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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

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: 001-37766

 

INTELLIA THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

36-4785571

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

 

 

40 Erie Street, Suite 130, Cambridge, Massachusetts

02139

(Address of Principal Executive Offices)

(Zip Code)

857-285-6200

(Registrant’s Telephone Number, Including Area Code)  

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each Class

Trade Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

NTLA

The Nasdaq Global Market

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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes       No  

The number of shares outstanding of the registrant’s common stock as of July 31, 2020: 58,740,613 shares.

 

 


 

PART I - FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (unaudited)

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019

4

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

35

 

 

Item 4. Controls and Procedures.

35

 

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

36

 

 

Item 1A. Risk Factors

36

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

87

 

Item 6. Exhibits

88

 

 

Signatures

89

 

 

 

2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets (unaudited)

(Amounts in thousands except share and per share data)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

361,687

 

 

$

57,226

 

Marketable securities

 

 

75,117

 

 

 

222,500

 

Accounts receivable

 

 

3,864

 

 

 

4,620

 

Prepaid expenses and other current assets

 

 

5,699

 

 

 

5,135

 

Total current assets

 

 

446,367

 

 

 

289,481

 

Marketable securities - noncurrent

 

 

-

 

 

 

4,746

 

Property and equipment, net

 

 

16,402

 

 

 

17,996

 

Operating lease right-of-use assets

 

 

23,469

 

 

 

19,137

 

Other assets

 

 

4,592

 

 

 

2,920

 

Total Assets

 

$

490,830

 

 

$

334,280

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7

 

 

$

3,941

 

Accrued expenses

 

 

15,374

 

 

 

13,273

 

Current portion of operating lease liability

 

 

5,834

 

 

 

5,745

 

Current portion of deferred revenue

 

 

37,927

 

 

 

12,674

 

Total current liabilities

 

 

59,142

 

 

 

35,633

 

Deferred revenue, net of current portion

 

 

62,752

 

 

 

16,136

 

Long-term operating lease liability

 

 

17,349

 

 

 

12,630

 

Other long-term liabilities

 

 

-

 

 

 

-

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 120,000,000 shares authorized;

   58,724,238 and 50,198,044 shares issued and outstanding at

  June 30, 2020 and December 31, 2019, respectively

 

 

6

 

 

 

5

 

Additional paid-in capital

 

 

716,503

 

 

 

570,493

 

Accumulated other comprehensive income

 

 

155

 

 

 

261

 

Accumulated deficit

 

 

(365,077

)

 

 

(300,878

)

Total stockholders’ equity

 

 

351,587

 

 

 

269,881

 

Total Liabilities and Stockholders’ Equity

 

$

490,830

 

 

$

334,280

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

3


INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(Amounts in thousands except per share data)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Collaboration revenue

 

$

16,263

 

 

$

11,118

 

 

$

29,179

 

 

$

21,551

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

37,771

 

 

 

25,460

 

 

 

72,421

 

 

 

49,169

 

General and administrative

 

 

11,526

 

 

 

13,118

 

 

 

22,840

 

 

 

23,651

 

Total operating expenses

 

 

49,297

 

 

 

38,578

 

 

 

95,261

 

 

 

72,820

 

Operating loss

 

 

(33,034

)

 

 

(27,460

)

 

 

(66,082

)

 

 

(51,269

)

Interest income

 

 

641

 

 

 

1,777

 

 

 

1,883

 

 

 

3,646

 

Net loss

 

$

(32,393

)

 

$

(25,683

)

 

$

(64,199

)

 

$

(47,623

)

Net loss per share, basic and diluted

 

$

(0.61

)

 

$

(0.56

)

 

$

(1.24

)

 

$

(1.05

)

Weighted average shares outstanding, basic and

   diluted

 

 

53,369

 

 

 

45,814

 

 

 

51,938

 

 

 

45,526

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(218

)

 

 

196

 

 

 

(106

)

 

 

283

 

Comprehensive loss

 

$

(32,611

)

 

$

(25,487

)

 

$

(64,305

)

 

$

(47,340

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

4


INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(64,199

)

 

$

(47,623

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,107

 

 

 

2,638

 

Equity-based compensation

 

 

8,921

 

 

 

8,996

 

Accretion of investment discounts

 

 

(268

)

 

 

(2,630

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

756

 

 

 

3,359

 

Prepaid expenses and other current assets

 

 

(564

)

 

 

(1,339

)

Operating right-of-use assets

 

 

3,195

 

 

 

1,388

 

Other assets

 

 

239

 

 

 

125

 

Accounts payable

 

 

(3,899

)

 

 

(293

)

Accrued expenses

 

 

2,434

 

 

 

947

 

Deferred revenue

 

 

71,869

 

 

 

(13,772

)

Operating lease liabilities

 

 

(2,719

)

 

 

(926

)

Net cash provided by (used in) operating activities

 

 

18,872

 

 

 

(49,130

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,881

)

 

 

(2,474

)

Purchases of marketable securities

 

 

(31,208

)

 

 

(182,582

)

Maturities of marketable securities

 

 

183,500

 

 

 

214,000

 

Net cash provided by investing activities

 

 

150,411

 

 

 

28,944

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock through follow-on offering,

   net of issuance costs of $0.4 million

 

 

107,732

 

 

 

-

 

Proceeds from issuance of common stock through at-the-market offerings,

   net of issuance costs of $0.1 million

 

 

14,722

 

 

 

7,912

 

Proceeds from issuance of common stock to Regeneron

 

 

12,580

 

 

 

-

 

Proceeds from options exercised

 

 

1,370

 

 

 

2,024

 

Issuance of shares through employee stock purchase plan

 

 

685

 

 

 

534

 

Net cash provided by financing activities

 

 

137,089

 

 

 

10,470

 

Net increase (decrease) in cash and cash equivalents and restricted cash equivalents

 

 

306,372

 

 

 

(9,716

)

Cash and cash equivalents and restricted cash equivalents, beginning of period

 

 

57,226

 

 

 

58,856

 

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

 

$

363,598

 

 

$

49,140

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash

   equivalents to condensed consolidated balance sheet:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

361,687

 

 

$

49,140

 

Restricted cash equivalents, included in other assets

 

 

1,911

 

 

 

-

 

Total cash, cash equivalents and restricted cash equivalents

 

$

363,598

 

 

$

49,140

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Purchases of property and equipment unpaid at period end

 

$

432

 

 

$

867

 

Right-of-use assets acquired under operating leases

 

 

7,527

 

 

 

1,343

 

Proceeds from at-the-market offerings unpaid at period end

 

 

-

 

 

 

27,140

 

 

See notes to condensed consolidated financial statements.

5


INTELLIA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements (unaudited)

1.

Overview and Basis of Presentation

Intellia Therapeutics, Inc. (“Intellia” or the “Company”) is a leading genome editing company focused on developing curative therapeutics utilizing a biological tool known as CRISPR/Cas9, which stands for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”). This is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). The Company believes that CRISPR/Cas9 technology has the potential to transform medicine by editing disease-associated genes with a single treatment course, and that it can also be used to create novel engineered cell therapies that can replace a patient’s diseased cells or effectively target various cancers and autoimmune diseases. The Company is leveraging its leading scientific expertise, clinical development experience and intellectual property (“IP”) position to unlock a broad set of therapeutic applications for CRISPR/Cas9 genome editing and to develop a potential new class of therapeutic products.

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2019.

The unaudited condensed consolidated financial statements include the accounts of Intellia Therapeutics, Inc. and its wholly owned, controlled subsidiary, Intellia Securities Corp. All intercompany balances and transactions have been eliminated in consolidation. Comprehensive loss is comprised of net loss and gain/loss on marketable securities.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these condensed consolidated financial statements have been made in connection with the calculation of revenues, research and development expenses and equity-based compensation expense. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances at the time such estimates are made. Actual results could differ from those estimates. The Company periodically reviews its estimates in light of changes in circumstances, facts and experience. The extent of the impact of the coronavirus disease 19 (“COVID-19”) pandemic on the Company’s operational and financial performance will depend on certain developments, including the length and severity of this pandemic, as well as its effect on our employees, collaborators and vendors, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its consolidated results of operations or financial position.

The effects of material revisions in estimates are reflected in the condensed consolidated financial statements prospectively from the date of the change in estimate. Certain prior year amounts have been reclassified in order to conform to the current year presentation.

In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

6


Liquidity

Since its inception through June 30, 2020, the Company has raised an aggregate of $889.8 million to fund its operations, of which $268.8 million was through its collaboration agreements, $170.5 million was from its initial public offering (“IPO”) and concurrent private placements, $249.1 million was from follow-on public offerings, $116.4 million was from at-the-market offerings and $85.0 million was from the sale of convertible preferred stock. The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2020, as well as research and cost reimbursement funding from its collaboration agreement with Regeneron, will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these condensed consolidated financial statements.

2.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included in the Annual Report for the year ended December 31, 2019. There have been no material changes during the six months ended June 30, 2020, other than as noted below.

Restricted Cash Equivalents

Restricted cash equivalents are money market funds held in collateral accounts that are restricted to secure a letter of credit in accordance with the lease for 281 Albany Street that the Company entered into in March of 2020 (see Note 8). The letter of credit is required to be maintained throughout the term of the lease, which is ten years. These restricted cash equivalents amount to $1.9 million and are reported in “Other Assets” in the Company’s condensed consolidated balance sheet.

Recent Accounting Pronouncements – Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new standard modifies disclosure requirements related to fair value measurement. The Company adopted ASU 2018-13 on January 1, 2020. The adoption did not have a material impact on the Company’s condensed consolidated financial statements as of and for the three or six months ended June 30, 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard changes how credit losses are measured for most financial assets and certain other instruments. For trade and other receivables, the standard requires the use of a new forward-looking “expected credit loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. With certain exceptions, the guidance is applied using a modified retrospective approach by reflecting adjustments through a cumulative-effect impact to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2016-13 on January 1, 2020. The adoption did not have a material effect on the Company’s condensed consolidated financial statements as of and for the three or six months ended June 30, 2020.

Recent Accounting Pronouncements – Issued but not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in ASU 2019-12 are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted. The Company does not anticipate that the adoption of ASU 2019-12 will have a material effect on the Company’s condensed consolidated financial statements.

7


3.

Marketable Securities

The following table summarizes the Company’s available-for-sale marketable securities as of June 30, 2020 and December 31, 2019 at net book value:

 

 

 

June 30, 2020

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Estimated Fair

Value

 

 

 

(In thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

41,487

 

 

$

75

 

 

$

-

 

 

$

41,562

 

Financial institution debt securities

 

 

28,512

 

 

 

80

 

 

 

-

 

 

 

28,592

 

Corporate debt securities

 

 

4,963

 

 

 

-

 

 

 

-

 

 

 

4,963

 

Total

 

$

74,962

 

 

$

155

 

 

$

-

 

 

$

75,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Estimated Fair

Value

 

 

 

(In thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

159,361

 

 

$

142

 

 

$

(1

)

 

$

159,502

 

Financial institution debt securities

 

 

40,173

 

 

 

105

 

 

 

-

 

 

 

40,278

 

Corporate debt securities

 

 

18,966

 

 

 

1

 

 

 

-

 

 

 

18,967

 

Other asset-backed securities

 

 

8,485

 

 

 

14

 

 

 

-

 

 

 

8,499

 

Total

 

$

226,985

 

 

$

262

 

 

$

(1

)

 

$

227,246

 

 

 

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At June 30, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income was composed of activity related to the Company’s available-for-sale marketable securities. There were no material realized gains or losses in the six months ended June 30, 2020 or for the year ended December 31, 2019 and, as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income during the period. The Company did not have any securities in a material unrealized loss position at June 30, 2020.

The Company's available-for-sale securities that are classified as short-term marketable securities in the condensed consolidated balance sheet mature within one year or less as of the balance sheet date. Available-for-sale securities that are classified as noncurrent in the condensed consolidated balance sheet are those that mature after one year but within five years from the balance sheet date and that the Company does not intend to dispose of within the next twelve months. At June 30, 2020 and December 31, 2019, the Company did not hold any investments that matured beyond five years of the balance sheet date.

4.

Fair Value Measurements

The Company classifies fair value-based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

8


As of June 30, 2020 and December 31, 2019, the Company’s financial assets recognized at fair value on a recurring basis consisted of the following:

 

 

 

Fair Value as of June 30, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents

 

$

354,282

 

 

$

354,282

 

 

$

-

 

 

$

-

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

41,562

 

 

 

41,562

 

 

 

-

 

 

 

-

 

Financial institution debt securities

 

 

28,592

 

 

 

-

 

 

 

28,592

 

 

 

-

 

Corporate debt securities

 

 

4,963

 

 

 

-

 

 

 

4,963

 

 

 

-

 

Total marketable securities

 

 

75,117

 

 

 

41,562

 

 

 

33,555

 

 

 

-

 

Total

 

$

429,399

 

 

$

395,844

 

 

$

33,555

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value as of December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents

 

$

46,917

 

 

$

46,917

 

 

$

-

 

 

$

-

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

159,502

 

 

 

159,502

 

 

 

-

 

 

 

-

 

Financial institution debt securities

 

 

40,278

 

 

 

-

 

 

 

40,278

 

 

 

-

 

Corporate debt securities

 

 

18,967

 

 

 

-

 

 

 

18,967

 

 

 

-

 

Other asset-backed securities

 

 

8,499

 

 

 

-

 

 

 

8,499

 

 

 

-

 

Total marketable securities

 

 

227,246

 

 

 

159,502

 

 

 

67,744

 

 

 

-

 

Total

 

$

274,163

 

 

$

206,419

 

 

$

67,744

 

 

$

-

 

 

The Company’s financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value. After completing our validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2020 or December 31, 2019.

Other financial instruments, including accounts receivable, accounts payable and accrued expense, are carried at cost, which approximate fair value due to the short duration and term to maturity.

5.

Accrued Expenses

Accrued expenses consisted of the following:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(In thousands)

 

Accrued research and development

 

$

7,160

 

 

$

4,208

 

Employee compensation and benefits

 

 

5,677

 

 

 

6,311

 

Accrued legal and professional expenses

 

 

1,892

 

 

 

1,563

 

Accrued other

 

 

645

 

 

 

1,191

 

Total accrued expenses

 

$

15,374

 

 

$

13,273

 

 

9


6.

Commitments and Contingencies

 

Litigation

 

There have been no material changes to any of the outstanding litigation, nor is the Company a party to any new litigation, since December 31, 2019. For further information please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2019.

License Agreements

The Company is party to license agreements, which include contingent payments. These payments will become payable if and when certain development, regulatory and commercial milestones are achieved. As of June 30, 2020, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

7.

Collaborations

To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, the Company has formed, and intends to seek other opportunities to form, strategic alliances with collaborators who can augment its leadership in CRISPR/Cas9 therapeutic development. As of June 30, 2020, the Company’s accounts receivable and contract liabilities were primarily related to the Company’s collaboration with Regeneron Pharmaceuticals, Inc. (“Regeneron”). As of June 30, 2019, the Company’s accounts receivable and contract liabilities were primarily related to the Company’s collaborations with Regeneron and Novartis Institutes for BioMedical Research (“Novartis”).

The following table presents changes in the Company’s accounts receivable and contract liabilities during the six months ended June 30, 2020 and 2019 (in thousands):

 

 

 

Balance at

Beginning of

Period

 

 

Additions

 

 

Deductions

 

 

Balance at End

of Period

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

4,620

 

 

$

101,049

 

 

$

(101,805

)

 

$

3,864

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

28,810

 

 

$

87,477

 

 

$

(15,608

)

 

$

100,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

Beginning of

Period

 

 

Additions

 

 

Deductions

 

 

Balance at End

of Period

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

7,547

 

 

$

7,779

 

 

$

(11,138

)

 

$

4,188

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

55,932

 

 

$

2,000

 

 

$

(15,772

)

 

$

42,160

 

 

During the six months ended June 30, 2020 and 2019, the Company recognized the following revenues as a result of changes in the contract liability balance (in thousands):

 

 

 

Six Months Ended June 30,

 

Revenue recognized in the period from:

 

2020

 

 

2019

 

Amounts included in the contract liability at the beginning of the period

 

$

5,674

 

 

$

15,772

 

 

Costs to obtain and fulfill a contract

The Company did not incur any expenses to obtain collaboration agreements and costs to fulfill those contracts do not generate or enhance resources of the Company. As such, no costs to obtain or fulfill a contract have been capitalized in any period.

10


Regeneron Pharmaceuticals, Inc.

In April 2016, the Company entered into a license and collaboration agreement with Regeneron (the “2016 Regeneron Agreement”). The 2016 Regeneron Agreement has two principal components: i) a product development component under which the parties will research, develop and commercialize CRISPR/Cas-based therapeutic products primarily focused on genome editing in the liver, and ii) a technology collaboration component, pursuant to which the Company and Regeneron will engage in research-related activities aimed at discovering and developing novel technologies and improvements to CRISPR/Cas technology to enhance the Company’s genome editing platform. Under this agreement, the Company also may access the Regeneron Genetics Center and proprietary mouse models to be provided by Regeneron for a limited number of the Company’s liver programs.

On May 30, 2020, the Company entered into (i) amendment no. 1 (the “2020 Regeneron Amendment”) to the 2016 Regeneron Agreement, (ii) co-development and co-funding agreements for the treatment of hemophilia A and hemophilia B (the “Hemophilia Co/Co”) agreements and (iii) a stock purchase agreement (the “2020 Stock Purchase Agreement”).

2016 Regeneron Agreement: Scope. Under the initial six-year term of the 2016 Regeneron Agreement, Regeneron obtained exclusive rights for up to ten targets (the “Regeneron Target Cap”) to be chosen by Regeneron during the Technology Collaboration Term, as defined in the 2016 Regeneron Agreement, subject to a target selection process and various adjustments and limitations set forth in the 2016 Regeneron Agreement. Of these ten total targets, Regeneron may select up to five non-liver targets, while the remaining targets must be focused in the liver. The Company retains the exclusive right to solely develop certain in vivo products directed against specified genetic targets as well as certain non-liver targets from the Company’s ongoing and planned research activities. During the collaboration term, and subject to a target selection process, the Company has the right to choose additional liver targets for its own development using commercially reasonable efforts. Certain targets that either the Company or Regeneron select during the collaboration term may be subject to co-development and co-promotion (“Co/Co”) agreements at the Company or Regeneron’s option. Regeneron has the option to enter into Co/Co agreements for up to five liver targets (other than the Company’s reserved liver targets) and the Company has the option to enter into one Intellia Independent Co/Co Option (as defined in the 2016 Regeneron Agreement). At the inception of the 2016 Regeneron Agreement, Regeneron selected the first of its ten targets, transthyretin amyloidosis (“ATTR”), which is subject to a Co/Co agreement between the Company and Regeneron (the “ATTR Co/Co”). The general terms and conditions for the ATTR Co/Co were outlined within the 2016 Regeneron Agreement.

In addition, the Company granted Regeneron a non-exclusive, worldwide license, pursuant to which the Company and Regeneron will engage in research related activities aimed at discovering and developing novel technologies and improvements to CRISPR/Cas technology to enhance the Company’s genome editing platform.  

2016 Regeneron Agreement: Financial Terms. In connection with the 2016 Regeneron Agreement, the Company received a nonrefundable upfront payment of $75.0 million. In addition, on Regeneron programs that are not subject to Co/Co agreements, the Company may be eligible to earn, on a per-licensed target basis, (i) up to $25.0 million in development milestones, including for the dosing of the first patient in each of Phase I, Phase II and Phase III clinical trials, (ii) up to $110.0 million in regulatory milestones, including for the acceptance of a regulatory filing in the U.S., and for obtaining regulatory approval in the U.S. and in certain other identified countries and (iii) up to $185.0 million in sales-based milestone payments. The Company is also eligible to earn royalties ranging from the high-single digits to low teens, in each case, on a per-product basis, which royalties are potentially subject to various reductions and offsets and incorporate the Company’s existing low- to mid-single-digit royalty obligations under a license agreement with Caribou Biosciences, Inc. (“Caribou”). In connection with the 2016 Regeneron Agreement, Regeneron purchased $50.0 million of the Company’s common stock in a private placement under a stock purchase agreement concurrent with the Company’s IPO.

2020 Regeneron Amendment: Scope. The 2020 Regeneron Amendment, among other things, (i) extends the Technology Collaboration Term until April 11, 2024, with a further option to extend an additional twenty-four months upon notice and a $30.0 million nonrefundable payment to the Company, (ii) increases the Regeneron Target Cap from ten to fifteen (with the additional five targets focused only in the liver) and (iii) allows for a second Intellia Independent Co/Co Option. The Company also granted a non-exclusive license to Regeneron under certain CRISPR/Cas platform IP for the commercialization of up to ten ex vivo edited CRISPR Products (as defined in the 2020 Regeneron Amendment) made using certain cell types, subject to certain limitations on Regeneron’s activities in T cells. The ex vivo license does not include access to the Company’s IP directed to its ex vivo targets, programs, or cell engineering processes. This non-exclusive license is subject to royalty obligations such that the Company is eligible to earn royalties on ex vivo edited CRISPR Products ranging from the high-single

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digits to low teens, in each case, on a per-product basis, subject to various reductions and offsets and the Company’s existing royalty obligations to Caribou. The Company transferred the license to develop the Factor VIII target for the treatment of hemophilia A to Regeneron. In addition, a target that was previously a Regeneron evaluation target was transferred back to the Company as an Intellia reserved liver target.

In connection with the 2020 Regeneron Amendment, the Company and Regeneron also entered into the Hemophilia Co/Co agreements, which are directed to Factor VIII and Factor IX for the treatment of hemophilia A and hemophilia B. Factor VIII and Factor IX do not count toward the Regeneron Target Cap. Under the Hemophilia Co/Co agreements, which are substantially based upon the terms and conditions as outlined under the 2016 Regeneron Agreement, the Company and Regeneron will collaborate to research, develop, manufacture, and commercialize CRISPR Products for the treatment of hemophilia A and hemophilia B, for which Regeneron will be the Lead Party (as discussed below). Further, worldwide development costs and profits of any future products will be split between the Company and Regeneron, 35% and 65%, respectively, subject to certain deductions.  

2020 Regeneron Amendment: Financial Terms. As part of the consideration for the 2020 Regeneron Amendment, Regeneron paid the Company an upfront payment of $70.0 million, which included the $25.0 million fee to extend the Technology Collaboration Term to April 2024. The potential future milestones and royalties remain unchanged from the 2016 Regeneron Agreement. In addition, on May 30, 2020, the Company and Regeneron entered into the 2020 Stock Purchase Agreement. Under the 2020 Stock Purchase Agreement, the Company sold to Regeneron 925,218 shares of its common stock, par value $0.0001 per share, for aggregate cash consideration of $30.0 million, or $32.42 per share (the “Equity Transaction”), representing a 100% premium over the volume-weighted average trading price of the Company’s common stock during the 30-day period prior to the closing of the Equity Transaction. Under the 2020 Stock Purchase Agreement, Regeneron will not dispose of any shares of common stock it beneficially owns in the Company until the termination of the Technology Collaboration Term.

Research Collaboration. Research activities under the 2016 Regeneron Agreement and the 2020 Regeneron Amendment (collectively the “Amended Agreements”) will be governed by evaluation and research and development plans that will outline the parties’ responsibilities under, anticipated timelines of and budgets for, the various programs. The Company will assist Regeneron with the preliminary evaluation of its selected in vivo targets, and Regeneron will be responsible for preclinical research, conducting clinical development and manufacturing and commercialization of CRISPR Products directed to each of its exclusive selected targets. The Company may assist, as requested by Regeneron, with the later discovery and research of product candidates directed to any selected target. For each selected target, Regeneron is required to use commercially reasonable efforts to submit regulatory filings necessary to achieve investigational new drug (“IND”), or other regulatory acceptance for at least one product directed to each applicable target and, following IND acceptance, to develop and commercialize at least one such product.

Governance. Pursuant to the 2016 Regeneron Agreement, the parties formed a joint steering committee, which is responsible for setting research objectives and overseeing the general strategies and research and development activities undertaken by the parties.

Term and Termination. Under the Amended Agreements, the Technology Collaboration Term ends in April 2024, except that Regeneron may make a one-time payment of $30.0 million to extend the Technology Collaboration Term for an additional two-year period. The Amended Agreements will continue until the date when no royalty or other payment obligations are due, unless earlier terminated in accordance with the terms of the Amended Agreements. Regeneron’s royalty payment obligations expire on a country-by-country and product-by-product basis upon the later of (i) the expiration of the last valid claim of the royalty-bearing patents covering such product in such country, (ii) twelve years from the first commercial sale of such product in such country, or (iii) the expiration of regulatory exclusivity for such product. The Company may terminate the Amended Agreements on a target-by-target basis if Regeneron or any of its affiliates institutes a patent challenge against the Company’s CRISPR/Cas or certain other background patent rights or does not proceed with the development of a product directed to a selected target within specified periods of time. Regeneron may terminate the Amended Agreements, without cause, upon 180 days written notice to the Company, either in its entirety or on a target-by-target basis, in which event, certain rights in the terminated targets and associated IP revert to the Company, as described in the Amended Agreements. Following such termination, the Company may owe Regeneron royalties, in certain circumstances, up to mid-single digits on any terminated targets that the Company subsequently commercializes on a product-by-product basis for a period of twelve years after the first commercial sale of any such products. Either party may terminate the Amended Agreements, either in their entirety or with

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respect to the research collaboration or one or more of the targets selected by Regeneron, in the event of the other party’s uncured material breach.

Co-Development and Co-Promotion Agreements. In July 2018, the Company and Regeneron finalized the form of the Co/Co agreement that will be used as the basis for each Co/Co agreement directed to a target. Simultaneously, the Company and Regeneron executed the ATTR Co/Co agreement, for which the Company is the clinical and commercial Lead Party and Regeneron is the Participating Party (each, as defined in the Co/Co agreements, as applicable, and described below). In May 2020, the Company and Regeneron executed the Hemophilia Co/Co agreements, for which Regeneron is the clinical and commercial Lead Party and the Company is the Participating Party.

Co-Development and Co-Promotion: Agreement Structure. Under the 2016 Regeneron Agreement, Regeneron had the right to exercise at least four options, after TTR, to enter into a Co/Co agreement for the Company’s liver targets (other than the Company’s reserved liver targets), while the Company had the opportunity to exercise at least one option to enter into a Co/Co agreement for Regeneron’s liver targets, the exact number of options being subject to certain conditions of the target selection process. In connection with the 2020 Regeneron Amendment, the Company received one additional option to enter into a Co/Co agreement, while Regeneron’s number of Co/Co options remained the same. Each option to enter into a Co/Co agreement must be exercised (or forfeited) once a target reaches a defined preclinical stage. One party will be the “Lead Party” and the other party the “Participating Party.” The Lead Party will have control and primary responsibility for the development, manufacturing, regulatory, and commercial activities. The Participating Party will have the right to consult on these activities through its participation on the joint development and commercialization committees and will have the right to co-fund development and commercialization activities in exchange for a share of profits. In general, under each Co/Co agreement, the parties will share equally in worldwide development costs and profits of any future products. Prior to reaching a specific development milestone, the Participating Party may elect to reduce its share of worldwide development costs and profits by 50%. Pursuant to the ATTR Co/Co, on December 13, 2019, Regeneron informed the Company that it would exercise its rights under the ATTR Co/Co agreement to modify its share of worldwide development costs and profits from 50% to 25%, effective in mid-June 2020.

As noted above, in connection with the 2020 Regeneron Amendment, the Company and Regeneron entered into two Hemophilia Co/Co agreements. Under the Hemophilia Co/Co agreements, which are substantially based upon the Company and Regeneron’s previously agreed-upon form of Co/Co agreement, but do not count toward Regeneron’s total number of Co/Co options, the Company and Regeneron will collaborate to research, develop, manufacture, and commercialize CRISPR Products for the treatment of hemophilia A and hemophilia B. Regeneron will be the clinical and commercial lead for such activities.

Co-Development and Co-Promotion: Governance. The parties formed joint development and commercialization committees to oversee all profit share products under the Co/Co agreements as discussed below. The committees are responsible for overseeing the development, manufacture, regulatory matters, and commercialization (including pricing and reimbursement) efforts under the ATTR Co/Co and the Hemophilia Co/Co agreements.

Co-Development and Co-Promotion: Termination. Either party may terminate a particular Co/Co agreement by providing 180 days written notice. If the Company terminates, the product subject to the Co/Co agreement becomes a Regeneron product, and is subject to all future milestone and royalty payment obligations under the 2016 Regeneron Agreement. If Regeneron terminates and has contributed at least $5.0 million in development costs under the particular Co/Co agreement, the Company will pay low- to mid-single-digit royalties on the net sales of the product, depending on co-funding percentage, stage at termination and, if any, Regeneron IP incorporated into the relevant product.

2016 Regeneron Agreement: Accounting Analysis. The Company determined that the 2016 Regeneron Agreement is within the scope of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and its related amendments (collectively known as “ASC 606”). The Company evaluated the promised goods and services under the 2016 Regeneron Agreement and determined that it included three performance obligations: (i) a combined performance obligation including the licenses to targets and the associated research activities and evaluation plans; (ii) a combined performance obligation including the technology collaboration and associated research activities; and (iii) the common stock.

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Under the 2016 Regeneron Agreement, the Company determined that the transaction price was $125.0 million, consisting of the following consideration: (i) the nonrefundable upfront payment of $75.0 million; and (ii) the payment of the common stock of $50.0 million. None of the clinical or regulatory milestones were included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future regulatory progress and the licensee’s efforts. Any consideration related to sales-based milestones and royalties will be recognized when the related sales occur as they were determined to relate predominantly to the licenses granted to Regeneron and therefore have also been excluded from the transaction price.

The Company first allocated $50.0 million of the transaction price to the common stock. The common stock was sold at its standalone selling price and the Company concluded that the total discount inherent in the arrangement is entirely attributable to the combined performance obligation including the licenses to targets and associated research activities and evaluation plans and the combined performance obligation including the technology collaboration and associated research activities. As such, the remaining $75.0 million of the transaction price was allocated to the combined performance obligation including the licenses to targets and associated research activities and evaluation plans and the combined performance obligation including the technology collaboration and associated research activities on a relative standalone selling price basis. The Company estimated the standalone selling price of each combined performance obligation by taking into consideration internal estimates of research and development personnel needed to perform the research and development services, estimates of expected cash outflows to third parties for services and supplies, selling prices of comparable transactions and typical gross profit margins. As a result of this evaluation, the Company allocated $63.8 million to the combined performance obligation including the licenses to targets and associated research activities and evaluation plans and $11.2 million to the combined performance obligation including the technology collaboration and associated research activities. The $