License and Collaboration Agreement with Regeneron	6 Months Ended
Jun. 30, 2022
License And Collaboration Agreement With Regeneron [Abstract]
License and Collaboration Agreement with Regeneron	12. License and Collaboration Agreement with Regeneron Agreement Overview In November 2017, the Company entered into the Regeneron Agreement with Regeneron under which Regeneron made an upfront, nonrefundable $25.0 million payment to the Company. The parties were to undertake specified activities with respect to the discovery or development of new potential therapies directed to a set of defined collaboration targets. Each party was responsible for its own respective costs and agreed to use commercially reasonable efforts to complete the activities as designated in the agreed-upon research plan. The Company was primarily responsible for the direction and conduct of the research program whereas Regeneron was primarily responsible for the contribution of various technologies and expertise of its own as well as contribution of employees and research services. In October 2020, the parties amended the Regeneron Agreement pursuant to which, among other things, ATOH1, the target of the DB-ATO program, was removed as a collaboration target and the terms and plans for the DB-OTO and AAV.103 programs were modified. The primary responsibilities of each party remained consistent with those prior to the amendment. In connection with the amendment, the Company issued 10,000,000 shares of Series C convertible preferred stock to Regeneron in consideration for its entry into the amendment. Pursuant to the amendment, Regeneron agreed to pay the Company $0.3 million to fund the Company’s ongoing research plan and $0.5 million to help secure the services of a contract development and manufacturing organization. The $0.5 million payment was creditable against the milestone associated with the initiation of manufacturing to support Good Laboratory Practices toxicology studies of DB-OTO. Additionally, Regeneron agreed to reimburse the Company for up to $10.5 million of third-party costs related to investigational new drug (“IND”) enabling studies for DB-OTO as such costs are incurred. The Company achieved its first pre-IND milestone of $4.4 million and its second pre-IND milestone of $1.1 million in November 2020 and October 2021, respectively. In November 2021, Regeneron elected to extend the research term of the collaboration. The research term was extended to November 15, 2023 and Regeneron is obligated to pay the Company an extension fee of $10.0 million in the fourth quarter of 2022. As of June 30, 2022 and December 31, 2021, the Company had unbilled receivables of $10.0 million and $11.4 million, respectively, due from Regeneron. Through June 30, 2022, the Company had received an aggregate of $5.5 million in milestone payments from Regeneron pursuant to the collaboration. As of June 30, 2022, the next milestone that the Company was eligible to receive was in relation to the initiation of manufacturing for its AAV.103 program, or the initiation of a Phase 1 clinical trial of DB-OTO. Accounting Analysis The Company accounts for its collaboration with Regeneron in accordance with FASB ASC Topic ASC 808, Collaborative Arrangements, and applies FASB ASC Topic 606, Revenue from Contracts with Customers, by analogy to determine the measurement and recognition of the consideration received from Regeneron. All research activities under the collaboration are considered a single performance obligation. The transaction price of $46.9 million consists of (i) $25.0 million received upfront, (ii) $0.3 million received to fund the ongoing research plan, (iii) $5.5 million of aggregate milestones achieved, (iv) $10.5 million in reimbursements for third-party costs related to IND-enabling studies for DB-OTO, and (v) $10.0 million as consideration for Regeneron’s election to extend the research term, partially offset by the fair value of the Series C convertible preferred stock issued to Regeneron of approximately $4.4 million. Future milestones are considered variable consideration and are fully constrained until such time as achievement is considered probable. The Company satisfies its performance obligation over time and measures progress towards completion using an input method based on costs incurred. There are significant judgments and estimates inherent in the determination of the costs to be incurred for the research and development activities related to the collaboration with Regeneron. These estimates and assumptions include a number of objective and subjective factors, including the likelihood that a target will be successfully developed through its IND filing and the estimated costs associated with such development, including the potential third-party costs related to each target’s IND-enabling study. The Company concluded the consideration received from Regeneron represents reimbursements of the Company’s cost incurred and should therefore be accounted for as contra-research and development in the Company’s condensed consolidated statements of operations and comprehensive (loss) income. Deferred collaboration liability is classified in the condensed consolidated balance sheets based on the expected timing of when the costs will be recognized in the future. The Company recognized $2.2 million and $3.8 million as contra-research and development expenses for the three months ended June 30, 2022 and 2021, respectively. The Company recognized $5.2 million and $5.7 million as contra-research and development expenses for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and December 31, 2021, there was deferred collaboration liability classified in current liabilities of $9.1 million and $8.1 million, respectively, and classified in long-term liabilities of $10.2 million and $16.4 million, respectively. As of June 30, 2022 and December 31, 2021, the Company had $10.0 million and $11.4 million of unbilled accounts receivable due from Regeneron, respectively, which are classified in accounts receivable from related party.

License and Collaboration Agreement with Regeneron

6 Months Ended

Jun. 30, 2022

License And Collaboration Agreement With Regeneron [Abstract]

License and Collaboration Agreement with Regeneron

12. License and Collaboration Agreement with Regeneron

Agreement Overview

In November 2017, the Company entered into the Regeneron Agreement with Regeneron under which Regeneron made an upfront, nonrefundable $25.0 million payment to the Company. The parties were to undertake specified activities with respect to the discovery or development of new potential therapies directed to a set of defined collaboration targets. Each party was responsible for its own respective costs and agreed to use commercially reasonable efforts to complete the activities as designated in the agreed-upon research plan. The Company was primarily responsible for the direction and conduct of the research program whereas Regeneron was primarily responsible for the contribution of various technologies and expertise of its own as well as contribution of employees and research services.

In October 2020, the parties amended the Regeneron Agreement pursuant to which, among other things, ATOH1, the target of the DB-ATO program, was removed as a collaboration target and the terms and plans for the DB-OTO and AAV.103 programs were modified. The primary responsibilities of each party remained consistent with those prior to the amendment. In connection with the amendment, the Company issued 10,000,000 shares of Series C convertible preferred stock to Regeneron in consideration for its entry into the amendment. Pursuant to the amendment, Regeneron agreed to pay the Company $0.3 million to fund the Company’s ongoing research plan and $0.5 million to help secure the services of a contract development and manufacturing organization. The $0.5 million payment was creditable against the milestone associated with the initiation of manufacturing to support Good Laboratory Practices toxicology studies of DB-OTO. Additionally, Regeneron agreed to reimburse the Company for up to $10.5 million of third-party costs related to investigational new drug (“IND”) enabling studies for DB-OTO as such costs are incurred. The Company achieved its first pre-IND milestone of $4.4 million and its second pre-IND milestone of $1.1 million in November 2020 and October 2021, respectively.

In November 2021, Regeneron elected to extend the research term of the collaboration. The research term was extended to November 15, 2023 and Regeneron is obligated to pay the Company an extension fee of $10.0 million in the fourth quarter of 2022. As of June 30, 2022 and December 31, 2021, the Company had unbilled receivables of $10.0 million and $11.4 million, respectively, due from Regeneron. Through June 30, 2022, the Company had received an aggregate of $5.5 million in milestone payments from Regeneron pursuant to the collaboration. As of June 30, 2022, the next milestone that the Company was eligible to receive was in relation to the initiation of manufacturing for its AAV.103 program, or the initiation of a Phase 1 clinical trial of DB-OTO.

Accounting Analysis

The Company accounts for its collaboration with Regeneron in accordance with FASB ASC Topic ASC 808, Collaborative Arrangements, and applies FASB ASC Topic 606, Revenue from Contracts with Customers, by analogy to determine the measurement and recognition of the consideration received from Regeneron. All research activities under the collaboration are considered a single performance obligation. The transaction price of $46.9 million consists of (i) $25.0 million received upfront, (ii) $0.3 million received to fund the ongoing research plan, (iii) $5.5 million of aggregate milestones achieved, (iv) $10.5 million in reimbursements for third-party costs related to IND-enabling studies for DB-OTO, and (v) $10.0 million as consideration for Regeneron’s election to extend the research term, partially offset by the fair value of the Series C convertible preferred stock issued to Regeneron of approximately $4.4 million. Future milestones are considered variable consideration and are fully constrained until such time as achievement is considered probable. The Company satisfies its performance obligation over time and measures progress towards completion using an input method based on costs incurred.

There are significant judgments and estimates inherent in the determination of the costs to be incurred for the research and development activities related to the collaboration with Regeneron. These estimates and assumptions include a number of objective

and subjective factors, including the likelihood that a target will be successfully developed through its IND filing and the estimated costs associated with such development, including the potential third-party costs related to each target’s IND-enabling study.

The Company concluded the consideration received from Regeneron represents reimbursements of the Company’s cost incurred and should therefore be accounted for as contra-research and development in the Company’s condensed consolidated statements of operations and comprehensive (loss) income. Deferred collaboration liability is classified in the condensed consolidated balance sheets based on the expected timing of when the costs will be recognized in the future.

The Company recognized $2.2 million and $3.8 million as contra-research and development expenses for the three months ended June 30, 2022 and 2021, respectively. The Company recognized $5.2 million and $5.7 million as contra-research and development expenses for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and December 31, 2021, there was deferred collaboration liability classified in current liabilities of $9.1 million and $8.1 million, respectively, and classified in long-term liabilities of $10.2 million and $16.4 million, respectively. As of June 30, 2022 and December 31, 2021, the Company had $10.0 million and $11.4 million of unbilled accounts receivable due from Regeneron, respectively, which are classified in accounts receivable from related party.