☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Large accelerated filer | Accelerated filer | |||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company |
☐
our ability to continue as a going concern;
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.
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March 31, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 97,468 | $ | 84,580 | ||||
Short-term investments | 57,627 | 104,098 | ||||||
Collaboration receivables | 6,228 | 4,596 | ||||||
Prepaid expenses and other current assets | 6,921 | 9,391 | ||||||
Restricted cash | 950 | 950 | ||||||
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Total current assets | 169,194 | 203,615 | ||||||
Property and equipment, net | 13,781 | 12,539 | ||||||
Right-of-use assets, net | 10,268 | 10,400 | ||||||
Goodwill | 21,359 | 21,359 | ||||||
Intangible assets, net | 84,844 | 85,536 | ||||||
Other assets | 5,796 | 2,752 | ||||||
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Total assets | $ | 305,242 | $ | 336,201 | ||||
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Liabilities and Stockholders’ Equity | �� | |||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,297 | $ | 15,968 | ||||
Accrued expenses | 7,478 | 7,072 | ||||||
Current portion of deferred revenue | 26,760 | 18,100 | ||||||
Current portion of operating lease liability | 573 | 530 | ||||||
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Total current liabilities | 41,108 | 41,670 | ||||||
Contingent consideration | 94,203 | 103,655 | ||||||
Deferred revenue, net of current portion | 15,328 | 25,256 | ||||||
Operating lease liability, net of current portion | 11,931 | 12,084 | ||||||
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Total liabilities | 162,570 | 182,665 | ||||||
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Commitments and contingencies (Notes 3, 4 and 12) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of March 31, 2020 and December 31, 2019, respectively; no shares issued and outstanding as of March 31, 2020 and December 31, 2019 | — | — | ||||||
Common stock, $0.001 par value; 200,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 60,037,663 shares and 60,022,067 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | 60 | 60 | ||||||
Additionalpaid-in capital | 515,535 | 512,231 | ||||||
Accumulated deficit | (373,778 | ) | (359,496 | ) | ||||
Accumulated other comprehensive income | 855 | 741 | ||||||
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Total stockholders’ equity | 142,672 | 153,536 | ||||||
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Total liabilities and stockholders’ equity | $ | 305,242 | $ | 336,201 | ||||
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March 31, 2021 | December 31, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 155,746 | $ | 342,027 | ||||
Investments | 499,007 | 312,001 | ||||||
Collaboration receivables | 23,240 | 26,598 | ||||||
Prepaid expenses and other current assets | 16,721 | 11,741 | ||||||
Restricted cash | 4,826 | 4,826 | ||||||
Total current assets | 699,540 | 697,193 | ||||||
Property and equipment, net | 16,563 | 15,372 | ||||||
Right-of-use | 71,154 | 72,957 | ||||||
Goodwill | 21,359 | 21,359 | ||||||
Intangible assets, net | 77,106 | 79,127 | ||||||
Other assets | 4,918 | 3,928 | ||||||
Total assets | $ | 890,640 | $ | 889,936 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 17,068 | $ | 8,839 | ||||
Accrued expenses | 16,240 | 13,202 | ||||||
Current portion of deferred revenue | 72,373 | 67,563 | ||||||
Current portion of operating lease liability | 12,084 | 11,733 | ||||||
Income tax liability | 254 | — | ||||||
Total current liabilities | 118,019 | 101,337 | ||||||
Contingent consideration | 108,251 | 152,230 | ||||||
Deferred revenue, net of current portion | 226,876 | 228,659 | ||||||
Operating lease liability, net of current portion | 48,604 | 50,953 | ||||||
Total liabilities | 501,750 | 533,179 | ||||||
Commitments and contingencies (Notes 3 and 12) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020 | 0 | — | ||||||
Common stock, $0.001 par value; 200,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 75,217,672 shares and 75,029,625 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 75 | 75 | ||||||
Additional paid-in capital | 775,499 | 769,965 | ||||||
Accumulated deficit | (386,761 | ) | (413,283 | ) | ||||
Accumulated other comprehensive income | 77 | — | ||||||
Total stockholders’ equity | 388,890 | 356,757 | ||||||
Total liabilities and stockholders’ equity | $ | 890,640 | $ | 889,936 | ||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Collaboration revenue | $ | 4,654 | $ | 1,474 | ||||
Operating expenses: | ||||||||
Research and development | 21,439 | 17,423 | ||||||
General and administrative | 7,458 | 6,554 | ||||||
Change in fair value of contingent consideration | (9,452 | ) | 11,702 | |||||
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Total operating expenses | 19,445 | 35,679 | ||||||
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Loss from operations | (14,791 | ) | (34,205 | ) | ||||
Interest income, net | 509 | 521 | ||||||
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Loss before benefit from income taxes | (14,282 | ) | (33,684 | ) | ||||
Benefit from income taxes | — | 486 | ||||||
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Net loss | $ | (14,282 | ) | $ | (33,198 | ) | ||
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Net loss per share—basic and diluted | $ | (0.24 | ) | $ | (0.74 | ) | ||
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Weighted average common shares outstanding—basic and diluted | 60,008,217 | 45,004,521 | ||||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Collaboration revenue | $ | 34,600 | $ | 4,654 | ||||
Operating expenses: | ||||||||
Research and development | 41,140 | 21,439 | ||||||
General and administrative | 10,817 | 7,458 | ||||||
Change in fair value of contingent consideration | (43,979 | ) | (9,452 | ) | ||||
Total operating expenses | 7,978 | 19,445 | ||||||
Income (loss) from operations | 26,622 | (14,791 | ) | |||||
Other income, net | 154 | 509 | ||||||
Income (loss) before income tax provision | 26,776 | (14,282 | ) | |||||
Income tax provision | (254 | ) | — | |||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | |||
Net income (loss) per share—basic | $ | 0.35 | $ | (0.24 | ) | |||
Weighted average common shares outstanding—basic | 75,189,696 | 60,008,217 | ||||||
Net income (loss) per share—diluted | $ | 0.34 | $ | (0.24 | ) | |||
Weighted average common shares outstanding—diluted | 79,101,624 | 60,008,217 | ||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net loss | $ | (14,282 | ) | $ | (33,198 | ) | ||
Other comprehensive income (loss): | ||||||||
Unrealized gains onavailable-for-sale securities, net of tax of $0 | 114 | 155 | ||||||
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Comprehensive loss | $ | (14,168 | ) | $ | (33,043 | ) | ||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | |||
Other comprehensive income (loss): | ||||||||
Unrealized gains on available-for-sale | 77 | 114 | ||||||
Comprehensive income (loss) | $ | 26,599 | $ | (14,168 | ) | |||
Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2019 | 60,022,067 | $ | 60 | $ | 512,231 | $ | (359,496 | ) | $ | 741 | $ | 153,536 | ||||||||||||
Exercise of stock options | 15,596 | — | 132 | — | — | 132 | ||||||||||||||||||
Stock-based compensation expense | — | — | 3,172 | — | — | 3,172 | ||||||||||||||||||
Unrealized gains onavailable-for-sale securities | — | — | — | — | 114 | 114 | ||||||||||||||||||
Net loss | — | — | — | (14,282 | ) | — | (14,282 | ) | ||||||||||||||||
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Balances at March 31, 2020 | 60,037,663 | $ | 60 | $ | 515,535 | $ | (373,778 | ) | $ | 855 | $ | 142,672 | ||||||||||||
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Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2018 | 45,139,955 | $ | 45 | $ | 371,257 | $ | (246,203 | ) | $ | 196 | $ | 125,295 | ||||||||||||
Exercise of stock options | 154,484 | — | 897 | — | — | 897 | ||||||||||||||||||
Stock-based compensation expense | — | — | 1,959 | — | — | 1,959 | ||||||||||||||||||
Unrealized gains onavailable-for-sale securities | — | — | — | — | 155 | 155 | ||||||||||||||||||
Net loss | — | — | — | (33,198 | ) | — | (33,198 | ) | ||||||||||||||||
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Balances at March 31, 2019 | 45,294,439 | $ | 45 | $ | 374,113 | $ | (279,401 | ) | $ | 351 | $ | 95,108 | ||||||||||||
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Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balances at December 31, 2020 | 75,029,625 | $ | 75 | $ | 769,965 | $ | (413,283 | ) | $ | 0 | $ | 356,757 | ||||||||||||
Exercise of stock options | 188,047 | — | 1,550 | — | — | 1,550 | ||||||||||||||||||
Stock-based compensation expense | — | — | 3,984 | — | — | 3,984 | ||||||||||||||||||
Unrealized gains on available-for-sale | — | — | — | — | 77 | 77 | ||||||||||||||||||
Net income | — | — | — | 26,522 | — | 26,522 | ||||||||||||||||||
Balances at March 31, 2021 | 75,217,672 | $ | 75 | $ | 775,499 | $ | (386,761 | ) | $ | 77 | $ | 388,890 | ||||||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (14,282 | ) | $ | (33,198 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | 1,351 | 1,025 | ||||||
Stock-based compensation expense | 3,172 | 1,959 | ||||||
Change in fair value of contingent consideration | (9,452 | ) | 11,702 | |||||
Deferred income tax benefit | — | (486 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Collaboration receivables | (1,633 | ) | (482 | ) | ||||
Prepaid expenses and other assets | (397 | ) | (285 | ) | ||||
Right-of-use assets | 132 | 115 | ||||||
Accounts payable | (9,545 | ) | (1,048 | ) | ||||
Accrued expenses | 584 | (71 | ) | |||||
Lease liability | (110 | ) | (74 | ) | ||||
Deferred revenue | (1,267 | ) | (688 | ) | ||||
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Net cash used in operating activities | (31,447 | ) | (21,531 | ) | ||||
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Cash flows from investing activities: | ||||||||
Purchases of investments | (27,409 | ) | — | |||||
Sales and maturities of investments | 73,994 | 28,905 | ||||||
Purchases of property and equipment | (2,325 | ) | (1,039 | ) | ||||
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Net cash provided by investing activities | 44,260 | 27,866 | ||||||
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Cash flows from financing activities: | ||||||||
Payments of public offering costs | (57 | ) | — | |||||
Proceeds from option exercises | 132 | 897 | ||||||
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Net cash provided by financing activities | 75 | 897 | ||||||
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Net increase in cash, cash equivalents and restricted cash | 12,888 | 7,232 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 85,530 | 56,224 | ||||||
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Cash, cash equivalents and restricted cash at end of period | $ | 98,418 | $ | 63,456 | ||||
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Cash, cash equivalents and restricted cash at end of period: | ||||||||
Cash and cash equivalents | $ | 97,468 | $ | 62,431 | ||||
Restricted cash | 950 | 1,025 | ||||||
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Total cash, cash equivalents and restricted cash at end of period | $ | 98,418 | $ | 63,456 | ||||
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Supplemental disclosure ofnon-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 764 | $ | 95 | ||||
Deferred offering costs included in accounts payable and accrued expenses | $ | 120 | $ | — |
thousands, except share amounts)
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balances at December 31, 2019 | 60,022,067 | $ | 60 | $ | 512,231 | $ | (359,496 | ) | $ | 741 | $ | 153,536 | ||||||||||||
Exercise of stock options | 15,596 | — | 132 | — | — | 132 | ||||||||||||||||||
Stock-based compensation expense | — | — | 3,172 | — | — | 3,172 | ||||||||||||||||||
Unrealized gains on available-for-sale | — | — | — | — | 114 | 114 | ||||||||||||||||||
Net loss | — | — | — | (14,282 | ) | — | (14,282 | ) | ||||||||||||||||
Balances at March 31, 2020 | 60,037,663 | $ | 60 | $ | 515,535 | $ | (373,778 | ) | $ | 855 | $ | 142,672 | ||||||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 2,841 | 1,351 | ||||||
Stock-based compensation expense | 3,984 | 3,172 | ||||||
Change in fair value of contingent consideration | (43,979 | ) | (9,452 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Collaboration receivables | 3,358 | (1,633 | ) | |||||
Prepaid expenses and other assets | (4,672 | ) | 2,647 | |||||
Right-of-use | 3,049 | 132 | ||||||
Long-term prepaid rent | (1,298 | ) | (3,044 | ) | ||||
Accounts payable | 8,114 | (9,545 | ) | |||||
Accrued expenses | 2,733 | 584 | ||||||
Income tax liabilit y | 254 | — | ||||||
Lease liability | (3,244 | ) | (110 | ) | ||||
Deferred revenue | 3,027 | (1,267 | ) | |||||
Net cash provided by (used in) operating activities | 689 | (31,447 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of investments | (186,929 | ) | (27,409 | ) | ||||
Sales and maturities of investments | — | 73,994 | ||||||
Purchases of property and equipment | (1,591 | ) | (2,325 | ) | ||||
Net cash provided by (used in) investing activities | (188,520 | ) | 44,260 | |||||
Cash flows from financing activities: | ||||||||
Payments of public offering costs | — | (57 | ) | |||||
Proceeds from option exercises | 1,550 | 132 | ||||||
Net cash provided by financing activities | 1,550 | 75 | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash: | (186,281 | ) | 12,888 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 346,853 | 85,530 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 160,572 | $ | 98,418 | ||||
Cash, cash equivalents and restricted cash at end of period: | ||||||||
Cash and cash equivalents | $ | 155,746 | $ | 97,468 | ||||
Restricted cash | 4,826 | 950 | ||||||
Total cash, cash equivalents and restricted cash at end of period | $ | 160,572 | $ | 98,418 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 826 | $ | 764 | ||||
Deferred offering costs included in accounts payable and accrued expenses | $ | — | $ | 120 |
Thediseases under a collaboration with Sanofi Pasteur Inc. (“Sanofi”), the vaccines global business unit of Sanofi S.A.
next-generation CF candidate to support and optimize future clinical development.
hypertension and respiratory infectious diseases.
In September 2019, the Company announced its decisiona clinical
1, 2021.
In July 2019, the
In July 2019, the Company entered into an Open Market Sale Agreement (the (“Jefferies”) under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $50.0
On March 13, 2020, the Company filed a universal shelf registration statement on FormS-3 with the SEC (the “2020 Shelf”) to register for sale from time to time up to $350.0 million of common stock, preferred stock, debt securities, warrants and/million.
On March 13, 2020, the Company entered into Amendment No. 1 to the Open Market Sale AgreementSM with Jefferies, which increased the aggregate dollar amount of shares of common stock that the Company may issue and sellsold pursuant to the Sales Agreement from $50.0 million to $100.0 million, which became effective whenduring the 2020 Shelf was declared effective. As of May 1, 2020, the Company had issued and sold $37.9 million under the Sales Agreement. three months ended March 31, 2021.
Registration Statement. The price to the public was $22.00 per share, resulting in gross proceeds to the Company of $125.0 million, before deducting underwriting discounts and commissions of $7.5 million and other offering expenses of $0.5 million.
Going Concern
In accordance with Accounting Standards Update (“ASU”)No. 2014-15,Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic205-40),the Amended Sanofi Agreement, the Company has evaluated whether there are conditions granted to Sanofi exclusive, worldwide licenses under applicable patents, patent applications,
The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through March 31, 2020, the Company has funded its operations with proceeds from the sale of redeemable convertible preferred stock and the sale of bridge units, which ultimately converted into shares of the Company’s common stock, the proceeds from the Company’s initial public offering (the “IPO”) the upfront payment receivedmaterials, including those arising under the Original Sanofi Agreement, the proceeds from a private placement of the Company’s common stockcollaboration, to develop, commercialize and the proceeds from a public offering of the Company’s common stock. The Company has incurred recurring losses and cash outflows from operations since its inception, including net losses of $14.3 million and $33.2 million for the three months ended March 31, 2020 and 2019, respectively. In addition, the Company had an accumulated deficit of $373.8 million as of March 31, 2020. The Company expectsmanufacture mRNA vaccines to continue to generate operating losses for the foreseeable future.
As of May 7, 2020, the date of issuance of these unaudited interim condensed consolidated financial statements, the Company expects that its cash, cash equivalents and short-term investments of $155.1 million as of March 31, 2020, togetherprevent, treat or cure diseases, disorders or conditions in humans caused by any infectious disease pathogen, with the net proceeds of approximately $36.6 million from issuances and sales of common stock pursuant to the Sales Agreement between March 30, 2020 and May 1, 2020, which transactions were settled between April 1, 2020 and May 5, 2020, will be sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of 2021. The future viability of the Company beyond that point is dependent on the Company’s ability to raise additional capital to finance its operations.
Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. The Company expects that its expenses will increase in connection with its ongoing business activities. As a result, the Company will need substantial additional funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the sale of equity, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If the Company is unable to obtain funding, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.
Based on its recurring losses and cash outflows from operations since inception, expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance its future operations, the Company concluded that there is substantial doubt about its ability to continue as a going concern.
In August 2018, the FASB issued ASU No.2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This new standard removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this new standard as of the required effective date of January 1, 2020, and its adoption had no impact on the Company’s consolidated financial statements.
In November 2018, the FASB issued ASUNo. 2018-18,Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update provides clarification on the interaction between Accounting Standards CodificationUpdate (“ASC”ASU”) 606,Revenue from Contracts with Customers (“ASC 606”), and ASC 808,Collaborative Arrangements(“ASC 808”), including the alignment of unit of account guidance between the two topics. The Company adopted this new standard as of the required effective date of January 1, 2020, and its adoption had no impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASUThis standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that the adoption ofadopted this new standard will haveas of the required effective date of January 1, 2021, and its adoption had no impact on itsthe Company’s condensed consolidated financial statements and disclosures.
result in astandard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect the adoption ofadopted this new standard to have a materialas of the required effective date of January 1, 2021, and its adoption had no impact on itsthe Company’s condensed consolidated financial statements.
Pursuant to the Amended Sanofi Agreement,6. In June 2020, the Company and Sanofi have agreedentered into the Second Sanofi Amendment, which became effective in July 2020 following early termination of the waiting period under the Hart-Scott Rodino Act, to collaborate to perform certain research and development activities to advance mRNA vaccines and mRNA vaccine platform development during a three-year research term, which may be extended by mutual agreement. Other thanexpand the Licensed Fieldscope ofSARS-CoV-2, the Company is obligated to manufacture and supply certainnon-clinical and clinical product until the Company transfers such manufacturing capabilities to Sanofi, which the Company originally estimated to take up to eight years to complete. The collaboration activities will be subject to a collaboration plan to be updated annually. During March 2020, the joint steering committee revised the collaboration timeline and the Company now estimates the completion of the transfer of manufacturing capabilitieslicenses granted to be six years, or 2024.
Pursuant to the Amended Sanofi Agreement, the Company and Sanofi have agreed to a governance structure, including committees and working groups, to manage the activities under the collaboration. If the Company and Sanofi do not mutually agree on certain decisions, Sanofi would be able to break a deadlock without the Company’s consent. The collaboration includes an estimated budget. Sanofi is responsible for paying reimbursable development costs, including the Company’s employee costs,out-of-pocket costs paid to third parties and manufacturing costs, up to a specified amount for the Licensed Field other thanSARS-CoV-2, for which each party pays its own employee costs and share equally in the collective out of pocket costs.
Sanofi.
amount for each Licensed Field.
an additional payment of $75.0 million. The Amended Sanofi Agreement provides that the Company is eligible to receive aggregate potential payments of up to $805.0 million from Sanofi, which includes the $45.0 million upfront payment the Company received in 2018, potential milestone payments and potential option exercise payments. Sanofi will also pay the Company $5.0 million with respect to each additional Licensed Field for which it exercises an option. Sanofi did not pay an upfront fee to the Company with respect to the addition ofSARS-CoV-2 as a Licensed Field. Sanofi has also agreed to pay the Company milestone payments$1.9 billion upon the achievement of additional specified development,
regulatory, manufacturing and commercialization milestones.milestones, inclusive of the fee to exercise the option to extend the Collaboration Term. In particular, the Company is entitled to receive development, and regulatory milestone payments of up to $63.0 million per Licensed Field and sales milestone payments of up to $85.0$148.0 million perfor each Licensed Field.Field, other than the
Notwithstanding
Pursuant to the Amended Sanofi Agreement, Sanofi has also agreed to pay the Company a tiered royaltyroyalties on worldwide net sales of all mRNA vaccines within each in the
Under the Sanofi Amendment,Agreement, except where such vaccines are provided as a donation or transferred to a third party without any profit margin, in which case the Company and Sanofi agreedwill be paid royalties sufficient to negotiate in good faith an additional amendment related to activities directed to clinical development or commercialization of a product related toSARS-CoV-2, which could include the applicablecover its royalty terms.
obligations.
Moreover,
single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606.
The Company accounts for the Sanofi Amendment entered into on March 26, 2020, with the exception of the Licensed Field forSARS-CoV-2, under ASC 606. In determining the appropriate amount of revenue to be recognized under ASC 606, the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
containing mRNA until the Company transfers such manufacturing capabilities to Sanofi; and (vi) the technology and process transfer. The Company assessed whether each of these promised goods or services are distinct performance obligations on their own or if they need to be combined with other promises to create a bundle that is a distinct performance obligation. The Company determined that the promised goods and services do not have standalone value and are highly interrelated. Accordingly, the promised goods and services represent one performance obligation. Additionally, Sanofi’s right to exercise optionsits option to extend the research term and have the Company conduct research and development activities to advance mRNA vaccines for up to twoan additional three infectious disease pathogens withinwere determined at the granted licensestime of the modification to the Licensed Fields are accounted for separately as they do not represent material rights, based on the criteria of ASC 606. Upon the exercise of any option by Sanofi, the contract promises associated with an option target would use606, and therefore do not represent a separate proportional performance model for purposes of revenue recognition under ASC 606. There is no significant financing component ornon-cash consideration included in the Amended Sanofi Agreement.
Under ASC 606, at the end of each reporting period, the Companyre-evaluates the probability that the consideration associated with each milestone or reimbursement will not be subject to a significant reversal in the cumulative amount of revenue recognized, and, if necessary, adjusts the estimate of the overall transaction price. The estimated collaboration budget is consistentlyre-evaluated and changes to the budget, if any, require approval by the Joint Steering Committee. If an approved change occurs, the Company willre-evaluate the transaction price which could potentially affect the cumulative amount of revenue recognized. In March 2020, the joint steering committee agreed to a revised budget and collaboration plan. As a result, during the three months ended March 31, 2020, the Company increased the overall transaction price by $30.5 million. The transaction price includes the upfront,non-refundable payment of $45.0 million for the transfer of the combined license, supply and development obligations under the Original Sanofi Agreement, an estimated $34.3 million in reimbursable employee costs, an estimated $88.3 million in reimbursable development costs includingout-of-pocket costs paid to third parties and manufacturing costs and an estimated $14.0 million in milestone payments.
obligation.
The Company has estimated the completion of manufacturing activities to be in 2024.
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Collaboration revenue | $ | 4,654 | $ | 1,474 |
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Collaboration revenue | $ | 34,600 | $ | 4,654 |
March 31, 2020 | December 31, 2019 | |||||||
Contract liabilities | ||||||||
Deferred revenue | $ | 42,088 | $ | 43,356 |
The Company considers
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Contract liabilities | ||||||||
Deferred revenue | $ | 299,249 | $ | 296,222 |
The Company evaluated the Sanofi Amendment, with respect to the Licensed Field for SARS-COV-2, under the ASC 606 contract modification guidance and determined that the Sanofi Amendment, with respect to the Licensed Field for SARS-COV-2, should be accounted for as a separate contract as it added additional distinct goods and services at a stand-alone price. The Original Sanofi Agreement will continue to be accounted for under ASC 606. The Company determined the Sanofi Amendment, with respect to the Licensed Field for SARS-COV-2, will be accounted for under ASC 808 as both parties are active participants and each party pays its own employee costs and share equally in the collective out of pocket costs. The Company will record payments to Sanofi under the amendment for SARS-COV-2 as research and development expense and reimbursements from Sanofi, if any, will be recorded as an offset to research and development expense. As of March 31, 2020, activities had not yet commenced with respect to the development of a vaccine againstSARS-Cov-2 pursuant to the Sanofi Amendment.
March 31, 2020 | ||||||||||||||||||||
Estimated Life | Gross Carrying Amount | Accumulated Amortization | Impairment Charge | Net Carrying Amount | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Definite-lived intangible assets: | ||||||||||||||||||||
MRT | 6 years | $ | 45,992 | $ | (3,439 | ) | $ | — | $ | 42,553 | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||
IPR&D—CF | Indefinite | 42,291 | — | — | 42,291 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total intangible assets, net | $ | 88,283 | $ | (3,439 | ) | $ | — | $ | 84,844 | |||||||||||
|
|
|
|
|
|
|
|
December 31, 2019 | ||||||||||||||||||||
Estimated Life | Gross Carrying Amount | Accumulated Amortization | Impairment Charge | Net Carrying Amount | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Definite-lived intangible assets: | ||||||||||||||||||||
MRT | 8 years | $ | 45,992 | $ | (2,747 | ) | $ | — | $ | 43,245 | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||
IPR&D—CF | Indefinite | 42,291 | — | — | 42,291 | |||||||||||||||
IPR&D—OTC | Indefinite | 18,559 | — | (18,559 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total intangible assets, net | $ | 106,842 | $ | (2,747 | ) | $ | (18,559 | ) | $ | 85,536 | ||||||||||
|
|
|
|
|
|
|
|
March 31, 2021 | ||||||||||||||||
Estimated Life | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||
(In thousands) | ||||||||||||||||
Definite-lived intangible assets: | ||||||||||||||||
MRT | 6 years | $ | 45,992 | $ | (11,177 | ) | $ | 34,815 | ||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
IPR&D - CF | Indefinite | 42,291 | — | 42,291 | ||||||||||||
Total intangible assets, net | $ | 88,283 | $ | (11,177 | ) | $ | 77,106 | |||||||||
December 31, 2020 | ||||||||||||||||
Estimated Life | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||
(In | ||||||||||||||||
Definite-lived intangible assets: | ||||||||||||||||
MRT | 6 years | $ | 45,992 | $ | (9,156 | ) | $ | 36,836 | ||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
IPR&D - CF | Indefinite | 42,291 | — | 42,291 | ||||||||||||
Total intangible assets, net | $ | 88,283 | $ | (9,156 | ) | $ | 79,127 | |||||||||
2021.
Fair Value Measurements as of March 31, 2020 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | — | $ | 53,850 | $ | — | $ | 53,850 | ||||||||
U.S. government agency bonds | — | 57,627 | — | 57,627 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | 111,477 | $ | — | $ | 111,477 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 94,203 | $ | 94,203 | ||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | — | $ | 94,203 | $ | 94,203 | |||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2019 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | — | $ | 56,591 | $ | — | $ | 56,591 | ||||||||
U.S. government agency bonds | — | 104,098 | — | 104,098 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | 160,689 | $ | — | $ | 160,689 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 103,655 | $ | 103,655 | ||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | — | $ | 103,655 | $ | 103,655 | |||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements as of March 31, 2021 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | 0 | $ | 86,637 | $ | 0 | $ | 86,637 | ||||||||
U.S. treasuries | 0 | 441,082 | 0 | 441,082 | ||||||||||||
U.S. government agency bonds | 0 | 57,925 | 0 | 57,925 | ||||||||||||
$ | 0 | $ | 585,644 | $ | 0 | $ | 585,644 | |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | 0 | $ | 0 | $ | 108,251 | $ | 108,251 | ||||||||
$ | 0 | $ | 0 | $ | 108,251 | $ | 108,251 | |||||||||
Fair Value Measurements as of December 31, 2020 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | — | $ | 273,827 | $ | — | $ | 273,827 | ||||||||
U.S. treasuries | 0 | 292,001 | — | 292,001 | ||||||||||||
U.S. government agency bonds | — | 20,000 | — | 20,000 | ||||||||||||
$ | — | $ | 585,828 | $ | — | $ | 585,828 | |||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 152,230 | $ | 152,230 | ||||||||
$ | — | $ | — | $ | 152,230 | $ | 152,230 | |||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
Due within one year | $ | 299,369 | $ | 299,451 | $ | 201,606 | $ | 201,596 | ||||||||
Due after one year through two years | 199,561 | 199,556 | 110,395 | 110,405 | ||||||||||||
Total available-for-sale | $ | 498,930 | $ | 499,007 | $ | 312,001 | $ | 312,001 | ||||||||
Unobservable Inputs | Fair Value at | |||||||||||
Projected Year of Payment | March 31, 2020 | December 31, 2019 | ||||||||||
Earnout payments | 2026 - 2039 | 87,054 | $ | 96,097 | ||||||||
Milestone payments | 2026 - 2030 | 7,149 | 7,558 | |||||||||
|
|
|
| |||||||||
$ | 94,203 | $ | 103,655 | |||||||||
|
|
|
|
Unobservable Inputs Projected Year of Payment | Fair Value at | |||||||||||
March 31, | December 31, | |||||||||||
2021 | 2020 | |||||||||||
Earnout payments | 2027 - 2039 | $ | 99,122 | $ | 142,250 | |||||||
Milestone payments | 2027 - 2032 | 9,129 | 9,980 | |||||||||
$ | 108,251 | $ | 152,230 | |||||||||
2020.
Fair Value | ||||
Balance as of December 31, 2019 | $ | 103,655 | ||
Decrease in fair value of contingent consideration | (9,452 | ) | ||
|
| |||
Balance as of March 31, 2020 | $ | 94,203 | ||
|
|
The
Fair Value | ||||
Balance as of December 31, 2020 | $ | 152,230 | ||
Decrease in fair value of contingent consideration | (43,979 | ) | ||
Balance as of March 31, 2021 | $ | 108,251 | ||
March 31, 2020 | December 31, 2019 | |||||||
Laboratory equipment | $ | 9,700 | $ | 9,044 | ||||
Computer equipment | 893 | 779 | ||||||
Office equipment | 883 | 883 | ||||||
Leasehold improvements | 5,635 | 5,635 | ||||||
Construction in progress | 4,590 | 3,460 | ||||||
|
|
|
| |||||
21,701 | 19,801 | |||||||
Less: Accumulated depreciation and amortization | (7,920 | ) | (7,262 | ) | ||||
|
|
|
| |||||
$ | 13,781 | $ | 12,539 | |||||
|
|
|
|
March 31, 2021 | December 2020 | |||||||
Laboratory equipment | $ | 17,403 | $ | 12,710 | ||||
Computer equipment | 933 | 922 | ||||||
Office equipment | 941 | 941 | ||||||
Leasehold improvements | 4,822 | 5,730 | ||||||
Construction in progress | 2,498 | 5,189 | ||||||
26,597 | 25,492 | |||||||
Less: Accumulated depreciation and amortization | (10,034 | ) | (10,120 | ) | ||||
$ | 16,563 | $ | 15,372 | |||||
March 31, 2020 | December 31, 2019 | |||||||
Accrued external research and development expenses | $ | 3,879 | $ | 1,763 | ||||
Accrued employee compensation and benefits | 2,298 | 3,547 | ||||||
Accrued consultant and professional fees | 1,174 | 1,390 | ||||||
Other | 127 | 372 | ||||||
|
|
|
| |||||
$ | 7,478 | $ | 7,072 | |||||
|
|
|
|
March 31, 2021 | December 31, 2020 | |||||||
Accrued external research and development expenses | $ | 5,100 | $ | 2,805 | ||||
Accrued employee compensation and benefits | 3,425 | 5,600 | ||||||
Accrued consultant and professional fees | 1,969 | 1,489 | ||||||
Other | 5,746 | 3,308 | ||||||
$ | 16,240 | $ | 13,202 | |||||
Purchase Plan
Company
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Intrinsic Value | |||||||||||||
(in years) | ||||||||||||||||
Outstanding as of December 31, 2019 | 8,646,378 | $ | 8.06 | 8.42 | $ | 3,687 | ||||||||||
Granted | 2,369,168 | $ | 7.66 | |||||||||||||
Exercised | (15,596 | ) | $ | 8.49 | ||||||||||||
Forfeited | (16,723 | ) | $ | 9.16 | ||||||||||||
|
| |||||||||||||||
Outstanding as of March 31, 2020 | 10,983,227 | $ | 7.97 | 8.56 | $ | 22,260 | ||||||||||
|
| |||||||||||||||
Exercisable as of March 31, 2020 | 4,287,057 | $ | 7.72 | 7.88 | $ | 9,685 | ||||||||||
Vested and expected to vest as of March 31, 2020 | 10,983,227 | $ | 7.97 | 8.56 | $ | 22,260 |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Intrinsic Value | |||||||||||||
(in years) | ||||||||||||||||
Outstanding as of December 31, 2020 | 9,557,391 | $ | 8.79 | 7.92 | $ | 93,256 | ||||||||||
Granted | 2,324,110 | $ | 22.77 | |||||||||||||
Exercised | (188,047 | ) | $ | 8.24 | ||||||||||||
Forfeited | (41,941 | ) | $ | 14.88 | ||||||||||||
Outstanding as of March 31, 2021 | 11,651,513 | $ | 11.57 | 8.18 | $ | 73,830 | ||||||||||
Exercisable as of March 31, 2021 | 5,456,919 | $ | 7.84 | 7.21 | $ | 47,181 | ||||||||||
Vested and expected to vest as of March 31, 2021 | 11,651,513 | $ | 11.57 | 8.18 | $ | 73,830 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Risk-free interest rate | 0.86 | % | 2.47 | % | ||||
Expected term (in years) | 6.1 | 6.0 | ||||||
Expected volatility | 68.0 | % | 73.9 | % | ||||
Expected dividend yield | 0 | % | 0 | % |
Restricted Common Stock
The following table summarizes the Company’s restricted stock activity since December 31, 2019:
Number of Shares | Weighted Average Grant-Date Fair Value | |||||||
Unvested restricted common stock outstanding as of December 31, 2019 | 34,168 | $ | 1.28 | |||||
Forfeited restricted common stock | — | $ | — | |||||
Vested restricted common stock | (27,405 | ) | $ | 1.28 | ||||
|
| |||||||
Unvested restricted common stock outstanding as of March 31, 2020 | 6,763 | $ | 1.28 | |||||
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Risk-free interest rate | 1.01 | % | 0.86 | % | ||||
Expected term (in years) | 6.1 | 6.1 | ||||||
Expected volatility | 69.9 | % | 68.0 | % | ||||
Expected dividend yield | 0 | % | 0 | % |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Research and development expenses | $ | 1,454 | $ | 869 | ||||
General and administrative expenses | 1,718 | 1,090 | ||||||
|
|
|
| |||||
$ | 3,172 | $ | 1,959 | |||||
|
|
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Research and development expenses | $ | 2,080 | $ | 1,454 | ||||
General and administrative expenses | 1,904 | 1,718 | ||||||
$ | 3,984 | $ | 3,172 | |||||
10. Net Loss per Share
Net Loss per Share
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Numerator: | ||||||||
Net loss | $ | (14,282 | ) | $ | (33,198 | ) | ||
Denominator: | ||||||||
Weighted average common shares outstanding—basic and diluted | 60,008,217 | 45,004,521 | ||||||
|
|
|
| |||||
Net loss per share—basic and diluted | $ | (0.24 | ) | $ | (0.74 | ) | ||
|
|
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Basic net income (loss) per common share: | ||||||||
Numerator: | ||||||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | |||
Denominator: | ||||||||
Weighted average common shares outstanding—basic | 75,189,696 | 60,008,217 | ||||||
Net income (loss) per share—basic | $ | 0.35 | $ | (0.24 | ) | |||
Diluted net income (loss) per common share: | ||||||||
Numerator: | ||||||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | |||
Denominator: | ||||||||
Weighted average common shares outstanding—diluted | 79,101,624 | 60,008,217 | ||||||
Net income (loss) per share—diluted | $ | 0.34 | $ | (0.24 | ) |
The Company’s potentially dilutive securities, which include stock options and As of March 31, 2021, there are 0 unvested shares of restricted common stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be to reduce the net loss per share. Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
stock.
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Options to purchase common stock | 10,983,227 | 8,012,029 | ||||||
Unvested restricted common stock | 6,763 | 168,758 | ||||||
|
|
|
| |||||
10,989,990 | 8,180,787 | |||||||
|
|
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Options to purchase common stock | 3,053,207 | 10,983,227 | ||||||
Unvested restricted common stock | 0 | 6,763 | ||||||
3,053,207 | 10,989,990 | |||||||
Agreements
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Lease cost | ||||||||
Operating lease cost | $ | 4,772 | $ | 673 | ||||
Total lease cost | $ | 4,772 | $ | 673 | ||||
Other information | ||||||||
Operating cash flows from operating leases | $ | 4,968 | $ | 650 | ||||
Operating lease liabilities arising from obtaining right-of-use | 1,246 | — | ||||||
Weighted-average remaining lease term | 5 years | 8 years | ||||||
Weighted-average discount rate | 11.9 | % | 17.5 | % |
March 31, 2021 | December 31, 2020 | |||||||
2021 | $ | 14,421 | $ | 18,067 | ||||
2022 | 15,178 | 15,178 | ||||||
2023 | 15,591 | 15,591 | ||||||
2024 | 16,050 | 16,050 | ||||||
2025 | 12,030 | 12,029 | ||||||
2026 and thereafter | 7,134 | 7,134 | ||||||
Total future minimum lease payments | 80,404 | 84,049 | ||||||
Less: imputed interest | (19,716 | ) | (21,363 | ) | ||||
Present value of lease liabilities | $ | 60,688 | $ | 62,686 | ||||
Agreement
In November 2016, the Company entered into a research agreement with MIT pursuant to which the Company was obligated to reimburse MIT in an amount up to $3.1 million for specified direct and indirect costs incurred through October 2019 in specified research activities conducted for the Company (the “2016 MIT Agreement”). Research and development expenses related to this agreement totaled $0 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively. As amended, the 2016 MIT Agreement expired in October 2019 and as
2020. Additionally, the Company is required to pay a total of $0.7 million due to the achievement of specified milestones in accordance with the license agreement with MIT.lipid-basedlipid nanoparticles used for delivery of coding RNA components in its MRT platform, including products that may be developed under the Company’s collaboration with Sanofi.20202021 and 2019. In 2019, pursuant$0.7 upfront paymentpayments the Company received in 2020 under the OriginalSecond Sanofi Amendment and the Securities Purchase Agreement. The Company is required to pay MIT a portion of the Sanofi (see Note 3).Sanofi. The determination of the relative value of such rights is subject to a process described in the Company’s license agreement with MIT.
Research and development expenses related to this agreement totaled less than $0.1 million during each of the three months ended March 31, 2020 and 2019. As of March 31, 2020 and December 31, 2019, there were no liabilities recorded by the Company related to this agreement.
2020.
13. Related Party Transactions
Private Placement
In connection with a private placement
Business Impact of theCOVID-19 Pandemic
The outbreak of a novel strain of virus namedSARS-CoV-2 (severe acute respiratory syndrome 2), which causes coronavirus disease, orCOVID-19, has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. In April 2020, we announced that enrollment and dosing have been paused in our ongoing Phase 1/2 clinical trial in patients with cystic fibrosis, or CF, as a consequence of the response to theCOVID-19 pandemic.management’s perspective. We are uncertain when such enrollment and dosing will resume, which may impact our timing to report data from this trial. The full extent to which theCOVID-19 pandemic will directly or indirectly impactproviding an overview of our business resultsand strategy, followed by a discussion of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerningCOVID-19, the actions taken in an effort to contain it or to potentially treat or vaccinate againstCOVID-19 and the economic impact on local, regional, national and international markets. Management is actively monitoring this situation and the possible effects on our financial condition liquidity,and results of operations. As further discussed below, our vision is to continue building a leading messenger RNA, or mRNA, product company, leveraging our extensive experience with proprietary mRNA product development, delivery, manufacturing and process development. However, we will need substantial additional funding to support our continuing operations suppliers, industry, and workforce. For additional information on risks posed by theCOVID-19 pandemic, please see Part II, Item 1A – “Risk Factors – Risks Relatedpursue our growth strategy. We believe that our existing cash, cash equivalents and investments will enable us toCOVID-19,” included elsewhere in this Quarterly Report on Form10-Q.
fund our operating expenses and capital expenditure requirements through 2023.
Sanofi, the vaccine global business unit of Sanofi S.A.
translation and expression of fully functional CFTR protein, thereby restoring this essential ion channel, which we believe will address the pathology of CF directly. Currently approved CFTR modulating therapies are limited to patients with specific genetic mutations; therefore, there remains a significant unmet medical need for patients with CF who have genetic mutations
2021.
and respiratory infectious diseases. In addition, we are pursuing discovery efforts in diseases that affect the liver.
delivering mRNA encoding therapeutic antibodies. We have early discovery efforts ongoing in these areas.
On March 26, 2020, we amended our collaboration with Sanofi to include Two of the target pathogens under development are a novel strain of an mRNA vaccine forcoronavirus named as an additional infectious disease pathogen. Multiple are being evaluatedto supportMRT5500 was selected as the lead candidate selectionfor a vaccine againstthe goalMRT5500 against a virus challenge. It was also demonstrated that MRT5500-immunized mice and NHPs exhibited ainitiatingassociated with afirst-in-humanfourththird quarter of 2020. Assuming an accelerated development pathway due to theCOVID-19 pandemic and successful completion of clinical studies demonstrating safety and efficacy, earliest approval of a vaccine from this program could occur in the second half of 2021. For information on risks related to our successful development of a vaccine against
In September 2019, we announced our decision to discontinue the development
In 2018, Through March 31, 2021, we entered intohave funded our operations primarily through sales of equity securities and upfront and milestone payments received under a collaboration and license agreement with Sanofi or the Original Sanofi Agreement, to develop mRNA vaccines for up to five infectious disease pathogens, or the Licensed Fields. On March 26, 2020,and we and Sanofi amended the Original Sanofi Agreement, or the Sanofi Amendment, to include vaccines againstSARS-CoV-2 as an additional Licensed Field, increasing the numberhave received proceeds of infectious disease pathogens to up to six. The Original Sanofi Agreement, as amended by the Sanofi Amendment, is referred to as the Amended Sanofi Agreement.
Under the Amended Sanofi Agreement, we and Sanofi are jointly conducting research and development activities to advance mRNA vaccines and mRNA vaccine platform development during a three-year research term, which may be extended by mutual agreement. approximately $1.1 billion from such transactions.
We and Sanofi also agreed that certain provisions of the Original Sanofi Agreement, including provisions related to milestone payments, royalties and royalty reductions, shall not apply to vaccine products for the prevention, treatment or cure ofSARS-CoV-2 that are purchased by a governmental authority whileSARS-CoV-2 is a declared pandemic. We and Sanofi agreed to negotiate in good faith the royalty terms applicable to such products, which terms shall reflect the economic conditions applicable to commercializing such products and shall not exceed the royalty terms for the existing Licensed Fields.
Through March 31, 2020, we have funded our operations primarily with net cash proceeds of $189.2 million from the sale of redeemable convertible preferred stock and the sale of bridge units, which ultimately converted into shares of our common stock, net cash proceeds of $113.2 million from our initial public offering of our common stock, or the IPO, $45.0 million from the upfront payment received under the Original Sanofi Agreement, net cash proceeds of $44.1 million from a private placement of our common stock and net cash proceeds of $84.0 million from a public offering of our common stock.
In July 2019, we entered into an Open Market Sale Agreement$50.0$100.0 million. OnAs of March 13, 2020,31, 2021, we amended the Sales Agreement to increase the aggregate dollar amount of shares of common stock that may be sold pursuant to the Sales Agreement from $50.0 million to $100.0 million, which became effective when our universal shelf registration statement on FormS-3 (FileNo. 333-237159) was declared effective. Between April 1, 2020 and May 5, 2020, we settled the transactions that occurred pursuant to the Sales Agreement, as amended, whereby wehave issued and sold an aggregate of 2,863,163 shares of our common stock between March 30, 2020 and May 1, 2020,pursuant to the Sales Agreement, resulting in gross proceeds of $37.9 million, before deducting commissions of $1.1 million and other offering expenses of $0.2 million. There were no shares issued or sold pursuant to the Sales Agreement during the three months ended March 31, 2021. In the future, $62.1 million of shares of common stock remain available to be sold pursuant to the Sales Agreement, which sales, if any, would be made under our universal shelf registration statement on Form
licensing arrangements with third parties or grants from organizations and foundations. 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 capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential
There is no assurance that we will be successful in obtaining additional financing on terms acceptable to us, if at all, nor is it considered probableSanofi exclusive, worldwide licenses under applicable patents, patent applications,
included elsewhere in this Quarterly Report on Form
In
Under the terms of the Original Sanofi Agreement, we have granted to Sanofi exclusive, worldwide licenses under applicable patents, patent applications,know-how and materials, including those arising under the collaboration, to develop, commercialize and manufacture mRNA vaccines to prevent, treat or cure diseases, disorders or conditions in humans caused by any of three Licensed Fields. In addition, pursuantrecognized revenue relating to the terms of the OriginalAmended Sanofi Agreement and subject to certain limitations, Sanofi has the options to add up to two additional infectious disease pathogens within the granted licenses to the License Fields.
Agreement. Under revenue recognition guidance, we account for: (i) the license we conveyed to Sanofi with respect to the Licensed Fields, (ii) the licensed
We recognize adjustments in revenue under the cumulative
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
MRT5005 program | $ | 6,094 | $ | 6,622 | ||||
Discovery program | 3,775 | 2,042 | ||||||
Vaccine program | 2,589 | 257 | ||||||
MRT5201 program | — | 1,869 | ||||||
Oligonucleotide program | — | 34 | ||||||
Unallocated research and development expenses | 8,981 | 6,599 | ||||||
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Total research and development expenses | $ | 21,439 | $ | 17,423 | ||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Discovery program | $ | 8,616 | $ | 3,775 | ||||
Vaccine program | 7,570 | 2,589 | ||||||
MRT5005 program | 6,214 | 6,094 | ||||||
Unallocated research and development expenses | 18,740 | 8,981 | ||||||
Total research and development expenses | $ | 41,140 | $ | 21,439 | ||||
In September 2019, we announced our decision to discontinue the development of MRT5201. We are not investing any additional funds in this program and we have reallocated all resources previously dedicated to the OTC deficiency program to our other programs.
the success of our collaboration with Sanofi;
Interest
Interest Net
Other Income (Expense), Net
Other income (expense), net consists of miscellaneous income and expense unrelated to our core operations.
Amended Sanofi Agreement.
development tax credit carryforwards of $6.5$7.0 million and $2.7$4.3 million, respectively, which will, if not utilized, begin to expire in 2032 and 2028, respectively, and orphan drug tax credit carryforwards of $13.0$17.4 million, which begin to expire in 2037. We also have state investment tax credit carryforwards of $0.3$0.8 million, which will, if not utilized, begin to expire in 2020. As of December 31, 2019,2020, we recorded a full valuation allowance against our net deferred tax assets, except for the deferred tax asset associated with our alternative minimum tax credit carryforwards, which will be fully refundable.
assets.
2020
Three Months Ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
(in thousands) | ||||||||||||
Collaboration revenue | $ | 4,654 | $ | 1,474 | $ | 3,180 | ||||||
Operating expenses: | ||||||||||||
Research and development | 21,439 | 17,423 | 4,016 | |||||||||
General and administrative | 7,458 | 6,554 | 904 | |||||||||
Change in fair value of contingent consideration | (9,452 | ) | 11,702 | (21,154 | ) | |||||||
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Total operating expenses | 19,445 | 35,679 | (16,234 | ) | ||||||||
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Loss from operations | (14,791 | ) | (34,205 | ) | 19,414 | |||||||
Interest income, net | 509 | 521 | (12 | ) | ||||||||
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Loss before benefit from income taxes | (14,282 | ) | (33,684 | ) | 19,402 | |||||||
Benefit from income taxes | — | 486 | (486 | ) | ||||||||
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Net loss | $ | (14,282 | ) | $ | (33,198 | ) | $ | 18,916 | ||||
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2020:
Three Months Ended March 31, | ||||||||||||
2021 | 2020 | Change | ||||||||||
(in thousands) | ||||||||||||
Collaboration revenue | $ | 34,600 | $ | 4,654 | $ | 29,946 | ||||||
Operating expenses: | ||||||||||||
Research and development | 41,140 | 21,439 | 19,701 | |||||||||
General and administrative | 10,817 | 7,458 | 3,359 | |||||||||
Change in fair value of contingent consideration | (43,979 | ) | (9,452 | ) | (34,527 | ) | ||||||
Total operating expenses | 7,978 | 19,445 | (11,467 | ) | ||||||||
Income (loss) from operations | 26,622 | (14,791 | ) | 41,413 | ||||||||
Other income, net | 154 | 509 | (355 | ) | ||||||||
Income (loss) before income tax provision | 26,776 | (14,282 | ) | 41,058 | ||||||||
Income tax provision | (254 | ) | — | (254 | ) | |||||||
Net income (loss) | $ | 26,522 | $ | (14,282 | ) | $ | 40,804 | |||||
2020, resulting in a larger percent of the transaction price recognized. See “—Components of Our Results of Operations – Collaboration Revenue” above.
Three Months Ended March 31, | ||||||||||||
2020 | 2019 | Change | ||||||||||
(in thousands) | ||||||||||||
Direct external research and development expenses by program: |
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MRT5005 program | $ | 6,094 | $ | 6,622 | $ | (528 | ) | |||||
Discovery program | 3,775 | 2,042 | 1,733 | |||||||||
Vaccine program | 2,589 | 257 | 2,332 | |||||||||
MRT5201 program | — | 1,869 | (1,869 | ) | ||||||||
Oligonucleotide program | — | 34 | (34 | ) | ||||||||
Unallocated research and development expenses: | ||||||||||||
Personnel related (including stock-based compensation) | 5,985 | 4,285 | 1,700 | |||||||||
Other | 2,996 | 2,314 | 682 | |||||||||
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Total research and development expenses | $ | 21,439 | $ | 17,423 | $ | 4,016 | ||||||
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Three Months Ended March 31, | ||||||||||||
2021 | 2020 | Change | ||||||||||
(in thousands) | ||||||||||||
Direct external research and development expenses by program: | ||||||||||||
Discovery program | $ | 8,616 | $ | 3,775 | $ | 4,841 | ||||||
Vaccine program | 7,570 | 2,589 | 4,981 | |||||||||
MRT5005 program | 6,214 | 6,094 | 120 | |||||||||
Unallocated research and development expenses: | ||||||||||||
Personnel related (including stock-based compensation) | 8,757 | 5,985 | 2,772 | |||||||||
Other | 9,983 | 2,996 | 6,987 | |||||||||
Total research and development expenses | $ | 41,140 | $ | 21,439 | $ | 19,701 | ||||||
Direct external expenses of our MRT5005 program decreased by $0.5 million during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to decreased manufacturing costs. Expenses incurred in the three months ended March 31, 2019 related to manufacturing costs in preparation of our Phase 1/2 clinical trial of MRT5005 for the treatment of patients with CF.
diseases.
increased clinical trial costs offset by decreased manufacturing costs.
asset.
compensation.
Benefit from Income Taxes
Duringcontingent consideration during the three months ended March 31, 2020 and 2019, we2021.
Amended Sanofi Agreement.
liquidity.
In July 2019, we filed a universal shelf registration statement on FormS-3 with the SEC, or the 2019 Shelf,
In July 2019, we entered into an Open Market Sale AgreementSM, orthe Sales Agreement, with Jefferies, under which we may issue and sell shares of our common stock, from time to time, having an aggregate offering price of up to $50.0$100.0 million.
Sales of common stock through Jefferies may be made by any method that is deemed an “at the market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. Jefferies has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell shares of our common stock based upon our instructions. We are not obligated to make any sales of our common stock under the Sales Agreement. Between April 1, 2020 and May 5, 2020,As of March 31, 2021, we settled the transactions that occurred pursuant to the Sales Agreement, whereby wehave issued and sold an aggregate of 2,863,163 shares of our common stock, between March 30, 2020 and May 1, 2020, resulting in gross proceeds of $37.9 million, before deducting commissions of $1.1 million and other offering expenses of $0.2 million. TheseThere were no shares were issued andor sold under the 2019 Shelf.
On March 13, 2020, we filed a universal shelf registration statement on FormS-3 with the SEC, or the 2020 Shelf, to register for sale from time to time up to $350.0 million of our common stock, preferred stock, debt securities, warrants and/or units in one of more offerings (FileNo. 333-237159). This registration statement was declared effective on May 4, 2020. Upon the effectiveness of the 2020 Shelf, we deregistered the 2019 Shelf and no more sales may be made pursuant to the 2019 Shelf. On March 13, 2020, we entered into Amendment No. 1 to the Open Market Sale AgreementSM with Jefferies, which increased the aggregate dollar amount of shares of common stock that we may issue and sell pursuant to the Sales Agreement from $50.0 million to $100.0 million, which became effective whenduring the 2020 Shelf was declared effective. As of May 1, 2020, we had issued and sold $37.9 million under the Sales Agreement.three months ended March 31, 2021. In the future, $62.1 million of shares of common stock remain available to be sold pursuant to the Sales Agreement, which sales, if any, would be made under the 2020 Shelf. Any
Registration Statement. The price to the public was $22.00 per share, resulting in gross proceeds to us of $125.0 million, before deducting underwriting discounts and commissions of $7.5 million and other offering expenses of $0.5 million. We did not receive any proceeds from the sales of shares of common stock by the stockholder.
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Net cash used in operating activities | $ | (31,447 | ) | $ | (21,531 | ) | ||
Net cash provided by investing activities | 44,260 | 27,866 | ||||||
Net cash provided by financing activities | 75 | 897 | ||||||
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Net increase in cash, cash equivalents and restricted cash | $ | 12,888 | $ | 7,232 | ||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net cash provided by (used in) operating activities | $ | 689 | $ | (31,447 | ) | |||
Net cash provided by (used in) investing activities | (188,520 | ) | 44,260 | |||||
Net cash provided by financing activities | 1,550 | 75 | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (186,281 | ) | $ | 12,888 | |||
Investing Activities
Financing Activities
proceeds from option exercises.
During the three months ended March 31, 2019, net cash provided by financing activities was $0.9 million, consisting solely of proceeds from option exercises.
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;
hire additional clinical, quality control and scientific personnel;
our ability to continue as a going concern.
Other Obligations
On March 26, 2020, we200 West Street location in Waltham, Massachusetts. Under the lease agreement for the 200 West Street location, our landlord will reimburse us $26.3 million for tenant improvement allowances. We expect to spend between $10.5 million and Sanofi entered into$12.5 million towards
tenant improvement allowances.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act
2021.
In 2018, we entered into
if the outcome of ourthe preclinical testing and studies will ultimately support the further development of aSARS-CoV-2 vaccine candidate.MRT5500. As a result, we cannot be sure that weMRT5500 will be able to advance aSARS-CoV-2 vaccine candidatebe advanced into clinical trials on the expected timeline, we expect, if at all, and we cannot be sure that applicable regulatory authorities will allow clinical trials to begin. Moreover, even if we do initiatethough a clinical trialstrial for aSARS-CoV-2 vaccine candidate, ourMRT5500 has been initiated, development efforts may not be successful, and clinical trials that we conductconducted may not demonstrate sufficient safety, purity and potency necessary to obtain the requisite regulatory approvals for anySARS-CoV-2 vaccine. MRT5500.
Moreover, if
Ourcandidate.
hire additional clinical, quality control and scientific personnel;
expand our manufacturing, operational, financial and management systems;
increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
maintain, expand and protect our intellectual property portfolio;
acquire orin-license other product candidates and technologies; and
incur additional legal, accounting and other expenses in operating as a public company.
To become and remain profitable, we, or our collaborators, must develop and eventually commercialize product candidates with significant market potential. This will require us to succeed in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate sufficient revenue to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.
the success of our collaboration with Sanofi;
our ability to continue as a going concern.
We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.
As of March 31, 2020, we had $155.1 million in existing cash, cash equivalents and short-term investments. We expect these available cash resources, together with the net proceeds of approximately $36.6 million from the issuances and sales of our common stock pursuant to the Sales Agreement between March 30, 2020 and May 1, 2020, which transactions were settled between April 1, 2020 and May 5, 2020, to fund our operating expenses and capital expenditure requirements into the third quarter of 2021. As of December 31, 2019, management concluded that there was substantial doubt under Accounting Standards UpdateNo. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40). The report from our independent registered public accounting firm for the year ended December 31, 2019 includes an explanatory paragraph stating that our recurring losses and cash outflows from operations since inception, expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance our future
operations raise substantial doubt about our ability to continue as a going concern. Based on our available cash resources, we do not have sufficient cash on hand to support current operations for at least the next twelve months from the date of filing this Quarterly Report on Form10-Q. If we are unable to obtain sufficient funding, we may be forced to delay or reduce the scope of our development programs, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. Future reports from our independent registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.
Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition
Recent changes in tax law may adversely affect our business or financial condition. On December 22, 2017, the U.S. government enacted the Tax Act, which significantly reformed the Code. The Tax Act, among other things, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of current year taxable income and elimination of net operating loss carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.
As part of Congress’s response to theCOVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the CARES Act was enacted on March 27, 2020. Both contain numerous tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the80%-of-income limitation on the use of net operating losses, which was enacted as part of the Tax Act. It also provides that net operating losses arising in any taxable year beginning after December 31, 2017, and before January 1, 2021 are generally eligible to be carried back up to five years. The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30 to 50% of adjusted taxable income.
Regulatory guidance under the Tax Act, the FFCR Act and the CARES Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition. It is also likely that Congress will enact additional legislation in connection with theCOVID-19 pandemic, some of which could have an impact on our company. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the FFCR Act or the CARES Act.
In the near term, we are dependent on the success
successful initiation of clinical trials;
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In April 2020,
As part of our strategy, we intend to seek to enter into collaborations with third parties for one or more of our programs or product candidates. For example, in June 2018, we entered into
Any collaborations we enter into, including ourSanofi.
Collaborators may have
Collaborators
Collaborators
Collaborators may delay
Collaborators
Product
A collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval
Collaborators
Collaborators
Collaborations
If our collaborations doSanofi does not result in the successful development and commercialization of products,vaccines, or if one of any future collaboratorsSanofi terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements,our agreement with Sanofi, our development of productvaccine candidates could be delayed and we may need additional resources to develop our productvaccine candidates.
IfSanofi’s activities.
Under Even if we are able to successfully enter into collaborations with third parties for one or more of our programs or product candidates, such collaborations may be subject to risks similar to those described above under the Shire Agreement, priorrisk factor captioned “We have an existing collaboration with Sanofi and we are highly dependent on the efforts of Sanofi to advance our vaccine development program, including the first dosing of a patientvaccine against
business could be adversely affected
We do not currently have any agreements with third-party manufacturers for the long-term commercial supply of any of our product candidates.
We expect that the
Further, as set forth above in the risk factor captioned “We and Sanofi may not be successful in our joint efforts to successfully develop in an expedited timeframe an mRNA vaccine against
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.
Since the regulatory frameworkand European Union entered into a Trade and Cooperation Agreement. The agreement sets out certain procedures for pharmaceuticalapproval and recognition of medical products in the United Kingdom covering quality, safety, and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products is derived from EU directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.each jurisdiction. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit the Trade and Cooperation Agreement would prevent us from commercializing any product candidates in the United Kingdom and/or otherwise,the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may force usbe forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for ourany product candidates, which could significantly and materially harm our business.
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countries outside the European Union, including the United States, and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information and or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.
In addition, on December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling will have no immediate effect, and onOn December 30, 2018 the same judge issued an order staying the judgment pending appeal. The Trump Administration recently represented to the Court of Appeals considering this judgment that it does not oppose the lower court’s ruling. On July 10,18, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this case. On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA.unconstitutional. On January 21, 2020, the U.S. Supreme Court declined to review this decision on an expedited basis. Onbasis, but on March 3, 2020, the Court agreed to hear the case through its normal procedures. The Supreme Court heard oral argument in this case on November 10, 2020, and a decision is expected sometime this year. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reducelower the costs of drugs under Medicare and reform government program reimbursement methodologies forprescription drug products. AtSeveral of these orders are reflected in recently promulgated regulations, and one of these regulations is currently subject to a nationwide preliminary injunction. It remains to be seen whether these orders and resulting regulations will remain in force during the federal level, Congress and the Trump Administration have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administration issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that the Department of Health and Human Services will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay lessout-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments,out-of-pocket spending, and drug price increases. In addition, on December 23, 2019, the Trump Administration published a proposed rulemaking that, if finalized, would allow states or certain othernon-federal government entities to submit importation program proposals to FDA for review and approval. Applicants would be required to demonstrate their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers. At the same time, FDA issued draft guidance that would allow manufacturers to import their ownFDA-approved drugs that are authorized for sale in other countries (multi-market approved products).
Biden Administration.
An active trading market for our common stock may not be sustained.
Our shares of common stock began trading on the Nasdaq Global Select Market on June 28, 2018. Given the limited trading history of our common stock, there is a risk that an active trading market for our shares will not be sustained, which could put downward pressure on the market price for our common stock and thereby affect the ability of our stockholders to sell their shares. An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an EGC until the earlier of: (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the last day of the first fiscal year in which the market value of our common stock that is held bynon-affiliates exceeds $700 million as of June 30. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
reduced disclosure obligations regarding executive compensation;
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved; and
an exemption from compliance with the requirement of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements.
In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not EGCs.
We are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting andnon-voting common shares held bynon-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting andnon-voting common shares held bynon-affiliates is more than $700 million measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statements.
We have elected to take advantage of certain of the reduced reporting obligations. Investors may find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and requirements.
Salesnet operating loss carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the allowance of Unregistered Securities
None.
Useimmediate deductions for certain new investments instead of Proceedsdeductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.
On July 2, 2018, we closedadjusted taxable income.
* | Filed herewith. |
** | Furnished herewith. |
+ |
Indicates a management contract or compensatory arrangement. |
† | Submitted electronically herewith. |
Translate Bio, Inc. | ||||||
Date: May | By: | /s/ | ||||
Ronald C. Renaud, Jr. | ||||||
Ronald C. Renaud, Jr. | ||||||
Chief Executive Officer | ||||||
Date: May 6, 2021 | By: | /s/ Brendan Smith | ||||
Brendan Smith | ||||||
Chief Financial Officer and Treasurer |
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