10-Q 1 dtil-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2022

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: 001-38841

 

Precision BioSciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-4206017

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

302 East Pettigrew St., Suite A-100

Durham, North Carolina

27701

(Address of principal executive offices)

(Zip Code)

 

(919) 314-5512

(Registrant’s telephone number, including area code)

 

N/A

(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 $0.000005 per share

DTIL

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, 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 November 3, 2022, the registrant had 110,958,955 shares of common stock, $0.000005 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

 

Forward-Looking Statements

3

 

Risk Factor Summary

6

PART I.

FINANCIAL INFORMATION

8

Item 1.

Financial Statements (unaudited)

8

 

Condensed Consolidated Balance Sheets

8

 

Condensed Consolidated Statements of Operations

9

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

10

 

Condensed Consolidated Statements of Cash Flows

11

 

Notes to Condensed Consolidated Financial Statements

12

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

PART II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

96

Item 3.

Defaults Upon Senior Securities

96

Item 4.

Mine Safety Disclosures

96

Item 5.

Other Information

96

Item 6.

Exhibits

97

 

Signatures

100

 

 

 

 

 

 

2


 

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in 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”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including without limitation, statements regarding our future results of operations and financial position, business strategy and approach, including related results, prospective products, use and development of Licensed Products (as defined herein), planned preclinical studies and clinical trials, or discontinuance thereof, the status and results of our preclinical and clinical studies, including, the potential of our product candidates, if approved, to become best-in-class or first-in-class, expected release of interim data, expectations regarding our allogeneic chimeric antigen receptor T cell immunotherapy product candidates, expectations regarding the use and effects of ARCUS, including in connection with in vivo genome editing, collaborations and potential new partnerships or alternative opportunities for our product candidates, capabilities of our manufacturing facility, potential new application filings and regulatory approvals, research and development costs, timing, expected results and likelihood of success, plans and objectives of management for future operations, as well as the impact of the COVID-19 pandemic and variants thereof may be forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seeks,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part II. Item 1A. “Risk Factors” and Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:

our ability to become profitable;
our ability to procure sufficient funding and requirements under our current debt instruments and effects of restrictions thereunder;
risks associated with raising additional capital;
our operating expenses and our ability to predict what those expenses will be;
our limited operating history;
the success of our programs and product candidates in which we expend our resources;
our limited ability or inability to assess the safety and efficacy of our product candidates
our dependence on our ARCUS technology;
the risk that other genome-editing technologies may provide significant advantages over our ARCUS technology;
the initiation, cost, timing, progress, achievement of milestones and results of research and development activities and preclinical and clinical studies;
public perception about genome editing technology and its applications;
competition in the genome editing, biopharmaceutical, and biotechnology fields;
our or our collaborators’ ability to identify, develop and commercialize product candidates;
pending and potential product liability lawsuits and penalties against us or our collaborators related to our technology and our product candidates;
the U.S. and foreign regulatory landscape applicable to our and our collaborators’ development of product candidates;

3


 

our ability to obtain orphan drug designation or fast track designation for our product candidates or to realize the expected benefits of these designations;
our or our collaborators’ ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;
our or our collaborators’ ability to advance product candidates into, and successfully design, implement and complete, clinical trials;
potential manufacturing problems associated with the development or commercialization of any of our product candidates;
our ability to obtain an adequate supply of T cells from qualified donors;
our ability to achieve our anticipated operating efficiencies at our manufacturing facility;
delays or difficulties in our and our collaborators’ ability to enroll patients;
changes in interim “top-line” and initial data that we announce or publish;
if our product candidates do not work as intended or cause undesirable side effects;
risks associated with applicable healthcare, data protection, privacy and security regulations and our compliance therewith;
the rate and degree of market acceptance of any of our product candidates;
the success of our existing collaboration agreements and our ability to enter into new collaboration arrangements;
our current and future relationships with and reliance on third parties including suppliers and manufacturers;
our ability to obtain and maintain intellectual property protection for our technology and any of our product candidates;
potential litigation relating to infringement or misappropriation of intellectual property rights;
our ability to effectively manage the growth of our operations;
our ability to attract, retain, and motivate executives and personnel;
market and economic conditions;
effects of system failures and security breaches;
effects of natural and manmade disasters, public health emergencies and other natural catastrophic events;
effects of the COVID-19 pandemic and variants thereof, or any pandemic, epidemic, or outbreak of an infectious disease;
effects of sustained inflation, supply chain disruptions and major central bank policy actions;
insurance expenses and exposure to uninsured liabilities;
effects of tax rules; and
risks related to ownership of our common stock, including fluctuations in our stock price.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. All forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

4


 

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Precision,” the “Company,” “we,” “us,” and “our,” refer to Precision BioSciences, Inc. and its subsidiaries on a consolidated basis.

 

 

 

5


 

RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. Some of the principal risks and uncertainties include the following.

We have incurred significant operating losses since our inception and expect to continue to incur losses for the foreseeable future. We have not been profitable and may not achieve or maintain profitability.
We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts.
We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.
ARCUS is a novel technology, making it difficult to predict the time, cost and potential success of product candidate development. We have not yet been able to assess the safety and efficacy of most of our product candidates in humans and have only limited safety and efficacy information in humans to date regarding three of our product candidates.
We are heavily dependent on the successful development and translation of ARCUS, and due to the early stages of our product development operations, we cannot give any assurance that any product candidates will be successfully developed and commercialized.
Adverse public perception of genome editing may negatively impact the developmental progress or commercial success of products that we develop alone or with collaborators.
We face significant competition in industries experiencing rapid technological change, and there is a possibility that our competitors may achieve regulatory approval before us or develop product candidates or treatments that are safer or more effective than ours, which may harm our financial condition and our ability to successfully market or commercialize any of our product candidates.
Our future profitability, if any, will depend in part on our ability and the ability of our collaborators to commercialize any products that we or our collaborators may develop in markets throughout the world. Commercialization of products in various markets could subject us to risks and uncertainties.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products that we develop alone or with collaborators.
The regulatory landscape that will apply to development of therapeutic product candidates by us or our collaborators is rigorous, complex, uncertain and subject to change, which could result in delays or termination of development of such product candidates or unexpected costs in obtaining regulatory approvals.
Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome, and the inability to successfully and timely conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.
Any product candidates that we or our collaborators may develop will be novel and may be complex and difficult to manufacture, and if we experience manufacturing problems, it could result in delays in development and commercialization of such product candidates or otherwise harm our business.
Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.
Even if any product we develop alone or with collaborators receives marketing approval, such product may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

6


 

The ongoing novel coronavirus disease, COVID-19 has impacted, and may continue to impact, our business, and any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.
Our future success depends on our key executives, as well as attracting, retaining and motivating qualified personnel.

7


 

Part I. Financial information

 

Item 1. Financial Statements.

Precision Biosciences, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

212,051

 

 

$

143,663

 

Accounts receivable

 

 

715

 

 

 

488

 

Prepaid expenses

 

 

12,292

 

 

 

17,434

 

Other current assets

 

 

307

 

 

 

169

 

Total current assets

 

 

225,365

 

 

 

161,754

 

Property, equipment, and software—net

 

 

21,791

 

 

 

25,154

 

Intangible assets—net

 

 

1,969

 

 

 

2,048

 

Right-of-use assets—net

 

 

3,289

 

 

 

4,180

 

Investment in equity securities

 

 

3,091

 

 

 

3,091

 

Equity method investment

 

 

-

 

 

 

3,751

 

Note receivable—net

 

 

6,711

 

 

 

6,879

 

Other assets

 

 

9,517

 

 

 

4,641

 

Total assets

 

$

271,733

 

 

$

211,498

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,061

 

 

$

1,144

 

Accrued compensation

 

 

5,188

 

 

 

6,765

 

Accrued clinical and research and development expenses

 

 

3,285

 

 

 

4,028

 

Deferred revenue

 

 

48,405

 

 

 

21,244

 

Lease liabilities

 

 

1,981

 

 

 

1,822

 

Other current liabilities

 

 

1,228

 

 

 

977

 

Total current liabilities

 

 

61,148

 

 

 

35,980

 

Deferred revenue

 

 

90,510

 

 

 

67,015

 

Lease liabilities

 

 

3,305

 

 

 

4,813

 

Long term debt—net

 

 

22,173

 

 

 

2,478

 

Contract liabilities

 

 

10,000

 

 

 

10,000

 

Other noncurrent liabilities

 

 

217

 

 

 

44

 

Total liabilities

 

 

187,353

 

 

 

120,330

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock; $0.000005 par value— 200,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 111,745,219 shares issued and 110,934,747 shares outstanding as of September 30, 2022; 61,712,577 shares issued and 60,902,105 shares outstanding as of December 31, 2021

 

 

1

 

 

 

 

Additional paid-in capital

 

 

485,155

 

 

 

408,795

 

Accumulated deficit

 

 

(399,824

)

 

 

(316,675

)

Treasury stock

 

 

(952

)

 

 

(952

)

Total stockholders’ equity

 

 

84,380

 

 

 

91,168

 

Total liabilities and stockholders’ equity

 

$

271,733

 

 

$

211,498

 

 

See notes to condensed consolidated financial statements

8


 

Precision Biosciences, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

7,363

 

 

$

24,036

 

 

$

14,500

 

 

$

109,190

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,959

 

 

 

25,940

 

 

 

62,867

 

 

 

88,768

 

General and administrative

 

 

10,334

 

 

 

9,638

 

 

 

31,510

 

 

 

29,074

 

Total operating expenses

 

 

30,293

 

 

 

35,578

 

 

 

94,377

 

 

 

117,842

 

Operating loss

 

 

(22,930

)

 

 

(11,542

)

 

 

(79,877

)

 

 

(8,652

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of equity investment

 

 

 

 

 

274

 

 

 

 

 

 

274

 

Loss from equity method investment

 

 

(1,783

)

 

 

 

 

 

(4,183

)

 

 

 

Interest expense

 

 

(405

)

 

 

(55

)

 

 

(625

)

 

 

(79

)

Interest income

 

 

1,172

 

 

 

44

 

 

 

1,536

 

 

 

145

 

Total other income (expense), net

 

 

(1,016

)

 

 

263

 

 

 

(3,272

)

 

 

340

 

Net loss

 

$

(23,946

)

 

$

(11,279

)

 

$

(83,149

)

 

$

(8,312

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.22

)

 

$

(0.19

)

 

$

(1.04

)

 

$

(0.14

)

Weighted average shares of common stock outstanding - basic and diluted

 

 

110,849,196

 

 

 

59,657,677

 

 

 

80,127,701

 

 

 

58,018,550

 

 

See notes to condensed consolidated financial statements

9


 

Precision Biosciences, Inc.

Condensed Consolidated Statements of Changes in

Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balance- January 1, 2021

 

 

53,503,124

 

 

$

 

 

$

331,450

 

 

$

(286,073

)

 

$

(952

)

 

$

44,425

 

Stock option exercises

 

 

676,791

 

 

 

 

 

 

1,297

 

 

 

 

 

 

 

 

 

1,297

 

Issuance of common stock under employee stock purchase plan

 

 

90,796

 

 

 

 

 

 

418

 

 

 

 

 

 

 

 

 

418

 

Share-based compensation expense

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

3,632

 

Issuance of common stock to collaboration partners

 

 

3,762,190

 

 

 

 

 

 

27,739

 

 

 

 

 

 

 

 

 

27,739

 

Net loss

 

 

 

 

 

 

 

 

-

 

 

 

(18,689

)

 

 

 

 

 

(18,689

)

Balance- March 31, 2021

 

 

58,032,901

 

 

$

 

 

$

364,536

 

 

$

(304,762

)

 

$

(952

)

 

$

58,822

 

Stock option exercises

 

 

766,767

 

 

 

 

 

 

1,353

 

 

 

 

 

 

 

 

 

1,353

 

Share-based compensation expense

 

 

 

 

 

 

 

 

3,896

 

 

 

 

 

 

 

 

 

3,896

 

Proceeds from issuance of common stock, net of issuance cost

 

 

1,293,754

 

 

 

 

 

 

14,826

 

 

 

 

 

 

 

 

 

14,826

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,656

 

 

 

 

 

 

21,656

 

Balance- June 30, 2021

 

 

60,093,422

 

 

$

 

 

$

384,611

 

 

$

(283,106

)

 

$

(952

)

 

$

100,553

 

Stock option exercises

 

 

414,073

 

 

 

 

 

 

3,393

 

 

 

 

 

 

 

 

 

3,393

 

Issuance of common stock under employee stock purchase plan

 

 

36,091

 

 

 

 

 

 

386

 

 

 

 

 

 

 

 

 

386

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,551

 

 

 

 

 

 

 

 

 

4,551

 

Proceeds from issuance of common stock, net of issuance cost

 

 

348,432

 

 

 

 

 

 

3,839

 

 

 

 

 

 

 

 

 

3,839

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,279

)

 

 

 

 

 

(11,279

)

Balance- September 30, 2021

 

 

60,892,018

 

 

$

 

 

$

396,780

 

 

$

(294,385

)

 

$

(952

)

 

$

101,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance- January 1, 2022

 

 

61,712,577

 

 

$

 

 

$

408,795

 

 

$

(316,675

)

 

$

(952

)

 

$

91,168

 

Stock option exercises

 

 

233,001

 

 

 

 

 

 

340

 

 

 

 

 

 

 

 

 

340

 

Issuance of common stock under employee stock purchase plan

 

 

78,060

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

 

282

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,390

 

 

 

 

 

 

 

 

 

4,390

 

Proceeds from issuance of common stock, net of issuance cost

 

 

561,405

 

 

 

 

 

 

1,647

 

 

 

 

 

 

 

 

 

1,647

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(28,168

)

 

 

 

 

 

(28,168

)

Balance- March 31, 2022

 

 

62,585,043

 

 

$

 

 

$

415,454

 

 

$

(344,843

)

 

$

(952

)

 

$

69,659

 

Stock option exercises

 

 

78,234

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

38

 

Share-based compensation expense

 

 

 

 

 

 

 

 

5,138

 

 

 

 

 

 

 

 

 

5,138

 

Proceeds from issuance of common stock, net of issuance cost

 

 

36,274,651

 

 

 

 

 

 

47,670

 

 

 

 

 

 

 

 

 

47,670

 

Issuance of common stock to collaboration partners

 

 

12,407,440

 

 

 

 

 

 

11,553

 

 

 

 

 

 

 

 

 

11,553

 

Restricted stock units vested

 

 

260,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,035

)

 

 

 

 

 

(31,035

)

Balance- June 30, 2022

 

 

111,605,505

 

 

$

 

 

$

479,853

 

 

$

(375,878

)

 

$

(952

)

 

$

103,023

 

Stock option exercises

 

 

19,124

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock under employee stock purchase plan

 

 

116,612

 

 

 

1