimbursement.”
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
•the demand for our product candidates, if we obtain regulatory approval;
•our ability to set a price that we believe is fair for our products;
•our ability to generate revenue and achieve or maintain profitability;
•the level of taxes that we are required to pay; and
•the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.
Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.
Even if we obtain regulatory approval in a jurisdiction, the regulatory authority may still impose significant restrictions on the indicated uses or marketing of our product candidates or impose ongoing requirements for potentially costly post-approval studies, post-market surveillance or patient or drug restrictions. For example, the FDA typically advises that patients treated with gene therapy undergo follow-up observations for potential adverse events for a 15-year period. Additionally, the holder of an approved BLA is required to comply with FDA rules and is subject to FDA review and periodic inspections, in addition to other potentially applicable federal and state laws, to ensure compliance with cGMP and adherence to commitments made in the BLA.
If we or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. Moreover, product labeling, advertising and promotion for any approved product will be subject to regulatory requirements and continuing regulatory review. Failure to comply with such requirements,
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when and if applicable, could subject us to a number of actions ranging from warning letters to product seizures or significant fines, among other actions. See “Business—Government Regulation—U.S. Review and Approval Processes” for more information.
Any government investigation of alleged violations of laws or regulations could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenues.
Our employees or contractors may engage in misconduct or other improper activities, including noncompliance with research, development, manufacturing or regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
We are exposed to the risk of fraud or other misconduct by our employees and contractors, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Misconduct by our employees and contractors could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, personal imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on other programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
We have limited resources and may forego or delay pursuit of certain research programs or product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities or pursue collaborations rather than retain sole responsibility for development. Our current and future research and development programs for product candidates may not yield any commercially viable products. The evaluation of the commercial potential or target market for a particular product candidate is forward-looking and based upon assumptions involving, for example and not limited to, market evolution, advances in disease standard of care, competition and reimbursement. This reliance on assumptions means that, if our assumptions prove to be inaccurate or incomplete, we may pursue opportunities that end up having a number of competitors that are more advanced than our product candidates, or we may relinquish valuable rights to a product candidate through strategic collaboration, licensing or other royalty arrangements in cases where it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. We may also allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration or that does not prove to have viable commercial opportunities. Any failure to use our financial and human resources efficiently could harm our business and operations.
ZFP technology is novel and has never been used to develop any approved, commercially viable therapeutic products.
Our ZFP technology is a novel technology which to date has not yielded any approved commercially viable therapeutic products, and there can be no guarantee that our product development efforts using ZFP technology will be fruitful. We have invested heavily in development of this technology, and our failure to develop approved, commercially viable products using ZFP technology would significantly limit our business and prospects and would adversely impact the market value of our common stock.
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Risks Relating to Manufacturing
We recently completed the construction of several facilities for clinical trial supplies. We have limited experience manufacturing biopharmaceutical products, and there can be no assurance that we will be able to maintain compliant manufacturing facilities, build additional facilities and manufacture our product candidates as intended.
We expect to use both contract manufacturing organizations, or CMOs, and our own facilities to meet our projected needs for clinical trial supply. We operate an AAV manufacturing facility in Brisbane, California to manufacture Phase 1/2 clinical study supplies for our gene therapy product candidates, and in 2021 we completed construction of cell therapy manufacturing facilities in Brisbane, California and Valbonne, France to manufacture supplies for our cell therapy product candidates. Operationalizing these new facilities requires us to transition manufacturing processes and know-how of our product candidates from our CMOs to our own facilities. Transferring manufacturing processes and know-how is complex and involves review and incorporation of both documented and undocumented processes that may have evolved over time. In addition, transferring production to different facilities may require utilization of new or different processes to meet the specific requirements of a given facility. Additional studies may also need to be conducted to support the transfer of certain manufacturing processes and process improvements. We cannot be certain that all relevant know-how and data has been adequately incorporated into the manufacturing process until the completion of studies and evaluations intended to demonstrate the comparability of material previously produced by CMOs with that generated by our facilities. Although some of our employees have experience in the manufacturing of biopharmaceutical products from prior employment at other companies, we, as a company, have no prior experience in biopharmaceutical product manufacturing, and operating these facilities will require us to comply with complex regulations and to continue to hire and retain experienced scientific, quality control, quality assurance and manufacturing personnel. In addition, government approvals are required for us to operate manufacturing facilities and are time-consuming to obtain and maintain. As a manufacturer of biopharmaceutical products, we also will be required to demonstrate and maintain cGMP compliance. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Furthermore, establishing manufacturing operations will require a reallocation of other resources, particularly the time and attention of our senior management. Even if we are able to establish our own manufacturing capabilities, we could encounter challenges in operating the manufacturing facilities in compliance with cGMP, regulatory or other applicable requirements, resulting in potential negative consequences, including regulatory actions, which could undermine our ability to use these facilities for our own manufacturing needs. Any failure or delay in the development of our manufacturing capabilities could adversely impact the development of our product candidates.
The manufacture, storage and transport of our product candidates is complex, expensive, highly regulated and risky, which could hamper their commercial viability.
There are significant risks associated with manufacturing, storing and transporting our product candidates including, among others, cGMP compliance, cost overruns, technical problems with process scale-up, specialized facilities, process reproducibility, stability issues, lot consistency, yields and timely availability of highly specific raw materials. Even though product batches released for use in clinical trials undergo sample testing, some defects may only be identified following release. In addition, process deviations or unanticipated effects of approved process changes may result in these intermediate products not complying with stability requirements or specifications. Also, our product candidates must be stored and transported at temperatures within a certain range. If these environmental conditions deviate, our product candidates’ remaining shelf-lives could be impaired or their efficacy and safety could be adversely affected, making them no longer suitable for use. Moreover, product candidates that are biologics involve complex processes, including the development of cell lines or cell systems to produce the biologic, with the challenge of significant variability. There are difficulties in growing large quantities of such cells, consistently and sufficiently isolating certain types of cells and harvesting and purifying the biologic produced by them. The cost to manufacture biologics is generally far higher than traditional small molecule chemical compounds, and the manufacturing process can be difficult to reproduce.
Moreover, manufacturing, storing and transporting our product candidates is subject to strict regulatory standards, which adds additional production risk. Even if efficacy and safety data from our clinical trials would otherwise support regulatory approval of a product candidate, there is no assurance that we or our CMOs will be able to manufacture our product candidates to specifications at levels necessary to support or maintain regulatory approval by the FDA or other regulatory authorities.
Thus, there is no guarantee we will be successful in establishing a larger-scale commercial manufacturing process for our product candidates or obtaining the needed manufacturing capacity. Due to these manufacturing challenges, there is risk that some of our product candidates could be subject to inventory outages, reputational damage and product liability risks, and result in additional expense and delays to clinical trials and commercialization. Supply interruptions or shortages could result in potential negative impacts to our business, prospects and market price of our common stock.
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If we use chemical, biological or hazardous materials in a manner that causes injury or violates laws, we may be liable for damages.
Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals, and various radioactive compounds typically employed in the study of molecular and cellular biology. We routinely use cells in culture and gene delivery vectors, and we employ small amounts of radioisotopes in trace experiments. Although we maintain up-to-date licensing and training programs, we cannot completely eliminate the risk of accidental contamination or injury from the use, storage, handling, or disposal of these materials. In the event of contamination or injury, we could be held liable for damages that result, and any liability could exceed our resources. We currently carry insurance covering certain claims arising from our use of these materials. However, if we are unable to maintain our insurance coverage at a reasonable cost and with adequate coverage, our insurance may not cover any liability that may arise. We are subject to federal, state, and local laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste products. Failure to comply with these laws and regulations could result in fines, penalties and additional liabilities and restrictions on our operations.
We currently rely on third parties to conduct some or all aspects of manufacturing of our product candidates for preclinical and clinical development. If one of our third-party manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers.
We currently have limited experience in clinical-scale manufacturing of our product candidates, and we rely in large part upon third-party CMOs to manufacture and supply drug product for our preclinical studies and clinical trials. Although we have in-house manufacturing facilities in Brisbane, California and Valbonne, France, these facilities will only manufacture limited quantities of our product candidates for our early-stage clinical trials. We intend to continue to rely on third parties for the manufacture of product candidates for later stage clinical trials, and for commercial-scale manufacturing for any approved product. The manufacture of biopharmaceutical products in compliance with the FDA’s cGMP requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biopharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to conduct later-stage clinical trials could be jeopardized. Any delay or interruption in the supply of clinical trial materials could delay the completion of our clinical trials, increase the costs associated with developing our product candidates and, depending upon the period of delay, require us to commence new clinical trials at significant additional expense or terminate the clinical trials completely.
We and our CMOs must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. We and our CMOs may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have limited control over our manufacturers’ compliance with these regulations and standards. Failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or impair our reputation.
Our current agreements with our CMOs do not provide for the entire supply of the drug product necessary for all anticipated clinical trials or for full scale commercialization. If we and our CMOs cannot agree to the terms and conditions for them to provide the drug product necessary for our clinical and commercial supply needs, we may not be able to manufacture the product candidate until a qualified alternative manufacturer is identified, which could also delay the development of, and impair our ability to commercialize our product candidates.
The number of third-party CMOs with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative CMOs, which could have an adverse effect on our business. New manufacturers of any product candidate would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing the product candidate. Obtaining the necessary FDA approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.
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We and third parties on which we rely may be adversely affected by natural disasters and catastrophic or other events outside of our control, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster or event.
Natural disasters could severely disrupt our operations and our facilities, including our current manufacturing facilities in Brisbane, California and Valbonne, France and the manufacturing facilities of our CMOs, and any disruption would likely have a negative impact on our business, financial condition, results of operations and prospects. If a natural disaster, pandemic or epidemic, including the evolving COVID-19 pandemic, political crisis, power outage or any other event that is out of our control occurred that prevented us or third parties on which we rely from using all or a significant portion of our or their facilities, that damaged critical infrastructure or that otherwise disrupted our or their operations, it may be difficult or, in certain cases, impossible for us to continue our business and operations for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and may not prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have an adverse effect on our business, financial condition, results of operations and prospects. Such disasters or events occurring at facilities of third parties on which we rely could also negatively impact our business and operations.
Risks Relating to our Industry
Our product candidates are based on novel genomic medicine technologies, which makes it difficult to predict the timing and costs of development and of subsequently obtaining regulatory approval.
We have concentrated our research and development efforts on genomic medicine, consisting of gene therapy, gene-edited cell therapy and genome engineering. The regulatory approval process for novel product candidates such as ours is unclear and may be lengthier and more expensive than the process for other, better-known or more extensively studied product candidates.
Regulatory review committees and advisory groups, and any new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our current or future product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be harmed. Even if our product candidates are approved, we expect that the FDA will require us to submit follow-up data regarding our clinical trial patients for a number of years after any approval. If this follow-up data shows negative long-term safety or efficacy outcomes for these patients, the FDA may revoke its approval or change the label of our products in a manner that could have an adverse impact on our business.
In addition, adverse developments in clinical trials of genomic medicines conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of our product candidates. The FDA and EMA have only very recent and limited experience in the approval of in vivo gene therapy products. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates.
If we or our competitors develop, acquire, or market technologies or products that are more effective than ours, our financial condition and ability to successfully market or commercialize our product candidates or be profitable would be adversely affected.
The biopharmaceutical industry is highly competitive and subject to significant and rapid technological change. We are aware of several companies focused on other methods for editing cells, editing genes and regulating gene expression and a growing number of commercial and academic groups pursuing the development of genome engineering technology. The field of genomic medicine is highly competitive, and we expect competition to persist and intensify in the future from a number of different sources, including biopharmaceutical companies, academic and research institutions, and government agencies that will seek to develop competing products as well as technologies that will compete with our ZFP technology platform. For example, in genome engineering and gene therapy products, competing proprietary technologies with our product development focus include but are not limited to, recombinant proteins, other gene therapy/cDNAs, nuclease and base editing technologies, antisense therapeutics and RNA interference technologies, siRNA, RNAi and microRNA approaches, exon skipping, small molecule drugs, monoclonal antibodies, CRISPR/Cas technology and TALE proteins, meganucleases, and MegaTALs. A growing number of companies are also developing rival cell therapy technologies and product candidates. See “Business—Competition” for more information on the competition we may face.
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Any products that we or our collaborators or strategic partners develop will enter into highly competitive markets. Even if we are able to generate products that are safe and effective for their intended use, competing technologies may prove to be more effective or less expensive, which, to the extent these competing technologies achieve market acceptance, will limit our revenue opportunities. In some cases, competing technologies have proven to be effective and less expensive. Competing technologies may include other methods of regulating gene expression or modifying genes. ZF nucleases and ZFP-TFs have broad application in the life sciences industry and compete with a broad array of new technologies and approaches being applied to genetic research by many companies.
In addition to possessing competing technologies, our competitors include biopharmaceutical companies with:
•substantially greater capital resources than ours;
•larger research and development staffs and facilities than ours; and
•greater experience in product development and in obtaining regulatory approvals and patent protection.
These organizations also compete with us to attract qualified personnel, attract parties for acquisitions, joint ventures or other collaborations and license the proprietary technologies of academic and research institutions that are competitive with our technology, which may preclude us from pursuing similar opportunities. Accordingly, our competitors may succeed in obtaining patent protection or commercializing products before us. Even if our product candidate is more effective, it may be disadvantaged if it is not first to market. In addition, any products that we develop may compete with existing products or services that are well established in the marketplace. Further, some of our product candidates in development are designed for use once. Any success in developing one-time use therapeutics could cause us to lose potential recurring revenues from therapeutics that are designed to be taken over a patient’s lifetime.
The ongoing COVID-19 pandemic has adversely impacted and could continue to adversely impact our business and operations and the business and operations of our collaborators, manufacturers and other business partners.
We have experienced and continue to experience impacts from the ongoing and evolving COVID-19 pandemic on our business and operations and could continue to experience these or potentially more severe impacts as the pandemic evolves in the United States, France, the United Kingdom and locations of our clinical studies and trials. We continue to conduct business operations pursuant to a modified operating plan that includes enhanced workplace safety protocols and modified working schedules. These protocols and modifications have slowed our productivity and disrupted our business to a moderate degree and are likely to continue doing so through the remainder of 2022. For example, we have experienced periodic short-term disruptions to our onsite operations while addressing positive cases of COVID-19 by onsite workers and clinical trial patients, and our operations could experience longer term disruptions in the future in the event of a significant outbreak of COVID-19 among our onsite workers or clinical trial patients. Moreover, from time to time, we have been required to reorganize and prioritize our resources to mitigate moderate COVID-19 impacts arising from travel restrictions, density restrictions and supply constraints. If our programs encounter longer-term disruptions, it could impact our ability to support our biopharmaceutical partners as contemplated in our collaboration agreements and could result in adjustments to our timelines, although we do not believe that the short-term disruptions to date have resulted in any such impacts.
Additionally, our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec has experienced and continues to experience delays in its timeline due in part to COVID-19 impacts and the diversion of healthcare resources to fight the pandemic. For example, we estimate that the opening of the first clinical trial site in the United Kingdom for this study experienced a delay of approximately one year due to the significant prevalence of COVID-19 in the United Kingdom. Additionally, we have experienced delays in recruiting, enrolling and dosing patients for this study, due in part to the hesitation of patients to travel by plane to trial sites not within driving distance and to enter medical facilities during the pandemic and also due in part to trial sites prioritizing COVID-19 clinical care over research activities such as the STAAR study. The study has also experienced delays when certain patients have decided to take the COVID-19 vaccine or tested positive for COVID-19 prior to enrollment or dosing in the study. Moreover, we have experienced some short-term delays in sourcing the necessary raw materials to manufacture supplies for the STAAR study and transporting clinical trial materials due to COVID-19 impacts. We estimate that these challenges have set back our STAAR study timelines by approximately three to six months. Clinical timelines for this study could be revised again if COVID-19 impacts to our recruitment, screening, enrollment and dosing of patients and to our sourcing of raw materials for this study intensify because of vaccination delays, new COVID-19 variants or unexpected events.
In addition, our STEADFAST study evaluating TX200, our wholly-owned CAR-Treg cell therapy product candidate for the treatment of kidney transplant rejection, has experienced delays in its timeline due to COVID-19 impacts related to manufacturing and technology transfer challenges with our CMOs and due to patients and donors testing positive for COVID-19. We estimate that these challenges set back our clinical study timeline by approximately three months. While we have now enrolled the first patient in this study and expect to dose this patient soon, and expect to dose the second patient in this study by the middle of 2022, this timeline could be revised if COVID-19 impacts result in additional delays.
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With respect to our partnered programs, the timelines for the studies and trials managed by our collaborators are also subject to potential delay in the future if these studies and trials experience similar challenges that we have experienced and continue to experience in our STAAR and STEADFAST studies.
Going forward, we will continue to monitor the impact of COVID-19 on our operations, research commitments and clinical trials and those of our collaborators, clinical trial sites and CMOs. The magnitude of these impacts will depend, in part, on the length and severity of the COVID-19 pandemic and related government orders and restrictions, and how the pandemic limits the ability of us and our business partners to operate business in the ordinary course. Disruptions to these operations, and possibly more severe disruptions in the future that could arise due to the extension of government orders or new government orders applicable in the places we operate or our industry generally or to us and our facilities specifically, could impede our ability to conduct research in a timely manner, comply with our research obligations to our collaborators and advance the development of our therapeutic programs. These delays and disruptions could result in adverse material impacts to our business, operating results and financial condition.
The extent to which the COVID-19 pandemic will impact our business, operations and financial condition, either directly or indirectly, will depend on future developments that remain highly uncertain at the present time. These developments include the ultimate duration and severity of the pandemic, the impacts of new COVID-19 variants, travel restrictions, public health restrictions in the United States, France, the United Kingdom and other countries, business closures or business disruptions and the effectiveness and timeliness of actions taken in the United States, France, the United Kingdom and other countries to contain and treat the disease, including the effectiveness of vaccination programs. The surge of new variants of the virus, including the recent Omicron variant, has resulted and may in the future result in the return of prior orders and restrictions or new quarantine and shelter-in-place orders or other restrictions. As our understanding of events evolves and additional information becomes available, we may materially change our guidance relating to our revenues, expenses and timelines for manufacturing, clinical trials and research and development.
While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, it could continue to result in significant disruption of global financial markets, impairing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the COVID-19 pandemic could materially affect our business and the value of our common stock.
In addition, to the extent the evolving COVID-19 pandemic continues to adversely affect our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.
Negative public opinion and increased regulatory scrutiny of genomic medicines may damage public perception of the safety of our product candidates and adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
Genetically modified products are currently subject to public debate and heightened regulatory scrutiny. Gene therapy remains a novel technology, with only two in vivo gene therapy products approved for a genetic disease to date in the United States and only a few in vivo gene therapy products for genetic diseases approved to date in the EU. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. For example, reports of serious adverse events in a retroviral gene transfer trial for infants with X-linked severe combined immunodeficiency (X-linked SCID) in France and subsequent FDA actions putting related trials on hold in the United States had a significant negative impact on the public perception and stock price of certain companies involved in gene therapy, whether or not the specific company was involved with retroviral gene transfer, or whether the specific company’s clinical trials were placed on hold in connection with these events. Other adverse events could occur in the field of genomic medicine that could result in increased regulatory scrutiny, potential regulatory delays or negative impact on public perception genomic medicines, which could cause our stock price to decline.
In particular, our success will depend upon physicians who specialize in the treatment of genetic diseases targeted by our product candidates, prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are familiar and for which greater clinical data may be available.
Even if the regulatory approval for genetically modified products developed using our technology is obtained, our success will also depend on public acceptance of the use of genetically modified products including medicines, plants and plant products. Claims that genetically modified products are unsafe for consumption or pose a danger to the environment may influence public attitudes. Our genetically modified products may not gain public acceptance. More restrictive government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death seen in other trials using other vectors. Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the relevant product
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candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.
Our current and future relationships with healthcare providers, customers and third-party payors subject us to applicable anti-kickback, fraud and abuse, privacy, data security and other healthcare laws and regulations. If we fail to comply with such regulations, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
Healthcare providers, including physicians, and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain regulatory approval. Arrangements with healthcare providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we would market, sell and distribute our products. As a biotechnology company, even though we will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse, transparency, health privacy and security and patients’ rights are and will be applicable to our business. For details regarding the restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate see “Business—Government Regulation—Additional Regulation.”
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Scrutiny has also increased, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. If our operations or if any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws or applicable regulations, we and they could be subjected to significant civil, criminal and administrative enforcement actions, see “Business—Government Regulation—Additional Regulation.”
Further, we are required to comply with domestic and international privacy and data security laws, such as the GDPR and the CCPA, and after January 1, 2023, the California Privacy Rights Act, which apply to the collection, use, disclosure, transfer, or other processing of personal data. Certain jurisdictions have enacted data localization and cross-border data transfer laws, which could make it more difficult to transfer information across jurisdictions. Existing mechanisms that may facilitate cross-border transfers of personal data may change or be invalidated. If we are unable to implement a legal mechanism to ensure that our transfers of personal data from Europe are lawful, we could face adverse consequences, including increased exposure to regulatory actions, substantial fines and injunctions against processing personal data, and could be required to increase our data processing capabilities in Europe or elsewhere at significant expense. Restrictions on our ability to transfer personal data from Europe or elsewhere could impact our clinical trial activities in Europe and limit our ability to collaborate with CROs and other third parties. For more information regarding these regulations, see “Business—Government Regulation—Privacy Regulation.”
Our obligations related to privacy and data security are quickly changing and becoming increasingly stringent, creating some uncertainty as to the effective future legal framework. These obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. These obligations may also necessitate changes to our information technologies, systems and practices and those of third parties upon which we rely. Moreover, despite our efforts, our personnel or third parties upon which we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Any failure or alleged failure (including as a result of deficiencies in our policies, procedures or measures relating to privacy, data security, marketing or communications) by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards or regulatory guidance relating to privacy or data security, may result in significant consequences. These consequences may include, but are not limited to, governmental investigations and enforcement actions, litigation (including class-related claims), additional reporting requirements and/or oversight, fines and penalties, bans on processing personal data, orders to destroy or not use personal data and adverse publicity. Any of these events could have a material adverse effect on our reputation, business or financial condition, including but not limited to interruptions or stoppages in business operations (including clinical trials), inability to process personal data or to operate in certain jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry or revision or restructuring of our operations.
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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face inherent risks of product liability exposure related to the testing of our product candidates in human clinical trials and will face even greater product liability risks if we commercially sell any approved products. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
•decreased demand for any product candidates or products that we may develop;
•termination of clinical trial sites or entire trial programs;
•injury to our reputation and significant negative media attention;
•withdrawal of clinical trial participants;
•significant costs to defend the related litigation;
•substantial monetary awards to clinical trial patients;
•loss of revenue;
•diversion of management and scientific resources from our business operations; and
•the inability to commercialize any products that we may develop.
We currently hold product liability insurance coverage at a level that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
Risks Relating to our Finances
We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.
We have generated operating losses since we began operations in 1995. The extent of our future losses and the timing of profitability are uncertain, and we expect to incur losses for the foreseeable future. We have been engaged in developing our ZFP technology since inception, which has and will continue to require significant research and development expenditures. To date, we have generated our funding from issuance of equity securities, revenues derived from collaboration agreements, other strategic partnerships in non-therapeutic applications of our technology, federal government research grants and grants awarded by research foundations. We expect to continue to incur additional operating losses for the next several years as we continue to develop our product candidates. If the time required to generate significant product revenues and achieve profitability is longer than we currently anticipate or if we are unable to generate liquidity through equity financing or other sources of funding, we may be forced to curtail or suspend our operations.
We may be unable to raise additional capital on favorable terms, if at all, which would harm our ability to develop our technology and product candidates and could delay or terminate some or all of our programs. Future sales and issuances of equity securities could also result in substantial dilution to our stockholders.
We have incurred significant operating losses and negative operating cash flows since inception and have not achieved profitability. We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure and research and product development activities. While we believe our available cash, cash equivalents, and marketable securities as of December 31, 2021, when combined with additional capital raises and expected revenues from collaborations, strategic partners and research grants, will be adequate to fund our currently planned operations through at least the next 12 months from the date the financial statements in this Annual Report on Form 10-K are issued, we will need to raise substantial additional capital to fund the development, manufacturing and potential commercialization of our product candidates. We regularly consider fund raising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation. In addition, as we focus our efforts on proprietary human therapeutics, we will need to seek FDA approvals of our product candidates, a process that could cost in excess of
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hundreds of millions of dollars per product. We may experience difficulties in accessing the capital markets due to external factors beyond our control, such as volatility in the equity markets for emerging biotechnology companies and general economic and market conditions both in the United States and abroad. For example, our ability to raise additional capital may be adversely impacted by global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide, which could be impacted by the evolving COVID-19 pandemic. We cannot be certain that we will be able to obtain financing on terms acceptable to us, or at all. Our failure to obtain adequate and timely funding will adversely affect our business and our ability to develop our technology and products candidates.
To the extent we raise additional capital by issuing equity securities, including sales pursuant to our at-the-market offering program with Jefferies LLC, our stockholders may experience substantial dilution. We may issue common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. New investors could gain rights superior to our existing stockholders.
Our ability to use net operating losses to offset future taxable income may be subject to limitations.
Although a certain amount of our federal net operating loss carryforwards carry forward indefinitely (but are subject to a percentage limitation), a significant amount of our federal and all of our state net operating loss carryforwards will begin to expire, if not utilized, beginning in 2024 and 2029, respectively. The net operating loss carryforwards subject to expiration could expire unused and be unavailable to offset future income tax liabilities. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change in its equity ownership value over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have experienced an ownership change in the past and we may also experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For example, California has imposed limits on the usability of California state net operating losses to offset California taxable income in tax years beginning after 2019 and before 2023. As a result, if we earn net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and other tax attributes, which could potentially result in increased future tax liability to us and adversely affect our future cash flows.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The market price of our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. In the event securities or industry analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Risks Relating to our Reliance on Third Parties
If conflicts arise with our contractors, collaborators or other business partners, these conflicts may limit our ability to implement our strategies and may harm our business and prospects.
If conflicts arise with our contractors, collaborators or other business partners, the other party will likely act in its self-interest, which may limit our ability to implement our strategies. For example, some of our collaborators are conducting multiple product development efforts within each area that is the subject of their collaboration with us. Our collaborators may develop, either alone or with others, product candidates in related fields that are competitive with the product candidates that are the subject of their collaborations with us. Competing products, either developed by the collaborators or to which the collaborators or have rights, may result in the withdrawal of their support for our product candidates.
Some of our collaborators could also become our competitors in the future. Our collaborators could develop or invest in competing products, preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate or breach their agreements with us unexpectedly or prematurely, or fail to devote sufficient resources to the development and commercialization of product candidates covered by the collaboration.
In addition, conflicts could arise between us and our collaborators resulting from disputes regarding our or our collaborators’ or strategic partners’ performance under the applicable agreement, including disputes arising from alleged breaches of our agreements with our collaborators.
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Any of these conflicts could harm our product development efforts and otherwise adversely affect our business and prospects.
Our collaborators control certain aspects of our product development efforts, including certain of our clinical trials, which could result in unanticipated delays and other obstacles in the commercialization of our product candidates.
We depend on collaborators to design and conduct certain of our clinical trials for some of our product candidates. As a result, these clinical trials may not be conducted in the manner or on the timeline we desire, which may negatively impact our product development efforts. For example, Pfizer is the trial sponsor of the Phase 3 AFFINE trial of giroctocogene fitelparvovec and we depend on the efforts of Pfizer to diligently seek to lift the clinical hold on the Phase 3 AFFINE trial and resume and complete the trial. However, Pfizer may be unable to cause the FDA to lift the clinical hold in a timely manner, or at all, or may be unwilling to resume the trial if the clinical hold is lifted, whether due to the FDA’s potential imposition of additional changes to the trial protocol as part of any lift of the clinical hold or otherwise.
Our lack of control over aspects of product development in our agreements with Novartis, Biogen, Kite, Sanofi, Takeda and Pfizer could cause delays or other difficulties in the development and commercialization of our product candidates, which may prevent us from completing the intended IND filings in a timely fashion and receiving any milestone, royalty payments and other benefits under the agreement. In addition, under their respective agreements, our third-party collaborators have certain rights to terminate the agreements by providing us with advance notices, therefore, the actual milestone payments that we may receive under these agreements may be substantially lower than the full amounts provided for under these agreements.
Our collaborators licensing our ZFP technologies may decide to adopt alternative technologies or products or may be unable or unwilling to develop commercially viable products with our ZFP technologies, which would negatively impact our revenues and our strategy to develop product candidates using ZFP technologies.
Several of our collaborations leverage our ZFP technology platform. These collaborators may elect to adopt alternative technologies in the future, which could decrease the value of our ZFP technology platform and impede the development of product candidates using the platform. Additionally, because many of our collaborators are likely to be working on more than one development project, they could choose to shift their resources to projects other than those they are working on with us. If they do so, this would delay our ability to test and develop our ZFP technology platform and would delay or terminate the development of our product candidates using the platform. Further, our collaborators may elect not to develop product candidates arising out of our collaborations or not to devote sufficient resources to the development, manufacturing, marketing or sale of these product candidates. If they terminate the collaborations with us and we wish to continue developing the product candidates, we will be required to seek the support of other collaborators or develop the products ourselves. We may not be able to identify a suitable partner or negotiate a favorable collaboration agreement, and we may not have sufficient resources and expertise internally, to allow us to continue the development of these product candidates.
Commercialization of our technologies will depend, in part, on collaborations with other companies. If we are not able to find collaborators in the future or if our collaborators do not diligently pursue product development efforts, we may not be able to develop our technologies or product candidates, which could slow our growth and decrease the market value of our common stock.
We do not have financial resources ourselves to fully develop, obtain regulatory approval for and commercialize our product candidates. We rely significantly on our collaborations with other biopharmaceutical companies to provide funding for our research and development efforts, including preclinical studies and clinical tests, and expect to rely significantly on such collaborations to provide funding for the lengthy regulatory approval processes required to commercialize our product candidates.
For example, we have collaborations with Novartis to develop product candidates to treat certain neurodevelopment disorders, including autism and intellectual disability; with Biogen to develop product candidates to treat tauopathies including Alzheimer’s disease, alpha-synuclein related diseases including Parkinson’s disease and other neurological diseases; and with Kite to develop product candidates to treat cancer; with Pfizer to develop product candidates to treat hemophilia A and amyotrophic lateral sclerosis and frontotemporal lobar degeneration linked to mutations of the C9ORF72 gene.
We are also party to a collaboration agreement with Sanofi for the development of therapeutics for hemoglobinopathies, including SCD. In December 2021, Sanofi notified us of its termination for convenience, effective in June 2022, of the collaboration agreement. As a result, as of the termination date, Sanofi will have no further obligations to develop or to fund the development of any research programs under such collaboration agreement. We cannot guarantee that we and Sanofi will be able to come to agreement on appropriate transition arrangements or otherwise execute an orderly transition under the collaboration agreement. Further, although we expect to complete the Phase 1/2 PRECIZIN-1 study of SAR445136, our product candidate to treat SCD developed with Sanofi, we cannot guarantee that we will be able to complete this study or continue developing SAR445136 beyond completion of this study. Although we are currently exploring options to advance the
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development of SAR445136, including seeking a potential new partner or developing the program on a wholly-owned basis with our own current financial resources or by seeking new financial resources, we cannot guarantee that we will be able to successfully secure any such options. In such case, we may be unable to continue developing SAR445136 or could choose to stop developing SAR44136 and discontinue the program. Any delays to or discontinuance of this program could have an adverse impact on our business, results of operations, financial condition and prospects.
If we are unable to secure additional collaborations or if our collaborators are unable or unwilling to diligently advance the development, regulatory approval and commercialization of our product candidates, our growth may slow and adversely affect our ability to generate funding for development of our technologies and product candidates. In addition, our collaborators may sublicense or abandon development programs with little advance notice, or we may have disagreements or disputes with our collaborators, which would cause associated product development to slow or cease. In addition, the business or operations of our collaborators may change significantly through restructurings, acquisitions, other strategic transactions that may negatively impact their ability to advance our programs. The evolving COVID-19 pandemic could similarly impact our ability to realize the expected benefits of our collaborations due to the impacts of the pandemic on our collaborators and their business and operations.
Under typical collaborations, we expect to receive revenue for the research and development of our product candidates based on achievement of specific milestones, as well as royalties based on a percentage of sales of any commercialized products. Achieving these milestones will depend, in part, on the efforts of our collaborators as well as our own efforts. If we or any collaboration partner fails to meet specific milestones, then the collaboration agreement may be terminated, which could reduce our revenues. In addition, if sales of commercialized products fail to meet expectations, we could receive lower royalties than expected.
Risks Relating to our Intellectual Property
Because it is difficult, time consuming and costly to obtain, maintain and enforce patent protections for our technologies and product candidates, and because third parties may have made inventions that are similar to ours, we may not be able to secure optimal patent protections of our technologies and product candidates.
Our commercial success may depend in part on obtaining, maintaining and enforcing patent protection for our technologies and product candidates and successfully defending any of our patents that may be challenged. Obtaining, maintaining and enforcing biopharmaceutical patents is costly, time consuming and complex, and we may not be able to file and prosecute all necessary or desirable patent applications in all desired jurisdictions, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner or at all. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent positions of biopharmaceutical companies can be highly uncertain and can involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date. In addition, future patent laws, regulations, rules, and court decisions may affect the scope, validity, enforceability, and associated remedies of our current and future patent claims. Accordingly, we cannot predict the breadth of claims that may issue from any patent applications that we own or license, nor are we able to predict whether any third-party patents might issue with claims that are relevant to our product candidates or technologies. Even if patents do successfully issue and even if such patents cover our technologies and product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated or deemed unenforceable. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, the existence of which could invalidate a patent or prevent a patent from issuing from a pending patent application. Furthermore, if third parties have made similar inventions, there are multiple ways they could impact the coverage of our own applications.
We are a party to various license agreements that grant us rights under specified patents and patent applications. We are also party to various license agreements by which we grant third parties rights under specified patents and patent applications. Our current licenses contain performance obligations. If we fail to meet those obligations, the licenses could be terminated. If we are unable to continue to license these technologies on commercially reasonable terms, or at all, we may be forced to delay or terminate aspects of our product development and research activities.
We are unable to exercise the same degree of control over intellectual property that we license from third parties as we exercise over our internally developed intellectual property. We do not control the prosecution of certain of the patent applications that we license from third parties; therefore, the patent applications may not be prosecuted as we desire or in a timely manner.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
•we or our licensors were the first to conceive and/or reduce to practice the inventions covered by each of our pending patent applications;
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•we or our licensors were the first to file patent applications for these inventions;
•the patents of others will not have an adverse effect on our ability to do business;
•others will not independently develop similar or alternative technologies or reverse engineer any of our products, processes or technologies;
•any of our pending patent applications will result in issued patents;
•any patents issued or licensed to us, our collaborators or strategic partners will provide a basis for commercially viable products or will provide us with any competitive advantages;
•any patents issued or licensed to us will not be challenged and invalidated by third parties;
•the laws, regulations, rules, or court decisions in the U.S. and foreign countries will not change or be interpreted in a way that modifies our patent rights or impacts our ability to enforce or maintain our patent rights; or
•we will develop additional products, processes or technologies that are patentable.
Others have filed and in the future are likely to file patent applications that are similar to ours. We are aware that there are academic groups and other companies that are attempting to develop technology that is based on the use of zinc finger, TALE, CRISPR/Cas and other DNA-binding proteins, and that these groups and companies have filed patent applications. Several patents with claims directed to this technology have issued, although we have no current plans to use the claimed inventions. If these or other patent applications issue as patents, it is possible that the holder of any patent or patents granted on these applications may bring an infringement action against us, our collaborators, or strategic partners claiming damages and seeking to enjoin research, development or commercial activities relating to the affected products and processes. The costs of litigating the claim could be substantial regardless of outcome. Moreover, we cannot predict whether we, our collaborators, or strategic partners would prevail in any actions. In addition, if the relevant patent claims were upheld as valid and enforceable and our products or processes were found to infringe a patent or patents, we or our collaborators may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, and we may be prevented from making, using, selling, offering to sell, or importing into the U.S. the relevant product or process unless we or our collaborators could obtain a license or were able to design around the patent claims. We can give no assurance that such a license would be available to us or our collaborators on commercially reasonable terms, or at all, or that we would be able to successfully design around the relevant patent claims. There may be significant litigation in the genomics or cell therapy industry regarding patent and other intellectual property rights, which could subject us to costly, lengthy and distracting litigation with unpredictable results.
We rely on trade secrets to protect technology where we believe patent protection is not appropriate or obtainable. Trade secrets, however, are difficult to protect. While we require employees, academic collaborators and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary information or enforce these confidentiality agreements.
Our collaborators, strategic partners, and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our technology and other confidential information in connection with our collaborations and strategic partnerships, then we may not be able to receive patent protection or protect our proprietary information.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time and may vary based on jurisdiction.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date or from the filing date of the corresponding international application. Various means to extend this expected expiration date may be available. Regardless, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be adversely affected, and our business would be harmed.
We rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors,
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collaborators, partners and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures have been and may in the future be breached, and we may not have adequate remedies for any breach. See also the risk factor titled “If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations and reputational harm.” In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, collaborators, partners and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have an adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business, results of operations and financial condition.
We may not be successful in obtaining or maintaining necessary rights to product components, platforms and processes for our development pipeline through acquisitions and in-licenses.
Presently, we believe we have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our gene and cell therapy product candidates. Because our programs may involve additional product candidates, such as TX200 and potential future CAR-Treg therapies that may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify on commercially reasonable terms, if at all. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights, including from other companies and academic institutions, that we may consider attractive. Other companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. Once an intellectual property right that we desire is licensed to another company, we may be precluded from obtaining our own licensed to such rights.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.
We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist
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that might be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
In many cases, patent prosecution of our in-licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry.
The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have an adverse effect on our business, financial condition, results of operations and prospects. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have an adverse effect on our business, financial condition, results of operations and prospects. As an example, Sangamo France has exclusively licensed the right to the CAR for use in TX200 from the University of British Columbia, or UBC. Should UBC terminate this license agreement, we may have to develop or acquire the appropriate CAR which would extend our anticipated development timeline and add expense, and which could result in our failure to realize the anticipated benefits of the acquisition of Sangamo France.
We may be involved in patent or intellectual property lawsuits or similar disputes involving patents under our control or patents of third parties claiming infringement, which lawsuits could be expensive, time-consuming and impair or prevent development and commercialization activities.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, declaratory judgment lawsuits, invalidity proceedings, interferences, oppositions, ex parte or inter partes reexaminations, post-grant reviews and inter partes review proceedings before the U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization, and such parties may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. For example, we are aware of certain patents held by third parties related to certain vector and vector manufacturing methods that are related to certain of our product candidates. We have not yet finalized the commercial scale manufacturing process for any of our product candidates. If our commercial scale manufacturing process utilizes these vector manufacturing methods, and if these third-party patents are valid and in force at the time of commercialization, we may need to challenge these patents, use or develop non-infringing alternatives or seek a license to these patents. In any event, if any third-party patents were held by a court of competent jurisdiction to cover our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block or hinder our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations or processes for manufacture or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license, or until such patents expires. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe.
In some instances, third parties may allege that we are infringing their patents or other proprietary rights even if they are not competitors or have an associated business. Such litigants would bring such infringement actions or threats of action with the goal of obtaining settlement money from us instead of engaging in costly and time-consuming litigation.
Defense of these claims, regardless of their merit, would involve substantial litigation expense, could expose proprietary information and would be a substantial diversion of employee resources from our business. In the event of a
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successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Competitors may also infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable, in whole or in part, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Moreover, if we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidate. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have an adverse impact on our business.
Interference or derivation proceedings provoked by third parties or brought by us or declared by the U.S. PTO may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could expose us to significant monetary damages, result in the loss of valuable intellectual property, require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation, interference, derivation or other proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be unable to license gene transfer technologies that we may need to commercialize our ZFP technology and potential products, if approved.
In order to regulate or modify a gene in a cell, the ZFP must be efficiently delivered to the cell. We have licensed certain gene transfer technologies for our ZFP in research, including AAV and mRNA technology, and we are evaluating these systems and other technologies that may need to be used in the delivery of ZFP into cells for in vitro and in vivo applications. We have not developed our own gene transfer technologies, and we rely on our ability to enter into license agreements to provide us with rights to the necessary gene transfer technology. Our approach has been to license appropriate technology as required. For example, we are aware of certain patents held by a third party related to certain vector manufacturing methods that are currently being used in certain of our product candidates. We have not yet finalized the commercial scale manufacturing process for any of our product candidates. If our commercial scale manufacturing process utilizes these vector manufacturing methods, and if these third-party patents are in force at the time of commercialization, we may need to use or develop a non-infringing manufacturing method or seek a license to these patents. However, we may not be able to license the gene transfer technologies on reasonable terms, if at all, required to develop and commercialize our product candidates. The inability to obtain a license to use gene transfer technologies with entities that own such technology on reasonable commercial terms, if at all, could delay or prevent the preclinical evaluation, drug development collaborations, clinical testing and/or commercialization of our therapeutic product candidates.
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Risks Relating to our Business Operations
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations and reputational harm.
We are increasingly dependent on information technology systems and infrastructure to operate our business, which are large and complex. In the ordinary course of our business, we collect, store, process and transmit large amounts of sensitive information, including intellectual property, proprietary business information, personal data (including personal health information) and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may or could have access to our computer networks or our confidential information. Many of those third parties in turn subcontract or outsource some of their responsibilities to third parties.
While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology systems, and the large amounts of sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity. Threats to information systems and data come from a variety of sources. In addition to traditional computer hackers, threat actors, personnel (such as through theft or misuse), sophisticated nation-states and nation-state-supported actors also engage in attacks. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, natural disasters (such as earthquakes, fires, floods), war or terrorism. Ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm and diversions of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments. In addition, the effects of the COVID-19 pandemic have intensified our dependence on information technology systems as many of our critical business activities are currently being conducted remotely and our increased reliance on personnel working from home could increase our cybersecurity risk.
Significant disruptions of our, our third-party vendors’ and/or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial and reputational harm to us. For example, in April 2018, we announced a data security incident involving the compromise of a senior executive’s company email account. Our investigation of the incident did not reveal any evidence that our systems were otherwise compromised in connection with the incident or that personal data about patients or other individuals besides the executive were accessed or disclosed. However, proprietary, confidential and other sensitive information of ours and that of other entities was accessed and may have been compromised as a result of the incident. Unforeseen developments related to this incident could occur, which could have a further adverse impact on us. Any litigation or regulatory review or investigation arising from this incident could result in significant legal exposure to us. A security incident or other interruption could also result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
While we are aware of the company email incident described above, there is no way of knowing with certainty whether we have experienced any other data security incidents that have not been discovered. While we have no reason to believe this to be the case, attackers have become very sophisticated in the way they conceal access to systems, and many companies that have been attacked are not aware that they have been attacked. Any delay in the discovery of an attack may result in increased expense and may harm our reputation. Any security incident or interruption that we, or a third-party upon which we rely, experience (including the company email incident described above) could lead to adverse consequences, including government enforcement actions (for example, investigations, fines, penalties, audits and inspections), additional reporting requirements and/or oversight, restrictions on processing data (including personal data), litigation (including class claims), indemnification obligations, harm to our reputation, monetary fund diversions and financial loss. Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. In addition, failure to maintain effective internal accounting controls related to security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and subject us to regulatory scrutiny. We may expend significant resources or modify our business activities in an effort to protect against security incidents or other interruptions. While we have
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implemented security measures intended to protect our information technology infrastructure and data, there can be no assurance that such measures will successfully prevent service interruptions or further security incidents. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages or claims related to our data privacy and security obligations. Additionally, we cannot be sure that our insurance coverage, if any, will be adequate or sufficient to protect us from or mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms, or at all, or that such coverage will pay future claims.
We have business operations in France and the United Kingdom, which exposes us to additional costs and risks.
Our business operations in France and the United Kingdom subject us to certain additional costs and risks associated with doing business outside the United States, including:
•the increased complexity and costs inherent in managing international operations in geographically disparate locations;
•challenges of complying with diverse regulatory, financial and legal requirements, which are subject to change at any time;
•potentially adverse tax consequences, including changes in applicable tax laws and regulations;
•potentially costly trade laws, tariffs, export quotas, custom duties or other trade restrictions, and any changes to them;
•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
•liabilities for activities of, or related to, our international operations;
•challenges inherent in efficiently managing employees in diverse geographies, including the need to adapt systems, policies, benefits and compliance programs to differing labor and other regulations;
•natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of health epidemics, including the evolving COVID-19 pandemic, and the resulting global economic and social impacts;
•workforce uncertainty in countries where labor unrest is more common than in the United States; and
•differing laws and regulations relating to data security and the unauthorized use of, or access to, commercial and personal information.
In addition, our international operations in France and the United Kingdom expose us to fluctuations in currency exchange rates between the Euro and the U.S. dollar and between the Pound Sterling and the U.S. dollar. Given the volatility of currency exchange rates, there is no assurance that we will be able to effectively manage currency transaction and/or conversion risks. To date, we have not entered into derivative instruments to offset the impact of foreign exchange fluctuations, which fluctuations could have an adverse effect on our financial condition and results of operations. In any event, difficulties resulting from these and other risks related to our operations outside of the United States could expose us to increased expenses, impair our development efforts, adversely affect our financial condition and results of operations and harm our competitive position.
We are in the process of growing the size of our organization globally, and we have experienced and may continue to experience difficulties in hiring, integrating and retaining qualified skilled employees
We are in the process of growing the size of our organization globally, and we have experienced and may continue to experience difficulties in hiring, integrating and retaining qualified skilled employees.
The growth and stability of our organization is critical to our ability to successfully achieve our strategic objectives. We may not be able to hire, integrate and retain a sufficient number of qualified employees with the appropriate levels of experience and skills to accomplish our growth objectives.
There currently is a shortage of skilled individuals with substantial experience discovering, developing and manufacturing genomic medicines, which is likely to continue. As a result, competition for these individuals is intense and the turnover rate can be high. We may not be able to hire, integrate and retain employees with these skills on acceptable terms given the competition among numerous biopharmaceutical companies and academic institutions for individuals with these skills. In addition, any negative or unexpected results in our preclinical or clinical trials or applications for marketing approval would make it more challenging to hire and retain qualified skilled employees. Moreover, the evolving COVID-19 pandemic has further challenged our ability to hire skilled employees. If we do not achieve our growth objectives, the progress of our research, development, manufacturing and regulatory efforts will slow down, which will adversely impact our business, financial condition, results of operations and prospects.
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We are dependent on certain key members of our executive team and certain of our scientific, clinical development and manufacturing personnel, the loss of whose services may impede the progress of our research, development, manufacturing and regulatory efforts. For example, in 2021, our former Chief Financial Officer and our former General Counsel, as well as several other senior finance and legal employees, resigned from Sangamo to pursue opportunities at various other biotechnology companies. We could experience resignations of other executives and employees in the future given the intensity of the competition for talent in the biotechnology industry, particularly in the San Francisco Bay Area. Additional resignations could result in more significant disruptions and threats to our growth and stability. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not have “key person” insurance on any of our employees.
We may not be successful in our efforts to discover, license or acquire new potential product candidates and may fail to capitalize on product candidates with a greater commercial opportunity or for which there is a greater likelihood of success.
If our existing product candidates do not receive regulatory approval or are not successfully commercialized, then the success of our business will depend on our ability to continue to expand our product pipeline through discovery, in-licensing or acquisitions. We may be unable to do so. If we do identify potential product candidates for licensing or acquisition, we may be unable to reach acceptable terms with the licensors or sellers. Further, there may be risks and liabilities associated with the product candidates which our due diligence efforts fail to discover, that are not disclosed to us, that we inadequately assess, or that we are unable to manage effectively. Additionally, we may not realize the anticipated benefits of such licenses or acquisitions for a variety of reasons, including the possibility that the product candidates prove not to be safe or effective in clinical trials, that we are unable to successfully integrate the product candidate into our operations, or that the anticipated benefits will not otherwise be realized within the expected timeframe.
Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain product candidates or indications that later prove to have greater commercial potential. Our spending on current and future research and development programs may not yield any commercially viable products. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration arrangement.
Risks Relating to our Common Stock and Corporate Organization
Our stock price has been volatile and will likely continue to be volatile, which could result in substantial losses for investors, and could be influenced by public perception of genomic medicines and the biotechnology sector.
Our stock price has been volatile and may continue to be volatile, which could cause stockholders to incur substantial losses. An active public market for our common stock may not be sustained, and the market price of our common stock may continue to be volatile. The market price of our common stock has fluctuated significantly in response to various factors, some of which are beyond our control, including but not limited to the following:
•announcements by us or collaborators providing updates on the progress or development status of product candidates or data from clinical trials;
•initiation or termination of clinical trials;
•changes in market valuations of similar companies;
•overall market and economic conditions, including the equity markets for emerging biotechnology companies;
•deviations in our results of operations from the guidance given by us;
•announcements by us or our competitors of new or enhanced products or technologies or significant contracts, acquisitions, strategic relationships, joint ventures or capital commitments;
•announcement of changes in business and operations by our collaborators, or changes to our existing collaboration agreements;
•changes in public opinions of genomic medicines;
•regulatory developments, including increased regulatory scrutiny of genomic medicines;
•changes, by one or more of our securities analysts, in recommendations, ratings or coverage of our stock;
•additions or departures of key personnel; and
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•sales of our common stock or other securities by us, officers or directors, liquidation of institutional funds that comprised large holdings of our stock and decreases in our cash balances.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including in connection with the ongoing and evolving COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to the evolving COVID-19 pandemic, and political, regulatory and other market conditions, may negatively affect the market price of shares of our common stock, regardless of our actual operating performance.
Actual or potential sales of significant amounts of shares of our common stock into the market could cause the market price of our common stock to fall or prevent it from increasing for numerous reasons.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Our outstanding shares of common stock generally may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act, or to the extent the issuance of such shares has already been registered under the Securities Act and are held by non-affiliates of ours. While Biogen agreed not to sell any of the shares that we issued to Biogen in April 2020 until the first anniversary of the effectiveness of the Biogen collaboration, and to limit resales through the second anniversary, such restrictions are only temporary. Further, we also agreed, subject to certain limitations, to register for resale under the Securities Act any of the shares we issued to Biogen. We have also filed registration statements registering all shares of common stock that we may issue under our equity compensation plans. Such shares can be freely sold in the public market upon issuance, subject to volume limitations and black-out periods applicable to affiliates. Additionally, we are party to a sales agreement with Jefferies LLC which permits us from time to time at our discretion to sell up to $150.0 million of shares of our common stock in the public markets at prevailing market prices. As of February 22, 2022, we have sold 2,007,932 shares of our common stock under the sales agreement for net proceeds of approximately $27.1 million.
In addition, in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and our policies regarding stock transactions, certain of our employees, executive officers and directors have adopted, and may continue to adopt, stock trading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directors require public filings. Our employees, executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. Actual or potential sales of our common stock by such persons could be viewed negatively by other investors and could cause the price of our common stock to fall or prevent it from increasing.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.
Anti-takeover provisions in our certificate of incorporation, Delaware law and our bylaws could make an acquisition of our company more difficult and could prevent attempts by our stockholders to remove or replace current management.
Anti-takeover provisions of Delaware law and in our certificate of incorporation and our bylaws may discourage, delay or prevent a change in control of our company, even if a change in control would be beneficial to our stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. In particular, under our certificate of incorporation our board of directors may issue up to 5,000,000 shares of preferred stock with rights and privileges that might be senior to our common stock, without the consent of the holders of the common stock. Moreover, without any further vote or action on the part of the stockholders, the board of directors would have the authority to determine the price, rights, preferences, privileges, and restrictions of the preferred stock. This preferred stock, if it is ever issued, may have preference over, and harm the rights of, the holders of common stock. Although the issuance of this preferred stock would provide us with flexibility in connection with possible acquisitions and other corporate purposes, this issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock.
Similarly, our authorized but unissued common stock is available for future issuance without stockholder approval. Our certificate of incorporation further provides that stockholders may not take action by written consent.
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In addition, our amended and restated bylaws:
•establish advance notice requirements for nominations for election to the board of directors or proposing matters that can be acted upon at stockholders’ meetings; and
•prohibit stockholders from calling a special meeting of stockholders.
We are also subject to Section 203 of the General Corporation Law of the State of Delaware, which provides, subject to certain exceptions, that if a person acquires 15% of our voting stock, the person is an “interested stockholder” and may not engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more or our voting stock. The application of Section 203 may, in some circumstances, deter or prevent a change in control of our company even when such change may be beneficial to our stockholders.
Our amended and restated bylaws designate exclusive forums for the adjudication of certain disputes, which could limit our stockholders’ ability to bring claims in a judicial forum it finds favorable for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that a state or federal court located within the State of Delaware is the sole and exclusive forum for:
•any derivative action or proceeding brought on our behalf;
•any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder of Sangamo to us or our stockholders;
•any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, our charter or our bylaws, as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware; and
•any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated bylaws further provide that a federal district court of the United State is the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. These provisions further provide that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to these provisions.
These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find any of these provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
ITEM 1B – UNRESOLVED STAFF COMMENTS
None.
ITEM 2 – PROPERTIES
Our corporate headquarters occupies approximately 87,700 square feet of office and research and development laboratory facilities in Brisbane, California, pursuant to a lease that expires in May 2029. We also lease approximately 59,485 square feet of research and office space, pursuant to a lease that expires in August 2031, and approximately 7,700 of office space, pursuant to a lease that expires in August 2026, in Richmond, California. We also lease approximately 25,600 square feet of office and research and development space in Valbonne, France, subject to leases that expire beginning in June 2025 through January 2030. We believe that our facilities are currently adequate to meet our needs. As we continue to expand our operations, we may need to lease or purchase additional facilities.
ITEM 3 – LEGAL PROCEEDINGS
We are not a party to any material pending legal proceeding. From time to time, we may be involved in legal proceedings arising in the ordinary course of business.
ITEM 4 – MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the Nasdaq Global Select Market under the symbol “SGMO.”
Holders
As of February 22, 2022, there were 59 holders of record of our common stock. This number does not include “street name,” or beneficial holders, whose shares are held of record by banks, brokers, financial institutions and other nominees.
Dividends
We have not paid dividends on our common stock, and currently do not plan to pay any cash dividends in the foreseeable future.
Stock Performance Graph
The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
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ITEM 6 – [RESERVED]
Data responsive to Item 6 have not been presented in accordance with amendments to Item 301 of Regulation S-K contained in SEC Release No. 33-10890.
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains trend analysis, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Exchange Act, as amended. These forward-looking statements include, without limitation, statements containing the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will,” and other words of similar import or the negative of those terms or expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties, estimates and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially from those set forth in such forward-looking statements as a result of, but not limited to, the “Risk Factors” described in Part I, Item 1A of this Annual Report on Form 10-K. You should read the following discussion and analysis along with the Consolidated Financial Statements and notes attached to those statements included elsewhere in this report.
In addition, the section of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Annual Report on Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 24, 2021.
Overview
We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates leveraging our novel science and our in-house manufacturing capabilities.
Our current clinical-stage product candidates are:
•Isaralgagene civaparvovec, also known as ST-920, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, is currently being evaluated in our Phase 1/2 STAAR clinical study, and we have initiated plans for a Phase 3 clinical trial;
•SAR445136, our zinc finger nuclease, or ZF nuclease, gene-edited cell therapy product candidate for the treatment of sickle cell disease, or SCD, is currently being evaluated in our Phase 1/2 PRECIZN-1 clinical study. We are developing SAR445136 with our collaborator Sanofi S.A., or Sanofi, through June 28, 2022, at which time SAR445136 will become a product candidate wholly-owned by Sangamo;
•TX200, our wholly-owned Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy product candidate for the prevention of immune-mediated rejection in HLA-A2 mismatched kidney transplantation, is currently being evaluated in our Phase 1/2 STEADFAST clinical study; and
•Giroctocogene fitelparvovec, also known as SB-525, is a gene therapy product candidate for the treatment of moderately severe to severe hemophilia A and is the subject of the registrational Phase 3 AFFINE clinical trial. We are developing giroctocogene fitelparvovec with our collaborator Pfizer Inc., or Pfizer.
Our preclinical development is focused in two innovative priority areas: (i) CAR-Treg cell therapies for autoimmune disorders and (ii) genome engineering for neurological diseases. Indications for our preclinical programs include neurodevelopmental disorders, cancer, inflammatory bowel disease, or IBD, tauopathies and neurodegenerative diseases such as amyotrophic lateral sclerosis, or ALS, multiple sclerosis, or MS, and Huntington’s disease, some of which we are developing with our collaborators Biogen MA, Inc. and Biogen International GmbH, which we refer to together as Biogen, Novartis Institutes for BioMedical Research, Inc., or Novartis, Pfizer, and Takeda Pharmaceutical Company Limited, or Takeda.
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Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our ZF technology platform. They leverage our collaborators’ therapeutic and clinical expertise and commercial resources with the goal to bring our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZF technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately $815.0 million in upfront licensing fees, milestone payments and proceeds from sales of our common stock to collaborators and have the right to earn up to $6.7 billion in future milestone payments from our collaborations, in addition to potential product royalties.
We believe that our in-house manufacturing capacity provides us a competitive advantage. We currently operate an adeno-associated virus, or AAV, manufacturing facility in our Brisbane, California headquarters and cell therapy manufacturing facilities in Brisbane, California and Valbonne, France. Our manufacturing strategy is to provide greater flexibility, quality and control by building a balanced and necessary capacity achieved through our in-house manufacturing and contract manufacturing organization, or CMO, partnerships, investing in manufacturing processes and analytics and developing a strong supply chain.
For additional information regarding our business, see “Business” in Part I, Item 1 of this Annual Report on Form 10‑K.
Recent Business Highlights
Fabry Disease
•In February 2022, we presented updated preliminary clinical data from the Phase 1/2 STAAR study evaluating isaralgagene civaparvovec, or ST-920, our wholly‑owned gene therapy product candidate for the treatment of Fabry disease at the 18th Annual WORLDSymposium. As of the November 9, 2021 cutoff date:
◦The four patients in Cohorts 1 and 2 all exhibited above normal α‑Gal A activity, ranging from 3-fold to 15-fold above mean normal at last measurement.
◦The two patients in Cohort 1 maintained elevated α‑Gal A activity for one year and are now in the long-term follow-up study.
◦The first patient in Cohort 3 exhibited α‑Gal A activity within mean normal range by week 2.
◦Lyso-Gb3 levels remained significantly reduced in the patient who exhibited the highest baseline levels of this biomarker.
◦The gene therapy candidate continued to be generally well tolerated in the five treated patients.
•The sixth patient in the STAAR study, who is the second patient in Cohort 3, was dosed after the cutoff date. We expect to provide updated data in the second half of 2022.
•Based on the Phase 1/2 data, we have initiated Phase 3 planning.
Sickle Cell Disease
•In December 2021, we presented updated preliminary proof-of-concept clinical data from the Phase 1/2 PRECIZN‑1 study of SAR445136, a ZF nuclease gene-edited cell therapy candidate in development with Sanofi, at the 63rd American Society for Hematology Annual Meeting and Exposition 2021, or ASH. As of the September 22, 2021 cutoff date:
◦No adverse events related to SAR445136 were reported.
◦All four treated patients experienced increases in total hemoglobin, fetal hemoglobin and percent F cells.
◦None of the patients required blood transfusions post engraftment.
•We expect that the next four patients treated in the study will be dosed with a product candidate manufactured using improved methods, which have been shown in internal experiments to increase long-term progenitor cells. We expect to complete dosing of these patients in the third quarter of 2022.
•We and Sanofi are collaborating on planning an orderly transition of Sanofi’s rights and obligations under the program to Sangamo on June 28, 2022, while we explore options to advance the program, including seeking a potential new partner.
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Hemophilia A
•In December 2021, with our collaborator Pfizer, we presented updated follow-up data from the Phase 1/2 Alta study of giroctocogene fitelparvovec, an investigational gene therapy for patients with moderately severe to severe hemophilia A, at ASH. As of the October 1, 2021 cutoff date:
◦At 104 weeks, the five patients in the highest dose 3e13 vg/kg cohort had mean factor VIII (FVIII) activity of 25.4% via chromogenic clotting assay.
◦In this cohort, mean annualized bleeding rate was 0.0 in the first year post‑infusion and was 1.4 throughout the total duration of follow‑up. All bleeding events occurred after week 69 post‑infusion. Two patients experienced bleeding events necessitating treatment with exogenous FVIII. No participants in the highest dose cohort had resumed prophylaxis.
◦Giroctocogene fitelparvovec continued to be generally well-tolerated.
•In February 2022, Pfizer announced that it hopes to obtain agreements from health authorities to resume the AFFINE trial of giroctocogene fitelparvovec and to begin to reopen trial sites in the first half of 2022. This trial was previously paused when some of the patients treated in this trial experienced FVIII activity greater than 150% following treatment. Pfizer has announced that it currently is in the process of submitting a protocol amendment to health authorities in the countries where this trial is being conducted and preparing responses to the U.S. FDA clinical hold. Over 50% of the patients have been enrolled in the Phase 3 AFFINE trial.
Renal Transplant Rejection
•In November 2021, the first patient was enrolled and is expected to be dosed soon in our Phase 1/2 STEADFAST study evaluating TX200, our wholly‑owned autologous HLA-A2 CAR Treg cell therapy product candidate treating patients receiving an HLA-A2 mismatched kidney from a living donor. We expect the second patient in this study to be dosed by the middle of 2022. We continue to open study sites and screen patients.
Manufacturing
•In 2021, we completed and brought online our in-house cell therapy manufacturing facilities in our Brisbane, California headquarters and in our Valbonne, France facilities. We now have these facilities in addition to the in-house AAV manufacturing facilities we brought online in Brisbane in 2020.
Impacts of the Ongoing COVID-19 Pandemic
We have experienced and continue to experience impacts from the ongoing and evolving COVID-19 pandemic on our business and operations and could continue to experience these or potentially more severe impacts as the pandemic evolves in the United States, France, the United Kingdom and locations of our clinical studies and trials. We continue to conduct business operations pursuant to a modified operating plan that includes enhanced workplace safety protocols and modified working schedules. These protocols and modifications have slowed our productivity and disrupted our business to a moderate degree and are likely to continue doing so through the remainder 2022. For example, we have experienced periodic short-term disruptions to our onsite operations while addressing positive cases of COVID-19 by onsite workers and clinical trial patients, and our operations could experience longer term disruptions in the future in the event of a significant outbreak of COVID-19 among our onsite workers or clinical trial patients. Moreover, from time to time, we have been required to reorganize and prioritize our resources to mitigate moderate COVID-19 impacts arising from travel restrictions, density restrictions and supply constraints. If our programs encounter longer-term disruptions, it could impact our ability to support our biopharmaceutical partners as contemplated in our collaboration agreements and could result in adjustments to our timelines, although we do not believe that the short-term disruptions to date have resulted in any such impacts.
Additionally, our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec has experienced and continues to experience delays in its timeline due in part to COVID-19 impacts and the diversion of healthcare resources to fight the pandemic. For example, we estimate that the opening of the first clinical trial site in the United Kingdom for this study experienced a delay of approximately one year due to the significant prevalence of COVID-19 in the United Kingdom. Additionally, we have experienced delays in recruiting, enrolling and dosing patients for this study, due in part to the hesitation of patients to travel by plane to trial sites not within driving distance and to enter medical facilities during the pandemic and also due in part to trial sites prioritizing COVID-19 clinical care over research activities such as the STAAR study. The study has also experienced delays when certain patients have decided to take the COVID-19 vaccine or tested positive for COVID-19 prior to enrollment or dosing in the study. Moreover, we have experienced some short-term delays in sourcing the necessary raw materials to manufacture supplies for the STAAR study and in transporting clinical trial materials due to COVID-19 impacts. We estimate that these challenges have set back our STAAR study timelines by approximately three to six months. Clinical timelines for this study could be revised again if COVID-19 impacts to our recruitment, screening, enrollment and
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dosing of patients and to our sourcing of raw materials for this study intensify because of vaccination delays, new COVID-19 variants or unexpected events.
In addition, our STEADFAST study evaluating TX200, our wholly-owned CAR-Treg cell therapy product candidate for the treatment of kidney transplant rejection, has experienced delays in its timeline due to COVID-19 impacts related to manufacturing and technology transfer challenges with our CMOs and due to patients and donors testing positive for COVID-19. We estimate that these challenges set back our clinical study timeline by approximately three months. While we have now enrolled the first patient in this study and expect to dose this patient soon, and expect to dose the second patient in this study by the middle of 2022, this timeline could be revised if COVID-19 impacts result in additional delays.
With respect to our partnered programs, the timelines for the studies and trials managed by our collaborators are also subject to potential delay in the future if these studies and trials experience similar challenges that we have experienced and continue to experience in our STAAR and STEADFAST studies.
Going forward, we will continue to monitor the impact of COVID-19 on our operations, research commitments and clinical trials and those of our collaborators, clinical trial sites and CMOs. The magnitude of these impacts will depend, in part, on the length and severity of the COVID-19 pandemic and related government orders and restrictions, and how the pandemic limits the ability of us and our business partners to operate business in the ordinary course. Disruptions to these operations, and possibly more severe disruptions in the future that could arise due to the extension of government orders or new government orders applicable in the places we operate or our industry generally or to us and our facilities specifically, could impede our ability to conduct research in a timely manner, comply with our research obligations to our collaborators and advance the development of our therapeutic programs. These delays and disruptions could result in adverse material impacts to our business, operating results and financial condition.
We do not anticipate any material negative impact on our financial condition in 2022 as a result of the COVID-19 pandemic. We believe we are well positioned financially in the near term to execute on our wholly-owned and partnered research and clinical programs. As of December 31, 2021, we had $464.7 million in cash, cash equivalents, and marketable securities. Although we believe we are well-capitalized currently, the effects of the evolving pandemic could result in disruption of global financial markets, impairing our ability to access capital, which could negatively affect our liquidity in the future. We do not currently anticipate any material impairments to the valuation of the financial assets or goodwill on our balance sheet as a result of the COVID-19 pandemic. We do not believe that the remote workplace arrangements we have implemented for our office-based employees have affected our financial reporting or control systems.
The extent to which the COVID-19 pandemic will impact our business, operations and financial condition, either directly or indirectly, will depend on future developments that remain highly uncertain at the present time. These developments include the ultimate duration and severity of the pandemic, the impacts of new COVID-19 variants, travel restrictions, new public health restrictions in the United States, France, the United Kingdom and other countries, business closures or business disruptions and the effectiveness and timeliness of actions taken in the United States, France, the United Kingdom and other countries to contain and treat the disease, including the effectiveness and timing of vaccination programs. The surge of new variants of the virus, including the recent Omicron variant, has resulted and may in the future result in the return of prior orders and restrictions or new quarantine and shelter-in-place orders or other restrictions. As our understanding of events evolves and additional information becomes available, we may materially change our guidance relating to our revenues, expenses and timelines for manufacturing, clinical trials and research and development.
See the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for additional information on risks and uncertainties related to the evolving COVID-19 pandemic.
Certain Components of Results of Operations
Our revenues have consisted primarily of revenues from upfront licensing fees, reimbursements for research services, milestone achievements and research grant funding. We expect revenues to continue to fluctuate from period to period and there can be no assurance that new collaborations or partner reimbursements will continue beyond their initial terms or that we are able to meet the milestones specified in these agreements.
We have incurred net losses since inception and expect to incur losses for at least the next several years as we continue our research and development activities. To date, we have funded our operations primarily through the issuance of equity securities and revenues from collaborations and research grants.
We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our product candidates from research stage through clinical trials. Pursuant to the terms of our agreements with Biogen, Kite Pharma, Inc., or Kite, Novartis and Sanofi, certain expenses related to research and development activities will be reimbursed to us. The reimbursement funds
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to be received from Biogen, Kite, Novartis, Pfizer and Sanofi will be recognized as revenue as the related costs are incurred and collection is reasonably assured.
General and administrative expenses consist primarily of salaries and personnel related expenses for executive, finance and administrative personnel, stock-based compensation expenses, professional fees, allocated facilities expenses, patent prosecution expenses and other general corporate expenses. As we continue to advance our product candidates into and through the clinic, we expect the growth of our business to require increased general and administrative expenses.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements and the related disclosures have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these Consolidated Financial Statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe 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 from these estimates under different assumptions or conditions. We believe the following policies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.
We believe our critical accounting policies and estimates relating to revenue recognition and valuation of long-lived assets including goodwill and intangible assets are the most significant estimates and assumptions used in the preparation of our Consolidated Financial Statements.
For a complete description of our significant accounting policies, see Note 1 – Organization, Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Revenue Recognition
We recognize revenues from research services generally as services are provided while revenues from non-refundable upfront fees are recognized over time either by measuring progress towards satisfaction of the relevant performance obligation using the input method (i.e., cumulative actual costs incurred relative to total estimated costs) or on a straight-line basis when a performance obligation is expected to be satisfied evenly over a period of time (when there is a stand-ready obligation).
The estimation of measure of progress is complex, involves significant judgment, and is affected by our estimates of the total costs required to complete the performance obligations including the total internal personnel costs and external costs to be incurred as well as, in certain cases, the estimated stand-ready obligation period. Changes in these estimates can have a material effect on our revenue recognition.
For a further description of our revenue recognition, see Note 4 – Major Customers, Partnerships and Strategic Alliances in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Valuation of Long-lived Assets including Goodwill and Intangible Assets
We review goodwill and indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value these assets below their carrying values. As of December 31, 2021, no impairment of goodwill or indefinite-lived intangible assets was identified.
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the years presented.
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Results of Operations
Years Ended December 31, 2021, 2020 and 2019
Revenues
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentage values) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | % | 2020 | 2019 | Change | % | ||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 110,701 | $ | 118,192 | $ | (7,491) | (6) | % | $ | 118,192 | $ | 102,428 | $ | 15,764 | 15 | % | |||||||||||||||||||||||||||||||
Total revenues consisted of revenues from collaboration agreements and research grants. We anticipate revenues over the next several years will be derived primarily from our collaboration agreements with Biogen, Novartis, Kite, and Pfizer as we continue to recognize upfront and milestone payments received under such agreements over time.
The decrease of $7.5 million in revenues in 2021 compared to 2020 was primarily attributed to a decrease of $47.4 million of milestone fees and recognition of upfront license fees related to our giroctocogene fitelparvovec and C9ORF72 collaboration agreements with Pfizer driven by completion of activities under these collaborations in the fourth quarter of 2020, a decrease of $3.2 million in revenue related to our collaboration agreement with Kite, a decrease of $2.8 million in revenue from sublicense fees related to our agreement with Dow AgroSciences LLC, and a decrease of $2.2 million in revenue related to our collaboration agreement with Sanofi, primarily due to a change in estimate regarding project scope and related project costs.
These decreases were partially offset by increases of $32.7 million and $14.4 million related to the recognition of upfront license fee and research revenue under our collaboration agreements with Novartis and Biogen, respectively.
Operating Expenses
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentage values) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | % | 2020 | 2019 | Change | % | ||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 230,819 | $ | 180,647 | $ | 50,172 | 28 | % | $ | 180,647 | $ | 145,922 | $ | 34,725 | 24 | % | |||||||||||||||||||||||||||||||
| General and administrative | 63,219 | 67,097 | (3,878) | (6) | % | 67,097 | 61,686 | 5,411 | 9 | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 294,038 | $ | 247,744 | $ | 46,294 | 19 | % | $ | 247,744 | $ | 207,608 | $ | 40,136 | 19 | % | |||||||||||||||||||||||||||||||
Research and Development Expenses
Research and development expenses consisted primarily of compensation related expenses, including stock-based compensation, laboratory supplies, preclinical and clinical studies, manufacturing clinical supply, contracted research, and allocated facilities and information technology expenses.
The increase of $50.2 million in research and development expenses in 2021 compared to 2020 was primarily driven by a $22.2 million increase in preclinical, clinical and lab supply expenses due to the timing of our trials and increased activity primarily attributable to our Biogen and Novartis collaborations, an $18.9 million increase in compensation expense as a result of increased headcount to support our programs, clinical trials and manufacturing operations, and a $15.0 million increase in manufacturing and overhead costs as we ramped up our internal manufacturing operations. These increases were partially offset by a reduction of research and development expenses by $5.2 million related to dissolution of the repayment obligation of a grant from the California Institute for Regenerative Medicine, or CIRM, associated with the development of the ST-400 program, which was discontinued in the third quarter of 2021. Stock-based compensation expense included in research and development expenses was $19.5 million and $13.5 million for the years ended December 31, 2021 and 2020, respectively.
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The table below shows research and development expenses related to our clinical and preclinical programs. As shown in the table below, preclinical and research programs contributed $58.8 million of the increase in our research and development expenses primarily due to advancement of our technical platform and our wholly-owned preclinical programs, offset by a decrease of $8.6 million in our clinical programs in 2021 as compared to 2020, primarily driven by completion of activities for our giroctocogene fitelparvovec and C9ORF72 programs with Pfizer.
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Programs | 2021 | 2020 | 2019 | |||||||||||||||||
| Clinical Programs: | ||||||||||||||||||||
| Inherited metabolic disorders clinical programs | $ | 63,800 | $ | 59,030 | $ | 61,845 | ||||||||||||||
| Beta thalassemia clinical program | 1,205 | 8,672 | 13,634 | |||||||||||||||||
Adjustment of CIRM award liability related to the termination of the grant (*) | (5,150) | — | — | |||||||||||||||||
| HIV clinical programs | 3,935 | 3,289 | 1,762 | |||||||||||||||||
| Hemophilia clinical programs | 1,688 | 3,108 | 12,805 | |||||||||||||||||
| Subtotal | 65,478 | 74,099 | 90,046 | |||||||||||||||||
| Preclinical and Research Programs: | ||||||||||||||||||||
| Wholly-owned programs and early research activities | 116,991 | 78,540 | 36,480 | |||||||||||||||||
| CNS partner programs | 47,418 | 21,726 | 7,001 | |||||||||||||||||
| Oncology programs | 894 | 6,214 | 12,281 | |||||||||||||||||
| Other | 38 | 68 | 114 | |||||||||||||||||
| Subtotal | 165,341 | 106,548 | 55,876 | |||||||||||||||||
| Total research and development expenses | $ | 230,819 | $ | 180,647 | $ | 145,922 | ||||||||||||||
(*) The amount is related to dissolution of the repayment obligation of the grant from CIRM associated with the ST-400 clinical program which was discontinued in 2021. See Note 4 – Major Customers, Partnerships and Strategic Alliances in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our clinical programs and if we are able to progress our earlier stage product candidates into clinical trials.
The length of time required to complete our development programs and our development costs for those programs may be impacted by the scope and timing of enrollment in clinical trials for our product candidates, our decisions to pursue development programs in other therapeutic areas, and whether we pursue development of our product candidates with a partner or collaborator or independently. For example, our product candidates are being developed in multiple therapeutic areas, and we do not yet know how many of those therapeutic areas we will continue to pursue. Furthermore, the scope and number of clinical trials required to obtain regulatory approval for each pursued therapeutic area is subject to the input of the applicable regulatory authorities, and we have not yet sought such input for all potential therapeutic areas that we may elect to pursue, and even after having given such input, applicable regulatory authorities may subsequently require additional clinical studies prior to granting regulatory approval based on new data generated by us or other companies, or for other reasons outside of our control. As a condition to any regulatory approval, we may also be subject to post-marketing development commitments, including additional clinical trial requirements. As a result of the uncertainties discussed above, we are unable to determine the duration of or complete costs associated with our development programs.
Our potential therapeutic products are subject to a lengthy and uncertain regulatory process that may not result in our receipt of any necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition, clinical trials of our product candidates may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval. The full extent of the impact of the COVID‑19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. A discussion of the risks and uncertainties with respect to our research and development activities, including completing the development of our product candidates, and the consequences to our business, financial position and growth prospects can be found in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
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General and Administrative Expenses
General and administrative expenses consist primarily of compensation related expenses including stock-based compensation for executive, legal, finance and administrative personnel, professional fees, allocated facilities and information technology expenses, and other general corporate expenses.
The decrease of $3.9 million in general and administrative expenses in 2021 compared to 2020 was primarily due to a $3.5 million decrease in legal and professional fees. Stock-based compensation expense included in general and administrative expenses was $13.4 million and $12.2 million for the years ended December 31, 2021 and 2020, respectively.
Interest and other income, net
The decrease of $3.4 million in interest and other income, net in 2021 compared to 2020 was due to a decrease of $3.5 million in interest income primarily due to lower portfolio yields as a result of a decrease in interest rates, and a decrease of $3.4 million as a result of fluctuations in foreign exchange rates, partially offset by a reversal of accrued interest amounting to $1.2 million related to the grant from CIRM upon cancellation of the repayment obligation, and an increase of $1.4 million in research tax credits earned by Sangamo France.
Income tax expense
Provision for income taxes was $0.3 million, $0.3 million, and zero for 2021, 2020 and 2019, respectively. The income tax expense for 2021 was primarily due to an increase in the long-term liability associated with uncertain tax positions and foreign income taxes. The income tax expense for 2020 was primarily related to the increase in the long-term liability associated with uncertain tax positions, foreign income taxes and state income taxes. In both years, the expense was partially offset by a foreign deferred tax benefit.
As of December 31, 2021, we had net operating loss carryforwards for federal and state income tax purposes of approximately $605.6 million and $253.9 million, respectively. The federal net operating loss generated before 2018 will begin to expire in 2022 and will keep expiring through 2037, if not utilized. Federal net operating losses generated from 2018 will carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029. We also have federal and state research tax credit carryforwards of $28.2 million and $22.1 million, respectively. The federal research credits will begin to expire in 2022, while the state research credits have no expiration date. Utilization of our net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before use. Due to the carryforwards related to the net operating losses and research and development tax credits, we do not expect to pay any U.S. federal taxes related to income in the near future.
Liquidity and Capital Resources
Liquidity
Since inception, we have incurred significant net losses, and we have funded our operations primarily through the issuance of equity securities, payments from corporate collaborators and strategic partners and research grants.
As of December 31, 2021, we had cash, cash equivalents, and marketable securities totaling $464.7 million compared to $692.0 million as of December 31, 2020. Our most significant use of capital was for employee compensation and external research and development expenses, such as manufacturing, clinical trials and preclinical activity related to our therapeutic programs. Our cash and investment balances are held in a variety of interest-bearing instruments, including U.S. government-sponsored entity debt securities, commercial paper securities, money market funds, corporate debt securities, asset-backed securities and certificates of deposit. Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.
In August 2020, we entered into an Open Market Sale Agreement℠, or the sales agreement, with Jefferies LLC, providing for the sale of up to $150.0 million of our common stock from time to time in ‘at-the-market’ offerings under an existing shelf registration statement. During the year ended December 31, 2021, we sold 2,007,932 shares of our common stock under the sales agreement for net proceeds of approximately $27.1 million.
While we expect our rate of cash usage to increase in the future, in particular to support our product development endeavors, we currently believe that our available cash, cash equivalents, and marketable securities and expected revenues from collaborations, strategic partnerships and research grants, will be adequate to fund our currently planned operations through at least the next 12 months from the date the Consolidated Financial Statements are issued. We may elect to raise additional capital through additional collaborative agreements or the sale of additional equity to fund our future needs beyond the next 12
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months. During this period of uncertainty and volatility related to the COVID-19 pandemic, we will continue to monitor our liquidity.
Cash Flows
Operating activities
Net cash used in operating activities was $233.3 million in 2021, primarily reflecting our net loss of $178.3 million, a decrease in deferred revenues of $84.2 million, a decrease in accounts payable and other accrued liabilities of $7.7 million, an increase in prepaid expenses and other assets of $7.2 million, a decrease for adjustment of CIRM award liability related to termination of the grant of $6.4 million, and a decrease in long‑term portion of lease liabilities by $4.3 million. These decreases were partially offset by $53.4 million of non-cash expenses related to stock-based compensation, depreciation and amortization, amortization of operating lease right-of-use assets, and net amortization of premium (discount) on marketable securities, and an increase in non-current liabilities by $1.2 million.
Net cash provided by operating activities was $169.9 million in 2020, primarily reflecting an increase in deferred revenues of $216.5 million due to cash received in connection with the Biogen collaboration agreement and the Novartis collaboration agreement, an increase in accounts payable and other accrued liabilities of $10.7 million, a decrease in accounts receivable of $31.7 million, and $39.1 million of non-cash expenses related to stock-based compensation, other changes in operating lease right-of-use assets, and depreciation and amortization. These increases were partially offset by our net loss of $121.1 million, and an increase in prepaid expenses and other assets by $10.4 million.
Investing activities
Net cash provided by investing activities was $248.2 million in 2021, mostly related to net maturities, sales and purchases of marketable securities, partially offset by $23.3 million purchases of property and equipment. Net cash used in investing activities was $271.6 million in 2020, mostly related to net maturities and purchases of marketable securities, and purchases of property and equipment.
Financing activities
Net cash provided by financing activities was $32.9 million in 2021, related to $27.9 million of proceeds from the at-the-market offering, net of offering expenses of $0.8 million, an increase of $5.6 million related to proceeds from the exercise of stock options, and an increase of $3.4 million related to proceeds from the issuance of common stock under our employee stock purchase plan, offset by a decrease of $3.3 million for taxes paid related to net share settlement of equity awards. Net cash provided by financing activities in 2020 was $153.1 million, primarily reflecting the $145.4 million estimated fair value of the shares issued to Biogen offset by $2.9 million of associated issuance costs, and an increase of $11.3 million related to proceeds from the exercise of stock options and purchases under the employee stock purchase plan.
Operating Capital and Capital Expenditure Requirements
We anticipate continuing to incur operating losses for at least the next several years. Although we believe we are well capitalized currently, the effects of the ongoing COVID-19 pandemic could result in significant disruption of global financial markets, impairing our ability to access capital, which could in the future negatively affect our liquidity. Future capital requirements beyond the next 12 months will be substantial, and we will need to raise substantial additional capital to fund the development, manufacturing and potential commercialization of our product candidates through equity or debt financing. In addition, as we focus our efforts on proprietary human therapeutics, we will need to seek FDA approvals of our product candidates, a process that could cost in excess of hundreds of millions of dollars per product. We regularly consider fund-raising opportunities and may decide, from time to time, to raise capital based on various factors, including market conditions and our plans of operation. Additional capital may not be available on terms acceptable to us, or at all. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to advance our product candidate pipeline would be harmed. Furthermore, any sales of additional equity securities, including sales pursuant to our at-the-market offering program, may result in dilution to our stockholders, and any debt financing may include covenants that restrict our business.
Our future capital requirements will depend on many forward-looking factors, including the following:
•the initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates;
•the outcome, timing and cost of regulatory approvals;
•the success of our collaboration agreements;
•delays that may be caused by changing regulatory requirements;
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•the number of product candidates that we pursue;
•the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
•the timing and terms of future in-licensing and out-licensing transactions;
•the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
•the cost of procuring clinical and commercial supplies of our product candidates;
•the extent to which we acquire or invest in businesses, products or technologies, including the costs associated with such acquisitions and investments; and
•the costs of potential disputes and litigation.
Contractual Obligations
As of December 31, 2021, we had contractual obligations and commercial commitments as follows (in thousands):
| Payments Due by Period | ||||||||||||||||||||
| Contractual Obligations | Total | Short-term | Long-term | |||||||||||||||||
| Operating leases | $ | 59,842 | $ | 6,605 | $ | 53,237 | ||||||||||||||
| License obligations | 760 | 146 | 614 | |||||||||||||||||
| Manufacturing obligations | 10,994 | 10,994 | — | |||||||||||||||||
| Total contractual obligations | $ | 71,596 | $ | 17,745 | $ | 53,851 | ||||||||||||||
Operating leases consist of base rents for facilities we occupy in Brisbane, California; Richmond, California; and Valbonne, France.
License obligations includes an ongoing license maintenance fee associated with cancellable in-licensed patent agreements.
Manufacturing obligations include the following non-cancelable material contractual commitments under manufacturing-related supplier arrangements as of December 31, 2021 (in thousands):
| Party | Total | Expiry date | ||||||||||||
| Brammer Bio MA - a Thermo Fisher Scientific Inc. subsidiary | $ | 3,727 | December 2022 | |||||||||||
Lonza Netherlands, B.V. | 7,267 | December 2022 | ||||||||||||
| Total manufacturing obligations | $ | 10,994 | ||||||||||||
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk relates to our cash, cash equivalents, and marketable securities. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and capturing a market rate of return based on our investment policy parameters and market conditions. We select investments that maximize interest income to the extent possible within these guidelines. To achieve our goals, we maintain a portfolio of cash equivalents and investments in securities of high credit quality and with varying maturities to match projected cash needs.
The securities in our investment portfolio are not leveraged and are classified as available-for-sale. The majority of these available-for-sale securities are short-term in nature and subject to minimal interest rate risk. Our investments currently consist of U.S. government-sponsored entity debt securities, commercial paper securities, corporate debt securities, asset-backed securities and certificates of deposit. Our investment policy, approved by our Board of Directors, limits the amount we may invest in any one type of investment issuer, thereby reducing credit risk concentrations. All investments are carried at market value, which approximates cost. We do not use derivative financial instruments in our investment portfolio. If market interest rates were to increase or decrease by one hundred basis points, the fair value of our investment portfolio would increase or decrease by an immaterial amount.
Foreign Currency Exchange Risk
We have operations in the United States as well as in Europe. The functional currency of each foreign subsidiary is the local currency. We are exposed to foreign currency risk, primarily through operations of our subsidiaries in Europe which conduct business primarily in Euros. We record gains and losses within our stockholders’ equity due to the translation of our subsidiaries’ financial statements into U.S. dollars.
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A 10% strengthening/(weakening) in the rates used to translate the results of our foreign subsidiaries would have increased/(decreased) net loss for the year ended December 31, 2021 by approximately $3.1 million and would not have materially impacted our operating loss.
Additionally, we incur foreign currency transaction gains and losses related to the level of activity between the United States and Europe. In 2021, we incurred foreign currency transaction losses of $1.2 million. A 10% unfavorable change in the Euro and U.S. dollar exchange rate on December 31, 2021 would have had an immaterial impact on foreign currency transaction losses for 2021.
As of December 31, 2021 and 2020, we maintained cash balances of approximately $6.9 million and $16.8 million, respectively, denominated in a foreign currency in the United States. A hypothetical 10% change in foreign exchange rates would have increased/(decreased) net loss for the year ended December 31, 2021 by approximately $0.7 million and would not have materially impacted our operating loss.
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ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SANGAMO THERAPEUTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: | |||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Sangamo Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sangamo Therapeutics, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Accounting for Revenue from Collaboration Agreement with Novartis | ||||||||
| Description of the Matter | As of December 31, 2021, the Company had a collaboration and license agreement with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) for the research, development and commercialization of gene regulation therapies to treat three neurodevelopmental disorders. As discussed in Note 1 of the consolidated financial statements, the Company concluded that providing licensed technology to Novartis is not a discrete performance obligation that is separate from providing research services to Novartis because the licensed technology does not have stand-alone value to Novartis apart from the research services to be performed pursuant to the agreement. As a result, the Company recognizes revenue from the upfront payment for the licensed technology based on the proportional performance of the research services through the estimated research period. Auditing the Company’s estimated measure of progress at a point in time during the estimated research period was complex and involved significant judgment. In particular, the measure of revenues from upfront non-refundable fees for the licensed technology is affected by management’s estimates of the total research services costs required to complete the performance obligations including the total internal personnel costs and external costs to be incurred. Changes in these estimates can have a material effect on revenue recognized. | |||||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for revenue from this collaboration agreement, including management’s review controls to evaluate the transaction price, including the upfront licensed technology fee and the estimated variable consideration for the research services, and all constrained amounts. Our audit procedures included, among others, gaining an understanding and testing the Company’s estimates of total expected costs by project, and testing the completeness and accuracy of the underlying data used by the Company in its revenue recognition model. We performed inquiries of the research and development personnel responsible for the specific development projects to corroborate management’s assumptions used in the Company’s estimates of total expected costs by project, evaluated any changes in the development timeline and/or increases or decreases in the total expected costs by project, and examined evidence supporting key inputs of the revenue recognition model including assessing whether actual costs incurred were appropriate under the terms of the contract. We also compared the estimates of total expected costs by project to actual costs incurred to evaluate management’s ability to forecast costs. | |||||||
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1997.
February 24, 2022
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, 2021 | December 31, 2020 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Interest receivable | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Marketable securities, non-current | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other non-current assets | |||||||||||
| Restricted cash | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Other accrued liabilities | |||||||||||
| Accrued compensation and employee benefits | |||||||||||
| Deferred revenues | |||||||||||
| Total current liabilities | |||||||||||
| Deferred revenues, non-current | |||||||||||
| Long-term portion of lease liabilities | |||||||||||
| Deferred income tax | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
| Total Sangamo Therapeutics, Inc. stockholders’ equity | |||||||||||
| Non-controlling interest | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Revenues | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | |||||||||||||||||
| General and administrative | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Loss from operations | ( | ( | ( | ||||||||||||||
| Interest and other income, net | |||||||||||||||||
| Loss before income taxes | ( | ( | ( | ||||||||||||||
| Income tax expense | |||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Net loss attributable to non-controlling interest | ( | ( | ( | ||||||||||||||
| Net loss attributable to Sangamo Therapeutics, Inc. stockholders | $ | ( | $ | ( | $ | ( | |||||||||||
| Basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders | $ | ( | $ | ( | $ | ( | |||||||||||
| Shares used in computing basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders | |||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Net pension losses | ( | ( | ( | ||||||||||||||
| Change in unrealized (loss) gain on marketable securities, net of tax | ( | ( | |||||||||||||||
| Comprehensive loss | ( | ( | ( | ||||||||||||||
| Comprehensive loss attributable to non-controlling interest | ( | ( | ( | ||||||||||||||
| Comprehensive loss attributable to Sangamo Therapeutics, Inc. | $ | ( | $ | ( | $ | ( | |||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Non- Controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2018 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
Cumulative-effect adjustment of on January 1, 2019 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under public offering, net of issuance costs | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional shares of Sangamo France | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Issuance costs related to Sangamo France acquisition | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Net pension losses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Net unrealized gain on marketable securities, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with the Biogen collaboration agreement, net of issuance costs | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional shares of Sangamo France | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net pension losses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with at-the-market offering, net of offering expenses | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional shares of Sangamo France | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net pension losses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Buy-out of non-controlling interest | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Operating Activities: | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Amortization of premium (discount) on marketable securities, net | ( | ( | |||||||||||||||
| Amortization and other changes in operating lease right-of-use assets | |||||||||||||||||
| Gain on free shares | ( | ( | ( | ||||||||||||||
| Net (gain) loss on disposal of property and equipment | ( | ||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Adjustment of CIRM award liability related to the termination of the grant | ( | ||||||||||||||||
| Net loss on lease termination | |||||||||||||||||
| Net changes in operating assets and liabilities: | |||||||||||||||||
| Interest receivable | ( | ( | |||||||||||||||
| Accounts receivable | ( | ( | |||||||||||||||
| Prepaid expenses and other assets | ( | ( | ( | ||||||||||||||
| Accounts payable and other accrued liabilities | ( | ( | |||||||||||||||
| Accrued compensation and employee benefits | |||||||||||||||||
| Deferred revenues | ( | ( | |||||||||||||||
| Long-term portion of lease liabilities | ( | ( | ( | ||||||||||||||
| Other non-current liabilities | |||||||||||||||||
| Net cash (used in) provided by operating activities | ( | ( | |||||||||||||||
| Investing Activities: | |||||||||||||||||
| Purchases of marketable securities | ( | ( | ( | ||||||||||||||
| Maturities of marketable securities | |||||||||||||||||
| Sales of marketable securities | |||||||||||||||||
| Purchases of property and equipment | ( | ( | ( | ||||||||||||||
| Purchase of additional Sangamo France shares | ( | ( | ( | ||||||||||||||
| Net cash provided by (used in) investing activities | ( | ( | |||||||||||||||
| Financing Activities: | |||||||||||||||||
| Proceeds from at-the-market offering, net of offering expenses | |||||||||||||||||
| Proceeds from public offering of common stock, net of issuance costs | |||||||||||||||||
| Proceeds from issuance of common stock in connection with the Biogen collaboration agreement, net of issuance costs | |||||||||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | ( | ||||||||||||||
| Proceeds from issuance of common stock under employee stock purchase plan | |||||||||||||||||
| Proceeds from exercise of stock options and restricted stock units | |||||||||||||||||
| Net cash provided by financing activities | |||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | ( | ( | |||||||||||||||
| 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 | $ | $ | $ | ||||||||||||||
| Supplemental cash flow disclosures: | |||||||||||||||||
| Property and equipment included in unpaid liabilities | $ | $ | $ | ||||||||||||||
| Buy-out of non-controlling interest | $ | $ | $ | ||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations | $ | $ | $ | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements
93
SANGAMO THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Sangamo Therapeutics, Inc. (“Sangamo” or “the Company”) was incorporated in the State of Delaware in June 1995 and changed its name from Sangamo Biosciences, Inc. in January 2017. Sangamo is a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients with serious diseases.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to non-controlling interests on its Consolidated Statements of Operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.
Liquidity and Management’s Plan
Sangamo is currently working on a number of long-term development projects that involve experimental technologies. The projects may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company plans to finance operations with available cash resources, collaborations and strategic partnerships funds, research grants and from the issuance of equity or debt securities. Sangamo believes that its available cash, cash equivalents, and marketable securities as of December 31, 2021, and expected future milestones and research services revenue from collaborations, strategic partnerships and research grants, will be adequate to fund its currently planned operations through at least the next 12 months from the date these Consolidated Financial Statements are issued. Sangamo will require substantial additional financial resources to complete the development and commercialization of its product candidates. Additional capital may not be available on terms acceptable to the Company, if at all. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, the Company’s business and ability to develop its technology and therapeutic products would be harmed. Furthermore, any sales of additional equity securities may result in dilution to the Company’s stockholders, and any debt financing may include covenants that restrict the Company’s business.
Summary of Significant Accounting Policies
During the year ended December 31, 2021, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreement with Sanofi S.A. (“Sanofi”). These changes in estimates were driven by a change in project scope and related project costs in September 2021 and subsequent notification of termination of the collaboration agreement, effective June 28, 2022, which resulted in changes to the measure of proportional cumulative performance. These adjustments decreased revenue by $1.6 million, increased net loss by $1.6 million and increased the Company’s basic and diluted net loss per share by $0.01 for the year ended December 31, 2021.
During the year ended December 31, 2020, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreements with Sanofi and Pfizer Inc. (“Pfizer”). These changes in estimates were driven by changes in project scope and related project costs which resulted in changes to the measure of proportional cumulative performance. These adjustments increased revenue by $8.9 million, decreased net loss by $8.9 million and decreased the Company’s basic and diluted net loss per share by $0.06 for the year ended December 31, 2020.
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During the year ended December 31, 2019, the Company recorded adjustments to revenue related to a change in estimate in connection with the giroctocogene fitelparvovec collaboration agreement with Pfizer. This change in estimate was driven by changes in project scope and related project costs which resulted in changes to the measure of proportional cumulative performance. These adjustments increased revenue by $5.7 million, decreased net loss by $5.7 million and decreased the Company’s basic net loss per share by $0.05 for the year ended December 31, 2019.
Revenue Recognition
The Company accounts for its revenues pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s contract revenues are derived from collaboration agreements including licensing arrangements and research activity grants. Research and licensing agreements typically include upfront signing or license fees, cost reimbursements for research services, minimum sublicense fees, milestone payments and royalties on future licensee’s product sales. The Company has agreements with both fixed and variable consideration. Non-refundable upfront fees and funding of research and development activities are considered fixed, while milestone payments are generally identified as variable consideration. Sangamo’s research grants are typically multi-year agreements and provide for the reimbursement of qualified expenses for research and development as defined under the terms of the grant agreement. Revenues under research grant agreements are generally recognized when the related qualified research expenses are incurred. Deferred revenue primarily represents the portion of research or license payments received but not earned.
In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The Company’s performance obligations include license rights, development services and services associated with regulatory submission and approval processes. Revenues from research services earned under collaboration agreements are generally recognized as revenue as the related services are provided. Revenues from non-refundable upfront fees are recognized over time either by measuring progress towards satisfaction of the relevant performance obligation, using the input method (i.e., cumulative actual costs incurred relative to total estimated costs) or on a straight-line basis when a performance obligation is expected to be satisfied evenly over a period of time (or when the entity has a stand-ready obligation). Significant management judgment is required to determine the level of effort required under an arrangement, and the period over which the Company expects to complete its performance obligations under the arrangement, which may include total internal personnel costs and external costs to be incurred as well as, in certain cases, the estimated stand-ready obligation period. Changes in these estimates can have a material effect on revenue recognized. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. The estimated period of performance and project costs, such as personnel and manufacturing cost, are reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverables.
As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Related costs and expenses under these arrangements have historically approximated the revenues recognized.
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| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Biogen MA, Inc. | % | % | |||||||||||||||
| Novartis Institutes for BioMedical Research, Inc. | % | % | |||||||||||||||
| Kite Pharma, Inc. | % | % | % | ||||||||||||||
| Sanofi S.A. | % | % | % | ||||||||||||||
| Pfizer Inc. | % | % | % | ||||||||||||||
| As of December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Biogen MA, Inc. | % | % | |||||||||
| Novartis Institutes for BioMedical Research, Inc. | % | % | |||||||||
| Sanofi S.A. | % | % | |||||||||
96
Fair Value Measurements
The carrying amounts for financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short-term maturities. Marketable securities are stated at their estimated fair values. The free shares asset is measured using a binomial-lattice pricing model and is reviewed each reporting period and adjusted as needed to approximate fair value.
| As of December 31, | |||||||||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||||||||
| Non-current restricted cash | |||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash as reported within the Consolidated Statements of Cash Flows | $ | $ | $ | ||||||||||||||||||||
Marketable Securities
Sangamo classifies its marketable securities as available-for-sale and records its investments at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss) (“AOCI”). The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as non-current marketable securities in the accompanying Consolidated Balance Sheets.
The Company’s investments are subject to a periodic impairment review. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time and extent to which the fair value has been less than the Company’s cost basis, the financial condition and near-term prospects of the investee and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. Realized gains and losses on marketable securities are included in interest and other income, net, which are determined using the specific identification method. Credit losses related to the marketable securities are recorded in interest and other income (expense), net in the Consolidated Statements of Operations through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.
Concentrations of Credit Risk and Other Risks
Cash, cash equivalents, and marketable securities consist of financial instruments that potentially subject the Company to a concentration of credit risk to the extent of the fair value recorded in the Consolidated Balance Sheets. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments that bear minimal risk. The Company has established policies relating to the quality, diversification, and maturities of securities to enable the Company to manage its credit risk. The Company is exposed to credit risk in the event of a default by the financial institutions or issuers of investments holding its cash, cash equivalents, and investments to the extent recorded on the Consolidated Balance Sheets.
Certain materials and key components that the Company utilizes in its operations are obtained through single suppliers. Since the suppliers of key components and materials must be named in an investigational new drug application (“IND”) filed with the U.S. Food and Drug Administration for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets which is generally to five years . For leasehold improvements, amortization is calculated using the straight-line method based on the shorter of the useful life or the lease term. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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Research and Development Expenses
Research and development expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations, materials and supplies and overhead allocations consisting of various support and facility-related costs. Research and development costs are expensed as incurred.
General and Administrative Expenses
General and administrative expenses consist of finance, human resources, legal and other administrative activities. These expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, facilities and overhead costs, legal expenses, and other general and administrative costs.
Stock-based Compensation
The Company measures and recognizes compensation expense for all stock-based payment awards made to Sangamo employees and directors, including employee share options, restricted stock units (“RSUs”) and employee stock purchases related to the Employee Stock Purchase Plan (“ESPP”) based on estimated fair values at the award grant date. The fair value of stock-based awards is amortized over the vesting period of the award using a straight-line method.
To estimate the fair value of an award, the Company uses the Black-Scholes option pricing model. This model requires inputs such as expected life, expected volatility, expected dividends and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of expected life and volatility are derived primarily from the Company’s historical data, the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The Company accounts for forfeitures in the period they occur.
Income Taxes
Income tax expense has been calculated using the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets if, based upon the available evidence, it is not more likely than not that the deferred tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Company’s Consolidated Financial Statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized. The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related income tax liability within other accrued liabilities on its Consolidated Balance Sheets. The Company evaluates uncertain tax positions on a regular basis and makes adjustments to these accruals when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.
Leases
The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.
As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of remaining lease payments. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease in a similar economic environment. The Company considers its credit risk, term of the lease, and total lease payments and adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. Rent expense for the Company’s operating leases is recognized on a straight-line basis over the lease term.
The Company has elected not to separate lease and non-lease components for its real estate and copier leases and, as a result, accounts for any lease and non-lease components as a single lease component. The Company has also elected not to apply the recognition requirement to any leases with a term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.
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Foreign Currency Translation
The functional currency of the Company’s foreign subsidiaries is primarily the Euro. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date. Foreign currency translation adjustments are recorded as a component of AOCI within stockholders’ equity. Revenues and expenses from the Company’s foreign subsidiaries are translated using the monthly average exchange rates in effect during the period in which the transactions occur. Foreign currency transaction gains and losses are recorded in interest and other income, net, on the Company’s Consolidated Statements of Operations.
Net Loss Per Share
Basic net loss per share attributable to Sangamo Therapeutics, Inc. stockholders has been computed by dividing net loss attributable to Sangamo Therapeutics, Inc. stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders is calculated by dividing net loss attributable to Sangamo Therapeutics, Inc. stockholders by the weighted-average number of shares of common stock plus potentially dilutive securities outstanding during the period.
Recent Accounting Pronouncements
None.
NOTE 2 – FAIR VALUE MEASUREMENTS
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, marketable securities, and the free shares asset. Fair value is determined based on a three-tier hierarchy under the authoritative guidance for fair value measurements and disclosures that prioritizes the inputs used in measuring fair value as follows:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurements and unobservable (i.e., supported by little or no market activity).
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The fair value measurements of the Company’s cash equivalents, marketable securities, and the free shares asset are identified at the following levels within the fair value hierarchy (in thousands):
| December 31, 2021 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | |||||||||||||||||||||||
| Commercial paper securities | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | |||||||||||||||||||||||
| Commercial paper securities | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Certificates of deposits | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
| Free shares asset | $ | $ | $ | $ | |||||||||||||||||||
Cash Equivalents and Marketable Securities
The Company generally classifies its marketable securities as Level 2. Instruments are classified as Level 2 when observable market prices for identical securities that are traded in less active markets are used. When observable market prices for identical securities are not available, such instruments are priced using benchmark curves, benchmarking of like securities, sector groupings, matrix pricing and valuation models. These valuation models are proprietary to the pricing providers or brokers and incorporate a number of inputs, including in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. For certain security types, additional inputs may be used, or some of the standard inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on any given day.
Free Shares Asset
As a result of the July 20, 2018 Share Purchase Agreement (“Sangamo France SPA”) to acquire Sangamo France (see Note 5 — Acquisition of Sangamo France), the Company entered into arrangements with the holders of approximately 477,000
100
“free shares” of Sangamo France pursuant to which the Company had the right to purchase such shares from the holders (a call option) and such holders had the right to sell to the Company such shares from time to time through mid‑2021 (a put option). As of December 31, 2021, the Company had purchased all of the 477,000 free shares for an aggregate cash payment of approximately $1.1 million, upon exercise of the put options. As of December 31, 2021, there were no free shares outstanding subject to purchase by the Company. The fair value of the free shares’ asset was $0.1 million at December 31, 2020.
| Free Shares valuation assumptions: | December 31, 2020 | ||||
| Sangamo stock price (USD) | $ | ||||
| Sangamo France stock price (EUR) | € | ||||
| EUR/ USD exchange rate | |||||
| Estimated correlation between Sangamo and Sangamo France stock prices | % | ||||
| Sangamo stock price (USD) volatility estimate | % | ||||
| Sangamo France stock price (EUR) volatility estimate | % | ||||
| EUR/ USD exchange rate volatility estimate | % | ||||
| Risk free rate and cost of debt by expected exercise date | Varies | ||||
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NOTE 3 – CASH EQUIVALENTS AND MARKETABLE SECURITIES
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | ( | ||||||||||||||||||||||
| Commercial paper securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Certificates of deposit | ( | ||||||||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | ( | ||||||||||||||||||||||
| Commercial paper securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Maturing in one year or less | $ | $ | |||||||||
| Maturing after one year through five years | |||||||||||
| Total | $ | $ | |||||||||
Realized gains and losses on the sales of investments were insignificant during the years ended December 31, 2021, 2020 and 2019.
The Company manages credit risk associated with its investment portfolio through its investment policy, which limits purchases to high-quality issuers and also limits the amount of its portfolio that can be invested in a single issuer. The Company did no
The Company had unrealized losses related to its marketable securities for the years ended December 31, 2021, 2020 and 2019. The Company had no material unrealized losses, individually and in the aggregate, for marketable securities that are in a continuous unrealized loss position for greater than 12 months as of December 31, 2021 and 2020. Based on the scheduled maturities of its investments, the Company determined that it was more likely than not that it will hold these investments for a
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NOTE 4 – MAJOR CUSTOMERS, PARTNERSHIPS AND STRATEGIC ALLIANCES
Novartis Institutes for BioMedical Research, Inc.
On July 27, 2020, the Company entered into a collaboration and license agreement with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) for the research, development and commercialization of gene regulation therapies to treat three neurodevelopmental disorders. Under the agreement, which was effective upon execution, the Company granted Novartis an exclusive, royalty bearing and worldwide license, under its relevant patents and know-how, to develop, manufacture and commercialize certain of its zinc finger protein (“ZFP”) transcription factors (“ZFP-TFs”) targeted to three undisclosed genes that are associated with certain neurodevelopmental disorders, including autism spectrum disorder and intellectual disability. The Company is performing early research activities over the collaboration period for each gene target and manufacture the ZPF-TFs required for such research, costs of which is funded by Novartis. Novartis is responsible for additional research activities, IND-enabling studies, clinical development, regulatory approvals, manufacturing of preclinical, clinical and approved products, and global commercialization. Subject to certain exceptions set forth in the agreement, the Company is prohibited from developing, manufacturing or commercializing any therapeutic product targeting any of the three genes that are the subject of the collaboration. Novartis also has the option to license certain of the Company’s proprietary adeno-associated viruses (“AAVs”) for the sole purpose of developing, manufacturing and commercializing licensed products arising from the collaboration.
Under the agreement, Novartis paid the Company a $75.0 million upfront license fee in August 2020. In addition to this fee and the cost reimbursements for early research activities, the Company is eligible to earn from Novartis up to $420.0 million in development milestones and up to $300.0 million in commercial milestones. The Company is also eligible to earn from Novartis tiered high single-digit to sub-teen double-digit royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments will be subject to reduction due to patent expiration, loss of market exclusivity and payments made under certain licenses for third-party intellectual property. The agreement will continue, on a product-by-product and country-by-country basis, until the expiration of the applicable royalty term. Novartis has the right to terminate the agreement, in its entirety or on a target-by-target basis, for any reason after a specified notice period. Each party also has the right to terminate the agreement on account of the other party’s bankruptcy or material, uncured breach.
All payments received under the agreement, when earned, are non-refundable and non-creditable. The transaction price of $95.1 million includes the upfront license fee of $75.0 million and estimated research costs of $20.1 million to be provided over the estimated research period. All clinical or regulatory milestone amounts were considered fully constrained at inception of the agreement. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company assessed the agreement with Novartis in accordance with ASC Topic 606 and concluded that Novartis is a customer. The Company has identified a single performance obligation within this arrangement as a license to the technology and ongoing research services. The Company concluded that the license is not discrete as it does not have stand-alone value to Novartis apart from the research services to be performed pursuant to the agreement. As a result, the Company recognizes revenue from the upfront payment based on proportional performance of the ongoing research services through the estimated research period. The estimation of progress towards the satisfaction of performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its performance obligation. As of December 31, 2021 and 2020, the Company had a receivable of $1.9 million and $1.1 million, respectively, and deferred revenue of $40.9 million and $70.9 million, respectively, related to this agreement.
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| Year Ended December 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||||
| Revenue related to Novartis agreement: | ||||||||||||||||||||||||||
| Recognition of upfront license fee | $ | $ | $ | |||||||||||||||||||||||
| Research services | ||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||
The Company paid $1.5 million for financial advisory fees during the year ended December 31, 2020, equal to 2 % of $75.0 million received for the upfront license fee related to the collaboration and license agreement with Novartis. The Company recognized $1.5 million as a contract asset as such amount represents a cost of obtaining the agreement. This balance is amortized and included in general and administrative expenses on a systematic basis consistent with the transfer of the services to Novartis in accordance with ASC Topic 340, Other Assets and Deferred Costs (“ASC Topic 340”). The Company amortized $0.6 million and $0.1 million during the years ended December 31, 2021 and 2020, respectively.
Biogen MA, Inc.
In February 2020, the Company entered into a collaboration and license agreement with Biogen MA, Inc. (“BIMA”) and Biogen International GmbH (together with BIMA, “Biogen”) for the research, development and commercialization of gene regulation therapies for the treatment of neurological diseases. The companies plan to leverage the Company’s proprietary ZFP technology delivered via AAV to modulate expression of key genes involved in neurological diseases. Concurrently with the execution of the collaboration agreement, the Company entered into a stock purchase agreement with BIMA, pursuant to which BIMA agreed to purchase 24,420,157 shares of the Company’s common stock (the “Biogen Shares”), at a price per share of $9.2137 , for an aggregate purchase price of approximately $225.0 million.
The collaboration agreement became effective in April 2020 following the termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other customary closing conditions, including the payment of $225.0 million for the purchase of the Biogen Shares.
Under the collaboration agreement, Biogen paid the Company an upfront license fee of $125.0 million in May 2020. The Company is also eligible to receive research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if Biogen selects all of the targets allowed under the agreement and all the specified milestones set forth in the agreement are achieved, which includes up to $925.0 million in pre-approval milestone payments and up to $1.5 billion in first commercial sale and other sales-based milestone payments. In addition, the Company is eligible to receive tiered high single-digit to sub-teen royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Under the collaboration agreement, the Company granted to Biogen an exclusive, royalty bearing and worldwide license, under its relevant patents and know-how, to develop, manufacture and commercialize certain ZFP and/or AAV-based products directed to up to twelve neurological disease gene targets selected by Biogen. Biogen has already selected four of these: ST-501 to treat tauopathies, ST-502 to treat synucleinopathies including Parkinson’s disease, a third product candidate targeting DM1, a neuromuscular disease, and a fourth undisclosed neurological disease gene target. Biogen has exclusive rights to nominate up to eight additional targets over a target selection period of five years . For each gene target selected by Biogen, the Company performs early research activities, costs of which are shared by the companies, aimed at the development of the combination of proprietary central nervous system delivery vectors and ZFP-TFs (or potential other ZFP products) targeting therapeutically relevant genes. Biogen has assumed responsibility and costs for the IND‑enabling studies, clinical development, related regulatory interactions, and global commercialization. The Company is responsible for manufacturing activities for the initial clinical trials for the first three products of the collaboration and plans to leverage its in-house manufacturing capacity, where appropriate, which is currently in development. Biogen is responsible for manufacturing activities beyond the first clinical trial for each of the first three products. The Company’s research activities for any targets will be performed over the period not to exceed seven years from the effective date of the agreement (i.e., through April 2027). Subject to certain exceptions set forth in the collaboration agreement, the Company is prohibited from developing, manufacturing or commercializing any therapeutic product directed to the targets selected by Biogen.
The collaboration agreement continues on a product-by-product and country-by-country basis until the expiration of all applicable royalty terms. Biogen has the right to terminate the collaboration agreement, in its entirety or on a target-by-target basis, for any reason after a specified notice period, and also has the right to replace up to ten targets. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach. In addition, the Company may terminate the collaboration agreement if Biogen challenges any patents licensed by the Company to Biogen.
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Pursuant to the terms of the stock purchase agreement, Biogen has agreed not to, without the Company’s prior written consent and subject to specified conditions and exceptions, directly or indirectly acquire shares of the Company’s outstanding common stock, seek or propose a tender or exchange offer or merger between the parties, solicit proxies or consents with respect to any matter, or undertake other specified actions related to the potential acquisition of additional equity interests in the Company. Such standstill restrictions expire on the earlier of the three-year anniversary of the effectiveness of the collaboration agreement and the date that Biogen beneficially owns less than 5 % of the Company’s common stock.
The stock purchase agreement also provides that from the first anniversary of the effectiveness of the collaboration agreement, through the second anniversary, Biogen will hold and not sell at least 50 % of the Biogen Shares, in addition to being subject to certain volume limitations. The stock purchase agreement further provides that, subject to certain limitations, until such time as all remaining Biogen Shares may be sold pursuant to Rule 144 promulgated under the Securities Exchange Act of 1933, as amended, within a 90-day period, Biogen may request the Company to register for resale any of the Biogen Shares on a registration statement to be filed with the Securities and Exchange Commission.
In addition, Biogen has agreed that, excluding specified extraordinary matters, it will vote the Biogen Shares in accordance with the Company’s recommendation and has granted the Company an irrevocable proxy with respect to the foregoing. Such voting provisions expire on the earlier of (i) the two-year anniversary of the effectiveness of the collaboration agreement, (ii) the date that Biogen beneficially owns less than 5 % of the Company’s common stock and (iii) the date the collaboration agreement is terminated; provided, however, that in no event shall such expiration date be prior to the one-year anniversary of the effectiveness of the collaboration agreement.
The Company assessed the collaboration agreement with Biogen in accordance with ASC Topic 606 and concluded that Biogen is a customer. The transaction price of $204.6 million includes the upfront license fee of $125.0 million and the excess consideration from the stock purchase of $79.6 million, which represents the difference between the $225.0 million received for the purchase of the Biogen Shares and the $145.4 million estimated fair value of the equity issued. The equity issued to Biogen was valued using an option pricing model to reflect certain holding period restrictions. None of the target selection fees and clinical or regulatory milestones have been included in the transaction price, as all such amounts are fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that nomination of additional targets and achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price as uncertain events are resolved or other changes in circumstances occur.
The Company has identified a single performance obligation within the Biogen collaboration agreement, which is a stand-ready obligation consisting of a series of distinct days of research services, during which Biogen obtains access to the Company’s license and research resources. Revenue from the upfront license fee relates to access to the license and Company’s obligation to stand-ready to perform such research services corresponding to the targets selected by Biogen. As a result of this obligation to perform research services when and if requested throughout the duration of the contract, the upfront license fee and the excess consideration from the stock purchase will be recognized over time on a straight-line basis consistent with the resources expected to be dedicated to providing the research services through April 2027, the estimated period of the obligation. The estimated period of performance is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverable. Revenue from the reimbursement by Biogen of shared costs of early research activities performed by Sangamo is recognized as the research services are performed. As of December 31, 2021 and 2020, the Company had a receivable of $2.8 million and $2.7 million, respectively, and deferred revenue of $154.0 million and $183.2 million, respectively, related to this agreement.
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||||
| Revenue related to Biogen agreement: | ||||||||||||||||||||||||||
| Recognition of license and stand-ready fee | $ | $ | $ | |||||||||||||||||||||||
| Research services | ||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||
The Company paid $7.0 million for financial advisory fees during the year ended December 31, 2020, equal to 2 % of $225.0 million received for the sale of shares and 2 % of $125.0 million received for the upfront fee. The fees incurred related to both the collaboration agreement with Biogen and to the stock purchase agreement for the sale of shares. The Company believes that the allocation of fees on a relative fair value basis between the two agreements is reasonable. The Company recognized $4.1 million, which represents 2 % of the transaction price of $204.6 million, as a contract asset. This balance is amortized and included in general and administrative expenses on a systematic basis consistent with the transfer of the services to Biogen in accordance with ASC Topic 340. The Company amortized $0.6 million and $0.4 million during the years ended
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December 31, 2021 and 2020, respectively. The Company recognized $2.9 million, which represented 2 % of the $145.4 million estimated fair value of the equity issued, as a share issuance cost and recorded this amount in equity as a reduction in net proceeds.
Kite Pharma, Inc.
In February 2018, the Company entered into a global collaboration and license agreement with Kite Pharma, Inc. (“Kite”), a Gilead Sciences, Inc. company, which became effective in April 2018, and was amended and restated in September 2019, for the research, development, and commercialization of potential engineered cell therapies for cancer. In this collaboration, Sangamo is working together with Kite on a research program under which the companies are designing zinc finger nucleases (“ZFNs”) and viral vectors to disrupt and insert certain genes in T cells and natural killer cells (“NK-cells”) including the insertion of genes that encode chimeric antigen receptors (“CARs”), T cell receptors (“TCRs”), and NK-cell receptors (“NKRs”) directed to mutually agreed targets. Kite is responsible for all clinical development, manufacturing and commercialization of any resulting products.
Subject to the terms of this agreement, the Company granted Kite an exclusive, royalty-bearing, worldwide sublicensable license under the Company’s relevant patents and know-how to develop, manufacture and commercialize, for the purpose of treating cancer, specific cell therapy products that may result from the research program and that are engineered ex vivo using selected ZFNs and viral vectors developed under the research program to express CARs, TCRs or NKRs directed to candidate targets.
During the research program term and subject to certain exceptions, except pursuant to this agreement, the Company is prohibited from researching, developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a target expressed on or in a human cancer cell. After the research program term concludes and subject to certain exceptions, except pursuant to this agreement, the Company will be prohibited from developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a candidate target.
Following the effective date, the Company received a $150.0 million upfront payment from Kite. In addition, Kite also reimburses the Company’s direct costs to conduct the joint research program. Sangamo is also eligible to receive contingent development- and sales-based milestone payments that could total up to $3.0 billion if all of the specified milestones set forth in this agreement are achieved. Of this amount, approximately $1.3 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones, and approximately $1.8 billion relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. Each development- and sales-based milestone payment is payable (i) only once for each licensed product, regardless of the number of times that the associated milestone event is achieved by such licensed product and, (ii) only for the first 10 times that the associated milestone event is achieved regardless of the number of licensed products that may achieve such milestone event. In addition, the Company is entitled to receive escalating, tiered royalty payments with a percentage in the single digits based on future annual worldwide net sales of licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
The initial research term in the agreement is six years . Kite has an option to extend the research term for up to two additional one-year periods for a separate upfront fee of $10.0 million per year. All contingent payments under the agreement, when earned, will be non-refundable and non-creditable. In connection with the amendment and restatement of the agreement in September 2019, the Company entered into a new research plan with Kite, with estimated reimbursable service cost of approximately $3.4 million, which is included in the total transaction price. The Company concluded the total transaction price under this agreement is $189.3 million and includes the upfront license fee of $150.0 million and $39.3 million estimated reimbursable service costs for identified research projects over the estimated performance period. Further, the Company concluded the estimated fees for the presumed exercise of the research term extension options and all milestone amounts are fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future events which are uncertain at this time. The Company will re-evaluate the transaction price including the estimated variable consideration included in the transaction price and all constrained amounts in each reporting period and as uncertain events are resolved or other changes in circumstances occur. None of the development and sales-based milestone payments have been included in the transaction price.
The Company assessed the agreement with Kite in accordance with ASC Topic 606 and concluded that Kite is a customer. Kite has the right to terminate this agreement in its entirety or on a per licensed product or per candidate target basis for any reason after a specified notice period. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach.
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The Company has identified the primary performance obligations within the Kite agreement as: (1) a license to the technology along with the stand-ready obligation to perform research services, and (2) the ongoing research services. Revenue from the upfront license fee relates to access to the license and Company’s obligation to stand-ready to perform such research services as additional targets are selected by Kite. As a result of this obligation to perform research services when and if requested throughout the duration of the contract, the fee for the license and the stand-ready obligation will be recognized over time on a straight-line basis through April 2024, the estimated period of the stand-ready obligation. Revenue from the reimbursable costs related to the integrated service deliverable is recognized as the research services are performed. Related costs and expenses under these arrangements have historically approximated the revenues recognized. The estimated period of performance and project cost is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverables. As of December 31, 2021, and 2020 the Company had a receivable of $0.1 million and $0.4 million, respectively, and deferred revenue of $56.5 million and $81.4 million, respectively, related to this agreement.
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||||
| Revenue related to Kite agreement: | ||||||||||||||||||||||||||
| Recognition of license and stand-ready fee | $ | $ | $ | |||||||||||||||||||||||
| Research services | ||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||
Pfizer Inc.
Giroctocogene Fitelparvovec Global Collaboration and License Agreement
In May 2017, the Company entered into an exclusive global collaboration and license agreement with Pfizer, pursuant to which it established a collaboration for the research, development, and commercialization of giroctocogene fitelparvovec, its gene therapy product candidate for hemophilia A, and closely related products.
Under this agreement, the Company is responsible for conducting the Phase 1/2 clinical trial and for certain manufacturing activities for giroctocogene fitelparvovec, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization of giroctocogene fitelparvovec. Sangamo may also collaborate in the research and development of additional AAV-based gene therapy products for hemophilia A.
Subject to the terms of the agreement, the Company granted Pfizer an exclusive worldwide royalty-bearing license, with the right to grant sublicenses, to use certain technology controlled by the Company for the purpose of developing, manufacturing and commercializing giroctocogene fitelparvovec and related products. Pfizer granted the Company a non-exclusive, worldwide, royalty-free, fully paid license, with the right to grant sublicenses, to use certain manufacturing technology developed under the agreement and controlled by Pfizer to manufacture the Company’s products that utilize the AAV delivery system. During a specified period, neither the Company nor Pfizer is permitted to clinically develop or commercialize, outside of the collaboration, certain AAV-based gene therapy products for hemophilia A.
Unless earlier terminated, the agreement has a term that continues on a per product and per country basis until the later of (i) the expiration of patent claims that cover the product in a country, (ii) the expiration of regulatory exclusivity for a product in a country, and (iii) fifteen years after the first commercial sale of a product in a country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. Upon termination for any reason, the license granted by the Company to Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec and related products will automatically terminate. Upon termination by the Company for cause or by Pfizer in any country or countries, Pfizer will automatically grant the Company an exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec in the terminated country or countries.
Upon execution of the agreement, the Company received an upfront fee of $70.0 million and is eligible to receive up to $208.5 million in payments upon the achievement of specified clinical development, intellectual property and regulatory milestones and up to $266.5 million in payments upon first commercial sale milestones for giroctocogene fitelparvovec and potentially other products. The total amount of potential clinical development, intellectual property, regulatory and first commercial sale milestone payments, assuming the achievement of all specified milestones in the agreement, is up to $475.0 million, which includes up to $300.0 million for giroctocogene fitelparvovec and up to $175.0 million for other products that may be developed under the agreement, subject to reduction on account of payments made under certain licenses for third-party intellectual property. In addition, Pfizer agreed to pay the Company royalties for each potential licensed product developed under the agreement that are an escalating tiered, double-digit percentage of the annual net sales of such product and
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are subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third-party intellectual property. To date, two milestones of $55.0 million in aggregate have been achieved and paid, however no products have been approved and therefore no royalty fees have been earned under the agreement.
The Company assessed the agreement with Pfizer in accordance with ASC Topic 606 and concluded that Pfizer is a customer. The total transaction price under this agreement is $134.0 million, which represents the upfront fee and research services fees of $79.0 million and fees related to two achieved milestones in an aggregate amount of $55.0 million. Sangamo is responsible for internal and external research costs as part of the upfront fee and has the ability to request additional reimbursement from Pfizer if certain conditions are met. None of the constrained clinical or regulatory milestones have been included in the transaction price. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price, including its estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company has identified the performance obligations within the agreement as a license to the technology and ongoing research services. The Company concluded that the license is not discrete as it does not have stand-alone value to Pfizer apart from the research services to be performed by the Company pursuant to the agreement. As a result, the Company recognized revenue from the upfront payment based on proportional performance of the ongoing research services through 2020, the period the Company performed research services. The estimation of progress towards the satisfaction of its performance obligation and project cost was reviewed quarterly and adjusted, as needed, to reflect the Company’s assumptions regarding the timing of its deliverables. In December 2020, the Company satisfied the deliverables and research services responsibilities within the arrangement. As a result, the Company recognized the remaining deferred revenue from the upfront payment in December 2020 and no revenue has been recognized during the year ended December 31, 2021.
In December 2019, the Company entered into an amendment to the collaboration agreement, pursuant to which the Company transferred the IND for giroctocogene fitelparvovec to Pfizer. Upon this transfer the Company achieved a $25.0 million milestone as the conditions for achieving the milestone were met. The cumulative revenue recognized in connection with this milestone was $25.0 million as of December 31, 2020 and included $1.3 million recognized during the year ended December 31, 2020.
In September 2020, the Company determined that there was a high probability of achievement of a $30.0 million milestone with Pfizer for giroctocogene fitelparvovec. The milestone was subsequently achieved upon dosing of the first subject in a Phase 3 clinical trial in early October 2020. The cumulative revenue recognized in connection with this milestone was $30.0 million during the year ended December 31, 2020.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||||||||
Revenue related to Pfizer giroctocogene fitelparvovec agreement: | |||||||||||||||||||||||
| Recognition of upfront fee and research services | $ | $ | $ | ||||||||||||||||||||
| Milestone achievement | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
In March 2019, the Company updated its estimated project cost and related revenues under this program. This adjustment was a direct result of the increase in project scope during the first quarter of 2019 and the corresponding costs, which resulted in a decrease in the measure of proportional performance. In December 2019, the Company updated its estimated project cost and related revenues upon transfer of the IND for giroctocogene fitelparvovec to Pfizer. This adjustment was a direct result of the decrease in project scope during the fourth quarter of 2019 and the corresponding costs, which resulted in an increase in the measure of proportional performance. During the year ended December 31, 2019, the Company recognized $15.7 million in revenues related to the Pfizer giroctocogene fitelparvovec agreement, which included approximately $8.7 million acceleration in revenues recorded in the three months ended December 31, 2019 related to the updated estimated project cost, offset by approximately $3.0 million reduction in revenues recorded in the three months ended March 31, 2019 related to the updated estimated project cost.
In March 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the giroctocogene fitelparvovec collaboration agreement with Pfizer. This adjustment was a direct result of the decision to decrease the project scope and the corresponding costs, after the successful IND transfer of the giroctocogene fitelparvovec product candidate to Pfizer, both of which resulted in an increase in the measure of proportional cumulative performance. This
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adjustment increased revenue by $2.4 million, decreased net loss by $2.4 million and decreased the Company’s basic net loss per share by $0.02 for year ended December 31, 2020.
C9ORF72 Research Collaboration and License Agreement
In December 2017, the Company entered into a separate exclusive, global collaboration and license agreement with Pfizer for the development and commercialization of potential gene therapy products that use ZFP-TFs to treat amyotrophic lateral sclerosis and frontotemporal lobar degeneration linked to mutations of the C9ORF72 gene. Pursuant to this agreement, the Company agreed to work with Pfizer on a research program to identify, characterize and preclinically develop ZFP-TFs that bind to and specifically reduce expression of the mutant form of the C9ORF72 gene.
Subject to the terms of this agreement, the Company granted Pfizer an exclusive, royalty-bearing, worldwide license under the Company’s relevant patents and know-how to develop, manufacture and commercialize gene therapy products that use resulting ZFP-TFs that satisfy pre-agreed criteria. During a specified period, neither the Company nor Pfizer will be permitted to research, develop, manufacture or commercialize outside of the collaboration any ZFPs that specifically bind to the C9ORF72 gene.
Unless earlier terminated, the agreement has a term that continues on a per licensed product and per country basis until the later of (i) the expiration of patent claims that cover the licensed product in a country, (ii) the expiration of regulatory exclusivity for a licensed product in a country, and (iii) fifteen years after the first commercial sale of a licensed product in a major market country. Pfizer also has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. The agreement will also terminate if the Company is unable to identify any lead candidates for development within a specified period of time or if Pfizer elects not to advance a lead candidate beyond a certain development milestone within a specified period of time. Upon termination for any reason, the license granted by the Company to Pfizer to develop, manufacture and commercialize licensed products under the agreement will automatically terminate. Upon termination by the Company for cause or by Pfizer without cause for any licensed product or licensed products in any country or countries, the Company will have the right to negotiate with Pfizer to obtain a non-exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize the licensed product or licensed products in the terminated country or countries.
Following termination by the Company for Pfizer’s material breach, Pfizer will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time. Following termination by Pfizer for the Company’s material breach, the Company will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time.
The Company received a $12.0 million upfront payment from Pfizer and is eligible to receive up to $60.0 million in development milestone payments from Pfizer contingent on the achievement of specified preclinical development, clinical development and first commercial sale milestones, and up to $90.0 million commercial milestone payments if annual worldwide net sales of the licensed products reach specified levels. In addition, Pfizer will pay the Company royalties based on an escalating tiered, mid to high single digit percentage of the annual worldwide net sales of the licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property. Each party will be responsible for the cost of its performance of the research program. Pfizer will be operationally and financially responsible for subsequent development, manufacturing and commercialization of the licensed products. To date, a milestone of $5.0 million has been achieved and paid, however no products have been approved and therefore no royalty fees have been earned under the C9ORF72 Pfizer agreement.
The Company assessed the agreement with Pfizer in accordance with ASC Topic 606 and concluded that Pfizer is a customer. The Company concluded the total transaction price under this agreement is $17.0 million, which represents the upfront fees of $12.0 million and fees related to achievement of one milestone in the amount of $5.0 million. None of the constrained clinical or regulatory milestones have been included in the transaction price. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price, including its estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company has identified the performance obligations within this agreement as a license to the technology and ongoing research services. The Company concluded that the license is not discrete as it does not have stand-alone value to Pfizer apart from the services to be performed by the Company pursuant to the agreement. As a result, the Company recognized revenue from the upfront payment based on proportional performance of the ongoing research services through 2020, the period the Company performed research services. The estimation of progress towards the satisfaction of its performance obligation and
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project cost was reviewed quarterly and adjusted, as needed, to reflect the Company’s assumptions regarding the timing of its deliverables. The Company satisfied the deliverables and research services responsibilities within the arrangement in September 2020, and as a result, recognized the remaining deferred revenue from the upfront payment in September 2020.
In September 2020, the Company earned a $5.0 million milestone associated with the completion of the Company’s research activities in its collaboration with Pfizer to develop genome regulation therapies using ZFP-TFs for the treatment of C9ORF72-related ALS and frontotemporal lobar degeneration. This milestone was achieved upon Pfizer’s notification to the Company of its election to pay the first development milestone payment under the collaboration agreement. This milestone payment is non-refundable, and the Company recognized on a cumulative basis $5.0 million for the year ended December 31, 2020.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||||||||
Revenue related to Pfizer C9ORF72 agreement: | |||||||||||||||||||||||
| Recognition of upfront fee | $ | $ | $ | ||||||||||||||||||||
| Milestone achievement | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
During the year ended December 31, 2020, the Company recorded adjustments to revenue related to changes in estimate in connection with the C9ORF72 collaboration agreement with Pfizer. These adjustments were a direct result of the decision to decrease the project scope and the corresponding costs due to advancement of the program, which resulted in an increase in the measure of proportional cumulative performance. These adjustments increased revenue by $8.8 million, decreased net loss by $8.8 million and decreased the Company’s basic net loss per share by $0.06 for the year ended December 31, 2020.
Sanofi S.A.
In January 2014, the Company entered into an exclusive worldwide collaboration and license agreement to develop therapeutics for hemoglobinopathies, focused on beta thalassemia and sickle cell disease (“SCD”). The agreement was originally signed with BIMA, who subsequently assigned it to Bioverativ Inc., which was later acquired by Sanofi. Under the agreement, the Company was originally jointly conducting two research programs: a beta thalassemia program, which was discontinued in the third quarter of 2021, and the SCD program, which resulted in the development of SAR445136, a ZF nuclease, gene-edited cell therapy product candidate for the treatment of SCD, which remains active.
In December 2021, Sanofi notified the Company of its termination for convenience, effective June 28, 2022 (the “Termination Date”), of the collaboration agreement. In its notice to the Company, Sanofi indicated that its termination relates to Sanofi’s change in strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. As of the Termination Date, the collaboration agreement will be terminated in its entirety and following the Termination Date, the Company will not be entitled to receive any further milestone payments or royalties from Sanofi. As of the Termination Date, Sanofi will have no further obligations to develop or to fund the development of any collaboration research programs under the collaboration agreement.
In the SCD program, the Company and Sanofi were jointly responsible for research and development activities prior to filing of an IND, but Sanofi is now responsible for subsequent worldwide clinical development, manufacturing and commercialization of licensed products developed under the agreement. Subject to the terms of the agreement, the Company had granted Sanofi an exclusive, royalty-bearing license, with the right to grant sublicenses, to use certain ZFP and other technology controlled by the Company for the purpose of researching, developing, manufacturing and commercializing licensed products developed under the agreement. The Company had also granted Sanofi a non-exclusive worldwide, royalty-free fully paid license with the right to grant sublicenses, under the Company’s interest in certain other intellectual property developed pursuant to the agreement. During the term of the agreement, the Company is not permitted to research, develop, manufacture or commercialize, outside of the agreement, certain gene therapy products that target genes relevant to the licensed products.
Under the agreement, the Company received an upfront license fee of $20.0 million and was eligible to receive up to $115.8 million in payments upon the achievement of specified clinical development and regulatory milestones, as well as up to $160.5 million in payments upon the achievement of specified sales milestones. The total amount of potential regulatory, clinical development, and sales milestone payments, assuming the achievement of all specified milestones in the agreement, was up to $276.3 million. In addition, the Company was to receive royalty payments for each licensed product that are a tiered double-digit percentage of annual net sales of each product. Sanofi was to reimburse Sangamo for agreed upon costs incurred in connection with research and development activities conducted by Sangamo. To date, a $6.0 million milestone has been
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achieved related to ST-400 for beta thalassemia and another $7.5 million milestone has been achieved related to SCD, however no products have been approved and therefore no royalty fees have been earned under the Sanofi agreement.
All contingent payments under the agreement, when earned, were non-refundable and non-creditable. The transaction price of $96.3 million includes the upfront license fee of $20.0 million, two unconstrained milestones in the amount of $13.5 million and estimated research costs of $62.8 million for identified research projects over the estimated performance period, as all unachieved milestone amounts are fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. None of the constrained clinical or regulatory milestones have been included in the transaction price.
The Company assessed the agreement with Sanofi in accordance with ASC Topic 606 and concluded that Sanofi is a customer. The Company has identified the performance obligations within this arrangement as a license to the technology and ongoing research services activities. The Company concluded that the license is not discrete as it does not have stand-alone value to Sanofi apart from the research services to be performed pursuant to the agreement. As a result, the Company recognizes revenue from the upfront payment based on proportional performance of the ongoing research services through June 28, 2022, the estimated period the Company will perform research services. The estimation of progress towards the satisfaction of performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverables. Related costs and expenses under these arrangements have historically approximated the revenues recognized. As of December 31, 2021 and 2020, the Company had a receivable of $0.6 million and $1.0 million, respectively, and deferred revenue of $1.1 million and $1.2 million, respectively, related to this agreement.
In August 2019, the Company achieved a $6.0 million milestone with Sanofi upon dosing of the third subject in the ST‑400 beta thalassemia Phase 1 clinical trial. The cumulative revenue recognized in connection with this milestone was approximately $5.9 million as of December 31, 2021 and included $0.1 million recognized during the year ended December 31, 2021.
In December 2019, the Company achieved a $7.5 million milestone with Sanofi upon dosing of the first subject in the SCD Phase 1 clinical trial. The cumulative revenue recognized in connection with this milestone was approximately $7.3 million as of December 31, 2021 and included $0.1 million recognized during the year ended December 31, 2021.
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Revenue related to Sanofi agreement: | |||||||||||||||||
| Recognition of upfront fee | $ | $ | $ | ||||||||||||||
| Research services | |||||||||||||||||
| Milestone achievement | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
During the year ended December 31, 2021, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreement with Sanofi. These changes in estimates were driven by a change in project scope and related project costs in September 2021 and subsequent notification of termination of the collaboration agreement which resulted in changes to the measure of proportional cumulative performance. These adjustments decreased revenue by $1.6 million, increased net loss by $1.6 million and increased the Company’s basic and diluted net loss per share by $0.01 for the year ended December 31, 2021.
During the year ended December 31, 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the collaboration agreement with Sanofi. This adjustment was a direct result of the decision in March 2020 to increase the project scope and the corresponding costs, both of which resulted in a decrease in the measure of proportional cumulative performance. This adjustment decreased revenue by $2.2 million, increased net loss by $2.2 million and increased the Company’s basic net loss per share by $0.02 for the year ended December 31, 2020.
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California Institute for Regenerative Medicine
In May 2018, the California Institute for Regenerative Medicine (“CIRM”) granted a Strategic Partnership Award for $8.0 million to fund the clinical studies of a potentially curative ZFP therapeutic for the treatment of beta thalassemia based on the application of Sangamo’s ZFN genome editing technology. The grant provided matching funds to support ST-400, a gene-edited cell therapy candidate for people with transfusion-dependent beta thalassemia. Under the terms of the CIRM grant, the Company was obligated to pay royalties and licensing fees based on a low single digit royalty percentage on net sales of CIRM-funded product candidates or CIRM-funded technology. The Company had the option to decline any and all amounts awarded by CIRM and as an alternative to revenue sharing, the Company had the option to convert the award to a loan, however no such election had been made as of December 31, 2020. The Company had received $5.2 million under the award as of December 31, 2020. The Company had recorded $6.4 million, including accrued interest of $1.2 million, as a loan related to this award in other non-current liabilities on the Consolidated Balance Sheet as of December 31, 2020.
As a result of the November 2021 decision to discontinue the development of ST‑400 in order to prioritize the development of other product candidates, the grant was terminated. In connection with the termination and discontinuation of the program, the Company elected not to convert the award to a loan and recognized the non-refundable award amount of $5.2 million as a reduction of research and development expenses, and $1.2 million of accrued interest on the award as interest and other income, net, on the Company’s Consolidated Statements of Operations for the year ended December 31, 2021. No amounts related to this award were included on the Consolidated Balance Sheet as of December 31, 2021.
Agreement with Sigma-Aldrich Corporation
In 2007, Sangamo entered into a license agreement with Sigma-Aldrich Corporation (“Sigma”) to provide Sigma with access to Sangamo’s proprietary ZFP technology and the exclusive right to use the technology to develop and commercialize research reagent products and services in the research field, excluding certain agricultural research uses that Sangamo previously licensed to Dow AgroSciences LLC (“DAS”), a wholly-owned subsidiary of Dow Chemical Company. Sangamo developed laboratory research reagents using its ZFP technology over a three-year research services period. Sangamo has since transferred the ZFP manufacturing technology to Sigma.
In October 2009, Sangamo expanded its license agreement with Sigma. In addition to the original terms of the license agreement, Sigma received exclusive rights to develop and distribute ZFP-modified cell lines for commercial production of protein pharmaceuticals and certain ZFP-engineered transgenic animals for commercial applications. Under the terms of the agreement, Sigma made an upfront cash payment of $20.0 million consisting of a $4.9 million purchase of 636,133 shares of Sangamo common stock, valued at $4.9 million, and a $15.1 million upfront license fee. Sangamo is also eligible to receive commercial license fees of $5.0 million based upon a percentage of net sales and sublicensing revenue and thereafter a reduced royalty rate of 10.5 % of net sales and sublicensing revenue. In addition, upon the achievement of certain cumulative commercial milestones, Sigma will make milestone payments to Sangamo up to an aggregate of $25.0 million. Sangamo does not have additional ongoing performance obligations under the agreement.
Revenues recognized under the agreement with Sigma for the years ended December 31, 2021, 2020 and 2019, were $1.1 million, $0.5 million and $0.6 million, respectively.
Agreement with DAS
In 2005, Sangamo entered into an exclusive commercial license with DAS, with an initial three-year research term. Under this agreement, Sangamo is providing DAS with access to its proprietary ZFP technology and the exclusive right to use the technology to modify the genomes or alter the nucleic acid or protein expression of plant cells, plants, or plant cell cultures. Sangamo has retained rights to use plants or plant-derived products to deliver ZFP-TFs or ZFNs into humans or animals for diagnostic, therapeutic or prophylactic purposes. In 2008, DAS exercised its option and obtained a commercial license to sell products incorporating or derived from plant cells generated using the Company’s ZFP technology. The exercise of the option triggered a one-time commercial license fee of $6.0 million, payment of the remaining $2.3 million of the previously agreed upon $4.0 million in research milestones, development and commercialization milestone payments for each product, and royalties on sales of products. In December 2010, the Company amended its agreement with DAS to extend the period of reagent manufacturing services and research services through December 31, 2012.
The agreement with DAS provided that DAS has the right to enter into certain sublicenses with third parties to use ZFP products derived from Company’s ZFP technology (“Licensing Program”) and also provided for minimum annual payment obligations each year due to Sangamo every October, provided the Licensing Program is not terminated by DAS. Annual fees ranged from $0.3 million to $3.0 million and totaled $25.3 million over 11 years, with the last payment being in October 2020 in the amount of $3.0 million. The Company had identified the performance obligation within this arrangement as a license to the technology. In July 2021, DAS gave notice to the Company of termination of the Licensing Program, effective as of September 2021. However, Sangamo’s sublicense to DAS remains in effect, as does the DAS agreement itself. In the event of any termination of the agreement, all rights to use the Company’s ZFP technology will revert to Sangamo, and DAS
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will no longer be permitted to practice Sangamo’s ZFP technology or to develop or, except in limited circumstances, commercialize any products derived from the Company’s ZFP technology.
Revenues under the agreement with DAS were $0.2 million, $3.0 million, and $3.0 million during 2021, 2020 and 2019, respectively.
NOTE 5 – ACQUISITION OF SANGAMO FRANCE
In 2018, Sangamo entered into various agreements with the goal of eventually acquiring 100 % of Sangamo France’s share capital, including arrangements with the holders of approximately 477,000 free shares of Sangamo France pursuant to which the Company had the right to purchase such shares from the holders (a call option), and such holders had the right to sell to the Company such shares from time to time through mid-2021 (a put option) (collectively the “Free Shares Options”). As of December 31, 2021, the Company acquired all of the 477,000 free shares, resulting in 100 % ownership of Sangamo France.
On October 1, 2018 (the “Acquisition Date”), the fair value of the Free Shares Options was estimated to be a liability of $0.2 million. See Note 2 – Fair Value Measurement – Free Shares Asset for information regarding the valuation method. The fair value of the Free Shares Options varied based on changes in the Company’s stock price during the option period. The fair value of the Free Shares Options was estimated to be an asset of $0.1 million as of December 31, 2020.
The acquisition of Sangamo France was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, in exchange for total consideration of approximately $45.9 million at the Acquisition Date. The operating results of Sangamo France after the Acquisition Date have been included in the Company’s Consolidated Statements of Operations. There was no
Non-controlling Interest
Prior to the acquisition of all the free shares, the fair value of the remaining non-controlling interest was determined based on the number of outstanding free shares comprising the non-controlling interest and the $2.99 acquisition price per share as of the Acquisition Date. The non-controlling interest was presented as a component of stockholders’ equity on the Company’s Consolidated Balance Sheet as of December 31, 2020. As of December 31, 2021, upon acquisition of 100 % of ordinary shares of Sangamo France, the carrying amount of the non-controlling interest was recorded as additional paid‑in capital on the Company’s Consolidated Balance Sheet.
| Total | |||||
| Balance at beginning of year | $ | ( | |||
| Fair value of additional shares acquired | ( | ||||
| Loss attributable to non-controlling interest | ( | ||||
| Buy-out of non-controlling interest | $ | ||||
| Balance at end of year | $ | ||||
NOTE 6 – OTHER BALANCE SHEET DETAILS
Property and Equipment, Net
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Laboratory equipment | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Furniture and fixtures | |||||||||||
| Manufacturing equipment | |||||||||||
| Construction in progress | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense was $9.4 million in 2021, $5.7 million in 2020 and $3.9 million in 2019.
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Intangible Assets
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Balance at end of year | $ | $ | |||||||||
Goodwill
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Balance at end of year | $ | $ | |||||||||
Other Accrued Liabilities
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Accrued research and development expenses | $ | $ | |||||||||
| Accrued professional fees | |||||||||||
| Customer advance | |||||||||||
| Other | |||||||||||
| Total other accrued liabilities | $ | $ | |||||||||
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Leases
Sangamo occupies approximately 87,700 square feet of office and research and development laboratory facilities in Brisbane, California pursuant to a lease that expires in May 2029. Sangamo also occupies approximately 59,485 square feet of research and office space, subject to a lease that expires in August 2031, and approximately 7,700 of office space, subject to a lease that expires in August 2026, in Richmond, California. In addition, the Company leases approximately 25,600 square feet of office and research and development space in Valbonne, France, subject to leases that expire beginning in June 2025 through January 2030.
In May 2020, the Company entered into an amendment to an existing lease to acquire approximately 8,500 square feet of additional research and office space in Richmond, California. The amended lease was effective October 1, 2020, and the Company recorded a lease liability and corresponding right-of-use asset of $1.3 million upon inception of this amended lease.
In January 2021, the Company entered into an amendment to an existing lease to acquire approximately 5,000 square feet of research and office space in Richmond, California. With this amendment, the existing lease expires in August 2026. Total lease payments over the life of this amended lease are approximately $0.9 million. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. On February 1, 2021, the lease commencement date, the Company recorded an operating lease right-of-use asset and a corresponding lease liability of $0.7 million.
In January 2021, the Company also entered into a new lease to acquire approximately 5,800 square feet of research and office space in Valbonne, France, which expires in January 2030. Total lease payments over the life of this amended lease are approximately $0.8 million. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. On January 29, 2021, the lease commencement date, the Company recorded an operating lease right-of-use asset and a corresponding lease liability of $0.6 million.
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In October 2021, the Company entered into an agreement to extend the lease of its research and office space in Richmond, California by five years until August 2031. The Company also leased an additional 7,997 square feet of office space at the same location from November 2021 through August 2031. The amended lease was effective October 1, 2021, and the Company recorded an adjustment to the lease liability and the corresponding right-of-use asset of $9.1 million upon inception of this amended lease. Pursuant to the terms of the amended lease, the landlord agreed to reimburse the Company up to $2.6 million, related to a tenant improvement allowance.
Certain of these leases include renewal options at the election of the Company to renew or extend the lease for an additional to ten years . These optional periods have not been considered in the determination of the ROU assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.
The Company performed evaluations of its contracts and determined each of its identified leases are operating leases. Components of operating leases were as follows (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
| Total | $ | $ | |||||||||
Variable lease expenses were not included in the measurement of the Company’s operating ROU assets and lease liabilities. This variable expense consists primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease expense, due to the Company’s election to not separate lease and non-lease components.
Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2021 was $6.9 million and was included in net cash used in operating activities in the Company’s Consolidated Statement of Cash Flows.
Rent expense related to lease agreements was $10.8 million, $10.4 million, and $7.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Future minimum payments under lease obligations at December 31, 2021 consist of the following (in thousands):
| Total | |||||
| 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: | |||||
| Imputed interest | ( | ||||
| Total | $ | ||||
Reported as of December 31, 2021: | |||||
| $ | |||||
| Long-term portion of lease liabilities | |||||
| Total | $ | ||||
As of December 31, 2021, the weighted-average remaining lease term is 8.0 years and the weighted-average incremental borrowing rate used to determine the operating lease liability was 5.6 % for the Company’s operating leases.
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Contractual Commitments
| Party | Total commitments | Expiry date | ||||||||||||
| Brammer Bio MA - a Thermo Fisher Scientific Inc. subsidiary | $ | December 2022 | ||||||||||||
Lonza Netherlands, B.V. | December 2022 | |||||||||||||
| Total contractual commitments | $ | |||||||||||||
The Company also had $0.8 million of license obligations related to its intellectual property as of December 31, 2021.
Contingencies
Sangamo is not party to any material pending legal proceeding. From time to time, Sangamo may be involved in legal proceedings arising in the ordinary course of business.
NOTE 8 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company’s Certificate of Incorporation authorizes the Company to issue up to 5,000,000 shares of preferred stock, which may be issued at the discretion of the Company’s Board of Directors. As of December 31, 2021, no
Common Stock
In June 2020, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to increase the total number of shares of the Company’s common stock authorized for issuance from 160,000,000 shares to 320,000,000 shares. As of December 31, 2021, 145,921,530 shares of the Company’s common stock are outstanding.
In connection with the collaboration agreement with BIMA described in Note 4 of these Consolidated Financial Statements, the Company entered into a stock purchase agreement with BIMA, pursuant to which BIMA agreed to purchase the Biogen Shares at a price per share of $9.2137 , for an aggregate purchase price of $225.0 million. The Company closed the sale of the Biogen Shares in April 2020.
In April 2019, the Company completed an underwritten public offering of its common stock, in which the Company sold an aggregate of 12.7 million shares of its common stock at a public offering price of $11.50 per share. The net proceeds to the Company from the sale of shares in this offering, after deducting underwriting discounts and commissions and other offering expenses, were approximately $136.3 million.
At-the-Market Offering Agreement
In August 2020, the Company entered into an Open Market Sale Agreement℠ with Jefferies LLC (“Jefferies”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of the Company’s common stock having an aggregate offering price of up to $150.0 million through Jefferies as the Company’s sales agent or principal. The Company is not obligated to sell any shares under the sales agreement. As of December 31, 2021, the Company sold 2,007,932 shares of its common stock for net proceeds of approximately $27.1 million. As of December 31, 2020, no shares had been sold under the sales agreement.
2018 Equity Incentive Plan
In May 2020, the Company’s stockholders approved an amendment and restatement of the 2018 Equity Incentive Plan (the “2018 Plan”), to, among other things, increase the aggregate number of shares of the Company’s common stock reserved for issuance under the 2018 Plan by 9,900,000 shares.
The exercise price of a stock option granted under the 2018 Plan may not be less than 100 % of the fair market value of the Company’s common stock subject to the stock option on the date of grant, and the option term will not exceed 10 years. If the person to whom the stock option is granted is a 10 % stockholder of the Company, and the stock option granted qualifies as an incentive stock option, then the exercise price per share will not be less than 110 % of the fair market value of the Company’s common stock on the date of grant, and the option term will not exceed five years . Generally, stock options granted under the 2018 Plan vest over four years at a rate of 25 % on the one-year anniversary of the date of grant and 1/48 per month thereafter and expire 10 years after the date of grant, or earlier upon termination of employment or services to the Company.
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The number of shares of common stock reserved for issuance under the 2018 Plan will be reduced: (i) on a 1 -for-1 basis for each share of common stock subject to a stock option or stock appreciation right granted under the plan, (ii) by a fixed ratio of 1.33 shares of common stock for each share of common stock issued pursuant to a full-value award granted under the plan.
Shares subject to any outstanding stock options or other awards under the 2018 Plan that expire or otherwise terminate prior to the issuance of the shares subject to those stock options or awards will be available for subsequent issuance under the 2018 Plan. Any unvested shares issued under the 2018 Plan that the Company subsequently purchases, pursuant to repurchase rights under the 2018 Plan, will be added back to the number of shares reserved for issuance under the 2018 Plan on a 1 -for-1 basis or a 1.33 -for-1 basis (depending on the ratio at which the share reserve was debited for the original award) and will accordingly be available for subsequent issuance in accordance with the terms of the 2018 Plan.
As of December 31, 2021, there were 7,799,855 shares of the Company’s common stock reserved for future awards under the Company’s 2018 Plan.
2020 Employee Stock Purchase Plan
In May 2021, the Company’s stockholders approved the Company’s 2020 Employee Stock Purchase Plan (“the ESPP”). The ESPP provides for a total of 5.0 million shares of common stock reserved for issuance thereunder. Eligible employees may purchase common stock at 85 % of the lesser of the fair market value of the Company’s common stock on the first day of the applicable two-year offering period or the last day of the applicable six-month purchase period. As of December 31, 2021, there were 4,782,452 shares of the Company’s common stock reserved for future issuance under the ESPP.
Stock Option Activity
| Number of Shares | Weighted- Average Exercise per Share Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||||||||
| Options outstanding at December 31, 2020 | $ | ||||||||||||||||||||||
| Options granted | $ | ||||||||||||||||||||||
| Options exercised | ( | $ | |||||||||||||||||||||
| Options canceled | ( | $ | |||||||||||||||||||||
| Options outstanding at December 31, 2021 | $ | $ | |||||||||||||||||||||
| Options exercisable at December 31, 2021 | $ | $ | |||||||||||||||||||||
The intrinsic value of options exercised was $2.8 million, $5.4 million and $4.7 million during the years ended December 31, 2021, 2020 and 2019, respectively.
Restricted Stock Units
During the years ended December 31, 2021, 2020 and 2019, the Company awarded 2,140,785 , 2,517,101 , and 834,745 RSUs, respectively. The RSUs awarded in the years ended December 31, 2021, 2020 and 2019 had an average grant date fair value per award of $11.16 , $8.06 and $9.49 , respectively. These awards generally vest in a series of three successive equal annual installments. The aggregate fair value of RSUs vested during the years ended December 31, 2021, 2020 and 2019 was $9.0 million, $3.7 million and $2.0 million, respectively.
| Number of Shares | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||
| RSUs outstanding at December 31, 2020 | |||||||||||||||||
| RSUs awarded | |||||||||||||||||
| RSUs released | ( | ||||||||||||||||
| RSUs forfeited | ( | ||||||||||||||||
| RSUs outstanding at December 31, 2021 | $ | ||||||||||||||||
RSUs that vested in the years ended December 31, 2021, 2020 and 2019 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other
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NOTE 9 – STOCK-BASED COMPENSATION
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Research and development | $ | $ | $ | ||||||||||||||
| General and administrative | |||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | ||||||||||||||
As of December 31, 2021, total stock-based compensation expense to be recognized in future periods related to unvested stock options was $31.6 million, which is expected to be expensed over a weighted-average period of 2.59 years. As of December 31, 2021, total stock-based compensation expense to be recognized in future periods related to unvested RSUs was $21.8 million, which is expected to be expensed over a weighted-average period of 1.76 years. There was no
Valuation Assumptions
Employee stock-based compensation expense was determined using the Black-Scholes option valuation model for stock options and employee share purchases under the ESPP. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The fair value of RSUs was based on the closing price of the underlying common stock on the date of grant.
The Company bases its determination of expected volatility through its assessment of the historical volatility of its common stock. The Company relied on its historical exercise and post-vested termination activity for estimating its expected term for use in determining the fair value of these options.
The weighted-average estimated fair value per share of options granted during the years ended December 31, 2021, 2020 and 2019 was $7.34 , $5.25 , and $6.37 , respectively, based upon the assumptions used in the Black-Scholes valuation model. The assumptions used for estimating the fair value of the employee stock options were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected term (in years) | |||||||||||||||||
| Expected dividend yield of stock | |||||||||||||||||
| Expected volatility | |||||||||||||||||
Employees purchased 433,107 , 274,382 and 249,364 shares of common stock through the ESPP at a weighted-average exercise price of $7.78 , $7.34 , and $8.53 per share during the years ended December 31, 2021, 2020 and 2019, respectively. The weighted-average estimated fair values of shares purchased under the Company’s ESPP during the years ended December 31, 2021, 2020 and 2019 were $4.48 , $8.02 and $4.70 , respectively, based upon the assumptions used in the Black-Scholes valuation model.
118
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected term (in years) | |||||||||||||||||
| Expected dividend yield of stock | |||||||||||||||||
| Expected volatility | |||||||||||||||||
NOTE 10 – EMPLOYEE BENEFIT PLAN
The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code covering all full-time employees (“Sangamo 401(k) Plan”). The Sangamo 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code.
The Company matched employee contributions equal to 100 % in 2021 and 50 % for the first 8 % in 2020 and 2019, up to a limit of $4,000 1.5 million, $1.2 million, and $0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.
119
NOTE 11 – INCOME TAXES
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Domestic | $ | ( | $ | ( | $ | ( | |||||||||||
| Foreign | ( | ||||||||||||||||
| Loss before income taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Income tax expense consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Income tax expense: | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Subtotal | |||||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | |||||||||||||||||
| State | |||||||||||||||||
| Foreign | ( | ( | |||||||||||||||
| Subtotal | ( | ( | |||||||||||||||
| Income tax expense | $ | $ | $ | ||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Tax at federal statutory rate | $ | ( | $ | ( | $ | ( | |||||||||||
| State taxes, net | ( | ( | ( | ||||||||||||||
| Foreign rate differential | ( | ||||||||||||||||
| Global Intangible Low-taxed Income | |||||||||||||||||
| Non-deductible stock-based compensation | |||||||||||||||||
| Research credits | ( | ( | ( | ||||||||||||||
| Change in valuation allowance | |||||||||||||||||
| Other | |||||||||||||||||
| Income tax expense | $ | $ | $ | ||||||||||||||
120
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Assets: | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | $ | |||||||||
| Research and development tax credit carryforwards | |||||||||||
| Stock-based compensation | |||||||||||
| Deferred revenue | |||||||||||
| Fixed assets | |||||||||||
| Lease liability | |||||||||||
| Accruals and reserves | |||||||||||
| Other | |||||||||||
| Total deferred tax asset | |||||||||||
| Valuation allowance | |||||||||||
| Deferred tax assets | |||||||||||
| Liabilities: | |||||||||||
| Intangible assets | ( | ( | |||||||||
| Operating lease right-of-use assets | ( | ( | |||||||||
| Deferred tax liabilities | ( | ( | |||||||||
| Total net deferred tax liabilities | $ | ( | $ | ( | |||||||
The deferred tax assets and liabilities based on tax jurisdictions are presented on the Consolidated Balance Sheets as follows (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Deferred tax assets (included in Other non-current assets on the Consolidated Balance Sheets) | $ | $ | |||||||||
| Deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | |||||||
A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. The Company regularly assesses the need for a valuation allowance against its deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that the Company’s deferred income tax assets will be realized. In evaluating the Company’s ability to recover its deferred income tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. Accordingly, based upon the Company’s analysis of these factors the net deferred tax assets have been substantially offset by a valuation allowance. The valuation allowance increased by $45.5 million, $26.6 million and $29.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, Sangamo had net operating loss carryforwards for federal and state income tax purposes of approximately $605.6 million and $253.9 million, respectively. The federal net operating loss generated before 2018 will begin to expire in 2022 and will keep expiring through 2037, if not utilized. Federal net operating loss generated from 2018 will carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029, respectively. The Company’s French net operating loss carryforward balance is $144.1 million, which carries over indefinitely. The Company also has federal and state research tax credit carryforwards of $28.2 million and $22.1 million, respectively. The federal research credits will begin to expire in 2022, while the state research credits have no expiration date. Utilization of the Company’s net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before utilization.
121
The Company’s policy is to reinvest the earnings of its non-U.S. subsidiaries in those operations. The Company does not provide for U.S. taxes on the earnings of foreign subsidiaries because the Company intends to reinvest such earnings offshore indefinitely. However, if these funds were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes. Due to the cumulative losses generated in foreign countries there are no earnings to repatriate.
The Company files federal and state income tax returns with varying statutes of limitations. The tax years from 2002 forward remain open to examination due to the carryover of net operating losses or tax credits. The Company also files the United Kingdom and French income tax returns, and the tax years from 2008 and thereafter remain open in the United Kingdom, and the tax years 2018 and thereafter in France are still subject to examination.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2021, the Company had $0.1 million accrued interest and/or penalties. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business. In the event that any unrecognized tax benefits are recognized, the amount that would impact the effective tax rate was $1.2 million, $0.6 million, and zero as of December 31, 2021, 2020 and 2019, respectively.
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Beginning balance | $ | $ | $ | ||||||||||||||
| Additions based on tax positions related to the current year | |||||||||||||||||
| Additions for tax positions of prior years | |||||||||||||||||
| Reductions for tax positions of prior years | ( | ( | ( | ||||||||||||||
| Ending balance | $ | $ | $ | ||||||||||||||
NOTE 12 – RELATED PARTY TRANSACTION
122
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A – CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision of our principal executive officer and acting principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15€ and 15d-15(e) of the Exchange Act) as of December 31, 2021. Based on that evaluation, as of December 31, 2021, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Inherent Limitations on Controls and Procedures
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can only provide reasonable assurances that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, for our company have been or will be detected. As these inherent limitations are known features of the disclosure and financial reporting processes, it is possible to design into the processes safeguards to reduce, though not eliminate, these risks. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. While our disclosure controls and procedures and our internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives, there can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining an adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on an evaluation under that framework, our management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
123
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sangamo Therapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Sangamo Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Sangamo Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated February 24, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
Redwood City, California
February 24, 2022
124
ITEM 9B – OTHER INFORMATION
None.
ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
Certain information required by Part III is omitted from this Report on Form 10-K because we intend to file our definitive Proxy Statement for our next Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, or the 2022 Proxy Statement, no later than 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information to be included in the 2022 Proxy Statement is incorporated herein by reference.
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is to be included in our 2022 Proxy Statement as follows:
•The information relating to our directors and nominees for director is to be included in the section entitled “Election of Directors;”
•The information relating to our executive officers is to be included in the section entitled “Executive Officers;”
•The information relating to our audit committee and audit committee financial expert is to be included in the section entitled “Election of Directors – Audit Committee;”
•The information relating to the procedures by which stockholders may recommend nominees to our Board of Directors is to be included in the section entitled “Questions and Answers About These Proxy Materials and Voting;” and
•The information regarding compliance with Section 16(a) of the Exchange Act is to be included in the section entitled “Delinquent Section 16(a) Reports.”
Such information is incorporated herein by reference to our 2022 Proxy Statement, provided that if the 2022 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 11 – EXECUTIVE COMPENSATION
The information required by this item is to be included in our 2022 Proxy Statement under the sections entitled “Executive Compensation,” “Director Compensation,” “Election of Directors – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated herein by reference, provided that if the 2022 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item with respect to equity compensation plans is to be included in our 2022 Proxy Statement under the section entitled “Equity Compensation Plan Information” and the information required by this item with respect to security ownership of certain beneficial owners and management is to be included in our 2022 Proxy Statement under the section entitled “Security Ownership of Certain Beneficial Owners and Management” and in each case is incorporated herein by reference, provided that if the 2022 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
125
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is to be included in our 2022 Proxy Statement under the sections entitled “Certain Relationships and Related Transactions” and “Election of Directors—Board Independence” and is incorporated herein by reference, provided that if the 2022 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is to be included in our 2022 Proxy Statement under the section entitled “Ratification of Independent Registered Public Accounting Firm” and is incorporated herein by reference, provided that if the 2022 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
126
PART IV
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are included as part of this Annual Report on Form 10-K:
1. Financial Statements—See Index to Consolidated Financial Statements in Item 8.
2. Financial Statement Schedules—Not Applicable.
3. Exhibits
Exhibit Number | Description of Document | ||||
| 2.1 | |||||
| 2.2 | |||||
| 2.3 | |||||
| 2.4 | |||||
| 3.1 | |||||
| 3.2 | |||||
| 3.3 | |||||
| 4.1 | |||||
| 4.2 | |||||
| 10.1(+) | |||||
| 10.2(+) | |||||
| 10.3(+) | |||||
| 10.4(+) | |||||
| 10.5(+) | |||||
| 10.6(+) | |||||
| 10.7(+) | |||||
| 10.8(+) | |||||
| 10.9(+) | |||||
| 10.10(+) | |||||
| 10.11(+) | |||||
| 10.12(+) | |||||
127
Exhibit Number | Description of Document | ||||
| 10.13(+) | |||||
| 10.14(+) | |||||
| 10.15(+) | |||||
| 10.16(+) | |||||
| 10.17(+) | |||||
| 10.18(+) | |||||
| 10.19(+) | |||||
| 10.20(+) | |||||
| 10.21(+) | |||||
| 10.22(+) | |||||
| 10.23(+) | |||||
| 10.24(+) | |||||
| 10.25(+) | |||||
| 10.26(+) | |||||
| 10.27(+) | |||||
| 10.28(+) | |||||
| 10.29(+) | |||||
| 10.30(+) | |||||
| 10.31(+) | |||||
| 10.32(+) | |||||
| 10.33(+) | |||||
| 10.34(+) | |||||
128
Exhibit Number | Description of Document | ||||
| 10.35(+) | |||||
| 10.36 | |||||
| 10.37 | |||||
| 10.38 | |||||
| 10.39 | |||||
| 10.40 | |||||
| 10.41 | |||||
| 10.42 | |||||
| 10.43 | |||||
| 10.44 | |||||
| 10.45 | |||||
| 10.46 | |||||
| 10.47 | |||||
| 10.48 | |||||
| 10.49 | |||||
| 10.50† | |||||
| 10.51† | |||||
| 10.52† | |||||
| 10.53† | |||||
129
Exhibit Number | Description of Document | ||||
| 10.54† | |||||
| 10.55⁑ | |||||
| 10.56† | |||||
| 10.57† | |||||
| 10.58⁑ | |||||
| 10.59† | |||||
| 10.60⁑ | |||||
| 10.61 | |||||
| 10.62⁑ | |||||
| 21.1 | |||||
| 23.1 | |||||
| 24.1 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1* | |||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | The cover page from Sangamo’s Annual Report on Form 10-K for the year ended December 31, 2021, is formatted in Inline XBRL and it is contained in Exhibit 101 | ||||
† Confidential treatment has been granted for certain information contained in this document pursuant to an order of the SEC. Such information has been omitted and filed separately with the SEC.
⁑ Certain portions of this exhibit (indicated by “[*]”) have been omitted in accordance with 17 CFR § 229.601(b).
(+) Indicates management contract or compensatory plan or arrangement.
* The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
130
ITEM 16 – FORM 10-K SUMMARY
None.
131
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2022.
| Date: February 24, 2022 | |||||||||||
| SANGAMO THERAPEUTICS, INC. | |||||||||||
| By: | / S / ALEXANDER D. MACRAE | ||||||||||
Alexander D. Macrae President and Chief Executive Officer | |||||||||||
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alexander D. Macrae and Scott Willoughby, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||||||
/ S / ALEXANDER D. MACRAE | President, Chief Executive Officer (Principal Executive Officer) and Director | February 24, 2022 | ||||||
| Alexander D. Macrae, M.B., Ch.B., Ph.D. | ||||||||
| / S / PRATHYUSHA DURAIBABU | Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | February 24, 2022 | ||||||
| Prathyusha Duraibabu | ||||||||
/ S / H. STEWART PARKER | Director and Chair of the Board | February 24, 2022 | ||||||
| H. Stewart Parker | ||||||||
/ S / ROBERT F. CAREY | Director | February 24, 2022 | ||||||
| Robert F Carey | ||||||||
/ S / KENNETH J. HILLAN | Director | February 24, 2022 | ||||||
| Kenneth J. Hillan, M.B., Ch.B. | ||||||||
/ S / JAMES R. MEYERS | Director | February 24, 2022 | ||||||
| James R. Meyers | ||||||||
/ S / JOHN H. MARKELS | Director | February 24, 2022 | ||||||
| John H. Markels, Ph.D. | ||||||||
/ S / SAIRA RAMASASTRY | Director | February 24, 2022 | ||||||
| Saira Ramasastry | ||||||||
/ S / KAREN L. SMITH | Director | February 24, 2022 | ||||||
| Karen L. Smith, M.D., Ph.D., M.B.A., L.L.M. | ||||||||
/ S / JOSEPH S. ZAKRZEWSKI | Director | February 24, 2022 | ||||||
| Joseph S. Zakrzewski | ||||||||