0001558370-20-004542.txt : 20200429 0001558370-20-004542.hdr.sgml : 20200429 20200429064839 ACCESSION NUMBER: 0001558370-20-004542 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200429 DATE AS OF CHANGE: 20200429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: uniQure N.V. CENTRAL INDEX KEY: 0001590560 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36294 FILM NUMBER: 20827257 BUSINESS ADDRESS: STREET 1: PAASHEUVELWEG 25A CITY: AMSTERDAM STATE: P7 ZIP: 1105 BP BUSINESS PHONE: 1-339-970-7000 MAIL ADDRESS: STREET 1: PAASHEUVELWEG 25A CITY: AMSTERDAM STATE: P7 ZIP: 1105 BP FORMER COMPANY: FORMER CONFORMED NAME: uniQure B.V. DATE OF NAME CHANGE: 20131030 10-Q 1 qure-20200429x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 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: 001-36294

uniQure N.V.

(Exact name of Registrant as specified in its charter)

The Netherlands

(State or other jurisdiction of incorporation or organization)

Not applicable

(I.R.S. Employer Identification No.)

Paasheuvelweg 25

1105 BP Amsterdam, The Netherlands

(Address of principal executive offices) (Zip Code)

+31-20-240-6000

(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

Ordinary Shares

QURE

The Nasdaq Global Select 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 the definitions of “large accelerated filer” “accelerated filer” and “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 Exchange Act.)    Yes No

As of April 27, 2020, the registrant had 44,312,658 ordinary shares, par value €0.05, outstanding.

TABLE OF CONTENTS

 

    

    

Page

PART I – FINANCIAL INFORMATION

Item 1

Financial Statements

2

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4

Controls and Procedures

30

PART II – OTHER INFORMATION

Item 1

Legal Proceedings

31

Item 1A

Risk Factors

31

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3

Defaults Upon Senior Securities

57

Item 4

Mine Safety Disclosures

57

Item 5

Other Information

57

Item 6

Exhibits

57

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under federal securities laws. Forward-looking statements are based on our current expectations of future events and many of these statements can be identified using terminology such as “believes,” “expects,” “anticipates,” “plans,” “may,” “will,” “projects,” “continues,” “estimates,” “potential,” “opportunity” and similar expressions. These forward-looking statements, which include statements related to the COVID-19 coronavirus pandemic, may be found in Part II, Item 1A “Risk Factors,” Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10-Q.

Forward-looking statements are only predictions based on management’s current views and assumptions and involve risks and uncertainties, and actual results could differ materially from those projected or implied. The most significant factors known to us that could materially adversely affect our business, operations, industry, financial position or future financial performance include those discussed in Part II, Item 1A “Risk Factors,” as well as those discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (“SEC”), including our most recent Annual Report on Form 10-K filed with the SEC on March 2, 2020, or in the documents where such forward-looking statements appear. You should carefully consider that information before you make an investment decision.

You should not place undue reliance on these statements, which speak only as of the date that they were made. Our actual results or experience could differ significantly from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in our Annual Report on Form 10-K for the year ended December 31, 2019, including in “Part I, Item 1A. Risk Factors,” as well as others that we may consider immaterial or do not anticipate at this time. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may make in the future or may file or furnish with the SEC. We do not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or to reflect the occurrence of unanticipated events. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

1

Part I – FINANCIAL INFORMATION

Item 1.Financial Statements

uniQure N.V.

UNAUDITED CONSOLIDATED BALANCE SHEETS

March 31, 

December 31, 

    

2020

    

2019

(in thousands, except share and per share amounts)

Current assets

Cash and cash equivalents

$

342,029

$

377,793

Accounts receivable and accrued income from related party

258

947

Prepaid expenses

5,738

4,718

Other current assets

1,576

748

Total current assets

349,601

384,206

Non-current assets

Property, plant and equipment, net of accumulated depreciation of $29.8 million as of March 31, 2020 and $28.6 million as of December 31, 2019 respectively

27,736

28,771

Operating lease right-of-use assets

26,288

26,797

Intangible assets, net

7,211

5,427

Goodwill

486

496

Restricted cash

2,921

2,933

Total non-current assets

64,642

64,424

Total assets

$

414,243

$

448,630

Current liabilities

Accounts payable

$

4,989

$

5,681

Accrued expenses and other current liabilities

9,507

12,457

Current portion of operating lease liabilities

5,900

5,865

Current portion of deferred revenue

6,732

7,627

Total current liabilities

27,128

31,630

Non-current liabilities

Long-term debt

36,209

36,062

Operating lease liabilities, net of current portion

30,518

31,133

Deferred revenue, net of current portion

23,713

23,138

Derivative financial instruments related party

1,004

3,075

Other non-current liabilities

524

534

Total non-current liabilities

91,968

93,942

Total liabilities

119,096

125,572

Commitments and contingencies

Shareholders' equity

Ordinary shares, €0.05 par value: 60,000,000 shares authorized at March 31, 2020 and December 31, 2019 and 44,299,596 and 43,711,954 ordinary shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively.

2,683

2,651

Additional paid-in-capital

992,136

986,803

Accumulated other comprehensive loss

(11,966)

(6,689)

Accumulated deficit

(687,706)

(659,707)

Total shareholders' equity

295,147

323,058

Total liabilities and shareholders' equity

$

414,243

$

448,630

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

2

uniQure N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

Three months ended March 31, 

    

2020

    

2019

(in thousands, except share and per share amounts)

License revenues from related party

47

557

Collaboration revenues from related party

57

579

Total revenues

104

1,136

Operating expenses:

Research and development expenses

(26,013)

(20,537)

Selling, general and administrative expenses

(9,072)

(8,067)

Total operating expenses

(35,085)

(28,604)

Other income

857

313

Other expense

(339)

(349)

Loss from operations

(34,463)

(27,504)

Interest income

822

442

Interest expense

(975)

(957)

Foreign currency gains, net

4,602

2,274

Other non-operating gains / (losses), net

2,015

(2,027)

Net loss

$

(27,999)

$

(27,772)

Other comprehensive (loss) / income:

Foreign currency translation adjustments

(5,277)

2,468

Total comprehensive loss

$

(33,276)

$

(25,304)

Basic and diluted net loss per ordinary share

$

(0.63)

(0.74)

Weighted average shares used in computing basic and diluted net loss per ordinary share

44,279,456

37,676,172

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

3

uniQure N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE-MONTH PERIOD ENDED MARCH 31

Accumulated

Additional

other

Total

Ordinary shares

paid-in

comprehensive

 Accumulated 

shareholders’

   No. of shares   

    

   Amount   

    

      capital      

    

(loss)/income

    

deficit

    

equity

(in thousands, except share and per share amounts)

Balance at December 31, 2018

37,351,653

$

2,299

$

720,072

$

(7,259)

$

(535,506)

$

179,606

Loss for the period

(27,772)

(27,772)

Other comprehensive loss

(2,468)

(2,468)

Hercules warrants exercise

37,175

2

1,271

1,273

Exercise of share options

183,807

10

2,088

2,098

Restricted and performance share units distributed during the period

188,081

11

(11)

Share-based compensation expense

4,294

4,294

Issuance of ordinary shares relating to employee stock purchase plan

3,126

81

81

Balance at March 31, 2019

37,763,842

$

2,322

$

727,795

$

(9,727)

$

(563,278)

$

157,112

Balance at December 31, 2019

43,711,954

$

2,651

$

986,803

$

(6,689)

$

(659,707)

$

323,058

Loss for the period

(27,999)

(27,999)

Other comprehensive loss

(5,277)

(5,277)

Exercise of share options

64,762

3

929

932

Restricted and performance share units distributed during the period

521,079

29

(29)

Share-based compensation expense

4,355

4,355

Issuance of ordinary shares relating to employee stock purchase plan

1,801

78

78

Balance at March 31, 2020

44,299,596

$

2,683

$

992,136

$

(11,966)

$

(687,706)

$

295,147

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

4

uniQure N.V.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31, 

        

2020

        

2019

(in thousands)

Cash flows from operating activities

Net loss

$

(27,999)

$

(27,772)

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

Depreciation and amortization

1,733

1,569

Share-based compensation expense

4,355

4,294

Change in fair value of derivative financial instruments

(2,015)

2,027

Unrealized foreign exchange gains

(4,824)

(1,820)

Changes in operating assets and liabilities:

Accounts receivable and accrued income, prepaid expenses and other current assets

(1,282)

(2,763)

Accounts payable

(546)

(246)

Accrued expenses, other liabilities and operating leases

(2,645)

(1,190)

Deferred revenue

270

(537)

Net cash used in operating activities

(32,953)

(26,438)

Cash flows from investing activities

Purchases of intangible assets

(2,213)

(996)

Purchases of property, plant and equipment

(677)

(234)

Net cash used in investing activities

(2,890)

(1,230)

Cash flows from financing activities

Proceeds from issuance of shares related to employee stock option and purchase plans

1,010

2,178

Proceeds from exercise of warrants

-

500

Net cash generated from financing activities

1,010

2,678

Currency effect on cash, cash equivalents and restricted cash

(943)

(635)

Net decrease in cash, cash equivalents and restricted cash

(35,776)

(25,625)

Cash, cash equivalents and restricted cash at beginning of period

380,726

237,342

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

$

344,950

$

211,717

Cash and cash equivalents

$

342,029

$

208,787

Restricted cash related to leasehold and other deposits

2,921

2,930

Total cash, cash equivalents and restricted cash

$

344,950

$

211,717

Supplemental cash flow disclosures:

Cash paid for interest

$

(780)

$

(751)

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

5

1General business information

uniQure (the “Company”) was incorporated on January 9, 2012 as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the laws of the Netherlands. The Company is a leader in the field of gene therapy and seeks to deliver to patients suffering from rare and other devastating diseases single treatments with potentially curative results. The Company’s business was founded in 1998 and was initially operated through its predecessor company, Amsterdam Molecular Therapeutics (AMT) Holding N.V (“AMT”). In 2012, AMT undertook a corporate reorganization, pursuant to which uniQure B.V. acquired the entire business and assets of AMT and completed a share-for-share exchange with the shareholders of AMT. Effective February 10, 2014, in connection with its initial public offering, the Company converted into a public company with limited liability (naamloze vennootschap) and changed its legal name from uniQure B.V. to uniQure N.V.

The Company is registered in the trade register of the Chamber of Commerce (Kamer van Koophandel) in Amsterdam, the Netherlands under number 54385229. The Company’s headquarters are in Amsterdam, the Netherlands, and its registered office is located at Paasheuvelweg 25, Amsterdam 1105 BP, the Netherlands and its telephone number is +31 20 240 6000.

The Company’s ordinary shares are listed on the Nasdaq Global Select Market and trade under the symbol “QURE”.

2Summary of significant accounting policies

2.1Basis of preparation

The Company prepared these unaudited consolidated financial statements in compliance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The unaudited consolidated financial statements are presented in U.S. dollars, except where otherwise indicated. Transactions denominated in currencies other than U.S. dollars are presented in the transaction currency with the U.S. dollar amount included in parenthesis, converted at the foreign exchange rate as of the transaction date.

2.2Unaudited interim financial information

The interim financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and changes in financial position for the period presented.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. The results of operations for the three months ended March 31, 2020, are not necessarily indicative of the results to be expected for the full year ending December 31, 2020 or for any other future year or interim period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020.

2.3Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

6

2.4Accounting policies

The principal accounting policies applied in the preparation of these unaudited consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2020.

2.5Recent accounting pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2020, as compared to the recent accounting pronouncements described in Note 2.3.23 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which could be expected to materially impact the Company’s unaudited consolidated financial statements. The Company has adopted ASU 2018-13, Fair Value Measurement (Topic 820) and additional disclosures related to significant unobservable inputs have been included within footnote 4 Fair value measurement.

3

Collaboration arrangements and concentration of credit risk

BMS collaboration

In May 2015, the Company entered into a collaboration and license agreement (the “BMS CLA”) and various related agreements with BMS that provide BMS with exclusive access to the Company’s gene therapy technology platform for the research, development and commercialization of therapeutics aimed at multiple targets in cardiovascular and other diseases (“Collaboration Targets”). The initial four-year research term under the collaboration terminated on May 21, 2019. During the initial research term of the BMS CLA, the Company supported BMS in discovery, non-clinical, analytical and process development efforts in respect of the Collaboration Targets. For any Collaboration Targets that may be advanced, the Company will be responsible for manufacturing of clinical and commercial supplies using the Company’s vector technologies and industrial, proprietary insect-cell based manufacturing platform. BMS reimburses the Company for all its research and development costs in support of the collaboration during the initial research term, and will lead development, regulatory and commercial activities for any Collaboration Targets that may be advanced. The BMS CLA provides that the companies may collaborate on up to ten Collaboration Targets in total. As of March 31, 2020, BMS has designated a total of four Collaboration Targets. In February 2019, BMS requested a one-year extension of the research term. In April 2019, following an assessment of the progress of this collaboration and the Company’s expanding proprietary programs, the Company notified BMS that the Company did not intend to agree to an extension of the research term but rather preferred to restructure or amend the collaboration to reduce or eliminate certain of the Company’s obligations under it.

The Company has agreed to certain restrictions on its ability to work independently of the collaboration, either directly or indirectly through any affiliate or third party, on certain programs that would be competitive with the collaboration programs. Accordingly, the Company is currently in discussions with BMS potentially to restructure or amend the BMS CLA and other related agreements following the expiration of the research term. It is currently uncertain whether a change to the BMS CLA will be agreed and, if agreed, what the specific terms of any such change may be. As a consequence, the Company has not taken into account the impact of such change, if any, on the timing of recognition of the prepaid License Revenue if and when the BMS CLA and other related agreements have been restructured or amended. The final resolution of these discussions may or may not result in material changes to the Company’s collaboration with BMS. The Company agreed, subject to certain conditions, to continue providing limited support of the pre-clinical Collaboration Targets, and any related costs will be reimbursed by BMS during these discussions.

The Company evaluated the BMS CLA and determined that its performance obligations are as follows:

(i)Providing access to its technology and know-how in the field of gene therapy as well as actively contributing to the target selection, the collaboration as a whole, the development during the target selection, the pre-clinical and the clinical phase through participating in joint steering committee and other governing bodies (“License Revenue”);
(ii)Providing pre-clinical Collaboration Target specific, non-clinical, analytical and process development services during the initial research term, which ended on May 21, 2019 (“Collaboration Revenue”); and

7

(iii)Providing clinical and commercial manufacturing services for Collaboration Targets (“Manufacturing Revenue”). To date the Company has not generated any Manufacturing Revenue.

Amounts owed by BMS in relation the collaboration services are as follows:

March 31, 

December 31, 

    

2020

    

2019

(in thousands)

Bristol Myers Squibb

$

258

$

947

Total

$

258

$

947

License Revenue

The Company recognized $0.0 million of License Revenue for the three months ended March 31, 2020, compared to $0.6 million during the same period in 2019 in relation to a $60.1 million upfront payment recorded on May 21, 2015, as well as $15.0 million received in relation to the designation of the second, third and fourth Collaboration Targets in August 2015 (together “Consideration”).

The Company would be entitled to an aggregate $16.5 million in target designation payments upon the selection of the fifth through tenth Collaboration Targets. The Company would also be eligible to receive research, development and regulatory milestone payments of up to $254.0 million for a lead Collaboration Target and up to $217.0 million for each of the other selected Collaboration Targets, if defined milestones are achieved. The Company would include the variable consideration related to the selection of the fifth to tenth Collaboration Target, or any of the milestones, in the transaction price once it is considered probable that including these payments in the transaction price would not result in the reversal of cumulative revenue recognized. The Company would recognize significant amounts of License Revenue for services performed in prior periods if and when the Company considers this probable. Due to the significant uncertainty surrounding the development of gene-therapy product candidates and the dependence on BMS’s performance and decisions, the Company does not currently consider this probable.

Additionally, the Company is eligible to receive net sales-based milestone payments and tiered mid-single to low double-digit royalties on product sales. The royalty term is determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a licensed product in a country and ends on the expiration of the last to expire of specified patents or regulatory exclusivity covering such licensed product in such country or, with a customary royalty reduction, ten years after the first commercial sale if there is no such exclusivity. These revenues will be recognized when performance obligations are satisfied.

The Company recognizes License Revenue over the expected performance period based on its measure of progress towards the completion of certain activities related to its services. The Company determines such progress by comparing activities performed at the end of each reporting period with total activities expected to be performed. The Company estimates total expected activities using a number of unobservable inputs, such as the probability of BMS designating additional targets, the probability of successfully completing each phase and estimated time required to provide services during the various development stages. If available, the Company uses product candidate-specific research and development plans. Alternatively, the Company assumes that completion of the pre-clinical phase requires an average of four years and that clinical development and commercial launch on average require 8.5 years.

8

4

 Fair value measurement

The Company measures certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. U.S. GAAP requires disclosure of methodologies used in determining the reported fair values, and establishes a hierarchy of inputs used when available. The three levels of the fair value hierarchy are described below:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2 - Valuations based on quoted prices for similar assets or liabilities in markets that are not active or models for which the inputs are observable, either directly or indirectly.
Level 3 - Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and are unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amount of cash and cash equivalents, accrued income from the related party, prepaid expenses, other assets, accounts payable, accrued expenses and other current liabilities reflected in the Consolidated balance sheets approximate their fair values due to their short-term maturities.

The following table sets forth the Company’s assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2020, and December 31, 2019:

 

Quoted prices
in active
markets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Total

 

Classification in Consolidated
balance sheets

(in thousands)

At December 31, 2019

Assets:

Cash, cash equivalents and restricted cash

$

380,726

$

$

$

380,726

Cash and cash equivalents; restricted cash

Total assets

$

380,726

$

$

$

380,726

Liabilities:

Derivative financial instruments - related party

3,075

3,075

Total liabilities

$

$

$

3,075

$

3,075

At March 31, 2020

Assets:

Cash, cash equivalents and restricted cash

$

344,950

$

$

$

344,950

Cash and cash equivalents; restricted cash

Total assets

$

344,950

$

$

$

344,950

Liabilities:

Derivative financial instruments - related party

$

$

$

1,004

$

1,004

Total liabilities

$

$

$

1,004

$

1,004

Changes in Level 3 items during the three months ended March 31, 2020, are as follows

Derivative

financial

    

instruments

(in thousands)

Balance at December 31, 2019

$

3,075

Net gains recognized in profit or loss

(2,015)

Currency translation effects

(56)

Balance at March 31, 2020

$

1,004

9

BMS warrants

The Company issued derivative financial instruments related to its collaboration with BMS. The fair value of the BMS derivative financial instruments (“BMS warrants”) as of March 31, 2020, was $1.0 million compared to a fair value of $3.1 million as of December 31, 2019. Changes in the fair value of the BMS warrants are primarily impacted by changes in the Company’s share price, whereby a decrease in share price generally results in a decrease of the fair value. In addition, the Company revised certain unobservable inputs as well as valuation techniques which resulted in a further decrease in fair value of $0.7 million as of March 31, 2020. These BMS warrants are described in more detail below.

The Company granted BMS two warrants:

A warrant allowing BMS to purchase a specific number of the Company’s unregistered ordinary shares such that its ownership will equal 14.9% immediately after such purchase (“1st warrant”). The 1st warrant can be exercised on the later of (i) the date on which the Company receives from BMS the Target Designation Fees (as defined in the BMS CLA) associated with the first six new targets (a total of seven Collaboration Targets); and (ii) the date on which BMS designates the sixth new target (the seventh Collaboration Target).
A warrant allowing BMS to purchase a specific number of the Company’s unregistered ordinary shares such that its ownership will equal 19.9% immediately after such purchase (“2nd warrant” and together with the 1st warrant, the “warrants”). The 2nd warrant can be exercised on the later of (i) the date on which the Company receives from BMS the Target Designation Fees associated with the first nine new targets (a total of ten Collaboration Targets); and (ii) the date on which BMS designates the ninth new target (the tenth Collaboration Target).

Pursuant to the terms of the BMS CLA, the exercise price in respect of each warrant is equal to the greater of (i) the product of (A) $33.84, multiplied by (B) a compounded annual growth rate of 10% (or approximately $53.65 as of March 31, 2020) and (ii) the product of (A) 1.10 and (B) the VWAP for the 20 trading days ending on the date that is five trading days prior to the date of a notice of exercise delivered by BMS.

As of March 31, 2020, BMS had designated a total of four Collaboration Targets, and as such, the warrants were not exercisable. The Company estimated the exercise of warrants to occur within four and six years after the balance sheet date.

The significant unobservable inputs that the Company uses to develop Level 3 fair value measurements include the number of ordinary shares outstanding at the time of BMS’s warrant exercises. The number of such shares outstanding at the time of exercise determines the number of unregistered shares to be issued in connection with the BMS warrants.

The warrants can only be exercised following the occurrence of events contractually defined in the warrant agreements. The probability of the occurrence of these events represent another significant unobservable input used in the calculation of the fair value of the warrants. The Company estimates that the probability of the occurrence of events allowing BMS to exercise the 1st warrant is within a range of 0% to 44% and between 0% to 11% with respect to the 2nd warrant. The arithmetic averages related to these ranges are 24% and 5% for the 1st and 2nd warrant, respectively.

10

5

Right-of-use asset and lease liabilities

The Company’s most significant leases relate to office and laboratory space under the following operating lease agreements:

Lexington, Massachusetts / United States

In July 2013, the Company entered into a lease for a facility in Lexington, Massachusetts, United States. In November 2018, the term was expanded by five years from 2024 to June 2029. The lease is renewable for two subsequent five-year terms. Additionally, the lease was expanded to include an additional 30,655 square feet within the same facility and for the same term. The lease of the expansion space commenced on June 1, 2019.

Amsterdam / The Netherlands

In March 2016, the Company entered into a 16-year lease for a facility in Amsterdam, the Netherlands, and amended this agreement in June 2016. The lease for this facility terminates in February 2032, with an option to extend in increments of five-year periods. The lease contract includes variable lease payments related to annual increases in payments based on a consumer price index.

On December 1, 2017, the Company entered into an agreement to sub-lease three of the seven floors of its Amsterdam facility for a ten-year term ending on December 31, 2027, with an option for the sub-lessee to extend until December 31, 2031. In February 2020, the Company amended the agreement to take back one of the three floors effective March 1, 2020. The fixed lease payments to be received during the remaining term amount to $6.5 million (EUR 5.9 million) as of March 31, 2020.

The components of lease cost were as follows:

    

Three months ended March 31, 

    

2020

    

2019

(in thousands)

Operating lease cost

$

1,290

$

897

Variable lease cost

145

4

Sublease income

(248)

(268)

Total lease cost

$

1,187

$

633

The table below presents the lease-related assets and liabilities recorded on the Consolidated balance sheets.

    

March 31, 

December 31,

2020

2019

(in thousands)

Assets

Operating lease right-of-use assets

$

26,288

26,797

Liabilities

Current

Current operating lease liabilities

5,900

5,865

Non-current

Non-current operating lease liabilities

30,518

31,133

Total lease liabilities

$

36,418

36,998

11

Other information

The weighted-average remaining lease term as of March 31, 2020 is 10.1 years, compared to 10.3 years as of December 31, 2019 and the weighted-average discount rate as of March 31, 2020 is 11.33%, compared to 11.33% as of December 31, 2019. The Company derived the discount rate, adjusted for differences such as in the term and payment patterns, from the Company’s loan from Hercules Capital which was refinanced immediately prior to the January 1, 2019 adoption date in December 2018.

The table below presents supplemental cash flow and non-cash information related to leases.

    

Three months ended March 31, 

    

2020

    

2019

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows for operating leases

$

1,424

$

1,413

Besides the initial recognition of operating right-of-use assets of $19.0 million upon adoption of the new lease standards on January 1, 2019, the Company did not obtain any additional right-of-use assets in exchange for lease obligations in the three months ended March 31, 2020 and March 31, 2019.

Undiscounted cash flows

The table below reconciles the undiscounted cash flows as of March 31, 2020, for each of the first five years and the total of the remaining years to the operating lease liabilities recorded on the Consolidated balance sheet as of March 31, 2020.

Lexington

Amsterdam1)

Other1)

Total

(in thousands)

2020 (nine months remaining)

$

2,535

$

1,855

$

139

$

4,529

2021

3,455

1,855

139

5,449

2022

3,552

1,855

5,407

2023

3,650

1,855

5,505

2024

4,146

1,855

6,001

Thereafter

20,745

12,833

33,578

Total lease payments

$

38,083

$

22,108

$

278

$

60,469

Less: amount of lease payments representing interest payments

(14,400)

(9,639)

(12)

(24,051)

Present value of lease payments

23,683

12,469

266

36,418

Less: current operating lease liabilities

(3,383)

(2,319)

(198)

(5,900)

Non-current operating lease liabilities

$

20,300

$

10,150

$

68

$

30,518

(1) Payments are due in EUR and have been translated at the foreign exchange rate as of March 31, 2020, of $1.10/ €1.00).

12

6

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities include the following items:

March 31, 

December 31, 

    

2020

    

2019

(in thousands)

Accruals for services provided by vendors-not yet billed

$

5,973

$

5,425

Personnel related accruals and liabilities

3,534

7,032

Total

$

9,507

$

12,457

7

Long-term debt

On June 14, 2013, the Company entered into a venture debt loan facility with Hercules, which was amended and restated on June 26, 2014, and again on May 6, 2016 (“2016 Amended Facility”). On December 6, 2018, the Company signed an amendment to the Second Amended and Restated Loan and Security Agreement that both refinanced the existing $20 million 2016 Amended Facility and provided an additional commitment of $30 million (of which $15 million is subject to the discretion of Hercules) (the “2018 Amended Facility”). At signing, the Company drew down an additional $15 million for a total of $35 million outstanding. The Company has the right to draw another $15 million through June 30, 2020 subject to the terms of the 2018 Amended Facility. The 2018 Amended Facility extended the loan’s maturity date from May 1, 2020 until June 1, 2023. The interest-only period was initially extended from November 2018 to January 1, 2021. The interest-only period was further extended to January 1, 2022 as a result of meeting the provision in the 2018 Amended Facility of raising more than $90.0 million in equity financing in September 2019. The Company is required to repay the facility in equal monthly installments of principal and interest between the end of the interest-only period and the maturity date. The interest rate continues to be adjustable and is the greater of (i) 8.85% or (ii) 8.85% plus the prime rate less 5.50% per annum.

Under the 2018 Amended Facility, the Company paid a facility fee of 0.50% of the $35 million outstanding as of signing and owes a back-end fee of 4.95% of the outstanding debt. In addition, in May 2020 the Company owes a back-end fee of 4.85% of $20 million, which is the amount of debt raised under the 2016 Amended Facility.

The amortized cost (including interest due presented as part of accrued expenses and other current liabilities) of the 2018 Amended Facility was $36.5 million as of March 31, 2020, compared to $36.3 million as of December 31, 2019, and is recorded net of discount and debt issuance costs. The foreign currency loss on the loan in the three months ended March 31, 2020, was $0.7 million compared to a foreign currency loss of $0.7 million during the same period in 2019.

Interest expense associated with the 2018 Amended Facility during the three months ended March 31, 2020 was $0.9 million compared to $0.9 million during the same period in 2019.

As a covenant in the 2018 Amended Facility, the Company has periodic reporting requirements and is required to keep a minimum cash balance deposited in bank accounts in the United States, equivalent to the lesser of 65% of the outstanding balance of principal due or 100% of worldwide cash and cash equivalents. This restriction on cash and cash equivalents only relates to the location of the cash and cash equivalents, and such cash and cash equivalents can be used at the discretion of the Company. In combination with other covenants, the 2018 Amended Facility restricts the Company’s ability to, among other things, incur future indebtedness and obtain additional debt financing, to make investments in securities or in other companies, to transfer assets, to perform certain corporate changes, to make loans to employees, officers and directors, and to make dividend payments and other distributions. The Company secured the facilities by directly or indirectly pledging its total assets of $414.2 million with the exception of $136.4 million of cash and cash equivalents and other current assets held by uniQure N.V.

The 2018 Amended Facility contains provisions that include the occurrence of a material adverse effect, as defined therein, which would entitle Hercules to declare all principal, interest and other amounts owed by the Company immediately due and payable. As of March 31, 2020, the Company was in compliance with all covenants and provisions.

13

8Share-based compensation

The Company’s share-based compensation plans include the 2014 Amended and Restated Share Option Plan (the “2014 Plan”) and inducement grants under Rule 5653(c)(4) of the Nasdaq Global Select Market with terms similar to the 2014 Plan (together the “2014 Plans”). At the annual general meeting of shareholders in June 2018, the Company’s shareholders approved amendments of the 2014 Plan, increasing the shares authorized for issuance by 3,000,000 to a total of 8,601,471.

a)2014 Plans

Share-based compensation expense recognized by classification included in the Consolidated statements of operations and comprehensive loss in relation to the 2014 Plans was as follows:

    

Three months ended March 31, 

2020

2019

(in thousands)

Research and development

$

2,382

$

1,980

Selling, general and administrative

1,958

2,298

Total

$

4,340

$

4,278

Share-based compensation expense recognized by award type was as follows:

Three months ended March 31, 

2020

2019

(in thousands)

Award type

Share options

$

2,208

$

2,076

Restricted share units (“RSUs”)

1,444

930

Performance share units (“PSUs”)

688

1,272

Total

$

4,340

$

4,278

As of March 31, 2020, the unrecognized share-based compensation expense related to unvested awards under the 2014 Plans were:

    

Unrecognized

  

Weighted average

    

share-based

    

remaining

compensation

period for

expense

     recognition     

(in thousands)

(in years)

Award type

Share options

$

28,880

3.10

Restricted share units

16,746

2.40

Performance share units

4,278

1.58

Total

$

49,904

2.73

The Company satisfies the exercise of share options and vesting of RSUs and PSUs through newly issued ordinary shares.

14

Share options

The following table summarizes option activity for the three months ended March 31, 2020:

Options

Number of

Weighted average

    

ordinary shares

    

exercise price

Outstanding at December 31, 2019

2,683,104

$

21.29

Granted

393,302

$

51.81

Forfeited

(8,214)

$

40.82

Exercised

(64,762)

$

14.38

Outstanding at March 31, 2020

3,003,430

$

25.38

Thereof, fully vested and exercisable at March 31, 2020

1,528,351

$

15.75

Thereof, outstanding and expected to vest at March 31, 2020

1,475,079

$

35.36

Total weighted average grant date fair value of options issued during the period (in $ millions)

$

11.5

Proceeds from option sales during the period (in $ millions)

$

0.9

Share options are priced on the date of grant and, except for certain grants made to non-executive directors, vest over a period of four years, the first 25% vests after one year from the grant date and the remainder vests in equal quarterly installments, over years two, three and four. Any options that vest must be exercised by the tenth anniversary of the grant date.

The fair value of each option issued is estimated at the respective grant date using the Hull & White option pricing model with the following weighted-average assumptions:

Three months ended March 31, 

Assumptions

    

2020

    

2019

Expected volatility

70%

75%

Expected terms

10 years

10 years

Risk free interest rate

1.44%

2.80% - 2.87%

Expected dividend yield

0%

0%

Restricted share units (“RSUs”)

The following table summarizes the RSUs activity for the three months ended March 31, 2020:

RSU

    

    

Weighted average

Number of

grant-date fair

ordinary shares

value

Non-vested at December 31, 2019

370,830

$

28.62

Granted

216,749

$

51.81

Vested

(166,974)

$

18.90

Forfeited

(1,535)

$

48.07

Non-vested at March 31, 2020

419,070

$

44.41

Total weighted average grant date fair value of RSUs granted during the period (in $ millions)

$

11.2

RSUs vest over one to three years. RSUs granted to non-executive directors will vest one year from the date of grant.

15

Performance share units (“PSUs”)

The following table summarizes the PSUs activity for the three months ended March 31, 2020:

PSU

    

    

Weighted average

Number of

grant-date fair

ordinary shares

value

Non-vested at December 31, 2019

479,422

$

21.17

Granted

91,003

$

57.56

Vested

(354,105)

$

17.44

Non-vested at March 31, 2020

216,320

$

42.58

Total weighted average grant date fair value of PSUs granted during the period (in $ millions)

$

5.2

In January 2019, the Company awarded PSUs to its executives and other members of senior management. These PSUs were earned as of January 2020 based on the Board’s assessment of the level of achievement of agreed upon performance targets through December 31, 2019. PSUs vest after three years.

b)Employee Share Purchase Plan (“ESPP”)

In June 2018, the Company’s shareholders adopted and approved an ESPP allowing the Company to issue up to 150,000 ordinary shares. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986. Under the ESPP, employees are eligible to purchase ordinary shares through payroll deductions, subject to any plan limitations. The purchase price of the ordinary shares on each purchase date is equal to 85% of the lower of the closing market price on the offering date or the closing market price on the purchase date of each three-month offering period. During the three months ended March 31, 2020, 1,801 ordinary shares were issued under the ESPP compared to 3,126 during the same period in 2019. As of March 31, 2020, a total of 136,406 ordinary shares remains available for issuance under the ESPP plan compared to a total of 144,283 as of March 31, 2019.

9

Income taxes

Deferred tax assets and deferred tax liabilities are recognized based on the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities, using current statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets.

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10Basic and diluted earnings per share

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding, assuming conversion of all potentially dilutive ordinary shares. As the Company has incurred a loss, all potentially dilutive ordinary shares would have an antidilutive effect, if converted, and thus have been excluded from the computation of loss per share.

The potentially dilutive ordinary shares are summarized below:

March 31, 

    

2020

    

2019

(ordinary shares)

BMS warrants

10,262,500

8,830,000

Stock options under 2014 Plans

3,003,430

2,969,444

Non-vested RSUs and earned PSUs

635,390

864,942

Stock options under previous option plan

14,000

14,000

Employee share purchase plan

681

471

Total potential dilutive ordinary shares

13,916,001

12,678,857

11Subsequent events

None.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and the accompanying notes thereto and other disclosures included in this Quarterly Report on Form 10-Q, including the disclosures under Part II, Item 1A “Risk Factors”, and our audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission ( the “SEC”), on March 2, 2020. Our unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and unless otherwise indicated are presented in U.S. dollars.

Overview

We are a leader in the field of gene therapy, seeking to develop single treatments with potentially curative results for patients suffering from genetic and other devastating diseases. We are advancing a focused pipeline of innovative gene therapies, including product candidates for the treatment of hemophilia and Huntington’s disease. We believe our validated technology platform and manufacturing capabilities provide us distinct competitive advantages, including the potential to reduce development risk, cost and time to market. We produce our AAV-based gene therapies in our own facilities with a proprietary, commercial-scale, current good manufacturing practices (“cGMP”)-compliant, manufacturing process. We believe our Lexington, Massachusetts-based facility is one of the world's leading, most versatile, gene therapy manufacturing facilities. 

Business Developments

Below is a summary of our recent significant business developments:

Hemophilia B program – Etranacogene dezaparvovec (AMT-061)

Etranacogene dezaparvovec is our lead gene therapy candidate and includes an AAV5 vector incorporating the FIX-Padua variant. We are currently conducting a pivotal study in patients with severe and moderately-severe hemophilia B. Etranacogene dezaparvovec has been granted Breakthrough Therapy Designation by the United States Food and Drug Administration (“FDA”) and access to the PRIME initiative by the European Medicines Agency (“EMA”).

In June 2018, we initiated our Phase III HOPE-B pivotal trial of etranacogene dezaparvovec. The trial is a multinational, multi-center, open-label, single-arm study to evaluate the safety and efficacy of etranacogene dezaparvovec. After a six-month lead-in period, patients received a single intravenous administration of etranacogene dezaparvovec. The primary endpoint of the study is based on the FIX activity level achieved following the administration of etranacogene dezaparvovec, and the secondary endpoints are measuring annualized FIX replacement therapy usage, annualized bleed rates and safety. Patients enrolled in the HOPE-B trial were tested for the presence of pre-existing neutralizing antibodies to AAV5 but not excluded from the trial based on their titers.

In March 2020, we completed dosing of 54 patients in the HOPE-B trial. The targeted number of patients to be dosed per the clinical trial protocol was 50. As set forth below, we have implemented and continue to implement various measures to allow us to closely monitor the trial within the guidance provided by the FDA regarding the impact of the COVID-19 coronavirus pandemic (“COVID-19”) in order to minimize any risk or disruption in patient follow-up visits.

In August 2018, we initiated a Phase IIb dose-confirmatory study of etranacogene dezaparvovec. In December 2019, we presented 52-week follow-up data from the study showing that all three patients had stabilized and sustained FIX activity at therapeutic levels after a one-time administration of etranacogene dezaparvovec. Mean FIX activity for the three patients at 52 weeks after administration was 41% of normal, with the first patient achieving FIX activity of 50% of normal, the second patient achieving FIX activity of 31% of normal and the third patient achieving FIX activity of 41% of normal. The second and third patients had previously screen-failed and were excluded from another gene therapy study due to pre-existing neutralizing antibodies to a different AAV vector.

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Huntington’s disease program (AMT-130)

AMT-130 is our novel gene therapy candidate for the treatment of Huntington’s disease. AMT-130 utilizes our miQURETM proprietary, gene-silencing platform and incorporates an AAV vector carrying a miRNA specifically designed to silence the huntingtin gene and the potentially highly toxic exon 1 protein fragment. AMT-130 has received orphan drug and fast track designations from the FDA and Orphan Medicinal Product Designation from the EMA.

In January 2019, our IND application for AMT-130 was cleared by the FDA. The Phase I/II protocol is a randomized, imitation surgery-controlled, double-blinded study conducted at three surgical sites, and multiple referring, non-surgical sites in the U.S. The primary objective of the study is to evaluate the safety, tolerability and efficacy of AMT-130 at two doses. In the fourth quarter of 2019, we initiated patient screening. Additionally, cGMP clinical material has been manufactured at our Lexington facility and has been released for shipment.

In March 2020, we announced the enrollment of the first two patients in our Phase I/II clinical study after both patients had successfully met all screening and eligibility criteria. These patients were scheduled to have their procedures at the end of March 2020. Due to the expanding impact of COVID-19, these procedures have been temporarily postponed. The decision to postpone treatment in the trial follows the COVID-19 related state of emergency declarations in the United States, where the trial is taking place. We are following all federal and local regulations including the FDA guidance on clinical trial conduct during the COVID-19 pandemic. We will continue our work to resume treatment in the Phase I/II trial as soon as it is clinically appropriate.

COVID-19 measures

In December 2019, COVID-19, a novel coronavirus disease, was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

Starting March 2020, we implemented measures to address the impact of COVID-19 on our business. As of March 13, 2020, we mandated a work-from-home policy for all non-essential employees at our Amsterdam and Lexington facilities. We supported our employees in setting up a healthy and efficient remote working environment. In conjunction with implementing this policy, we accelerated the roll-out of a number of information technology security measures such as dual factor authentication, to address the increased risks that we might be exposed to in conjunction with our employees working remotely. In addition, we conducted awareness training around cybersecurity for critical functions involved in making payments to vendors such as finance and supply chain.

As a biopharma research and development company, we are deemed to provide essential services under the “stay at home” advisory that was issued by the Governor of Massachusetts on March 23, 2020 and we are therefore maintaining our manufacturing operations at our Lexington site. We adapted to operate our laboratories at our Amsterdam site to comply with social distancing rules and to ensure the health and wellbeing of our employees under the current circumstances. We have discouraged our employees from using public transport and are accommodating them by arranging for alternative means of transport.

We conduct daily status video-meetings of local management at our two sites as well as daily leadership-team video meetings to implement these measures and to monitor the evolving situation. In addition, we are informing our employees through daily newsletter and have organized virtual local and global townhalls to share information and provide direction and support to our employees.

We have adapted our ongoing clinical research activities based on the directions and flexibility provided by the  “FDA Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 Pandemic” issued on March 18, 2020 in an attempt to minimize any risk, disruption or delay in either patient dosing or follow-up visits.

The broader implications of COVID-19 on our results of operations and overall financial performance remain uncertain. The COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, and our third-party business partners conduct business. While we have experienced disruptions in our operations as a result of COVID-19, we are adapting to the current environment to minimize the effect to our business. However,  we may experience more pronounced disruptions in our operations in the future.

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We believe our cash and cash equivalents as of March 31, 2020 will enable us to fund our operating expenses including our debt repayment obligations as they become due and capital expenditure requirements into 2022. We expect to continue to incur losses and to generate negative cash flows. We have no firm sources of additional funding. Until such time, if ever, as we can generate substantial cash flows from successfully commercializing our product candidates, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. Similar to the other risk factors pertinent to our business, COVID-19 might unfavorably impact our ability to generate such additional funding.

BMS collaboration

We entered into a collaboration and license agreement with BMS in May 2015. We have been supporting BMS in the discovery, non-clinical, analytical and process development efforts of Collaboration Targets. For any Collaboration Targets that are advanced, we will be responsible for manufacturing of clinical and commercial supplies using our vector technologies and industrial, proprietary insect-cell based manufacturing platform. BMS has been reimbursing us for all our research and development costs in support of the collaboration during the initial research term. BMS will lead the development, regulatory and commercial activities for all four currently active Collaboration Targets as well as additional Collaboration Targets that may be advanced.

In February 2019, BMS requested a one-year extension of the research term. In April 2019, following an assessment of the progress of this collaboration and our expanding proprietary programs, we notified BMS that we did not intend to agree to an extension of the research term. Accordingly, the initial four-year research term under the collaboration terminated on May 21, 2019. We are currently in discussions with BMS potentially to restructure or amend the collaboration and license agreement and other related agreements following the expiration of the research term. The final resolution of these discussions may or may not result in material changes to our collaboration with BMS.

Financial Overview

Key components of our results of operations include the following:

Three months ended March 31, 

    

2020

    

2019

(in thousands)

Total revenues

$

104

$

1,136

Research and development expenses

(26,013)

(20,537)

Selling, general and administrative expenses

(9,072)

(8,067)

Net loss

(27,999)

(27,772)

As of March 31, 2020, and December 31, 2019, we had cash and cash equivalents of $342.0 million and $377.8 million, respectively. We had a net loss of $28.0 million in the three months ended March 31, 2020, compared to $27.8 million for the same period in 2019. As of March 31, 2020, and December 31, 2019, we had accumulated deficits of $687.7 million and $659.7 million, respectively. We anticipate that our loss from operations will increase in the future as we:

Build-out our commercial infrastructure and seek marketing approval for any product candidates (including etranacogene dezaparvovec) that successfully complete clinical trials;
Advance the clinical development of AMT-130 for our Huntington’s disease gene therapy program;
continue to build-out our clinical, medical and regulatory capabilities;
Advance multiple research programs related to gene therapy candidates targeting liver-directed and central nervous system (“CNS”) diseases;
Continue to expand, enhance and optimize our technology platform, including our manufacturing capabilities, next-generation viral vectors and promoters, and other enabling technologies;
Acquire or in-license rights to new therapeutic targets or product candidates; and
Maintain, expand and protect our intellectual property portfolio, including in-licensing additional intellectual property rights from third parties.

See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.

20

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (“SEC”) we make assumptions, judgments and estimates that can have a significant impact on our net income/loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and judgments, including those related to the implementation of ASC 842 Leases, recognition of License Revenue in accordance with ASC 606, BMS warrants, share-based payments and corporate income taxes related to valuation allowance. We base our assumptions, judgments and estimates on historical experience and various other factors 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 clear from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the three months ended March 31, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 2, 2020.

We believe that the assumptions, judgments and estimates involved in the recognition of License Revenue in accordance with ASC 606, BMS warrants, share-based payments, corporate income taxes related to valuation allowance and accounting for operating leases under ASC 842 to be our critical accounting policies.

Revenues

We recognize Collaboration Revenues associated with pre-clinical Collaboration Target specific, non-clinical, analytical and process development activities that are reimbursable by BMS under our collaboration agreement during the initial research term (that ended on May 21, 2019). We are currently in discussions with BMS potentially to restructure the collaboration and license agreement and other related agreements following the expiration of the research term. During these discussions, which may be terminated by us or BMS at any time, we have agreed, subject to certain conditions, to continue providing limited support of the pre-clinical Collaboration Targets, and any related costs will be reimbursed by BMS.

We recognize License Revenues associated with the amortization of the non-refundable upfront payment, target designation fees and research and development milestone payments we received or might receive from BMS. The timing of these cash payments may differ from the recognition of revenue, as revenue is deferred and recognized over the duration of the performance period. We recognize other revenue, such as sales milestone payments, when earned.

Research and development expenses

We expense research and development costs (“R&D”) as incurred. Our R&D expenses generally consist of costs incurred for the development of our target candidates, which include:

Employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
Costs incurred for laboratory research, preclinical and nonclinical studies, clinical trials, statistical analysis and report writing, and regulatory compliance costs incurred with clinical research organizations and other third-party vendors;
Costs incurred to conduct consistency and comparability studies;
Costs incurred for the development and improvement of our manufacturing processes and methods;
Costs associated with our research activities for our next-generation vector and promoter platform; and
Facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

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Our research and development expenses primarily consist of costs incurred for the research and development of our product candidates, which include:

Etranacogene dezaparvovec (hemophilia B). We have incurred costs related to the research, development and production of etranacogene dezaparvovec for the treatment of hemophilia B. In June 2018, we initiated a pivotal trial. We completed enrollment of this pivotal trial in September 2019 and in March 2020 we achieved our target patient dosing;
AMT-130 (Huntington’s disease). We have incurred costs related to preclinical and nonclinical studies of AMT-130 and started incurring costs related to our Phase I/II trial in February 2019;
Preclinical research programs. We incur costs related to the research of multiple preclinical gene therapy product candidates with the potential to treat certain rare and other serious medical conditions; and
Technology platform development and other related research. We incur significant research and development costs related to manufacturing and other enabling technologies that are applicable across all our programs.

Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including manufacturing campaigns, regulatory submissions and enrollment of patients in clinical trials. The successful development of our product candidates is highly uncertain. Estimating the nature, timing or cost of the development of any of our product candidates involves considerable judgement due to numerous risks and uncertainties associated with developing gene therapies, including the uncertainty of:

the scope, rate of progress and expense of our research and development activities;