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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

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 001-37553

 

REGENXBIO Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

47-1851754

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

9804 Medical Center Drive

Rockville, MD

 

20850

(Address of principal executive offices)

 

(Zip Code)

(240) 552-8181

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RGNX

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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 Exchange Act). Yes No

As of May 2, 2024, there were 49,255,966 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

 

 


REGENXBIO INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

TABLE OF CONTENTS

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

 

3

 

 

Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

 

4

 

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

 

5

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

 

6

 

 

Notes to Consolidated Financial Statements

 

7

Item 2.

 

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

 

22

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

30

Item 4.

 

Controls and Procedures

 

30

 

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

32

Item 1A.

 

Risk Factors

 

32

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

 

32

Item 3.

 

Defaults Upon Senior Securities

 

32

Item 4.

 

Mine Safety Disclosures

 

32

Item 5.

 

Other Information

 

32

Item 6.

 

Exhibits

 

33

Signatures

 

34

 


INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes such as “anticipate,” “assume,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or variations of such words or by similar expressions. We have based these forward-looking statements on our current expectations, estimates and assumptions and analyses in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, uncertainties, assumptions and other important factors, including, but not limited to:

our ability to establish and maintain development partnerships, including our collaboration with AbbVie to develop and commercialize ABBV-RGX-314;
our ability to obtain and maintain regulatory approval of our product candidates and the labeling for any approved products;
the timing of enrollment, commencement, completion and the success of our AAVIATE®, AFFINITY BEYOND®, AFFINITY DUCHENNE®, ALTITUDE®, ASCENT™, ATMOSPHERE® and CAMPSIITE® clinical trials;
the timing of commencement and completion and the success of preclinical studies conducted by us and our development partners;
the timely development and launch of new products;
the scope, progress, expansion and costs of developing and commercializing our product candidates;
our ability to obtain, maintain and enforce intellectual property protection for our product candidates and technology, and defend against third-party intellectual property-related claims;
our expectations regarding the development and commercialization of product candidates currently being developed by third parties that utilize our technology;
our anticipated growth strategies;
our expectations regarding competition;
the anticipated trends and challenges in our business and the market in which we operate;
our ability to attract or retain key personnel;
the size and growth of the potential markets for our product candidates and the ability to serve those markets;
the rate and degree of market acceptance of any of our products that are approved;
our expectations regarding our expenses and revenue;
our strategic pipeline prioritization and corporate restructuring, including plans for advancing our product candidates, the expected charges and cost savings associated with our restructuring and any future cost reduction measures;
our ability to execute strategic alternatives for our de-prioritized rare neurodegenerative disease clinical-stage programs;
our expectations regarding our need for additional financing and our ability to obtain additional financing;
our expectations regarding the outcome of legal proceedings;
our expectations regarding regulatory developments in the United States and foreign countries; and
changes in the financial markets and banking system that may affect the availability and terms on which we may obtain financing and our ability to accurately predict how long our existing cash resources will be sufficient to fund our anticipated operating expenses.

1


You should carefully read the factors discussed in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the factors discussed elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other filings with the U.S. Securities and Exchange Commission (the SEC) for additional discussion of the risks, uncertainties, assumptions and other important factors that could cause our actual results or developments to differ materially and adversely from those projected in the forward-looking statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on us or our businesses or operations. Such statements are not guarantees of future performance, and actual results or developments may differ materially and adversely from those projected in the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we disclaim any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Available Information

Our principal offices are located at 9804 Medical Center Drive, Rockville, MD 20850, and our telephone number is (240) 552-8181. Our website address is www.regenxbio.com. The information contained in, or that can be accessed through, our website is not a part of, or incorporated by reference in, this Quarterly Report on Form 10-Q. We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Exchange Act. You may obtain any reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.

You also may view and download copies of our SEC filings free of charge at our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and is not considered part of, this Quarterly Report on Form 10-Q. Investors should also note that we use our website, as well as SEC filings, press releases, public conference calls and webcasts, to announce financial information and other material developments regarding our business. We use these channels, as well as any social media channels listed on our website, to communicate with investors and members of the public about our business. It is possible that the information that we post on our social media channels could be deemed material information. Therefore, we encourage investors, the media and others interested in our company to review the information that we post on our social media channels.

As used in this Quarterly Report on Form 10-Q, the terms “REGENXBIO,” “we,” “us,” “our” or the “Company” mean REGENXBIO Inc. and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

AAVIATE, AFFINITY BEYOND, AFFINITY DUCHENNE, ALTITUDE, ATMOSPHERE, CAMPSIITE, NAV, NAVXCELL, REGENXBIO and the REGENXBIO logos are our registered trademarks. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

REGENXBIO INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share data)

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,975

 

 

$

34,522

 

Marketable securities

 

 

225,728

 

 

 

240,736

 

Accounts receivable, net

 

 

15,828

 

 

 

24,790

 

Prepaid expenses

 

 

13,590

 

 

 

14,520

 

Other current assets

 

 

27,297

 

 

 

20,403

 

Total current assets

 

 

395,418

 

 

 

334,971

 

Marketable securities

 

 

41,807

 

 

 

38,871

 

Accounts receivable

 

 

523

 

 

 

701

 

Property and equipment, net

 

 

127,662

 

 

 

132,103

 

Operating lease right-of-use assets

 

 

57,558

 

 

 

60,487

 

Restricted cash

 

 

2,030

 

 

 

2,030

 

Other assets

 

 

4,217

 

 

 

4,807

 

Total assets

 

$

629,215

 

 

$

573,970

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

31,356

 

 

$

22,786

 

Accrued expenses and other current liabilities

 

 

33,129

 

 

 

49,703

 

Deferred revenue

 

 

13

 

 

 

148

 

Operating lease liabilities

 

 

7,066

 

 

 

7,068

 

Liability related to sale of future royalties

 

 

38,615

 

 

 

50,567

 

Total current liabilities

 

 

110,179

 

 

 

130,272

 

Operating lease liabilities

 

 

80,183

 

 

 

82,222

 

Liability related to sale of future royalties

 

 

44,702

 

 

 

43,485

 

Other liabilities

 

 

3,485

 

 

 

6,249

 

Total liabilities

 

 

238,549

 

 

 

262,228

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock; $0.0001 par value; 10,000 shares authorized, no shares issued
   and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock; $0.0001 par value; 100,000 shares authorized at March 31, 2024
   and December 31, 2023;
49,043 and 44,046 shares issued and outstanding at
   March 31, 2024 and December 31, 2023, respectively

 

 

5

 

 

 

4

 

Additional paid-in capital

 

 

1,162,267

 

 

 

1,021,214

 

Accumulated other comprehensive loss

 

 

(3,229

)

 

 

(4,429

)

Accumulated deficit

 

 

(768,377

)

 

 

(705,047

)

Total stockholders’ equity

 

 

390,666

 

 

 

311,742

 

Total liabilities and stockholders’ equity

 

$

629,215

 

 

$

573,970

 

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

 

3


REGENXBIO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share data)

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenues

 

 

 

 

 

 

License and royalty revenue

 

$

15,622

 

 

$

19,138

 

Total revenues

 

 

15,622

 

 

 

19,138

 

Operating Expenses

 

 

 

 

 

 

Cost of revenues

 

 

4,283

 

 

 

4,112

 

Research and development

 

 

54,844

 

 

 

58,516

 

General and administrative

 

 

18,291

 

 

 

22,634

 

Impairment of long-lived assets

 

 

2,101

 

 

 

 

Other operating expenses (income)

 

 

(34

)

 

 

33

 

Total operating expenses

 

 

79,485

 

 

 

85,295

 

Loss from operations

 

 

(63,863

)

 

 

(66,157

)

Other Income (Expense)

 

 

 

 

 

 

Interest income from licensing

 

 

37

 

 

 

70

 

Investment income

 

 

2,469

 

 

 

2,166

 

Interest expense

 

 

(1,973

)

 

 

(2,755

)

Total other income (expense)

 

 

533

 

 

 

(519

)

Net loss

 

$

(63,330

)

 

$

(66,676

)

Other Comprehensive Income

 

 

 

 

 

 

Unrealized gain on available-for-sale securities, net

 

 

1,200

 

 

 

3,779

 

Total other comprehensive income

 

 

1,200

 

 

 

3,779

 

Comprehensive loss

 

$

(62,130

)

 

$

(62,897

)

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(1.38

)

 

$

(1.53

)

Weighted-average common shares outstanding, basic and diluted

 

 

45,733

 

 

 

43,451

 

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

 

4


REGENXBIO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2023

 

 

44,046

 

 

$

4

 

 

$

1,021,214

 

 

$

(4,429

)

 

$

(705,047

)

 

$

311,742

 

Vesting of restricted stock units, net of tax

 

 

270

 

 

 

 

 

 

(910

)

 

 

 

 

 

 

 

 

(910

)

Exercise of stock options, net of tax

 

 

135

 

 

 

 

 

 

884

 

 

 

 

 

 

 

 

 

884

 

Issuance of common stock under employee
   stock purchase plan

 

 

27

 

 

 

 

 

 

411

 

 

 

 

 

 

 

 

 

411

 

Issuance of common stock and pre-funded warrants
   upon public offering, net of transaction
   costs of $
534

 

 

4,565

 

 

 

1

 

 

 

131,066

 

 

 

 

 

 

 

 

 

131,067

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

9,602

 

 

 

 

 

 

 

 

 

9,602

 

Unrealized gain on available-for-sale securities, net

 

 

 

 

 

 

 

 

 

 

 

1,200

 

 

 

 

 

 

1,200

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63,330

)

 

 

(63,330

)

Balances at March 31, 2024

 

 

49,043

 

 

$

5

 

 

$

1,162,267

 

 

$

(3,229

)

 

$

(768,377

)

 

$

390,666

 

 

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2022

 

 

43,299

 

 

$

4

 

 

$

973,145

 

 

$

(15,401

)

 

$

(441,553

)

 

$

516,195

 

Vesting of restricted stock units, net of tax

 

 

99

 

 

 

 

 

 

(419

)

 

 

 

 

 

 

 

 

(419

)

Exercise of stock options, net of tax

 

 

37

 

 

 

 

 

 

471

 

 

 

 

 

 

 

 

 

471

 

Issuance of common stock under employee
   stock purchase plan

 

 

30

 

 

 

 

 

 

583

 

 

 

 

 

 

 

 

 

583

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,206

 

 

 

 

 

 

 

 

 

11,206

 

Unrealized gain on available-for-sale securities, net

 

 

 

 

 

 

 

 

 

 

 

3,779

 

 

 

 

 

 

3,779

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,676

)

 

 

(66,676

)

Balances at March 31, 2023

 

 

43,465

 

 

$

4

 

 

$

984,986

 

 

$

(11,622

)

 

$

(508,229

)

 

$

465,139

 

 

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

5


REGENXBIO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(63,330

)

 

$

(66,676

)

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

 

 

 

 

 

 

Stock-based compensation expense

 

 

9,602

 

 

 

11,206

 

Depreciation and amortization

 

 

4,180

 

 

 

4,178

 

Net amortization of premiums (accretion of discounts) on marketable debt securities

 

 

(468

)

 

 

682

 

Impairment of long-lived assets

 

 

2,101

 

 

 

 

Non-cash interest expense

 

 

688

 

 

 

(574

)

Other non-cash adjustments

 

 

(71

)

 

 

(122

)

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

9,177

 

 

 

9,495

 

Prepaid expenses

 

 

930

 

 

 

(1,621

)

Other current assets

 

 

(6,826

)

 

 

(13,651

)

Operating lease right-of-use assets

 

 

1,528

 

 

 

1,390

 

Other assets

 

 

590

 

 

 

(1,893

)

Accounts payable

 

 

8,461

 

 

 

(3,103

)

Accrued expenses and other current liabilities

 

 

(17,077

)

 

 

(15,443

)

Deferred revenue

 

 

(135

)

 

 

(433

)

Operating lease liabilities

 

 

(2,041

)

 

 

(1,504

)

Other liabilities

 

 

(2,764

)

 

 

(2,849

)

Net cash used in operating activities

 

 

(55,455

)

 

 

(80,918

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of marketable debt securities

 

 

(55,190

)

 

 

 

Maturities of marketable debt securities

 

 

68,930

 

 

 

67,912

 

Purchases of property and equipment

 

 

(557

)

 

 

(4,818

)

Net cash provided by investing activities

 

 

13,183

 

 

 

63,094

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

884

 

 

 

471

 

Taxes paid related to net settlement of stock-based awards

 

 

(910

)

 

 

(419

)

Proceeds from issuance of common stock under employee stock purchase plan

 

 

411

 

 

 

583

 

Proceeds from public offering of common stock and pre-funded warrants,
   net of underwriting discounts and commissions

 

 

131,601

 

 

 

 

Offering expenses related to at-the-market offering program

 

 

(35

)

 

 

 

Repayments under liability related to sale of future royalties, net of imputed interest

 

 

(11,226

)

 

 

(9,672

)

Net cash provided by (used in) financing activities

 

 

120,725

 

 

 

(9,037

)

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

 

 

78,453

 

 

 

(26,861

)

Cash and cash equivalents and restricted cash

 

 

 

 

 

 

Beginning of period

 

 

36,552

 

 

 

98,982

 

End of period

 

$

115,005

 

 

$

72,121

 

 

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

6


REGENXBIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1. Nature of Business

REGENXBIO Inc. (the Company) is a clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. The Company's investigational gene therapies use adeno-associated virus (AAV) vectors from its proprietary gene delivery platform (NAV Technology Platform). The NAV® Technology Platform consists of exclusive rights to a large portfolio of AAV vectors, including commonly used AAV8 and AAV9. The Company has developed a broad pipeline of gene therapy product candidates using the NAV Technology Platform as a one-time treatment to address an array of diseases. In addition to its internal product development efforts, the Company also selectively licenses the NAV Technology Platform to other leading biotechnology and pharmaceutical companies (NAV Technology Licensees). As of March 31, 2024, the NAV Technology Platform was being applied by NAV Technology Licensees in one commercial product, Zolgensma®, and in the preclinical and clinical development of a number of other licensed products. Additionally, the Company has licensed intellectual property rights to collaborators for the joint development and commercialization of certain product candidates. The Company was formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland.

The Company has incurred cumulative losses since inception and as of March 31, 2024, had generated an accumulated deficit of $768.4 million. The Company's ability to transition to recurring profitability is dependent upon achieving a level of revenues adequate to support its cost structure, which depends heavily on the successful development, approval and commercialization of its product candidates. The Company may never achieve recurring profitability, and unless and until it does, the Company will continue to need to raise additional capital. There is no assurance that the Company will be able to raise sufficient capital or obtain financing on favorable terms, or at all. As of March 31, 2024, the Company had cash, cash equivalents and marketable securities of $380.5 million, which management believes is sufficient to fund operations for at least the next 12 months from the date these consolidated financial statements were issued.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 27, 2024. Certain information and footnote disclosures required by GAAP, which are normally included in the Company’s annual consolidated financial statements, have been omitted pursuant to SEC rules and regulations for interim reporting. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year, any other interim periods, or any future year or period. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. Management bases its estimates on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates. Significant estimates are used in the following areas, among others: license and royalty revenue, the allowance for credit losses, accrued research and development expenses and other accrued liabilities, stock-based compensation expense, interest expense under the liability related to the sale of future royalties, income taxes and fair value measurements.

7


Reclassifications

Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassifications are not material and have no effect on previously reported financial position, results of operations and cash flows.

Restricted Cash

Restricted cash consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements and certain other agreements with third parties. The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported on the consolidated balance sheets to the total of these amounts as reported at the end of the period in the consolidated statements of cash flows (in thousands):

 

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

112,975

 

 

$

70,091

 

Restricted cash

 

 

2,030

 

 

 

2,030

 

Total cash and cash equivalents and restricted cash

 

$

115,005

 

 

$

72,121

 

 

Accounts Receivable

Accounts receivable primarily consist of consideration due to the Company resulting from its license agreements with customers. Accounts receivable include amounts invoiced to licensees as well as rights to consideration which have not yet been invoiced, including unbilled royalties, and for which payment is conditional solely upon the passage of time. If a licensee elects to terminate a license prior to the end of the license term, the licensed intellectual property is returned to the Company and any accounts receivable from the licensee which are not contractually payable to the Company are charged off as a reduction of license revenue in the period of the termination. Accounts receivable which are not expected to be received by the Company within 12 months from the reporting date are stated net of a discount to present value and recorded as non-current assets on the consolidated balance sheets. The present value discount is recognized as a reduction of revenue in the period in which the accounts receivable are initially recorded and is accreted as interest income from licensing over the term of the receivables.

Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. Management assesses the collectability of its accounts receivable using the specific identification of account balances, and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions. If necessary, an allowance for credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. Please refer to Note 9 for further information regarding the allowance for credit losses related to accounts receivable.

Leases

The Company accounts for its lease arrangements in accordance with Accounting Standards Codification (ASC) 842, Leases (ASC 842). Under ASC 842, the Company classifies its leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the Company. Lease classification is evaluated at the inception of the lease agreement. Regardless of classification, the Company records a right-of-use asset and a lease liability for all leases with a term greater than 12 months. All of the Company’s leases have been classified as operating leases. Operating lease expense is recognized on a straight-line basis over the term of the lease, with the exception of variable lease expenses which are recognized as incurred.

The Company identifies leases in its contracts if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company does not allocate lease consideration between lease and nonlease components and records a lease liability equal to the present value of the remaining fixed consideration under the lease. The interest rates implicit in the Company’s leases are generally not readily determinable. Accordingly, the Company uses its estimated incremental borrowing rate at the commencement date of the lease to determine the present value discount of the lease liability. The Company estimates its incremental borrowing rate for each lease based on an evaluation of its expected credit rating and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the term of the lease. The right-of-use asset for each lease is equal to the lease liability, adjusted for unamortized initial direct costs and lease incentives and prepaid or accrued rent. Initial direct costs of entering into a lease are included in the right-of-use asset and amortized as lease expense over the term of the lease. Lease incentives, such as tenant improvement allowances, are recorded as a reduction of the right-of-use asset and amortized as a reduction of lease expense over the term of the lease. The Company excludes options to extend or terminate leases from the calculation of the lease liability unless it is reasonably certain the option will be exercised.

8


The Company evaluates its right-of-use assets for impairment in accordance with its policy for long-lived assets. To the extent an impairment of a right-of-use asset is recognized, the remaining carrying value of the asset is subsequently amortized as lease expense on a straight-line basis from the date of impairment to the earlier of the end of the right-of-use asset’s useful life or the end of the lease term.

The Company determines the classification of subleases at the inception of the sublease, as well as whether the Company has been relieved of its primary obligation under the original lease. All of the Company's subleases have been classified as operating leases and, in each case, the Company has not been relieved of its primary obligation under the original lease and continues to account for the original lease as it did prior to the commencement of the sublease. Sublease income is recognized on a straight-line basis over the term of the sublease as a reduction of the related lease expense of the original lease. Initial direct costs of entering into a sublease are deferred and amortized on a straight-line basis over the term of the sublease as a reduction of sublease income.

Impairment of Long-lived Assets

The Company's long-lived assets consist primarily of property and equipment and operating lease right-of-use assets. The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparison of the book values of the assets to estimated future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. Please refer to Note 5 and Note 6 for further information on impairment of long-lived assets.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

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

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for assets and liabilities categorized in Level 3. The level within the fair value hierarchy of an asset or liability measured at fair value is based on the lowest level of any input that is significant to the fair value measurement. The fair values of the Company’s Level 2 financial instruments are based on quoted market prices or broker or dealer quotations for similar assets. These investments are initially valued at the transaction price and subsequently valued utilizing third-party pricing providers or other market observable data. Please refer to Note 4 for further information on the Company's fair value measurements.

Pre-funded Warrants

Warrants are accounted for based on the specific terms of the warrant agreements. The Company's pre-funded warrants are indexed to the Company's common stock and meet the criteria to be classified as equity. Proceeds from the issuance of pre-funded warrants are recorded within additional paid-in capital and are not subject to remeasurement. Please refer to Note 8 for further information regarding pre-funded warrants issued by the Company.

9


Net Loss Per Share

Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of computing both basic and diluted net loss per share, pre-funded warrants are considered outstanding shares upon issuance because the shares may be issued for nominal consideration and are exercisable after the original issuance date. Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net loss per share until the contingency has been fully met. For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation of diluted net loss per share if their effect would be anti-dilutive.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The Company did not adopt any new accounting standards during the three months ended March 31, 2024 and 2023 which had a material impact on the consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances certain interim and annual disclosure requirements of reportable segment information, including information about significant segment expenses. Additionally, the standard requires entities with a single reportable segment to provide all disclosures required by ASC 280, Segment Reporting. The standard is effective for the Company for annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosure of an entity's effective tax rate reconciliation and requires the disclosure of income taxes paid to be disaggregated by jurisdiction. The standard is effective for the Company beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.

3. Marketable Securities

The following tables present a summary of the Company’s marketable securities, which consist solely of available-for-sale debt securities (in thousands):

 

 

 

Amortized Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

87,801

 

 

$

 

 

$

(975

)

 

$

86,826

 

Certificates of deposit

 

 

6,327

 

 

 

 

 

 

(78

)

 

 

6,249

 

Corporate bonds

 

 

175,776

 

 

 

37

 

 

 

(1,353

)

 

 

174,460

 

 

 

$

269,904

 

 

$

37

 

 

$

(2,406

)

 

$

267,535

 

 

 

 

Amortized Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

71,811

 

 

$

6

 

 

$

(1,248

)

 

$

70,569

 

Certificates of deposit

 

 

6,572

 

 

 

 

 

 

(106

)

 

 

6,466

 

Corporate bonds

 

 

204,793

 

 

 

143

 

 

 

(2,364

)

 

 

202,572

 

 

 

$

283,176

 

 

$

149

 

 

$

(3,718

)

 

$

279,607

 

 

As of March 31, 2024 and December 31, 2023, no available-for-sale debt securities had remaining maturities greater than three years. The amortized cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, or to the earliest call date for callable debt securities purchased at a premium.

10


As of March 31, 2024 and December 31, 2023, the balance in accumulated other comprehensive loss consisted solely of unrealized gains and losses on available-for-sale debt securities, net of reclassification adjustments for realized gains and losses and income tax effects. The Company uses the aggregate portfolio approach to release the tax effects of unrealized gains and losses on available-for-sale debt securities in accumulated other comprehensive loss. Realized gains and losses from the sale or maturity of marketable securities are based on the specific identification method and are included in results of operations as investment income. The Company did not recognize any realized gains or losses on available-for-sales securities during the three months ended March 31, 2024 and 2023, and no income tax effects or reclassification adjustments were recorded in accumulated other comprehensive loss during the periods.

The following tables present the fair values and unrealized losses of available-for-sale debt securities held by the Company in an unrealized loss position for less than 12 months and 12 months or greater (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

41,321

 

 

$

(21

)

 

$

45,505

 

 

$

(954

)

 

$

86,826

 

 

$

(975

)

Certificates of deposit

 

 

722

 

 

 

(3

)

 

 

5,282

 

 

 

(75

)

 

 

6,004

 

 

 

(78

)

Corporate bonds

 

 

48,933

 

 

 

(146

)

 

 

92,795

 

 

 

(1,207

)

 

 

141,728

 

 

 

(1,353

)

 

 

$

90,976

 

 

$

(170

)

 

$

143,582

 

 

$

(2,236

)

 

$

234,558

 

 

$

(2,406

)

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

12,877

 

 

$

(16

)

 

$

52,686

 

 

$

(1,232

)

 

$

65,563

 

 

$

(1,248

)

Certificates of deposit

 

 

965

 

 

 

(2

)

 

 

5,257

 

 

 

(104

)

 

 

6,222

 

 

 

(106

)

Corporate bonds

 

 

25,051

 

 

 

(48

)

 

 

144,642

 

 

 

(2,316

)

 

 

169,693

 

 

 

(2,364

)

 

 

$

38,893

 

 

$

(66

)

 

$

202,585

 

 

$

(3,652

)

 

$

241,478

 

 

$

(3,718

)

 

As of March 31, 2024, available-for-sale debt securities held by the Company in an unrealized loss position consisted of 82 investment grade security positions. The Company has the intent and ability to hold such securities until recovery, and based on the credit quality of the issuers and low severity of each unrealized loss position relative to its amortized cost basis, the Company did not identify any credit losses associated with its available-for-sale debt securities. The Company did not record an allowance for credit losses on its available-for-sale debt securities as of March 31, 2024 or December 31, 2023, and no impairment or credit losses on available-for-sale debt securities were recorded during the three months ended March 31, 2024 and 2023.

4. Fair Value Measurements

Financial instruments reported at fair value on a recurring basis include cash equivalents and marketable securities. The following tables present the fair value of cash equivalents and marketable securities in accordance with the hierarchy discussed in Note 2 (in thousands):

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

prices

 

 

other

 

 

Significant

 

 

 

 

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

 

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market mutual funds

 

$

 

 

$

73,399

 

 

$

 

 

$

73,399

 

Total cash equivalents

 

 

 

 

 

73,399

 

 

 

 

 

 

73,399

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 

 

 

 

86,826

 

 

 

 

 

 

86,826

 

Certificates of deposit

 

 

 

 

 

6,249

 

 

 

 

 

 

6,249

 

Corporate bonds

 

 

 

 

 

174,460

 

 

 

 

 

 

174,460

 

Total marketable securities

 

 

 

 

 

267,535

 

 

 

 

 

 

267,535

 

Total cash equivalents and marketable securities

 

$

 

 

$

340,934

 

 

$

 

 

$

340,934

 

 

11


 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

prices

 

 

other

 

 

Significant

 

 

 

 

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

 

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market mutual funds

 

$

 

 

$

13,024

 

 

$

 

 

$

13,024

 

Total cash equivalents

 

 

 

 

 

13,024

 

 

 

 

 

 

13,024

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 

 

 

 

70,569

 

 

 

 

 

 

70,569

 

Certificates of deposit

 

 

 

 

 

6,466

 

 

 

 

 

 

6,466

 

Corporate bonds

 

 

 

 

 

202,572

 

 

 

 

 

 

202,572

 

Total marketable securities

 

 

 

 

 

279,607

 

 

 

 

 

 

279,607

 

Total cash equivalents and marketable securities

 

$

 

 

$

292,631

 

 

$

 

 

$

292,631

 

 

Management estimates that the carrying values of its current accounts receivable, other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value due to the short-term nature of those instruments. Accounts receivable which contain non-current portions and certain non-current payables reported as other liabilities are recorded at their present values using a discount rate that is based on prevailing market rates on the date the amounts were initially recorded. Management does not believe there have been any significant changes in market conditions or credit quality that would cause the discount rates initially used to be materially different from those that would be used as of March 31, 2024 to determine the present value of these instruments. Accordingly, management estimates that the carrying values of its non-current accounts receivable and other liabilities approximate the fair value of those instruments. Management estimates that the carrying value of the liability related to the sale of future royalties approximates fair value. As discussed in Note 7, the carrying value of the liability related to the sale of future royalties is based on the Company’s estimate of future royalties expected to be paid by the Company over the life of the arrangement, which are considered Level 3 inputs.

Long-lived assets, if determined to be not recoverable and impaired, are measured at fair value on a nonrecurring basis using Level 3 inputs. Please refer to Note 6 for further information on nonrecurring fair value measurements of long-lived assets during the three months ended March 31, 2024.

5. Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Laboratory and manufacturing equipment

 

$

75,931

 

 

$

75,632

 

Computer equipment and software

 

 

4,727

 

 

 

4,700

 

Furniture and fixtures