10-Q 1 gbio-20230930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

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: 001-39319

GENERATION BIO CO.

(Exact name of registrant as specified in its charter)

Delaware

    

81-4301284

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

301 Binney Street
Cambridge, Massachusetts

 

02142

(Address of principal executive offices)

 

(Zip Code)

(617) 655-7500

(Registrant’s telephone number, including area code)

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, $0.0001 Par Value

 

GBIO

 

Nasdaq Global Select Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of November 3, 2023 there were 66,078,017 shares of Common Stock, $0.0001 par value per share, outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, of Generation Bio Co. contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these words or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report include, among other things, statements about:

the initiation, timing, progress and results of our research and development programs and preclinical studies and clinical trials;
our estimates regarding expenses, future revenue, capital requirements, need for additional financing and the period over which we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements;
the potential achievement of milestones and receipt of payments under our collaboration with ModernaTX, Inc.;
our ability to enter into additional collaborations with third parties or obtain additional funding;
our ability to find one or more third parties to assume our lease or sublease the property in Waltham, MA;
the potential advantages of our non-viral genetic medicine platform;
our plans to develop and, if approved, subsequently commercialize any product candidates we may develop;
the timing of and our ability to submit applications and obtain and maintain regulatory approvals for any product candidates we may develop;
our estimates regarding the potential addressable patient populations for our programs;
our commercialization, marketing and manufacturing capabilities and strategy;
our expectations regarding our ability to obtain and maintain intellectual property protection;
our intellectual property position;
our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our objectives;
the impact of government laws and regulations;
our competitive position and our expectations regarding developments and projections relating to our competitors and any competing therapies that are or become available; and
developments and expectations relating to our competitors and our industry.

2

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and stockholders should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in the “Risk Factors” section in this Quarterly Report and our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a competitive and rapidly changing 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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter into.

Stockholders should read this Quarterly Report and the documents that we file with the SEC with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Except where the context otherwise requires or where otherwise indicated, the terms “we,” “us,” “our,” “our company,” “the company,” and “our business” in this Quarterly Report refer to Generation Bio Co. and its consolidated subsidiary.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Generation Bio Co.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

September 30, 2023

December 31, 2022

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

93,360

$

93,171

Marketable securities

 

197,665

 

185,920

Tenant receivable

 

660

 

395

Prepaid expenses and other current assets

 

6,124

 

7,530

Total current assets

 

297,809

 

287,016

Property and equipment, net

 

22,376

 

22,215

Operating lease right-of-use assets

54,414

59,208

Restricted cash

 

5,692

 

5,692

Deferred offering costs

 

433

 

434

Other long-term assets

 

768

 

1,699

Total assets

$

381,492

$

376,264

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

2,650

$

662

Accrued expenses and other current liabilities

 

9,474

 

11,402

Deferred revenue

11,974

Operating lease liability

8,721

7,086

Total current liabilities

 

32,819

 

19,150

Deferred revenue, net of current portion

45,766

Operating lease liability, net of current portion

70,993

74,621

Total liabilities

 

149,578

 

93,771

Commitments and contingencies (Note 9)

 

  

 

  

Stockholders’ equity:

 

 

Preferred stock, $0.0001 par value; 5,000,000 shares authorized and no shares issued or outstanding at September 30, 2023 and December 31, 2022

 

 

Common stock, $0.0001 par value; 150,000,000 shares authorized at September 30, 2023 and December 31, 2022; 65,927,956 and 59,505,437 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

7

 

6

Additional paid-in capital

 

768,102

 

727,335

Accumulated other comprehensive loss

 

(4)

 

(83)

Accumulated deficit

 

(536,191)

 

(444,765)

Total stockholders’ equity

 

231,914

 

282,493

Total liabilities and stockholders’ equity

$

381,492

$

376,264

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

5

Generation Bio Co.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

    

2023

    

2022

Revenues:

Collaboration revenue

$

2,146

$

$

3,026

$

Operating expenses:

  

 

  

 

  

 

  

Research and development

21,862

21,192

65,694

75,111

General and administrative

 

11,641

 

11,477

 

37,474

 

31,383

Total operating expenses

 

33,503

 

32,669

 

103,168

 

106,494

Loss from operations

 

(31,357)

 

(32,669)

 

(100,142)

 

(106,494)

Other income:

 

  

 

 

  

 

  

Other income and interest income, net

 

3,091

 

1,363

 

8,716

 

2,260

Net loss and net loss attributable to common stockholders

$

(28,266)

$

(31,306)

$

(91,426)

$

(104,234)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.43)

$

(0.53)

$

(1.43)

$

(1.81)

Weighted average common shares outstanding, basic and diluted

 

65,907,000

 

58,872,334

 

63,951,508

 

57,679,635

Comprehensive loss:

 

  

 

  

 

  

 

  

Net loss

$

(28,266)

$

(31,306)

$

(91,426)

$

(104,234)

Other comprehensive loss:

 

  

 

  

 

  

 

  

Unrealized gains (losses) on marketable securities

 

19

 

37

 

79

 

(302)

Comprehensive loss

$

(28,247)

$

(31,269)

$

(91,347)

$

(104,536)

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

6

Generation Bio Co.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

 Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Capital

Loss

Deficit

Equity

Three Months Ended September 30, 2023

Balances at June 30, 2023

    

65,784,250

$

7

$

762,228

$

(23)

$

(507,925)

$

254,287

Vesting of restricted common stock

 

143,706

 

 

(130)

 

 

 

(130)

Stock-based compensation expense

 

 

 

6,004

 

 

 

6,004

Unrealized gains on marketable securities

 

 

 

 

19

 

 

19

Net loss

 

 

 

 

 

(28,266)

 

(28,266)

Balances at September 30, 2023

 

65,927,956

$

7

$

768,102

$

(4)

$

(536,191)

$

231,914

Accumulated

Additional

Other

Total

Common Stock

 Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Capital

Loss

Deficit

Equity

Three Months Ended September 30, 2022

Balances at June 30, 2022

    

57,597,141

$

6

$

706,261

$

(339)

$

(381,054)

$

324,874

Issuance of common stock from public ATM offering, net of commissions and offering costs of $315

1,379,887

9,617

9,617

Issuance of common stock upon exercise of stock options

 

15,026

 

 

58

 

 

 

58

Vesting of restricted common stock

 

280,404

 

 

(394)

 

 

 

(394)

Issuance of common stock under other equity plans

2,711

15

15

Stock-based compensation expense

 

 

 

5,848

 

 

 

5,848

Unrealized gains on marketable securities

 

 

 

 

37

 

 

37

Net loss

 

 

 

 

 

(31,306)

 

(31,306)

Balances at September 30, 2022

 

59,275,169

$

6

$

721,405

$

(302)

$

(412,360)

$

308,749

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

7

Generation Bio Co.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Capital

Loss

Deficit

Equity

 

Nine Months Ended September 30, 2023

Balances at December 31, 2022

    

59,505,437

    

$

6

    

$

727,335

    

$

(83)

    

$

(444,765)

    

$

282,493

Sale of common stock in connection with the Moderna Share Purchase Agreement

5,859,375

1

 

22,555

 

 

22,556

Vesting of restricted common stock

 

455,463

 

 

(448)

 

 

 

(448)

Issuance of common stock under other equity plans

107,681

367

367

Stock-based compensation expense

 

 

 

18,293

 

 

 

18,293

Unrealized gains on marketable securities

 

 

 

 

79

 

 

79

Net loss

 

 

 

 

 

(91,426)

 

(91,426)

Balances at September 30, 2023

 

65,927,956

$

7

$

768,102

$

(4)

$

(536,191)

$

231,914

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Capital

Loss

Deficit

Equity

Nine Months Ended September 30, 2022

Balances at December 31, 2021

    

56,969,618

    

$

6

    

$

689,866

    

$

    

$

(308,126)

    

$

381,746

Issuance of common stock from public ATM offering, net of commissions and offering costs of $404

1,795,524

12,338

12,338

Issuance of common stock upon exercise of stock options

 

147,400

 

 

611

 

 

 

611

Vesting of restricted common stock

 

294,767

 

 

(394)

 

 

 

(394)

Issuance of common stock under other equity plans

67,860

379

379

Stock-based compensation expense

 

 

 

18,605

 

 

 

18,605

Unrealized losses on marketable securities

 

 

 

 

(302)

 

 

(302)

Net loss

 

 

 

 

 

(104,234)

 

(104,234)

Balances at September 30, 2022

 

59,275,169

$

6

$

721,405

$

(302)

$

(412,360)

$

308,749

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

8

Generation Bio Co.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

    

Nine Months Ended September 30, 

2023

2022

Cash flows from operating activities:

Net loss

$

(91,426)

$

(104,234)

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

 

  

 

  

Stock-based compensation expense

 

18,293

 

18,605

Depreciation and amortization expense

 

3,938

 

3,784

Amortization (accretion) of premium (discount) on marketable securities, net

 

(6,699)

 

(984)

Loss on sale of property and equipment

24

28

Loss on impairment of property and equipment

5,395

Changes in operating assets and liabilities:

 

 

  

Tenant receivable

 

(265)

 

(395)

Prepaid expenses and other current assets

 

1,408

 

(4,939)

Operating lease right-of-use assets

4,794

4,017

Other noncurrent assets

 

931

 

(1,151)

Accounts payable

 

1,386

 

(444)

Accrued expenses and other current liabilities

 

(2,633)

 

(1,663)

Deferred revenue

44,474

Operating lease liability

(1,992)

2,536

Net cash used in operating activities

 

(27,767)

 

(79,445)

Cash flows from investing activities:

 

  

 

  

Purchases of property and equipment

 

(2,817)

 

(8,119)

Purchases of marketable securities

 

(295,967)

 

(221,000)

Maturities of marketable securities

 

291,000

 

55,000

Net cash used in investing activities

 

(7,784)

 

(174,119)

Cash flows from financing activities:

 

  

 

  

Payment of share issuance costs

(179)

(50)

Proceeds from sale of common stock in connection with the Moderna Share Purchase Agreement

36,000

Proceeds from issuance of common stock from public ATM offering, net of commissions and offering costs

12,360

Proceeds from exercise of stock options and other types of equity, net

 

367

 

990

Tax withholding payments related to net share settlements of restricted stock units

(448)

(394)

Net cash provided by financing activities

 

35,740

 

12,906

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

 

189

 

(240,658)

Cash, cash equivalents and restricted cash at beginning of period

 

98,863

 

380,837

Cash, cash equivalents and restricted cash at end of period

$

99,052

$

140,179

Supplemental disclosure of noncash investing and financing information:

 

  

 

  

Purchases of property and equipment included in accounts payable and accrued expenses

$

1,330

$

165

Unrealized gains (losses) on marketable securities

$

79

$

(302)

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

9

1. Nature of the Business and Basis of Presentation

Generation Bio Co., or Generation Bio, was incorporated on October 21, 2016 as Torus Therapeutics, Inc. and subsequently changed its name to Generation Bio Co. Generation Bio Co. and its consolidated subsidiary, or the company, we, our or us, are innovating genetic medicines to provide durable, redosable treatments for potentially hundreds of millions of patients living with rare and prevalent diseases. Our non-viral genetic medicine platform incorporates our novel immune-quiet DNA, or iqDNA; our unique cell-targeted lipid nanoparticle delivery system, or ctLNP; and our highly scalable capsid-free manufacturing process that uses our proprietary cell-free rapid enzymatic synthesis, or RES, to produce iqDNA. iqDNA is an optimized variant of our closed-ended DNA, or ceDNA, that has displayed a superior tolerability profile compared to previous ceDNA constructs and that we have chosen as our cargo for our lead program in hemophilia A as well as for all other programs. Using our approach, we are developing novel genetic medicines to provide targeted delivery of genetic payloads that include large and multiple genes to a range of cell types across a broad array of diseases. We are also engineering our genetic medicines to be redosable, which may enable individualized patient titration to reach the desired therapeutic expression and to maintain efficacy throughout a patient’s life. We are headquartered in Cambridge, Massachusetts.

We are subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of a product. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if our development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, we have funded our operations with proceeds from the sale of instruments convertible into convertible preferred stock (which converted into convertible preferred stock in 2017), sales of convertible preferred stock (which converted into common stock in 2020), and sales of common stock in underwritten public offerings, “at-the-market” offerings, and in a private placement, as well as payments pursuant to our collaboration with ModernaTX, Inc., or Moderna. We have incurred recurring losses, including net losses of $91.4 million for the nine months ended September 30, 2023 and $104.2 million for the nine months ended September 30, 2022. As of September 30, 2023, we had an accumulated deficit of $536.2 million. We expect to continue to generate operating losses in the foreseeable future. As of November 9, 2023, the issuance date of these condensed consolidated financial statements, we expect that our cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements for at least 12 months.

We will need to obtain additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements. We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into additional collaborative or strategic alliances or licensing arrangements. The terms of any financing may adversely affect the holdings or the rights of our stockholders. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies or programs. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, pipeline expansion or commercialization efforts, which could adversely affect our business prospects. Although management will continue to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations when needed or at all.

The accompanying condensed consolidated financial statements reflect the operations of Generation Bio and our wholly owned subsidiary, Generation Bio Securities Corporation. Intercompany balances and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, or GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

10

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and stock-based compensation expense. We base our estimates on historical experience, known trends and other market-specific or other relevant factors that we believe to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Unaudited interim financial information

The condensed consolidated balance sheet as of December 31, 2022 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K that was most recently filed with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of our financial position as of September 30, 2023, the results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022 have been made. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023 or any other period.

Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K that was most recently filed with the SEC.

Concentrations of credit risk and of significant suppliers

Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities. We believe that we are not exposed to significant credit risk due to the financial strength of the national depository institutions in which our cash, cash equivalents, and marketable securities are held. We maintain our cash equivalents in money market funds that invest in U.S. treasury securities. We have adopted an investment policy that limits the amounts that we may invest in the securities of a single issuer with the exclusion of the U.S. government. We have not experienced any credit losses.

We are dependent on a small number of third-party suppliers for our drug substance and drug product. In particular, we rely, and expect to continue to rely, on third-party suppliers for certain materials and components required for the production of any product candidates we may develop for our programs. These programs could be adversely affected by a significant interruption in the supply process.

Revenue Recognition

We enter into collaboration agreements that are within the scope of ASC Topic 606, “Revenue from Contracts with Customers”, or ASC 606, under which we license rights to certain of our potential product candidates and perform research and development services. The terms of these contracts typically include payment of the following: non-refundable, upfront fees; reimbursement of research and development costs; development, regulatory, and commercial milestone payments; royalties on net sales of licensed products, and a premium or discount on the sale of our common stock.

11

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for contracts determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of 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, we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect consideration we are entitled to in exchange for the goods or services we transfer to the customer.

The promised goods or services in our arrangements typically consist of license rights to our intellectual property and research and development services. We provide options to additional items in the contract, which will be accounted for as separate contracts if and when the other party elects to exercise such options, unless the option provides a material right to such party. We evaluate the other party’s options for material rights, or options to acquire additional goods or services for free or at a discount. If the other party’s options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the contract. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the other party and are considered distinct when (i) the other party can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, we consider factors such as the stage of development of the underlying intellectual property, the capabilities of the other party to develop the intellectual property on its own or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract.

We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each contract that includes variable consideration, we evaluate the number of potential payments and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Our contracts include development, regulatory, and commercial milestone payments that will be assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within our control or the counterparty’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of such development, regulatory, and commercial milestones and any related constraint, and if necessary, we adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues in the period of adjustment. To date, we have not recognized any consideration related to the achievement of development, regulatory, or commercial milestone revenue resulting from our collaboration contracts.

For contracts that include sales-based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any consideration related to sales-based royalty revenue resulting from our collaboration contract.

We allocate the transaction price based on the estimated stand-alone selling price of each of the performance obligations. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price for service obligations, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Additionally, in determining the standalone selling price for material rights, we utilize comparable transactions, clinical trial success probabilities, and estimates of option exercise likelihood. Variable consideration is

12

allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the satisfaction of each performance obligation.

The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations that consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Upfront payments and fees are recorded as deferred revenue upon receipt or when due until we perform our obligations. Amounts are recorded as accounts receivable when our right to consideration is unconditional.

3. Marketable Securities and Fair Value Measurements

The following tables present our marketable securities by security type:

As of September 30, 2023

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

(in thousands)

Cost

Gains

Losses

Value

U.S. treasury securities

$

197,669

$

8

$

(12)

$

197,665

As of December 31, 2022

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

(in thousands)

Cost

Gains

Losses

Value

U.S. treasury securities

$

186,003

$

13

$

(96)

$

185,920

As of September 30, 2023 and December 31, 2022, our marketable securities consisted of investments that mature within one year of their purchase date.

The following tables present our assets that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques that we utilized to determine such fair value:

    

Fair Value Measurements at September 30, 2023 Using:

(in thousands)

Level 1

Level 2

Level 3

Total

Cash equivalents:

 

  

 

  

 

  

 

  

Money market funds

$

35,109

$

$

$

35,109

Marketable securities:

 

  

 

  

 

  

 

  

U.S. treasury securities

 

 

197,665

 

 

197,665

Totals

$

35,109

$

197,665

$

$

232,774

    

Fair Value Measurements at December 31, 2022 Using:

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

  

 

  

 

  

 

  

Money market funds

$

77,010

$

$

$

77,010

Marketable securities:

 

  

 

  

 

  

 

  

U.S. treasury securities

 

 

185,920

 

 

185,920

Totals

$

77,010

$

185,920

$

$

262,930

13

4. Collaboration and License Agreement

Moderna Collaboration and License Agreement

In March 2023, we entered into a Collaboration and License Agreement, or the Collaboration Agreement, with Moderna to collaborate on developing treatments for certain diseases by targeting delivery of nucleic acids to liver cells and certain cells outside of the liver.

Under the Collaboration Agreement, the parties have agreed to collaborate on preclinical research programs relating to lipid nanoparticle, or LNP, delivery systems and nucleic acid payloads, with each party obtaining certain rights to intellectual property used in and arising out of such research programs. Each party will be solely responsible for its own clinical development and commercialization of products under the Collaboration Agreement. Moderna will reimburse us for the internal and external costs incurred by us in conducting the research programs, to the extent consistent with such research plans and budgets.

Moderna has exclusive options, upon payment of option exercise fees, to obtain worldwide, exclusive, sublicensable licenses under specified company intellectual property to develop, manufacture and commercialize (a) products comprising LNP delivery systems and nucleic acid payloads that are directed to (i) up to two liver targets, (ii) up to two non-liver targets and (iii) a third liver or non-liver target and (b) Exclusive Targets, which are Independent Program Products (as defined below) that include messenger RNA, or mRNA, that are directed to gene and protein targets in any of certain agreed-upon immune cell types, referred to as the Cell Target Types. Subject to the exclusivity obligations described below, each party has granted to the other a worldwide, non-exclusive, sublicensable license under certain LNP-related intellectual property arising out of the non-liver ctLNP program, or the Joint Collaboration ctLNP Intellectual Property, to develop, manufacture and commercialize products comprising LNP delivery systems and nucleic acid payloads directed to gene and protein targets in any of the Cell Target Types, or Independent Program Products.

Each party is obligated to use commercially reasonable efforts to complete the activities assigned to it under the research plans, and Moderna is further obligated to use commercially reasonable efforts to develop, seek regulatory approval for and commercialize at least one product directed to each target for which Moderna exercises its exclusive license option in at least one indication in the United States and in specified European countries.

We have agreed not to, directly or indirectly, alone or with, for or through any third party, develop, manufacture, commercialize or exploit (a) products containing mRNA that are directed to any of the Cell Target Types, during an agreed-upon exclusivity period, which may be extended by payment of extension fees, (b) products directed to any liver target or non-liver target during the option periods for those targets, (c) products directed to any liver target or non-liver target for which Moderna has exercised its exclusive license option or (d) products containing mRNA that are directed to any Exclusive Target for which Moderna has exercised its exclusive license option.

Under the terms of the Collaboration Agreement, in April 2023, Moderna made an upfront payment to us of $40.0 million, and paid us $7.5 million in prepaid research funding. In addition, we are eligible to receive up to $1.8 billion in milestone payments upon the achievement of specified development, regulatory, commercial, and sales milestone events, research term extension fees and exclusivity extension fees. Subject to reductions in specified circumstances, we will also be entitled to receive tiered royalties: (i) ranging from high-single-digits to low-double-digits on sales of licensed products that are directed to any liver target or non-liver target with respect to which Moderna has exercised its exclusive license option, and (ii) in the single digits on sales of Independent Program Products, including the exclusively licensed Independent Program Products directed to the Exclusive Targets. In consideration for the non-exclusive license granted by Moderna to us under the Joint Collaboration ctLNP Intellectual Property, we have agreed to pay Moderna tiered royalties in the single digits on sales of Independent Program Products that include mRNA, subject to reductions in specified circumstances. Royalties will be paid by each party, on a licensed product-by-licensed product and country-by-country basis, until the latest to occur of: (i) expiration of the last-to-expire of specified licensed patent rights; (ii) expiration of regulatory exclusivity; or (iii) ten years after the first commercial sale of the applicable licensed product.

In addition, in connection with the execution of the Collaboration Agreement, we entered into a Share Purchase Agreement, or the Share Purchase Agreement, with Moderna, pursuant to which we issued and sold 5,859,375 shares of

14

our common stock to Moderna, at a price of $6.14 per share, for an aggregate purchase price of $36.0 million, which closed concurrently with the execution of the Collaboration Agreement. Under the Share Purchase Agreement, Moderna has the right, subject to certain terms and conditions, to purchase up to 3.06% of the outstanding shares of our common stock (on a post-closing basis) in connection with a future equity financing of at least $25.0 million by us.

Moderna Agreement Assessment

We assessed the promised goods and services under the Collaboration Agreement, in accordance with ASC 606. At inception, the Collaboration Agreement included one combined performance obligation, which includes the license to the ctLNP technology to target indications outside of the liver and the related research services to develop such technology, as the two items are not distinct in context of the contract. The Collaboration Agreement also provides Moderna with options to receive additional research services and options to receive exclusive licenses. The options to receive exclusive licenses allow Moderna to develop and commercialize product candidates that utilize our ctLNP and ceDNA technology for targets within the liver, as well as utilizing the ctLNP technology to be developed as part of the Collaboration Agreement and our ceDNA technology for targets outside the liver. These options are considered to be a priced at a discount to its standalone selling price and therefore are considered to be material rights.  

The initial transaction price included a $40.0 million upfront fee, premium paid over the fair value of the common stock of $13.3 million in connection with shares issued and sold to Moderna under the Share Purchase Agreement, and estimated revenue associated with the payment for research services, including $7.5 million in prepaid research services. We utilized the expected amount method to determine the amount of reimbursement for these activities. We utilized the most likely amount method to determine the amount of consideration to include in the transaction price related to any variable consideration related to exclusivity fees, and milestones, and the royalty payments are constrained based on the royalty constraint. No amounts are included in the transaction price related to these elements.  

We initially allocated the transaction price to each unit of account as follows:

Performance Obligations (in thousands)

Standalone Selling Price

Transaction Price Allocated

ctLNP technology and research license

$

52,500

$

42,576

First liver program commercialization option license

7,000

5,677

Second liver program commercialization option license

 

7,000

 

5,677

First non-liver program commercialization option license

 

11,700

 

9,488

Second non-liver program commercialization option license

 

11,700

 

9,488

Third liver or non-liver program commercialization option license

6,150

4,987

Total

$

96,050

$

77,893

The transaction price was allocated to each unit of account based on the relative estimated standalone selling prices, over which management has applied significant judgment, of each element. We developed the estimated standalone selling price for combined performance obligation and each of the options to receive licenses primarily based on the probability-weighted present value of expected future cash flows associated with each license related to each specific program and an estimate of the costs to provide services including a reasonable return. In developing such estimate, we also considered applicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating the agreement, the probability of success and the time needed to commercialize a product candidate pursuant to the associated license.

On a quarterly basis, we measure proportional performance of the combined performance obligation over time using an input method based on cost incurred relative to the total estimated costs by determining the proportion of effort incurred as a percentage of total effort we expect to expend. This ratio is then applied to the transaction price allocated to the combined performance obligation and each of the options to receive licenses. Any changes to these estimates will be recognized in the period in which they change as a cumulative catch up. All allocated consideration for the material rights is deferred until such time that Moderna exercises its options or the right to exercise the options expires. Upon exercise,

15

we will determine the appropriate revenue recognition methodology and any other implications on the accounting treatment for the arrangement.

The following table provides a summary of the transaction price allocated to each unit of account, in addition to revenue activity during the period:

Performance Obligations

Transaction Price Allocated

Revenue Recognized During

Deferred Revenue

(in thousands)

As of September 30, 2023

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2023

As of September 30, 2023

ctLNP technology and research license

$

40,979

$

2,146

$

3,026

$

30,188

First liver program commercialization option license

5,464

4,429

Second liver program commercialization option license

 

5,464

 

 

 

4,429

First non-liver program commercialization option license

 

9,132

 

 

 

7,402

Second non-liver program commercialization option license

 

9,132

 

 

 

7,402

Third liver or non-liver program commercialization option license

4,799

3,890

Total

$

74,970

$

2,146

$

3,026

$

57,740

16

5. Property and equipment, net

Property and equipment, net consisted of the following:

September 30, 

December 31,

(in thousands)

2023

2022

Laboratory equipment

$

14,317

$

13,619

Computer equipment and software

 

1,356

 

1,189

Furniture and fixtures

 

1,256

 

1,146

Leasehold improvements

 

20,854

 

20,786

Construction in progress

 

3,027

 

13

40,810

36,753

Less: Accumulated depreciation and amortization

(18,434)

(14,538)

Total

$

22,376

$

22,215

Depreciation and amortization expense for the three and nine months ended September 30, 2023 was $1.3 million and $3.9 million, respectively. Depreciation and amortization expense for the three and nine months ended September 30, 2022 was $1.4 million and $3.8 million, respectively.

In July 2021, we entered into a lease agreement to build out a current Good Manufacturing Practice-, or cGMP-, compliant manufacturing facility in Waltham, Massachusetts in order to scale ceDNA manufacturing utilizing RES for clinical and initial commercial supply. We decided to transition from building out the cGMP compliant manufacturing facility to utilizing an external cleanroom facility after achieving increased scalability of the RES development process in the second half of 2022. Consequently, we are seeking one or more third parties to assume our lease or sublease the property. The balance of construction in progress at September 30, 2023, was comprised primarily of the capitalization of construction costs to renovate the property for alternative use.

6. Accrued Expenses

Accrued expenses and other current liabilities consisted of the following:

September 30, 

December 31,

(in thousands)

    

2023

2022

Accrued employee compensation and benefits

$

5,809

$

7,970

Accrued external research and development expenses

 

1,786

 

1,959

Accrued professional fees

 

815

 

1,047

Property and equipment

694

Other

 

370

 

426

Total

$

9,474

$

11,402

7. Equity

As of September 30, 2023, our amended and restated certificate of incorporation authorizes us to issue 150,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share, all of which preferred stock is undesignated.

In August 2021, we entered into an “at-the-market” sales agreement pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $250.0 million. As of November 9, 2023, the issuance date of these condensed consolidated financial statements, we have issued and sold 1,795,524 shares of our common stock pursuant to this sales agreement resulting in net proceeds of $12.3 million.

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In March 2023, in connection with the Share Purchase Agreement with Moderna, we issued and sold 5,859,375 shares of our common stock to Moderna at a price of $6.14 per share for an aggregate purchase price of $36.0 million. For additional information, refer to Note 4, Collaboration and License Agreements.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of our stockholders. Holders of common stock are not entitled to receive dividends, unless declared by the board of directors.

8. Stock-Based Compensation

Stock incentive plans

Our 2017 Stock Incentive Plan, or the 2017 Plan, provided for us to grant incentive stock options or nonstatutory stock options, restricted stock, restricted stock units and other equity awards to employees, non-employees, and directors.

In May 2020, our board of directors adopted, and in June 2020, our stockholders approved, the 2020 Stock Incentive Plan, or the 2020 Plan, and together with the 2017 Plan, the Plans, which became effective on June 11, 2020. The 2020 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares of common stock reserved for issuance under the 2020 Plan is the sum of (1) 2,547,698 shares; plus (2) the number of shares (up to a maximum of 7,173,014 shares) as was equal to the sum of (x) the number of shares of common stock reserved for issuance under the 2017 Plan that remained available for grant under the 2017 Plan on June 11, 2020 and (y) the number of shares of common stock subject to outstanding awards granted under the 2017 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of common stock outstanding on such date, and (ii) an amount determined by the board of directors. In January 2021, 2022 and 2023, the number of shares of common stock authorized for issuance under the 2020 Plan was increased from 10,275,717 shares to 12,154,517 shares, from 12,154,517 shares to 14,433,745 shares, and from 14,433,745 shares to 16,813,962 shares, respectively. Upon the effectiveness of the 2020 Plan, we ceased granting additional awards under the 2017 Plan.

The Plans are administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions on any award under the Plans are determined at the discretion of the board of directors, or its committee if so delegated. Stock options granted under the Plans with service-based vesting conditions generally vest over four years and expire after ten years. The exercise price for stock options granted is not less than the fair value of common stock as of the date of grant. Prior to our IPO, fair value of common stock was determined by the board of directors. Subsequent to our IPO, fair value of common stock is based on quoted market prices.

As of September 30, 2023, 1,457,015 shares remained available for future issuance under the 2020 Plan. Shares subject to outstanding awards granted under the Plans that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right will be available for future awards under the 2020 Plan.

Grant of stock options

During the nine months ended September 30, 2023, we granted time-based options to certain employees for the purchase of an aggregate of 1,765,301 shares of common stock with a weighted average grant date fair value of $3.67 per share that vest over a weighted average period of approximately four years.

Restricted stock units

During the nine months ended September 30, 2023, we issued 848,530 restricted stock units with a fair value of $3.9 million that vest over a weighted average period of approximately four years.

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Employee stock purchase plan

In May 2020, our board of directors adopted, and in June 2020, our stockholders approved, the 2020 Employee Stock Purchase Plan, or the 2020 ESPP, which became effective June 11, 2020. The 2020 ESPP is administered by our board of directors or by a committee appointed by the board of directors. The number of shares of common stock authorized for issuance under the 2020 ESPP automatically increases on the first day of each fiscal year, beginning with the fiscal year that commenced on January 1, 2021 and continuing for each fiscal year until, and including the fiscal year commencing on, January 1, 2030, in an amount equal to the lowest of (1) 1,302,157 shares of common stock, (2) 1% of the number of shares of common stock outstanding on such date, and (3) an amount determined by the board of directors. In January 2021, 2022, and 2023, the number of shares of common stock authorized for issuance under the 2020 ESPP was increased from 481,231 shares to 950,931 shares, from 950,931 shares to 1,520,738 shares, and from 1,520,738 shares to 2,115,792 shares, respectively. As of September 30, 2023, 1,826,149 shares remained available for issuance under the 2020 ESPP.

Stock-based compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

(in thousands)

   

2023

    

2022

   

2023

    

2022

Research and development expenses

$

2,874

$

3,046

$

8,608

$

9,674

General and administrative expenses

 

3,130

 

2,802

 

9,685

 

8,931

Total

$

6,004

$

5,848

$

18,293

$

18,605

As of September 30, 2023, total unrecognized compensation cost related to unvested time-based stock options and restricted stock units was $31.7 million, with $27.1 million expected to be recognized over a weighted average period of 2.2 years and $4.6 million expected to be recognized over a weighted average period of 2.4 years, respectively.

9. Commitments and Contingencies

401(k) Plan

We have a defined-contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended, or the 401(k) Plan. The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to contribute a portion of their annual compensation on a pre-tax and/or after-tax basis. In September 2020, we adopted a match program, beginning on January 1, 2021, for employee contributions to the 401(k) Plan up to a maximum of four percent of the employee’s salary, subject to the maximums established under the U.S. Internal Revenue Code of 1986, as amended.

Indemnification agreements

In the ordinary course of business, we may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with members of our board of directors and our officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited. We have not incurred any material costs as a result of such indemnifications and are not currently aware of any indemnification claims.

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Legal proceedings

We, from time to time, may be party to litigation arising in the ordinary course of business. We were not subject to any material legal proceedings during the nine months ended September 30, 2023.

10. Net Loss per Share

We have generated a net loss in all periods presented, therefore the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive. We excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated:

September 30, 

    

2023

   

2022

Unvested restricted stock units

1,179,349

1,170,433

Stock options to purchase common stock

 

9,676,685

 

8,786,200

Total

 

10,856,034

 

9,956,633

11. Related Parties

In March 2023, we entered into the Collaboration Agreement with Moderna. In connection with the Share Purchase Agreement, we issued and sold 5,859,375 shares of our common stock to Moderna, which resulted in Moderna becoming the beneficial owner of 8.9% of our outstanding common stock and a related party.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. It should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and our consolidated financial statements and related notes appearing in our most recently filed Annual Report on Form 10-K, or Annual Report, with the Securities and Exchange Commission, or SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report, in our Annual Report and in the other documents filed with the SEC, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are innovating genetic medicines to provide durable, redosable treatments for potentially hundreds of millions of patients living with rare and prevalent diseases. Our non-viral genetic medicine platform incorporates our novel immune-quiet DNA, or iqDNA; our unique cell-targeted lipid nanoparticle delivery system, or ctLNP; and our highly scalable capsid-free manufacturing process that uses our proprietary cell-free rapid enzymatic synthesis, or RES, to produce iqDNA. iqDNA is an optimized variant of our closed-ended DNA, or ceDNA, that has displayed a superior tolerability profile compared to previous ceDNA constructs and that we have chosen as our cargo for our lead program in hemophilia A as well as for all other programs. Using our approach, we are developing novel genetic medicines to provide targeted delivery of genetic payloads that include large and multiple genes to a range of cell types across a broad array of diseases. We are also engineering our genetic medicines to be redosable, which may enable individualized patient titration to reach the desired level of therapeutic expression and to maintain efficacy throughout a patient’s life.

We are advancing a broad portfolio of programs, including programs for rare and prevalent diseases of the liver. We are focused on diseases with significant unmet need for which our non-viral genetic medicine platform may substantially improve clinical efficacy relative to current gene therapy approaches. We are initially prioritizing rare monogenic diseases that result from mutations in a single gene, and which can be treated by delivering our iqDNA cargo to cells of the liver, called hepatocytes. We are focusing on indications like hemophilia A, which is our lead program, that have well-established biomarkers and clear clinical and regulatory pathways. We are at the preclinical research stage and are currently optimizing our ctLNP platform to improve hepatocyte delivery to treat hemophilia A and other rare monogenic diseases. Our ctLNP platform is comprised of three components: a base stealth LNP that has demonstrated the ability to avoid off-target clearance by the liver and spleen, bioconjugation chemistry that attaches biological targeting ligands to the stealth LNP, and biological targeting ligands that are designed to drive highly selective delivery of the ctLNP to the target cell or tissue type. We plan to expand our portfolio to include programs based on cell-targeted delivery of iqDNA to immune cells, tumors, retina, skeletal muscle, and to the central nervous system by developing discrete ctLNPs, each with a discrete targeting ligand engineered to reach a specific target cell type or tissue.

In addition, we believe that our non-viral genetic medicine platform may be used to develop therapies that deliver antibody genes to direct the liver to produce antibody therapies from patients’ own cells for years at a time from a single dose in a process we refer to as endogenous therapeutic antibody production, or ETAP. We plan to advance ETAP programs across multiple therapeutic areas, including prevalent diseases.

In July 2021, we entered into a lease agreement to build out a current Good Manufacturing Practice-, or cGMP-, compliant manufacturing facility, or the Seyon Facility, in Waltham, Massachusetts in order to scale ceDNA manufacturing utilizing RES for clinical and initial commercial supply. We decided to transition from building out the cGMP compliant manufacturing facility to utilizing an external cleanroom facility after achieving increased scalability of the RES development process in the second half of 2022. We have entered into an agreement with an external cleanroom facility at which we expect to manufacture cGMP-compliant clinical and initial commercial supply of iqDNA using RES that will

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allow us to retain control over personnel, quality, infrastructure and process. Additionally, we may enter into agreements with contract manufacturing organizations, or CMOs, to provide further manufacturing capacity.

In March 2023, we entered into a Collaboration and License Agreement, or the Collaboration Agreement, with ModernaTX, Inc., or Moderna, to collaborate on developing treatments for certain diseases by targeting delivery of nucleic acids to liver cells and certain cells outside of the liver. Under the Collaboration Agreement, the parties have agreed to collaborate on preclinical research programs relating to lipid nanoparticle, or LNP, delivery systems and nucleic acid payloads, with each party obtaining certain rights to intellectual property used in and arising out of such research programs.

The research programs will be conducted pursuant to research plans and associated research budgets established by governance committees formed by the parties. Moderna will reimburse us for the internal and external costs we incur in conducting the research programs, to the extent consistent with such research plans and budgets. Each party will be solely responsible for its own clinical development and commercialization of products under the Collaboration Agreement.

In addition, Moderna has exclusive options, upon payment of option exercise fees, to obtain worldwide, exclusive, sublicensable licenses under certain of our specified intellectual property to develop, manufacture and commercialize (a) products comprising LNP delivery systems and nucleic acid payloads that are directed to (i) up to two liver targets, (ii) up to two agreed-upon non-liver targets and (iii) a third liver or non-liver target and (b) Independent Program Products, which are products comprising LNP delivery systems that include mRNA that are directed to gene and protein targets in any of the agreed-upon immune cell types, or Cell Targets Types.