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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, 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: 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 30, 2021: 73,487,046 shares.

 

 


 

 

PART I - FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (unaudited)

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

4

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

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

18

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

32

 

 

Item 4. Controls and Procedures.

32

 

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

33

 

 

Item 1A. Risk Factors

33

 

 

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

81

 

Item 6. Exhibits

82

 

 

Signatures

83

 

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,

2021

 

 

December 31,

2020

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,879

 

 

$

160,020

 

Marketable securities

 

 

399,140

 

 

 

437,351

 

Accounts receivable

 

 

1,993

 

 

 

2,130

 

Prepaid expenses and other current assets

 

 

18,392

 

 

 

17,016

 

Total current assets

 

 

549,404

 

 

 

616,517

 

Marketable securities - noncurrent

 

 

22,262

 

 

 

-

 

Property and equipment, net

 

 

18,530

 

 

 

15,943

 

Operating lease right-of-use assets

 

 

77,070

 

 

 

39,114

 

Other assets

 

 

4,977

 

 

 

4,748

 

Total Assets

 

$

672,243

 

 

$

676,322

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,854

 

 

$

10,460

 

Accrued expenses

 

 

37,150

 

 

 

25,554

 

Current portion of operating lease liability

 

 

7,415

 

 

 

5,696

 

Current portion of deferred revenue

 

 

22,544

 

 

 

22,544

 

Total current liabilities

 

 

73,963

 

 

 

64,254

 

Deferred revenue, net of current portion

 

 

40,208

 

 

 

51,387

 

Long-term operating lease liability

 

 

63,259

 

 

 

33,609

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

  68,331,780 and 66,234,056 shares issued and outstanding at

  June 30, 2021 and December 31, 2020, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

1,044,939

 

 

 

962,173

 

Accumulated other comprehensive (loss) income

 

 

(13

)

 

 

1

 

Accumulated deficit

 

 

(550,120

)

 

 

(435,109

)

Total stockholders’ equity

 

 

494,813

 

 

 

527,072

 

Total Liabilities and Stockholders’ Equity

 

$

672,243

 

 

$

676,322

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Collaboration revenue

 

$

6,550

 

 

$

16,263

 

 

$

12,995

 

 

$

29,179

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

58,884

 

 

 

37,771

 

 

 

98,160

 

 

 

72,421

 

General and administrative

 

 

16,683

 

 

 

11,526

 

 

 

30,277

 

 

 

22,840

 

Total operating expenses

 

 

75,567

 

 

 

49,297

 

 

 

128,437

 

 

 

95,261

 

Operating loss

 

 

(69,017

)

 

 

(33,034

)

 

 

(115,442

)

 

 

(66,082

)

Interest income

 

 

211

 

 

 

641

 

 

 

431

 

 

 

1,883

 

Net loss

 

$

(68,806

)

 

$

(32,393

)

 

$

(115,011

)

 

$

(64,199

)

Net loss per share, basic and diluted

 

$

(1.01

)

 

$

(0.61

)

 

$

(1.70

)

 

$

(1.24

)

Weighted average shares outstanding, basic and

   diluted

 

 

68,164

 

 

 

53,369

 

 

 

67,675

 

 

 

51,938

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(1

)

 

 

(218

)

 

 

(14

)

 

 

(106

)

Comprehensive loss

 

$

(68,807

)

 

$

(32,611

)

 

$

(115,025

)

 

$

(64,305

)

 

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,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(115,011

)

 

$

(64,199

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,225

 

 

 

3,107

 

Equity-based compensation

 

 

17,038

 

 

 

8,921

 

Amortization/(accretion) of investment premiums/(discounts)

 

 

2,868

 

 

 

(268

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

137

 

 

 

756

 

Prepaid expenses and other current assets

 

 

(8,703

)

 

 

(564

)

Operating right-of-use assets

 

 

4,018

 

 

 

3,195

 

Other assets

 

 

(229

)

 

 

239

 

Accounts payable

 

 

(2,606

)

 

 

(3,899

)

Accrued expenses

 

 

10,135

 

 

 

2,434

 

Deferred revenue

 

 

(11,179

)

 

 

71,869

 

Operating lease liabilities

 

 

(5,050

)

 

 

(2,719

)

Net cash (used in) provided by operating activities

 

 

(105,357

)

 

 

18,872

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,350

)

 

 

(1,881

)

Purchases of marketable securities

 

 

(185,431

)

 

 

(31,208

)

Maturities of marketable securities

 

 

198,499

 

 

 

183,500

 

Net cash provided by investing activities

 

 

7,718

 

 

 

150,411

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

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

   net of issuance costs

 

 

-

 

 

 

107,732

 

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

   net of issuance costs

 

 

45,255

 

 

 

14,722

 

Proceeds from issuance of common stock to Regeneron

 

 

-

 

 

 

12,580

 

Proceeds from options exercised

 

 

19,503

 

 

 

1,370

 

Issuance of shares through employee stock purchase plan

 

 

970

 

 

 

685

 

Net cash provided by financing activities

 

 

65,728

 

 

 

137,089

 

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

   equivalents

 

 

(31,911

)

 

 

306,372

 

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

   period

 

 

164,606

 

 

 

57,226

 

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

 

$

132,695

 

 

$

363,598

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash and cash

   equivalents to condensed consolidated balance sheet:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,879

 

 

$

361,687

 

Restricted cash and cash equivalents, included in prepaids and other current assets

   and other assets

 

 

2,816

 

 

 

1,911

 

Total cash and cash equivalents and restricted cash and cash equivalents

 

$

132,695

 

 

$

363,598

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Purchases of property and equipment unpaid at period end

 

$

1,969

 

 

$

432

 

Right-of-use assets acquired under operating leases

 

 

41,974

 

 

 

7,527

 

Offering costs unpaid at period end

 

 

208

 

 

 

-

 

 

 

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 clinical-stage genome editing company, focused on developing novel, potentially curative therapeutics using CRISPR/Cas9 technology. CRISPR/Cas9, an acronym for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). To fully realize the transformative potential of CRISPR/Cas9, the Company is pursuing two primary approaches. The Company’s in vivo programs use intravenously administered CRISPR as the therapy, in which its proprietary delivery technology enables highly precise editing of disease-causing genes directly within specific target tissues. The Company’s ex vivo programs use CRISPR to create the therapy by using engineered human cells to treat cancer and autoimmune diseases. The Company’s deep scientific, technical and clinical development experience, along with its robust intellectual property (“IP”) portfolio, enables the Company to unlock broad therapeutic applications of CRISPR/Cas9 to create new classes of genetic medicine.

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 annual 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, 2020.

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 unrealized 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 the Company’s 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.

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.

Liquidity

Since its inception through June 30, 2021, the Company has raised an aggregate of approximately $1,166.1 million to fund its operations, of which $275.9 million was through its collaboration agreements, $170.5 million was from its initial public offering (“IPO”) and concurrent private placements, $438.3 million was from follow-on public offerings, $196.5 million was from at-the-market offerings and $85.0 million was from the sale of convertible preferred stock. In July 2021, the Company closed an underwritten public offering of 4,758,620 shares of common stock at the public offering price of $145.00 per share, for aggregate estimated net proceeds of $648.1 million after deducting approximately $41.9 million in underwriting discounts

6


and estimated offering costs (see Note 13 for further details). The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2021, along with the proceeds from the July 2021 public offering of common stock, 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, 2020. There have been no material changes during the six months ended June 30, 2021, other than as noted below.

Recent Accounting Pronouncements – Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Company adopted ASU 2019-12 on January 1, 2021. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

3.

Marketable Securities

The following table summarizes the Company’s available-for-sale marketable securities as of June 30, 2021 and December 31, 2020 at net book value:

 

 

 

June 30, 2021

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Estimated Fair

Value

 

 

 

(In thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

$

163,832

 

 

$

22

 

 

$

(2

)

 

$

163,852

 

Financial institution debt securities

 

 

182,076

 

 

 

12

 

 

 

(47

)

 

 

182,041

 

Corporate debt securities

 

 

42,191

 

 

 

2

 

 

 

-

 

 

 

42,193

 

Other asset-backed securities

 

 

33,315

 

 

 

1

 

 

 

-

 

 

 

33,316

 

Total

 

$

421,414

 

 

$

37

 

 

$

(49

)

 

$

421,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Estimated Fair

Value

 

 

 

(In thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

$

245,666

 

 

$

13

 

 

$

(11

)

 

$

245,668

 

Financial institution debt securities

 

 

138,445

 

 

 

6

 

 

 

(8

)

 

 

138,443

 

Corporate debt securities

 

 

41,765

 

 

 

3

 

 

 

(2

)

 

 

41,766

 

Other asset-backed securities

 

 

11,474

 

 

 

1

 

 

 

(1

)

 

 

11,474

 

Total

 

$

437,350

 

 

$

23

 

 

$

(22

)

 

$

437,351

 

 

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At June 30, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive (loss) income was composed of activity related to the Company’s available-for-sale marketable securities. There were no realized gains or losses in the six months ended June 30, 2021 or for the year ended December 31, 2020. The Company did not reclassify any amounts out of accumulated other comprehensive (loss) income during this period. The Company did not have any securities in a material unrealized loss position at June 30, 2021 or December 31, 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,

7


2021 and December 31, 2020, 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 (unadjusted) 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.

As of June 30, 2021 and December 31, 2020, the Company’s financial assets recognized at fair value on a recurring basis consisted of the following:

 

 

Fair Value as of June 30, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents and restricted cash equivalents

 

$

130,005

 

 

$

130,005

 

 

$

-

 

 

$

-

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

 

163,852

 

 

 

140,494

 

 

 

23,358

 

 

 

-

 

Financial institution debt securities

 

 

182,041

 

 

 

-

 

 

 

182,041

 

 

 

-

 

Corporate debt securities

 

 

42,193

 

 

 

-

 

 

 

42,193

 

 

 

-

 

Other asset-backed securities

 

 

33,316

 

 

 

-

 

 

 

33,316

 

 

 

-

 

Total marketable securities

 

 

421,402

 

 

 

140,494

 

 

 

280,908

 

 

 

-

 

Total

 

$

551,407

 

 

$

270,499

 

 

$

280,908

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value as of December 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents and restricted cash equivalents

 

$

163,805

 

 

$

163,805

 

 

$

-

 

 

$

-

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

 

245,668

 

 

 

241,664

 

 

 

4,004

 

 

 

-

 

Financial institution debt securities

 

 

138,443

 

 

 

-

 

 

 

138,443

 

 

 

-

 

Corporate debt securities

 

 

41,766

 

 

 

-

 

 

 

41,766

 

 

 

-

 

Other asset-backed securities

 

 

11,474

 

 

 

-

 

 

 

11,474

 

 

 

-

 

Total marketable securities

 

 

437,351

 

 

 

241,664

 

 

 

195,687

 

 

 

-

 

Total

 

$

601,156

 

 

$

405,469

 

 

$

195,687

 

 

$

-

 

 

Certain of the Company’s financial assets, including cash equivalents, restricted 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 its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2021 or December 31, 2020.

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

8


5.

Accrued Expenses

Accrued expenses consisted of the following:

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Accrued research and development

 

$

18,399

 

 

$

11,008

 

Employee compensation and benefits

 

 

10,039

 

 

 

10,920

 

Accrued legal and professional expenses

 

 

4,109

 

 

 

1,876

 

Accrued other

 

 

4,603

 

 

 

1,750

 

Total accrued expenses

 

$

37,150

 

 

$

25,554

 

 

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, 2020, except as described below. 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, 2020.

Caribou Arbitration

On October 17, 2018, the Company initiated an arbitration proceeding against Caribou Biosciences, Inc. (“Caribou”) asserting that Caribou violated the terms and conditions of a license agreement the Company entered into with them in July 2014 related to certain IP (the “Caribou License”), as well as other contractual and legal obligations to the Company, by using and seeking to license to third parties two patent families relating to specific structural or chemical modifications of guide RNAs (“gRNAs”), that were purportedly invented or controlled by Caribou, in the Company’s exclusive human therapeutic field, before an agreed-upon cutoff date of January 30, 2018.

On September 26, 2019, the Company announced that the arbitration panel issued an interim award concluding that both the structural and chemical gRNA modification technologies were exclusively licensed to the Company by Caribou pursuant to the Caribou License. Nevertheless, the arbitration panel, solely with respect to the clinically modified gRNAs, stated that it will declare that Caribou has an equitable “leaseback”, which it described as exclusive, perpetual and worldwide (the “Caribou Award”). The Caribou Award does not include the structural guide modifications IP also at issue in the arbitration, any other IP exclusively licensed or sublicensed by Caribou to the Company under the Caribou License (including but not limited to the foundational CRISPR/Cas9 IP co-owned by the Regents of the University of California, University of Vienna and Dr. Emmanuelle Charpentier), or any other of the Company’s IP. On February 6, 2020, the panel clarified that the Caribou Award is limited to a particular on-going Caribou program, known as CB-010, which seeks to develop a chimeric antigen receptor T (“CAR-T”) product directed at CD19.

On June 16, 2021, the Company executed a Leaseback Agreement (“Leaseback”) with Caribou, which settles the ongoing arbitration. Under the Leaseback negotiated by the parties, in exchange for an upfront payment, potential future regulatory and sales milestones, and single-digit royalties payable by Caribou, the Company has agreed to leaseback or sublicense certain CRISPR/Cas9 IP, including the Company’s chemical gRNA modification technology and foundational CRISPR/Cas9 IP, to Caribou so that it can develop and commercialize CB-010. Caribou also will be responsible for any payments required in respect of the Company’s in-licensed IP. The Company recorded $1.0 million within “Collaboration Revenue” on the condensed consolidated statements of operations and comprehensive loss for an upfront payment related to the Leaseback.

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, 2021, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

9


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, 2021, the Company’s accounts receivable is made up of $1.0 million for an upfront payment related to the Leaseback with Caribou (see Note 6) and $1.0 million related to the collaboration with Regeneron, and the Company’s contract liabilities were related to its collaboration with Regeneron.

The following table presents changes in the Company’s accounts receivable and contract liabilities during the six months ended June 30, 2021 and 2020 (in thousands):

 

 

 

Balance at

Beginning of

Period

 

 

Additions

 

 

Deductions

 

 

Balance at End

of Period

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

2,130

 

 

$

3,079

 

 

$

(3,216

)

 

$

1,993

 

Contract liabilities - Deferred revenue

 

$

73,931

 

 

$

-

 

 

$

(11,179

)

 

$

62,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

During the six months ended June 30, 2021 and 2020, 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:

 

 

2021

 

 

 

2020

 

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

 

$

11,179

 

 

$

5,674

 

 

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.

Regeneron Pharmaceuticals, Inc.

License and Collaboration Agreement

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. At the inception of the 2016 Regeneron Agreement, Regeneron selected the first of its 10 targets, transthyretin (“ATTR”) amyloidosis, which is subject to a co-development and co-promotion agreement between the Company and Regeneron (the “ATTR Co/Co”).

10


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 collaboration expansion builds upon the jointly developed targeted transgene insertion capabilities designed to durably restore a missing therapeutic protein, and to overcome the limitations of traditional gene therapy. The collaboration was extended until April 2024, at which point Regeneron has an option to renew for an additional two years. The 2020 Regeneron Amendment also grants Regeneron exclusive rights to develop products for five additionain vivo CRISPR/Cas-based therapeutic liver targets and non-exclusive rights to independently develop and commercialize up to 10 ex vivo gene edited products made using certain defined cell types.

Since December 31, 2020, there have been no material changes to the key terms of the 2016 Regeneron Agreement and the 2020 Regeneron Amendment (the “Amended Agreements”). For further information on the terms and conditions of these agreements, please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2020.

Revenue Recognition – Collaboration Revenue. Through June 30, 2021, excluding amounts allocated to Regeneron’s purchase of the Company’s common stock, the Company recorded $145.0 million in upfront payments under the Amended Agreements and $35.6 million for research and development services, primarily under the ATTR Co/Co agreement. Through June 30, 2021, the Company has recognized $135.2 million of collaboration revenue under all arrangements, including $5.5 million and $12.0 million during the three and six months ended June 30, 2021, respectively, and $16.3 million and $24.2 million during the three and six months ended June 30, 2020, respectively, in the condensed consolidated statements of operations and comprehensive loss. This includes $1.0 million and $1.8 million during the three and six months ended June 30, 2021, respectively, and $3.8 million and $8.6 million during the three and six months ended June 30, 2020, respectively, primarily representing payments due from Regeneron pursuant to the ATTR Co/Co agreement. These revenues are offset in part by contra-revenue related to the Hemophilia Co/Co agreements amounting to $1.0 million during the three and six months ended June 30, 2021, respectively.

As of June 30, 2021, there was approximately $62.8 million of the aggregate transaction price of the Amended Agreements remaining to be recognized, which the Company expects to be recognized during the research term through April 2024.

As of June 30, 2021 and December 31, 2020, the Company had accounts receivable of $1.0 million and $2.1 million, respectively, related to the Amended Agreements. The Company had deferred revenue of $62.8 million and $73.9 million as of June 30, 2021 and December 31, 2020, respectively, related to the Amended Agreements.

Novartis Institutes for BioMedical Research, Inc.

In December 2014, the Company entered into a strategic collaboration agreement with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) (the “2014 Novartis Agreement”), primarily focused on the research of new ex vivo CRISPR/Cas9-edited therapies using CAR-T cells and hematopoietic stem cells (“HSCs”). The agreement was amended in December 2018 (the “Novartis Amendment”) to also include research on ocular stem cells (“OSCs”). In December 2019, per the terms of the 2014 Novartis Agreement, the research term ended, although the 2014 Novartis Agreement remains in effect, for which the Company will be eligible to receive milestone and royalty payments in the future. In June 2021, the Company entered into Amendment No. 3 (the “Amendment”) to the 2014 Novartis Agreement. The Amendment amends Novartis’ rights with respect to all of the CAR-T Therapeutic Targets (as defined in the 2014 Novartis Agreement) that Novartis selected under the 2014 Novartis Agreement, including (a) making Novartis’ license non-exclusive for such CAR-T Therapeutic Targets, (b) removing Novartis’ diligence and related reporting obligations for such CAR-T Therapeutic Targets, and (c) refining the scope of Novartis’ sublicense rights for such CAR-T Therapeutic Targets. The Company made a one-time payment to Novartis of $10.0 million within 30 days after the effective date of the Amendment, which was recorded as research and development expense in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021. Since December 31, 2020, there have been no other material changes to the key terms of the 2014 Novartis Agreement and the Novartis Amendment. For further information on the terms and conditions of these agreements, please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2020.

11


Revenue Recognition – Milestone. In March 2020, the U.S. Food and Drug Administration (“FDA”) accepted the investigational new drug (“IND”) application submitted by Novartis for a CRISPR/Cas9-based engineered cell therapy for the treatment of sickle cell disease. As a result of meeting this milestone, the Company recognized $5.0 million as collaboration revenue within the condensed consolidated statement of operations and comprehensive loss. No other milestones under the 2014 Novartis Agreement and the Novartis Amendment were achieved during the three or six months ended June 30, 2021 or 2020. The Company is eligible to receive additional downstream success-based milestones and royalties.

As of June 30, 2021 and December 31, 2020, the Company had no accounts receivable or deferred revenue related to the 2014 Novartis Agreement and the Novartis Amendment.

8.

Leases

In March 2020, the Company entered into an agreement to lease approximately 39,000 square feet of office and laboratory space at 281 Albany Street in Cambridge, Massachusetts under an operating lease agreement (the “281 Albany Lease”). The Company’s obligation to pay rent will start on the date that is six months after the commencement date or the date on which the Company occupies the premises, whichever occurs earlier (the “Rent Commencement Date”). The initial term of the 281 Albany Lease is ten years following the Rent Commencement Date. In March 2021 the Company determined, in accordance with Accounting Standards Codification 842, “Leases (Topic 842)”, that the commencement date of the lease had been met as the facility was substantially complete and available for use and, accordingly, the Company recognized a right-of-use asset and a lease liability of approximately $40.4 million and $34.8 million, respectively, in the first quarter of 2021 related to the 281 Albany Lease. In determining the lease liability, the Company used an incremental borrowing rate of 5.52% based on a number of factors including the total lease payments, the Company’s credit rating, and the lease term. Included in the recognized right-of-use asset at the inception of the lease was approximately $5.6 million in lease payments that were prepaid under the terms of the lease. The base rent under the 281 Albany Lease is $99.00 per square foot per year during the first year of the term, which is subject to scheduled annual increases up to $128.87 per square foot per year during the last year of the initial term, plus certain operating expenses and taxes. In addition, the landlord agreed to contribute an aggregate of $4.4 million toward the cost of construction and tenant improvements for the premises. In accordance with the 281 Albany Lease, the Company is required to maintain a letter of credit in the amount of $1.9 million that is restricted for the term of the lease. These restricted cash equivalents are reported in “Other Assets” in the Company’s condensed consolidated balance sheets. The Company has the option to extend the 281 Albany Lease for two successive five-year terms. The option for this extension is not included as part of the lease liability and right-of-use asset at June 30, 2021, as it is not reasonably certain that it will be exercised.

 

9.

Equity-Based Compensation

In April 2016, the Company adopted the Amended and Restated 2015 Stock Option and Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) and other stock-based awards. Recipients of incentive stock options and non-qualified stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the fair value of such stock on the grant date. Stock options granted under the 2015 Plan generally vest 25% on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining three years, unless they contain specific performance-based vesting provisions. The maximum term of stock options granted under the 2015 Plan is ten years.

As of June 30, 2021, there were 3,938,391 shares available for future issuance under the 2015 Plan and the 2016 Employee Stock Purchase Plan. The number of shares reserved for issuance under the 2015 Plan shall be cumulatively increased by four percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares of common stock as determined by the board of directors. The number of shares reserved for issuance under the 2016 Employee Stock Purchase Plan shall be cumulatively increased by the lesser of a) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, b) 500,000 shares of common stock, or c) such lesser number of shares of common stock as determined by the board of directors.

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Equity-based compensation expense is classified in the condensed consolidated statements of operations and comprehensive loss as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Research and development

 

$

6,135

 

 

$

2,390

 

 

$

9,626

 

 

$

4,550

 

General and administrative

 

 

4,479

 

 

 

2,374

 

 

 

7,412

 

 

 

4,371

 

Total

 

$

10,614

 

 

$

4,764

 

 

$

17,038

 

 

$

8,921