Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of GreenLight Biosciences Holdings
PBC and its consolidated subsidiaries should be read together with the Company’s unaudited condensed consolidated financial statements, together with the related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the Company’s audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. This discussion contains forward-looking statements that involve numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” in Item 1A of Part II of this Report and Item IA of Part I of the Company’s Annual Report for the year ended December 31, 2022. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Report. All references to years, unless otherwise noted, refer to the Company’s fiscal years, which end on December 31. For purposes of this section, all references to “we,” “us,” “our,” “New GreenLight” or the “Company” refer to GreenLight Biosciences Holdings PBC and its consolidated subsidiaries.
Overview
GreenLight Biosciences Holdings, PBC is a pre-commercial stage biotechnology company with a proprietary cell-free ribonucleic acid (RNA) production platform for the discovery, development, and commercialization of high-performing products to promote healthier plants, foods, and people. Our vision is to pave the way for a sustainable planet through widely available and affordable RNA products. We are developing RNA products for plant and life science applications to advance crop management, plant protection, animal health, vaccine development and pandemic preparation. We have a pipeline of product candidates across various stages of development.
Since our inception in 2008, we have devoted substantially all of our efforts and financial resources to conducting research and development activities for our programs, acquiring, in-licensing, and discovering product candidates, securing related intellectual property rights, raising capital, and organizing and staffing our company. We do not have any products approved for sale and have not generated any revenue from product sales. From our founding through March 31, 2023, we have funded our operations primarily through proceeds from the sale of our capital stock, the Business Combination (including the related PIPE financing), the August 2022 PIPE Financing (as defined below), debt financings, the issuance of convertible notes and collaboration agreements.
We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $28.5 million and $38.2 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022 we had an accumulated deficit of $449.1 million and $420.6 million, respectively. Notwithstanding our recent corporate realignment, we expect to continue to incur significant expenses and operating losses as we pursue our remaining programs, particularly if and as we:
•conduct field and clinical trials for our product candidates;
•continue to develop additional product candidates;
•maintain, expand, and protect our intellectual property portfolio;
•hire additional and/or replacement clinical, scientific manufacturing and commercial personnel;
•expand external and/or establish internal commercial manufacturing sources and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
•acquire or in-license other product candidates and technologies;
•seek regulatory approvals for any product candidates that successfully complete field trials or clinical trials;
•establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
•add operational, financial and management information systems and personnel to support our product development, clinical execution and planned future commercialization efforts, as well as to support our operations as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. We expect to finance our operations through the sale of equity securities, debt financings or other capital sources, which may continue to include collaborations with other companies or other strategic transactions. The fundraising environment for early-stage biotechnology companies like ours continues to be extremely challenging, and we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise sufficient capital or enter into such agreements or arrangements as and when needed, we may have to significantly delay, scale back, or discontinue the development and
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commercialization of one or more of our product candidates and delay or discontinue the pursuit of potential in-license or acquisition opportunities.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to further reduce or terminate our operations. The Company expects that its existing cash and cash equivalents of $32.4 million as of March 31, 2023 will last through the second quarter of 2023 but will not be sufficient to fund its operations for twelve months from the date these interim financial statements are issued. We are continuing to evaluate a range of additional opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities. In the event the Company is unable to secure additional outside capital to fund our obligations prior to the end of the second quarter of 2023, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws.
Macroeconomic Conditions
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, including in Europe, and record inflation. GreenLight’s business, financial condition and results of operations could be materially and adversely affected by any negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.
Economic uncertainty in various global markets, including the U.S. and Europe, caused by political instability and conflict and economic challenges caused by the ongoing COVID-19 pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. While we recognize that the United States public health emergency for COVID-19 is planned to end in May 2023, the full impact of the ongoing COVID-19 pandemic to date and current macroeconomic conditions, including changes in inflation, interest rates and overall economic conditions and uncertainties on our business, operations and product development timelines and plans remains uncertain, and will depend on certain developments, including its impact on our field trial completion, clinical trial initiation and enrollment, trial sites, contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.
While we are experiencing limited financial and operational impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with these macroeconomic conditions, including potential uncertainty with the stability of banks and other financial institutes in light of the Silicon Valley Bank closure in March 2023, it is impossible to predict the extent to which GreenLight’s operations will be impacted in the short and long term, or the ways in which such instability could impact our business and results of operations. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine, geopolitical tensions, record inflation or otherwise, are impossible to predict, but could be substantial. Furthermore, the impacts from the COVID-19 pandemic have resulted and will likely continue to result in significant disruptions to the global economy and capital markets around the world. GreenLight cannot predict the future progression or full impact of the outbreak and its effects on GreenLight’s business and operations. We continue to closely monitor the global economic and geopolitical conditions as we evolve our business continuity plans, clinical development plans and response strategy.
Recent Developments
Indication of Interest from Fall Line
On March 29, 2023, the Company received a non-binding indication of interest from Fall Line Endurance Fund, L.P. (“Fall Line”) to acquire all of the outstanding capital stock of the Company (the “Proposed Transaction”). The terms of any potential agreement between GreenLight and Fall Line would be contingent on certain conditions, including completion of due diligence review and negotiation of definitive transaction documents, as well as certain to be identified Company stockholders agreeing to roll their existing equity in connection with the Proposed Transaction. GreenLight’s Board of Directors through a special committee thereof (the “Special Committee”) is carefully evaluating Fall Line’s indication of interest within the context of the ongoing review of various alternatives and in consultation with its retained financial and legal advisors. No assurance can be given that a definitive transaction with respect to Fall Line’s indication of interest or any other potential transaction will eventually be consummated. GreenLight does not intend to make further announcements about any of the various alternatives that are being evaluated unless and until GreenLight’s Board of Directors and/or the Special Committee has approved a specific transaction or otherwise determines that further disclosure is appropriate or
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necessary. As of March 31, 2023, Fall Line had a beneficial ownership percentage of 5.9% based on 151,681,314 shares of GreenLight Common Stock issued and outstanding as of March 31, 2023.
Business Combination and Public Company Costs
On August 9, 2021, the Company and Merger Sub entered into the Business Combination Agreement with GreenLight Biosciences, Inc. (the "Business Combination Agreement" and the transactions contemplated by the Business Combination Agreement, the "Business Combination"). On February 2, 2022, the Business Combination was consummated, pursuant to which Merger Sub merged with and into GreenLight Biosciences, Inc., with GreenLight Biosciences, Inc. surviving the Merger as a wholly owned subsidiary of the Company. On February 2, 2022, in connection with the consummation of the Merger, the Company changed its name to GreenLight Biosciences Holdings, PBC and became a public benefit corporation.
Immediately before the closing of the Business Combination, the Company held approximately $207.0 million in a trust account for its public stockholders. In connection with the Business Combination, the Company's public stockholders redeemed shares of public common stock for $194.9 million, and the funds remaining after such redemptions became available to finance transaction expenses and the future operations of the Company. In connection with the Business Combination, the Company entered into agreements with new investors and existing investors in GreenLight Biosciences, Inc. to subscribe for and purchase an aggregate of approximately 12.4 million shares of the Company's Class A Common Stock (the “February 2022 PIPE Financing”). The February 2022 PIPE Financing was consummated on February 2, 2022 and resulted in gross proceeds of approximately $136.4 million (of which $35.3 million had been advanced to GreenLight Biosciences, Inc. by the Prepaying PIPE Investors).
The Merger was accounted for as a reverse recapitalization, whereby for accounting and financial reporting purposes, GreenLight Biosciences, Inc. was the acquirer. A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the Company represent the continuation of the consolidated financial statements of GreenLight Biosciences, Inc. in many respects. The shares of the Company remaining after redemptions of shares of the Company's public common stock and the unrestricted net cash and cash equivalents on the date the Business Combination was consummated were accounted for as a capital infusion to GreenLight Biosciences, Inc.
The most significant change in the Company's financial position and results of operations resulting from the consummation of the Business Combination (including the February 2022 PIPE Financing) was an estimated cash inflow (as compared to GreenLight Biosciences, Inc. balance sheet at December 31, 2021) of approximately $136.4 million, prior to payment of the transaction costs. Total direct and incremental transaction costs of $26.7 million were treated as a reduction of the cash proceeds with capital raising costs being deducted from GreenLight Biosciences, Inc.'s additional paid-in capital.
As a consequence of the Business Combination, GreenLight Biosciences, Inc. effectively became the successor to a publicly traded and Nasdaq-listed company, which required it to hire additional personnel and is requiring it to implement procedures and processes to address public company regulatory requirements and customary practices. The Company has incurred and expects to continue to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Financial Overview
Components of Our Results of Operations
Revenue
For the three months ended March 31, 2023, we have not recognized any revenue from product sales. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales or license agreements. However, there can be no assurance as to when we will generate such revenue, if at all.
License and Collaboration Revenue
License revenue is related to our license agreement with Serum Institute of India Private Limited (“SIIPL”) which was entered into in March 2022, pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to three mRNA products. The first licensed product target will be a shingles product target, and SIIPL has an option to select the additional two licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option to purchase research and clinical trial data, developed by SIIPL, for 50% of the cost of the research studies and clinical trials for use in the Company’s own development.
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Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation of exclusivity. The Company may receive up to a total of an additional $17.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by-product and country-by-country basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country. For the three months ended March 31, 2023, we recognized $3.8 million of revenue primarily related to the delivery of IP and research services, which includes manufacturing technology transfer services. We did not recognize any revenue under this agreement for the three months ended March 31, 2022.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. We were approved to receive a grant of $3.3 million in the aggregate. As of December 31, 2022, we had received the entire grant amount. The grant agreement provides for payments to reimburse qualifying costs, including general and administrative costs, incurred to perform our obligations under the agreement. Revenue from this grant agreement is recognized as the qualifying costs related to the grant are incurred, and any amounts received in excess of revenue recognized are initially recorded as deferred revenue on our condensed consolidated balance sheets and later recognized as revenue when qualified costs are incurred. As of March 31, 2023, we ceased any ongoing research work under such grant, completed close-out related activities and are in the process of returning any remaining unused funds to the Gates Foundation
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates. We expense research and development costs as incurred. These expenses include:
Program expenses
•external research and development expenses incurred under agreements with CMOs, CROs, universities and research laboratories that conduct our field trials, preclinical studies and development services;
•costs related to manufacturing material for our field trials and preclinical studies;
•laboratory supplies and research materials;
•payments made in cash or equity securities under third-party licensing agreements and acquisition agreements; and
•costs related to compliance with regulatory requirements;
Personnel expenses
•employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, and other related costs for employees involved in research and development efforts;
Facilities and other expenses
•costs of outside consultants engaged in research and development functions, including their fees and travel expenses; and
•facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent, utilities, and insurance.
Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our field trials and preclinical studies or other services performed.
This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.
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Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our pre-clinical development, field trials, process development, manufacturing, and clinical development activities. Our direct research and development expenses by program also include fees incurred under license, acquisition, and option agreements. We do not allocate costs associated with our discovery efforts, laboratory supplies, employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery as well as for managing our pre-clinical development, field trials, process development, manufacturing, and clinical development activities.
General and Administrative Expenses
General and administrative expense consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and other related costs. General and administrative expense also includes professional services, including legal, accounting and audit services, consulting fees and facility costs not otherwise included in research and development expenses, insurance, and other general administrative expenses.
We anticipate that our general and administrative expenses will increase commensurate with future commercialization of our products and expansion of research collaboration work. We also have incurred significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Other (Expense) Income, Net
Other (expense) income, net consists of interest income, interest expense and any change in the fair value of our warrant liabilities.
Income and Other Income, net
Income and other income, net primarily consists of income earned in connection with our investments in money market funds.
Interest Expense
Interest expense consists of interest on outstanding borrowings under our loan agreements with Trinity Capital, Silicon Valley Bank and Horizon Technology Finance. Interest expense also includes amortization of debt discount and debt issuance costs.
Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of the remeasurement gains or losses associated with changes in the fair value of the warrant liabilities. Until settlement, fluctuations in the fair value of our warrant liabilities are based on the remeasurement at each reporting period.
Provision for Income Taxes
Our income tax provision consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. There is no provision for U.S. federal, state, and foreign income taxes for the three months ended March 31, 2023 and 2022, respectively, as we have historically incurred net operating losses, and expect to continue to generate net operating losses. Based on this history of net operating losses, we also maintain a full valuation allowance against our U.S. federal and state deferred tax assets.
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Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022
The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31, |
|
|
INCREASE / |
|
Dollars (in thousands) |
|
2023 |
|
|
2022 |
|
|
(DECREASE) |
|
License and collaboration revenue |
|
$ |
3,820 |
|
|
$ |
— |
|
|
$ |
3,820 |
|
Grant revenue |
|
|
— |
|
|
|
257 |
|
|
|
(257 |
) |
Total revenue |
|
|
3,820 |
|
|
|
257 |
|
|
|
3,563 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
23,168 |
|
|
|
27,281 |
|
|
|
(4,113 |
) |
General and administrative |
|
|
8,944 |
|
|
|
9,755 |
|
|
|
(811 |
) |
Total operating expenses |
|
|
32,112 |
|
|
|
37,036 |
|
|
|
(4,924 |
) |
Loss from operations |
|
|
(28,292 |
) |
|
|
(36,779 |
) |
|
|
8,487 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest and other income, net |
|
|
603 |
|
|
|
4 |
|
|
|
599 |
|
Interest expense |
|
|
(1,007 |
) |
|
|
(1,073 |
) |
|
|
66 |
|
Change in fair value of warrant liability |
|
|
227 |
|
|
|
(359 |
) |
|
|
586 |
|
Total other income (expense), net |
|
|
(177 |
) |
|
|
(1,428 |
) |
|
|
1,251 |
|
Net loss |
|
$ |
(28,469 |
) |
|
$ |
(38,207 |
) |
|
$ |
9,738 |
|
License and Collaboration Revenue
For the three months ended March 31, 2023, we recognized $3.8 million of revenue from our license and collaboration agreement with SIIPL primarily related to the delivery of IP and research services, which includes manufacturing technology transfer services. We did not recognize any revenue under this agreement for the three months ended March 31, 2022.
Grant Revenue
There was no grant revenue was recorded for the three months ended March 31, 2023, compared to grant revenue of $0.3 million for the three months ended March 31, 2022. All of our grant revenue is derived from a grant made by the Bill & Melinda Gates Foundation in July 2020. The decrease in grant revenue was due to the fact that we ceased any ongoing research work under this grant as of December 31, 2022.
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31, |
|
|
INCREASE / |
|
Dollars (in thousands) |
|
2023 |
|
|
2022 |
|
|
(DECREASE) |
|
Program expense |
|
$ |
4,399 |
|
|
$ |
7,988 |
|
|
$ |
(3,589 |
) |
Personnel costs |
|
|
11,107 |
|
|
|
12,628 |
|
|
|
(1,521 |
) |
Other |
|
|
7,662 |
|
|
|
6,665 |
|
|
|
997 |
|
Total research and development expenses |
|
$ |
23,168 |
|
|
$ |
27,281 |
|
|
$ |
(4,113 |
) |
Research and development expense was $23.2 million for the three months ended March 31, 2023, compared to $27.3 million for the three months ended March 31, 2022. The decrease of $4.1 million resulted primarily from decreased program costs of $3.6 million related to research and development materials and manufacturing costs, decreased headcount supporting research and development activities which resulted in decreased personnel costs of $1.5 million, offset by an increase in other research and development costs of approximately $1.0 million, primarily related to an increase in rental expense as we expanded our footprints and entered into multiple leases during 2022 and an increase in depreciation expense due to an increase in capitalized expenditures for lab equipment and lab space leasehold improvements.
General and Administrative Expenses
General and administrative expense was $8.9 million for the three months ended March 31, 2023, compared to $9.8 million for the three months ended March 31, 2022. The decrease of $0.9 million was primarily due to a decrease of $0.7 million of professional fees,
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decreased personnel costs of $0.4 million; offset by an increase of $0.2 million related to facilities and other administrative expenses as we expanded our footprints and entered into multiple leases during 2022.
Interest and other income, net
Interest and other income, net was $0.6 million for the three months ended March 31, 2023 compared to an insignificant amount for the three months ended March 31, 2022. This increase was driven by an increase in our cash and cash equivalents due to capital raises in 2022 and an increase in the interest rate yield on our cash and cash equivalents.
Interest Expense
Interest expense was $1.0 million for the three months ended March 31, 2023, compared to $1.1 million for the three months ended March 31, 2022. The decrease is primarily related to principal payments on our debt offset by an increase in interest rates on our variable rate debt.
Change in Fair Value of Warrant Liabilities
Other income attributable to the change in the fair value of warrant liabilities as $0.2 million for the three months ended March 31, 2023 compared to an expense of $0.3 million for the three months ended March 31, 2022. The decrease of $0.5 million in the fair value of our warrant liabilities was due to the decrease in the fair value of the private placement warrants.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have generated recurring net losses. We do not have any products approved for sale and have not yet commercialized any product. Since our inception, we have funded our operations primarily through proceeds from the issuance of capital stock and to a lesser extent through debt financings, the issuance of convertible notes and collaboration agreements. From our founding through March 31, 2023, we have raised proceeds from the sale of our capital stock, the Business Combination (including the related PIPE financing), the August 2022 PIPE Financing, and from the issuance of debt and convertible notes. As of March 31, 2023, we had cash and cash equivalents of $32.4 million.
Private Placement and Securities Subscription Agreement
On August 11, 2022, we entered into Securities Subscription Agreements (the “August 2022 PIPE Subscription Agreements”) with certain institutional accredited investors (collectively, the “August 2022 PIPE Investors”), providing for the sale by us of 27,640,301 shares (the “August 2022 PIPE Shares”) of our Class A common stock at a purchase price of $3.92 per share, in a private placement (the “August 2022 PIPE Financing”). The August 2022 PIPE Shares were issued simultaneously with the execution and delivery of the August 2022 PIPE Subscription Agreements. The aggregate gross proceeds from the August 2022 PIPE Financing was approximately $108.3 million. The gross proceeds do not reflect transaction costs of $2.3 million. We are using the net proceeds from the August 2022 PIPE Financing to fund ongoing clinical development and commercialization of our existing product pipeline.
Business Combination and PIPE Financing
In February 2022, we consummated the Business Combination with ENVI, which generated gross proceeds to New GreenLight of approximately $136.4 million, including $124.3 million from the February 2022 PIPE Financing and $12.1 million from the trust account (after redemptions). The gross proceeds do not reflect transaction costs of $26.7 million. For more information, see “—Recent Developments—Business Combination and Public Company Costs” above.
Horizon Loan Agreement
In December 2021, we entered into a loan and security agreement with Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP (together, “Horizon”), which provided for a term loan facility in an aggregate principal amount of up to $25.0 million, $15.0 million of which was borrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after June 30, 2022. As of June 30, 2022, we had not borrowed, and could no longer borrow the remainder of the term loan. Under the agreement, in January 2022 the lenders were granted 10-year warrants to purchase shares of common stock of GreenLight. The warrants are exercisable in the aggregate for a number of shares equal to 3% of the total term loan facility (assuming we borrow the full facility amount of $25.0 million) divided by the exercise price of the warrants. Upon the closing of the Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement.
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Accrued interest is payable monthly. Under the terms of our agreement, this loan accrues interest at a floating rate per annum equal to the one-month prime rate as reported in the Wall Street Journal on a date that is 5 business days prior to the funding date of the Loan plus 5.75%. The principal of each term loan must be repaid in equal monthly installments beginning February 1, 2023 (or August 1, 2023 if we borrow any of the remaining $10.0 million), with a scheduled final maturity date of July 1, 2025. We may prepay the term loans in full, but not in part, without premium or penalty, other than a premium equal to (i) 3% of the principal amount of any prepayment made within 12 months after the applicable funding date, (ii) 2% of the principal amount of any prepayment made between 12 and 24 months after the applicable funding date and (iii) 1% of the principal amount of any prepayment made more than 24 months after the applicable funding date. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, we must pay a final payment fee equal to 3.0% of the original principal amount of the funded term loans.
The agreement contains customary affirmative and negative covenants (including an obligation to maintain certain amounts of cash in accounts subject to springing control in favor of the lenders) and customary events of default; it does not contain a financial covenant. We granted a second-priority, perfected security interest in substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to the lenders, which security interest is subordinated to the security interest granted to Silicon Valley Bank.
In April 2021, we entered into a joinder agreement with Horizon pursuant to which the Company became a party to the Horizon loan agreements as a co-borrower. Under the joinder agreement, the Company also granted Horizon a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property.
Silicon Valley Bank Loan Agreement
In September 2021, we entered into a loan and security agreement with Silicon Valley Bank, or SVB, providing for a term loan facility in an aggregate principal amount of up to $15.0 million, $10.0 million of which we borrowed at the closing and the remainder of which we may borrow following the achievement of certain milestones, but not after March 31, 2022. We did not borrow any additional amounts from SVB before March 31, 2022. At the closing, we granted SVB a 10-year warrant to purchase up to 34,427 shares of GreenLight Common Stock (assuming we borrow the entire $15.0 million from SVB and giving effect to the reverse recapitalization). Upon the closing of the Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A (“SVB Bridge Bank”).
Accrued interest is payable monthly. Under the terms of our agreement, this loan accrues interest at a floating rate per annum equal to the greater of (i) three and one half of one percent (3.50%) and (ii) the prime rate (as stated in the Wall Street Journal) plus the prime rate margin of one quarter of one percent (0.25%). The principal of each term loan must be repaid in equal monthly installments beginning April 1, 2022 (or October 1, 2022, if the Company borrows any of the remaining $5.0 million), with a scheduled final maturity date of September 1, 2024. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 4.0% of the original principal amount of the term loans. The Company may prepay the term loans in increments of $5.0 million and without premium or penalty, other than a premium equal to (i) with respect to any prepayment made on or before September 22, 2022, 3% of the principal so prepaid, (ii) with respect to any prepayment made after September 22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and (iii) with respect to any prepayment made after September 22, 2023 and on or before September 1, 2024, 1% of the principal so prepaid.
The loan and security agreement with SVB contains customary affirmative and negative covenants (including an obligation to maintain cash in accounts at SVB at all times in amounts sufficient to repay all loan obligations, which if not met constitute an event of default under the agreement) and customary events of default; it does not contain a financial covenant. We granted a first-priority, perfected security interest in substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to SVB.
In April 2021, we entered into a joinder agreement and first amendment to loan and security agreement with SVB pursuant to which the Company became a party to the SVB loan agreements as a borrower. Under these agreements, the Company also granted SVB a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property. These agreements also amended certain terms of the original SVB loan agreement to, among other things, add representations, affirmative and negative covenants, and events of default regarding the Company’s obligations as a public benefit corporation. Under the amended terms, it is an event of default for there to be any pending or threatened litigation by a shareholder alleging that we or our directors failed to satisfy any obligations under Delaware law regarding our status as a public benefit corporation, if the litigation is likely to result in a final monetary judgment against us in excess of $250,000. In addition, if any action, investigation, or proceeding is pending or known to be threatened in writing against us with respect to such a claim, the bank may not need to make further loans to us.
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Trinity Capital Equipment Financing Agreement
In March 2021, we entered into a master equipment financing agreement with Trinity Capital (Trinity) authorizing equipment financing with an aggregate borrowing capacity of $11.3 million, with up to $5.0 million available immediately and the remaining principal balance available to be drawn before September 2021. We entered into this loan to finance our capital purchases associated primarily with our research and manufacturing programs. The monthly payment factors for each draw are determined by Trinity based on the Prime Rate reported in the Wall Street Journal on the first day of the month in which an equipment financing schedule for such draw is executed. As of December 31, 2022, the Company had drawn the entire $11.3 million, which is repayable in monthly installments starting April 2021.
Funding Future Operations; Going Concern
The Company estimates that its existing cash and cash equivalents of $32.4 million as of March 31, 2023 will last through the second quarter of 2023 but will not be sufficient to fund its operations for twelve months from the date these interim financial statements are issued. As a result, there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these financial statements, as discussed in Note 1 - Nature of Business and Basis of Presentation of the notes to our condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022, included elsewhere herein.
Based on our existing cash and cash equivalents, we are evaluating a range of opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities. In the event the Company is unable to secure additional outside capital to fund our obligations when they become due over the next 12 months, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and field trials, seek regulatory approval, and pursue commercialization of any approved product candidates. We anticipate that our general and administrative expenses will increase commensurate with future commercialization of our products and expansion of research collaboration work. In addition, in light of the completion of the Business Combination, we have and expect to continue to incur higher costs associated with operating as a public company. Because of the numerous risks and uncertainties associated with research, development, and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:
•the design, initiation, timing, costs, progress, and results of our planned clinical trials and field trials;
•the progress of preclinical development and possible clinical trials of our current and future earlier- stage programs;
•the scope, progress, results and costs of our research programs and preclinical development of any additional product candidates that we may pursue;
•the development requirements of other product candidates that we may pursue;
•our headcount and associated costs and establish a commercial infrastructure;
•the timing and amount of milestone and royalty payments that we are required to make or eligible to receive under our current or future collaboration and license agreements;
•the outcome, timing and cost of meeting regulatory requirements established by the FDA, EPA and other regulatory authorities;
•the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
•the cost of expanding, maintaining, and enforcing our intellectual property portfolio, including filing, prosecuting, defending, and enforcing our patent claims and other intellectual property rights;
•the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us or any of our product candidates;
•the effect of competing technological and market developments;
•the cost and timing of completion of commercial-scale manufacturing activities;
•the extent to which we partner our programs, acquire or in-license other product candidates and technologies or enter into additional collaborations;
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•the revenue, if any, received from commercial sales of any future product candidates for which we receive marketing approval; and
•the costs of operating as a public company.
Until we can generate product revenues to support our cost structure, if any, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation, dividend, redemption, and other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31, |
|
|
INCREASE / |
|
|
|
2023 |
|
|
2022 |
|
|
(DECREASE) |
|
Net cash (used in) operating activities |
|
$ |
(31,060 |
) |
|
$ |
(49,511 |
) |
|
$ |
18,451 |
|
Net cash (used in) investing activities |
|
|
(1,608 |
) |
|
|
(250 |
) |
|
|
(1,358 |
) |
Net cash provided by (used in) financing activities |
|
|
(2,989 |
) |
|
|
102,497 |
|
|
|
(105,486 |
) |
Net increase (decrease) in cash, cash equivalents
and restricted cash |
|
$ |
(35,657 |
) |
|
$ |
52,736 |
|
|
$ |
(88,393 |
) |
Operating Activities
Cash flows from operating activities represent the cash receipts and disbursements related to all our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net loss for non-cash operating items such as depreciation, amortization, and stock-based compensation as well as changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.
During the three months ended March 31, 2023, operating activities used $31.1 million of cash, primarily resulting from our net loss of $28.5 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include depreciation and amortization expense of $2.3 million, stock-based compensation expense of $2.3 million, and amortization of right-of-use assets of $1.0 million; offset by a change in the fair value of our warrant liabilities of $0.2 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a decrease in deferred revenue of $3.8 million, a decrease of $2.7 million in accrued expenses, lease liabilities and other liabilities, a $1.8 million increase in prepaid expenses and other current assets, and an increase in accounts payable of $0.2 million. The decrease in accrued expenses was due to reduced level of research activities and the increase in prepaid expenses and other assets was due to operating costs to support our operations as a public company, including insurance policies. The decrease in deferred revenue was due to revenue recognized on our license agreement we entered into with SIIPL in 2022.
During the three months ended March 31, 2022, operating activities used $49.5 million of cash, primarily resulting from our net loss of $38.2 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include stock-based compensation of $2.2 million, depreciation and amortization expense of $2.1 million and amortization of right-of-use assets of $1.6 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2022 consisted primarily of a $2.0 million decrease in accounts payable, a $9.4 million decrease in accrued expenses, lease liabilities and other liabilities, a $6.3 million increase in prepaid expenses and other current assets, and an increase of $5.0 million in accounts receivable, partially offset by an increase in deferred revenue of $4.7 million. The increase in cash used in accounts payable and accrued expenses related to our increased level of operating activities and timing of vendor invoicing and payments. The increase in cash used for prepaid expenses and other assets was due to our increased level of research collaborations and manufacturing development activities related to our product candidates. The increase in deferred revenue was due to our license agreement we entered into with SIIPL in March 2022.
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Investing Activities
During the three months ended March 31, 2023, investing activities used $1.6 million of cash, consisting primarily of purchases of property and equipment related primarily to purchases of laboratory equipment and facilities improvements.
During the three months ended March 31, 2022, investing activities used $0.3 million of cash, consisting of purchases of property and equipment, of which a substantial majority related to laboratory and facilities improvements in Research Triangle Park, North Carolina and purchases of laboratory equipment and facilities improvements for our manufacturing facility in Rochester, New York.
Financing Activities
During the three months ended March 31, 2023, financing activities used $3.0 million of cash, which was primarily related to repayments on our debt and finance lease obligations.
During the three months ended March 31, 2022, financing activities provided $102.5 million of cash, consisting primarily of $80.5 million of net proceeds from the Business Combination, net of transaction costs, a $21.8 million in proceeds from issuance of convertible debt from PIPE Investors, and $1.2 million of proceeds from the exercise of public warrants, which were partially offset by $0.8 million of repayments on our secured debt and term loan payable.
Contractual Obligations and Commitments
Operating Lease Obligations
We have non-cancelable operating lease obligations, consisting primarily of lease payment obligations for our facilities, including our headquarters in Lexington, Massachusetts, comprised of office and laboratory space; office, laboratory and greenhouse space in Durham, North Carolina; laboratory and office space in Medford and Woburn, Massachusetts; our manufacturing facilities in Rochester, New York; and farm land located in Spain. The leases for these facilities expire on various dates through 2042, unless extended.
In December 2022, the Company entered into a lease for farm land located in Colusa County, California, which commenced in January 2023. The lease term expires in December 2032. The base rent for this lease is approximately $0.1 million per year, subject to annual increases based on the consumer price index beginning on January 1, 2024.
See Note 16, Leases, of the notes to our condensed consolidated financial statements for the three months ended March 31, 2023 and 2022, for further information on our operating lease obligations.
Purchase Obligations
In the normal course of business, we enter into contracts with third parties for field trials, preclinical studies and research and development supplies. These contracts generally do not contain minimum purchase commitments and provide for termination on notice, and therefore are cancellable contracts.
License Agreement Obligations
In December 2020, we entered into an assignment and license agreement with Bayer CropScience LLP (“Bayer”) under which we may be obligated to make milestone and royalty payments. These payment obligations are contingent upon future events, such as achieving certain development, regulatory, and commercial milestones or generating product sales. The timing of these events is uncertain; accordingly, we cannot predict the period during which these payments may become due. We have agreed to pay up to $2.0 million in milestone payments under this assignment and license agreement when certain development milestones are met. The Company assessed the milestones for the three months ended March 31, 2023 and concluded no such milestone payments were deemed probable nor due.
In August 2020, we entered into a license agreement with Acuitas Therapeutics, Inc. (“Acuitas”) under which we are obligated to make potential milestone payments, royalty payments, or both. These payment obligations are contingent upon future events, such as achieving certain clinical and regulatory milestones and generating product sales. Such payments are dependent upon the development of products using the intellectual property licensed under the agreements and are contingent upon the occurrence of future events. The potential clinical and regulatory milestone payments that Acuitas is entitled to receive is in the low double-digit millions for the first option exercised. With respect to the sale of each licensed products, the Company is also obligated to pay Acuitas royalties in the low single digit percentages on net sales of the licensed products by the Company and its affiliates and sublicensees in a given country until the last to occur, in such country, of (i) the expiration or abandonment of all licensed patent rights covering the licensed product, (ii) expiration of any regulatory exclusivity for the licensed product, or (iii) ten years from the first commercial sale of the licensed product. For the three months ended March 31, 2023, none of these events were deemed probable and hence no expenses were recorded.
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Debt Obligations
See Note 10, Debt, of the notes to our condensed consolidated financial statements included elsewhere in this filing for further information on our future debt repayment obligations.
Manufacturing Commitments and Obligations
In November 2021, we engaged Samsung Biologics Co., Ltd. (“Samsung”) as a contract development and manufacturing organization for scale up and commercial scale production of our mRNA COVID-19 vaccine pursuant to a Master Services Agreement and a Product Specific Agreement with Samsung (collectively, the “Samsung Agreements”). Pursuant to the Samsung Agreements, we must, among other things, (a) pay Samsung service fees for its pharmaceutical development and manufacturing services, (b) purchase certain minimum quantities of drug products, and (c) pay Samsung, on a minimum take-or-pay basis for each year under the agreement, for our minimum purchase commitments, as determined under the terms of the Samsung Agreements. Based on our minimum purchase commitments, we expect to pay Samsung a minimum of approximately $8.8 million in service fees under the Samsung Agreements, excluding the cost of raw materials. For the three months ended March 31, 2023, the Company did not incur any costs under this service agreement. We incurred approximately $5.9 million in costs under this service agreement for the year ended December 31, 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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 readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of the change in the estimate.
During the three months ended March 31, 2022, there have been no updates to our critical accounting estimates from those disclosed in "Management's Discussion and Analysis of Financial Condition" in our Form 10-K for the year ended December 31, 2022.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Recently Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is provided in Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements appearing elsewhere herein.
Emerging Growth Company and Smaller Reporting Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding nonbinding stockholder advisory votes on executive compensation and any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective, have not filed and not withdrawn a Securities Act registration statement that has not become effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the
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new or revised standard. This may make comparison of the Company's financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
The Company will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ENVI’s initial public offering, (b) in which the Company has total annual gross revenue of at least $1.235 billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
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