0001564590-21-024947.txt : 20210506 0001564590-21-024947.hdr.sgml : 20210506 20210506160636 ACCESSION NUMBER: 0001564590-21-024947 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210506 DATE AS OF CHANGE: 20210506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Intellia Therapeutics, Inc. CENTRAL INDEX KEY: 0001652130 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 364785571 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37766 FILM NUMBER: 21897721 BUSINESS ADDRESS: STREET 1: 40 ERIE STREET STREET 2: SUITE 130 CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 857-285-6200 MAIL ADDRESS: STREET 1: 40 ERIE STREET STREET 2: SUITE 130 CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 ntla-10q_20210331.htm 10-Q ntla-10q_20210331.htm
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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 March 31, 2021

OR

 

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

For the transition period from            to           

Commission File Number: 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 April 30, 2021: 68,153,597 shares.

 

 


 

 

PART I - FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (unaudited)

 

 

 

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

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

4

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 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

16

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

27

 

 

Item 4. Controls and Procedures.

27

 

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

28

 

 

Item 1A. Risk Factors

28

 

 

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

73

 

Item 6. Exhibits

74

 

 

Signatures

75

 

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) 

 

 

 

March 31,

2021

 

 

December 31,

2020

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,538

 

 

$

160,020

 

Marketable securities

 

 

442,525

 

 

 

437,351

 

Accounts receivable

 

 

953

 

 

 

2,130

 

Prepaid expenses and other current assets

 

 

16,068

 

 

 

17,016

 

Total current assets

 

 

601,084

 

 

 

616,517

 

Marketable securities - noncurrent

 

 

16,735

 

 

 

-

 

Property and equipment, net

 

 

16,157

 

 

 

15,943

 

Operating lease right-of-use assets

 

 

77,912

 

 

 

39,114

 

Other assets

 

 

5,003

 

 

 

4,748

 

Total Assets

 

$

716,891

 

 

$

676,322

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,688

 

 

$

10,460

 

Accrued expenses

 

 

21,215

 

 

 

25,554

 

Current portion of operating lease liability

 

 

8,255

 

 

 

5,696

 

Current portion of deferred revenue

 

 

22,544

 

 

 

22,544

 

Total current liabilities

 

 

60,702

 

 

 

64,254

 

Deferred revenue, net of current portion

 

 

45,829

 

 

 

51,387

 

Long-term operating lease liability

 

 

64,487

 

 

 

33,609

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

  67,890,334 and 66,234,056 shares issued and outstanding at

   March 31, 2021 and December 31, 2020, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

1,027,192

 

 

 

962,173

 

Accumulated other comprehensive (loss) income

 

 

(12

)

 

 

1

 

Accumulated deficit

 

 

(481,314

)

 

 

(435,109

)

Total stockholders’ equity

 

 

545,873

 

 

 

527,072

 

Total Liabilities and Stockholders’ Equity

 

$

716,891

 

 

$

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 March 31,

 

 

 

 

2021

 

 

2020

 

 

Collaboration revenue

 

$

6,445

 

 

$

12,916

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

 

39,276

 

 

 

34,650

 

 

General and administrative

 

 

13,594

 

 

 

11,314

 

 

Total operating expenses

 

 

52,870

 

 

 

45,964

 

 

Operating loss

 

 

(46,425

)

 

 

(33,048

)

 

Interest income

 

 

220

 

 

 

1,242

 

 

Net loss

 

$

(46,205

)

 

$

(31,806

)

 

Net loss per share, basic and diluted

 

$

(0.69

)

 

$

(0.63

)

 

Weighted average shares outstanding, basic and

   diluted

 

 

67,183

 

 

 

50,491

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(13

)

 

 

112

 

 

Comprehensive loss

 

$

(46,218

)

 

$

(31,694

)

 

 

See notes to condensed consolidated financial statements.

4


INTELLIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(46,205

)

 

$

(31,806

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,591

 

 

 

1,541

 

Equity-based compensation

 

 

6,424

 

 

 

4,157

 

Amortization/accretion of investment premiums/discounts

 

 

1,209

 

 

 

(200

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,177

 

 

 

(8,748

)

Prepaid expenses and other current assets

 

 

(5,448

)

 

 

(448

)

Operating right-of-use assets

 

 

1,596

 

 

 

1,566

 

Other assets

 

 

(255

)

 

 

97

 

Accounts payable

 

 

(917

)

 

 

(370

)

Accrued expenses

 

 

(4,588

)

 

 

177

 

Deferred revenue

 

 

(5,558

)

 

 

(3,151

)

Operating lease liabilities

 

 

(1,402

)

 

 

(1,360

)

Net cash used in operating activities

 

 

(52,376

)

 

 

(38,545

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,412

)

 

 

(845

)

Purchases of marketable securities

 

 

(148,330

)

 

 

(31,207

)

Maturities of marketable securities

 

 

125,200

 

 

 

89,500

 

Net cash (used in) provided by investing activities

 

 

(25,542

)

 

 

57,448

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

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

   net of issuance costs

 

 

45,255

 

 

 

4,528

 

Proceeds from options exercised

 

 

13,340

 

 

 

336

 

Net cash provided by financing activities

 

 

58,595

 

 

 

4,864

 

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

   equivalents

 

 

(19,323

)

 

 

23,767

 

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

 

$

145,283

 

 

$

80,993

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash and cash

   equivalents to condensed consolidated balance sheet:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,538

 

 

$

80,993

 

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

   and other assets

 

 

3,745

 

 

 

-

 

Total cash and cash equivalents and restricted cash and cash equivalents

 

$

145,283

 

 

$

80,993

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Purchases of property and equipment unpaid at period end

 

$

901

 

 

$

750

 

Right-of-use assets acquired under operating leases

 

 

40,394

 

 

 

7,347

 

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

 

 

-

 

 

 

551

 

 

 

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 proprietary, potentially curative CRISPR/Cas9-based therapeutics. 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”). The Company believes the breakthrough CRISPR/Cas9 technology has the potential to transform medicine by both producing therapeutics that permanently edit and/or correct disease-associated genes in the human body with a single dose of treatment and creating enhanced engineered cell therapies. The Company’s combination of deep scientific, technical and clinical development experience, and proprietary innovations in genome editing and delivery technologies, along with its intellectual property (“IP”) portfolio, puts it in a position to unlock broad therapeutic applications of the CRISPR/Cas9 technology and create new classes of therapeutic products.

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in 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 our employees, collaborators and vendors, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its consolidated results of operations or financial position.

The effects of material revisions in estimates are reflected in the condensed consolidated financial statements prospectively from the date of the change in estimate.

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 March 31, 2021, the Company has raised an aggregate of $1,165.3 million to fund its operations, of which $275.0 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. The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2021, as well as research and cost reimbursement funding from its collaboration agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”) (see Note 7), 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.

6


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 three months ended March 31, 2021, other than as noted below.

Recent Accounting Pronouncements – Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The 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 March 31, 2021 and December 31, 2020 at net book value:

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Estimated Fair

Value

 

 

 

(In thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

$

204,473

 

 

$

49

 

 

$

(4

)

 

$

204,518

 

Financial institution debt securities

 

 

169,979

 

 

 

7

 

 

 

(45

)

 

 

169,941

 

Corporate debt securities

 

 

51,311

 

 

 

1

 

 

 

(13

)

 

 

51,299

 

Other asset-backed securities

 

 

33,509

 

 

 

1

 

 

 

(8

)

 

 

33,502

 

Total

 

$

459,272

 

 

$

58

 

 

$

(70

)

 

$

459,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 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 three months ended March 31, 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 March 31, 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 March 31, 2021 and December 31, 2020, the Company did not hold any investments that matured beyond five years of the balance sheet date.

7


4.

Fair Value Measurements

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

As of March 31, 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 March 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents and restricted cash equivalents

 

$

143,129

 

 

$

143,129

 

 

$

-

 

 

$

-

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and other government securities

 

 

204,518

 

 

 

181,118

 

 

 

23,400

 

 

 

-

 

Financial institution debt securities

 

 

169,941

 

 

 

-

 

 

 

169,941

 

 

 

-

 

Corporate debt securities

 

 

51,299

 

 

 

-

 

 

 

51,299

 

 

 

-

 

Other asset-backed securities

 

 

33,502

 

 

 

-

 

 

 

33,502

 

 

 

-

 

Total marketable securities

 

 

459,260

 

 

 

181,118

 

 

 

278,142

 

 

 

-

 

Total

 

$

602,389

 

 

$

324,247

 

 

$

278,142

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 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:

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Accrued research and development

 

$

10,010

 

 

$

11,008

 

Employee compensation and benefits

 

 

6,244

 

 

 

10,920

 

Accrued legal and professional expenses

 

 

2,833

 

 

 

1,876

 

Accrued other

 

 

2,128

 

 

 

1,750

 

Total accrued expenses

 

$

21,215

 

 

$

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, which seeks to develop a chimeric antigen receptor T (“CAR-T”) product directed at CD19. As instructed by the panel, the parties have been negotiating the terms of the Caribou Award, including Caribou’s future payments to the Company.

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 March 31, 2021, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

7.

Collaborations

To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, the Company has formed, and intends to seek other opportunities to form, strategic alliances with collaborators who can augment its leadership in CRISPR/Cas9 therapeutic development. As of March 31, 2021, the Company’s accounts receivable and contract liabilities were related to the Company’s collaboration with Regeneron. As of March 31, 2020, the Company’s accounts receivable and contract liabilities were related to the Company’s collaborations with Regeneron and Novartis Institutes for BioMedical Research (“Novartis”).

9


The following table presents changes in the Company’s accounts receivable and contract liabilities during the three months ended March 31, 2021 and 2020 (in thousands):

 

 

 

Balance at

Beginning of

Period

 

 

Additions

 

 

Deductions

 

 

Balance at End

of Period

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

2,130

 

 

$

953

 

 

$

(2,130

)

 

$

953

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

73,931

 

 

$

-

 

 

$

(5,558

)

 

$

68,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

Beginning of

Period

 

 

Additions

 

 

Deductions

 

 

Balance at End

of Period

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

4,620

 

 

$

9,765

 

 

$

(1,017

)

 

$

13,368

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

28,810

 

 

$

-

 

 

$

(3,151

)

 

$

25,659

 

During the three months ended March 31, 2021 and 2020, the Company recognized the following revenues as a result of changes in the contract liability balance (in thousands):

 

 

Three Months Ended March 31,

 

Revenue recognized in the period from:

 

 

2021

 

 

 

2020

 

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

 

$

5,558

 

 

$

3,151

 

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 amyloidosis (“ATTR”), which is subject to a co-development and co-promotion agreement between the Company and Regeneron (the “ATTR Co/Co”).

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 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 additional in 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.

10


Revenue Recognition – Collaboration Revenue. Through March 31, 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 primarily for research and development services under the ATTR Co/Co agreement. Through March 31, 2021, the Company has recognized $129.7 million of collaboration revenue under all arrangements, including $6.4 million and $7.9 million during the three months ended March 31, 2021 and 2020, respectively, in the condensed consolidated statements of operations and comprehensive loss. This includes $0.9 million and $4.8 million during the three months ended March 31, 2021 and 2020, respectively, primarily representing payments due from Regeneron pursuant to the ATTR Co/Co agreement.

As of March 31, 2021, there was approximately $68.4 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 March 31, 2021 and December 31, 2020, the Company had accounts receivable of $1.0 million and $2.1 million, respectively, and deferred revenue of $68.4 million and $73.9 million, 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 (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. Since December 31, 2020, there have been no 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.

Revenue Recognition – Milestone. During the three months ended March 31, 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 months ended March 31, 2021 or 2020. The Company is eligible to receive additional downstream success-based milestones and royalties.

As of March 31, 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. As of March 31, 2021 the Company determined, in accordance with Accounting Standards Codification 842, “Leases (Topic 842)”, that the commencement date of the lease has 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. In addition, the Company had prepaid approximately $5.6 million in lease payments as of March 31, 2021 under the terms of this lease, which are included in the recognized right-of-use asset. 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

11


term of the lease. These restricted cash equivalents are reported in “Other Assets” in the Company’s condensed consolidated balance sheet. 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 March 31, 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 March 31, 2021, there were 2,890,540 shares available for future issuance. The number of shares reserved for issuance under the 2015 Plan shall be cumulatively increased by four percent of the number of shares of stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares of stock as determined by the board of directors.

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

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Research and development

 

$

3,491

 

 

$

2,160

 

General and administrative

 

 

2,933

 

 

 

1,997

 

Total

 

$

6,424

 

 

$

4,157

 

 

Restricted Stock

Restricted stock is measured at fair value based on the quoted price of the Company’s common stock.

The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2021:

 

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair Value

per Share

 

Unvested restricted stock as of December 31, 2020

 

 

193,936

 

 

$

23.98

 

Granted

 

 

259,839

 

 

 

57.71

 

Vested

 

 

-

 

 

 

-

 

Cancelled

 

 

(11,035

)

 

 

27.59

 

Unvested restricted stock as of March 31, 2021

 

 

442,740

 

 

$

43.69

 

 

In March 2021, the Company granted 259,839 RSUs with a service condition to executive and non-executive employees as part of their annual grant, which vest over a period of four years. The weighted average grant date fair value of these RSUs was $57.71. The vesting start date for these RSUs is January 1, 2021.

 

12


 

Included in the unvested restricted stock as of March 31, 2021 are 107,360 RSUs that include a performance condition in addition to a service condition. The RSUs vest over a period of three years and are subject to accelerated vesting based on the Company’s programs achieving certain development milestones before December 1, 2022. The fair value of the RSUs at date of grant was $15.05. There has been no additional vesting of these shares in the three months ended March 31, 2021.

 

As of March 31, 2021, there was $17.8 million of unrecognized equity-based compensation expense related to restricted stock that is expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 3.6 years. 

Stock Options

The weighted average grant date fair value of options, estimated as of the grant date using the Black-Scholes option pricing model, was $36.64 and $7.96 per option for those options granted during the three months ended March 31, 2021 and 2020, respectively. The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the three months ended March 31, 2021 and 2020 was $54.8 million and $0.3 million, respectively. Weighted average assumptions used to apply this pricing model were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Risk-free interest rate

 

0.9%

 

 

1.0%

 

Expected life of options

 

6.0 years

 

 

6.0 years

 

Expected volatility of underlying stock

 

72.0%

 

 

66.7%

 

Expected dividend yield

 

0.0%

 

 

0.0%

 

 

Risk-free Interest Rate.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with maturities approximately equal to the option’s expected term.

 

Expected Dividend Yield.  The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

 

Expected Volatility.  The expected volatility was derived from a blend of the Company’s historical volatility and an average of the historical stock volatilities of several peer companies within the Company’s industry, both over a period equivalent to the expected term of the stock option grants.

 

Expected Term.  The expected term represents the period that stock option awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term.

13


The Company uses the market closing price of its common stock as reported on the Nasdaq Global Select Market to determine the fair value of the shares of common stock underlying stock options. The following is a summary of stock option activity for the three months ended March 31, 2021: 

 

 

 

Number of

Options

 

 

Weighted

Average

Exercise

Price per

Share

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

 

 

 

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Outstanding at December 31, 2020

 

 

6,977,440

 

 

$

15.43

 

 

 

 

 

 

 

 

 

Granted

 

 

1,645,823

 

 

 

57.94

 

 

 

 

 

 

 

 

 

Exercised

 

 

(1,014,569

)

 

 

13.15

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(129,393

)

 

 

20.71

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

7,479,301

 

 

$

25.00

 

 

 

8.25

 

 

$

413,258

 

Exercisable at March 31, 2021

 

 

2,734,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2021, there was $86.9 million of unrecognized compensation cost related to stock options that have not yet vested. These costs are expected to be recognized over a weighted average remaining vesting period of 3.2 years.

 

10.

Loss Per Share

The Company calculates basic loss per share by dividing net loss for each respective period by the weighted average number of common shares outstanding for each respective period. The Company computes diluted loss per share after giving consideration to the dilutive effect of stock options and unvested restricted stock that are outstanding during the period, except where such securities would be anti-dilutive.

Basic and diluted loss per share was calculated as follows:

 

 

 

Three Months Ended March 31,