10-Q 1 pstx-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

or

 

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

For the transition period from ________ to ________

Commission File Number: 001-39376

 

Poseida Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-2846548

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer
Identification No.)

9390 Towne Centre Drive, Suite 200, San Diego, California

92121

(Address of Principal Executive Offices)

(Zip Code)

(858) 779-3100

(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, par value $0.0001 per share

PSTX

Nasdaq Global Select Market

 

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of May 8, 2024, the registrant had 96,957,650 shares of common stock, $0.0001 par value per share, outstanding.

 

 


POSEIDA THERAPEUTICS, INC.

Index

 

PART I. FINANCIAL INFORMATION

 

Page

 

 

 

Item 1. Financial Statements (Unaudited)

 

4

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

 

4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

 

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

 

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

 

7

Notes to Condensed Consolidated Financial Statements

 

8

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

 

23

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

34

Item 4. Controls and Procedures

 

34

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

36

Item 1A. Risk Factors

 

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

86

Item 3. Defaults Upon Senior Securities

 

86

Item 4. Mine Safety Disclosures

 

86

Item 5. Other Information

 

86

Item 6. Exhibits

 

87

Signatures

 

88

 

1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy, plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding the timing, scope and results of our development activities, including our ongoing and planned clinical trials;
the timing of and plans for regulatory filings;
our plans to obtain and maintain regulatory approvals of our product candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;
the potential benefits of our product candidates and technologies;
our expectations regarding the use of our platform technologies to generate novel product candidates;
the market opportunities for our product candidates and our ability to maximize those opportunities;
our business strategies and goals;
estimates of our expenses, capital requirements, any future revenue, and need for additional financing;
our expectations regarding manufacturing capabilities and plans, including the operation of our clinical manufacturing facility;
the performance of our third-party suppliers and manufacturers;
our ability to attract and/or retain new and existing collaborators with development, regulatory, manufacturing and commercialization expertise and our expectations regarding the potential benefits to be derived from such collaborations;
our expectations regarding our ability to obtain and maintain intellectual property protection for our platform technologies and product candidates and our ability to operate our business without infringing on the intellectual property rights of others;
our expectations regarding developments and projections relating to our competitors, competing therapies that are or become available, and our industry;
acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict, and the conflict in the Middle East, and the potential impact they may have on supply chains, the availability, and prices, of commodities, inflationary pressure and the overall U.S. and global financial markets;
financial conditions within the banking industry, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues;
future changes in or impact of law and regulations in the United States and foreign countries; and
the sufficiency of our existing cash, cash equivalents and short-term investments to fund our operations.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives and financial needs.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

2


You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Poseida”, “the Company,” “we,” “our” and “us” refer to Poseida Therapeutics, Inc.

We regularly make material business and financial information available to our investors using our investor relations website (https://investors.poseida.com). We therefore encourage investors and others interested in Poseida to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or the SEC, press releases and conference calls.

3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,297

 

 

$

44,472

 

Short-term investments

 

 

145,349

 

 

 

167,730

 

Accounts receivable

 

 

12,027

 

 

 

9,010

 

Prepaid expenses and other current assets

 

 

6,059

 

 

 

5,263

 

Total current assets

 

 

216,732

 

 

 

226,475

 

Property and equipment, net

 

 

18,364

 

 

 

19,055

 

Operating lease right-of-use assets

 

 

20,855

 

 

 

21,726

 

Intangible assets, net

 

 

1,320

 

 

 

1,320

 

Goodwill

 

 

4,228

 

 

 

4,228

 

Other long-term assets

 

 

1,081

 

 

 

1,081

 

Total assets

 

$

262,580

 

 

$

273,885

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,704

 

 

$

3,267

 

Accrued expenses and other liabilities

 

 

26,294

 

 

 

31,092

 

Operating lease liabilities, current

 

 

5,995

 

 

 

5,951

 

Deferred revenue, current

 

 

49,770

 

 

 

31,008

 

Total current liabilities

 

 

84,763

 

 

 

71,318

 

Term debt

 

 

58,691

 

 

 

58,590

 

Deferred revenue, non-current

 

 

11,903

 

 

 

16,780

 

Operating lease liabilities, non-current

 

 

19,875

 

 

 

20,882

 

Other long-term liabilities

 

 

2,754

 

 

 

2,614

 

Total liabilities

 

 

177,986

 

 

 

170,184

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value: 250,000,000 shares authorized at March 31, 2024 and December 31, 2023; 96,798,009 and 95,636,553 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

10

 

 

 

10

 

Additional paid-in capital

 

 

703,196

 

 

 

697,856

 

Accumulated other comprehensive income (loss)

 

 

(47

)

 

 

126

 

Accumulated deficit

 

 

(618,565

)

 

 

(594,291

)

Total stockholders’ equity

 

 

84,594

 

 

 

103,701

 

Total liabilities and stockholders’ equity

 

$

262,580

 

 

$

273,885

 

 

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

4


POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Collaboration revenue

 

$

28,142

 

 

$

10,343

 

Total revenue

 

 

28,142

 

 

 

10,343

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

42,921

 

 

 

38,052

 

General and administrative

 

 

9,798

 

 

 

11,807

 

Total operating expenses

 

 

52,719

 

 

 

49,859

 

Loss from operations

 

 

(24,577

)

 

 

(39,516

)

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(2,253

)

 

 

(2,028

)

Other income, net

 

 

2,556

 

 

 

2,697

 

Net loss

 

$

(24,274

)

 

$

(38,847

)

 

 

 

 

 

 

 

Other comprehensive income (expense):

 

 

 

 

 

 

Unrealized gain (loss) on short-term investments

 

 

(173

)

 

 

151

 

Comprehensive loss

 

$

(24,447

)

 

$

(38,696

)

 

 

 

 

 

 

 

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

 

$

(0.25

)

 

$

(0.45

)

Weighted-average number of shares outstanding, basic and diluted

 

 

96,019,579

 

 

 

86,265,223

 

 

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

5


POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2023

 

 

95,636,553

 

 

$

10

 

 

$

697,856

 

 

$

126

 

 

$

(594,291

)

 

 

103,701

 

Issuance of common stock under employee stock compensation plans, net of tax withholdings

 

 

1,161,456

 

 

 

 

 

 

(43

)

 

 

 

 

 

 

 

 

(43

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,383

 

 

 

 

 

 

 

 

 

5,383

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(173

)

 

 

 

 

 

(173

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,274

)

 

 

(24,274

)

Balance at March 31, 2024

 

 

96,798,009

 

 

$

10

 

 

$

703,196

 

 

$

(47

)

 

$

(618,565

)

 

$

84,594

 

 

 

 

Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

85,964,161

 

 

$

9

 

 

$

658,596

 

 

$

(149

)

 

$

(470,861

)

 

 

187,595

 

Issuance of common stock under employee stock compensation plans, net of tax withholdings

 

 

675,726

 

 

 

 

 

 

258

 

 

 

 

 

 

 

 

 

258

 

Issuance of common stock through ATM, net of issuance costs

 

 

119,000

 

 

 

 

 

 

928

 

 

 

 

 

 

 

 

 

928

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,480

 

 

 

 

 

 

 

 

 

7,480

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

151

 

 

 

 

 

 

151

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,847

)

 

 

(38,847

)

Balance at March 31, 2023

 

 

86,758,887

 

 

$

9

 

 

$

667,262

 

 

$

2

 

 

$

(509,708

)

 

$

157,565

 

 

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

6


POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(24,274

)

 

$

(38,847

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,380

 

 

 

1,324

 

Stock-based compensation

 

 

5,383

 

 

 

7,480

 

Accretion of discount on issued term debt

 

 

241

 

 

 

172

 

Accretion on investment securities, net

 

 

(1,868

)

 

 

(2,138

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(3,016

)

 

 

650

 

Prepaid expenses and other current assets

 

 

(854

)

 

 

1,902

 

Operating lease right-of-use assets

 

 

871

 

 

 

877

 

Accounts payable

 

 

(563

)

 

 

966

 

Accrued expenses and other liabilities

 

 

(5,356

)

 

 

(7,551

)

Operating lease liabilities

 

 

(963

)

 

 

(935

)

Deferred revenue

 

 

13,884

 

 

 

(1,905

)

Net cash used in operating activities

 

 

(15,135

)

 

 

(38,005

)

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(130

)

 

 

(784

)

Purchases of short-term investments

 

 

(53,367

)

 

 

(53,631

)

Proceeds from maturities of short-term investments

 

 

77,500

 

 

 

50,000

 

Net cash provided by (used in) investing activities

 

 

24,003

 

 

 

(4,415

)

Financing Activities:

 

 

 

 

 

 

Proceeds from issuance of common stock under employee stock compensation plans

 

 

549

 

 

 

752

 

Payment of taxes related to net share settlement of equity awards

 

 

(592

)

 

 

(494

)

Proceeds from issuance of common stock through ATM offering, net of issuance costs

 

 

 

 

 

928

 

Net cash provided by (used in) financing activities

 

 

(43

)

 

 

1,186

 

Net increase (decrease) in cash and cash equivalents

 

 

8,825

 

 

 

(41,234

)

Cash and cash equivalents at beginning of period

 

 

44,472

 

 

 

81,378

 

Cash and cash equivalents at end of period

 

$

53,297

 

 

$

40,144

 

 

 

 

 

 

 

 

Non-cash operating, investing and financing activities:

 

 

 

 

 

 

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

 

$

559

 

 

$

1,069

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

2,013

 

 

$

1,829

 

 

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

7


Note 1. Nature of Business and Basis of Presentation

Nature of Operations

Poseida Therapeutics, Inc. (the “Company” or “Poseida”) is a clinical-stage cell therapy and genetic medicines company advancing a new class of treatments for patients with cancer and rare diseases. The Company has discovered and is developing a broad portfolio of product candidates in a variety of indications based on its core proprietary platforms, including its non-viral piggyBac DNA Delivery System, Cas-CLOVER Site-specific Gene Editing System and nanoparticle-based gene delivery technologies.

The Company is subject to risks and uncertainties common to development-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 and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s therapeutic development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Liquidity and Capital Resources

The Company has experienced net losses and negative cash flows from operations since its inception and has relied on its ability to fund its operations primarily through equity and debt financings and strategic collaborations. For the three months ended March 31, 2024, the Company incurred a net loss of $24.3 million and negative cash flows from operations of $15.1 million. The Company expects it will continue to incur net losses and negative cash flows from operations for at least the next several years. As of March 31, 2024, the Company had an accumulated deficit of $618.6 million.

The Company expects that its cash, cash equivalents and short-term investments as of March 31, 2024 of $198.6 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. In the long term, the Company will need additional financing to support its continuing operations and pursue its business strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements reflect the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated financial statements include the accounts of Poseida Therapeutics, Inc. and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly state the financial position and the results of its operations and cash flows for interim periods presented. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 7, 2024 from which the Company derived its condensed consolidated balance sheet as of December 31, 2023.

Risk and Uncertainties

Global events such as the conflict in the Middle East, Russia’s invasion of Ukraine and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt the Company’s supply chain and adversely affect its ability to conduct ongoing and future clinical trials of the Company’s product candidates. The extent to which any such ongoing or future conflict ultimately impacts the Company’s business is highly uncertain and cannot be predicted with confidence at this time.

8


Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, which include, but are not limited to, estimates related to revenue, accrued expenses, research and development expenses, stock-based compensation expense and deferred tax valuation allowances. The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments purchased with original final maturities of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with financial institutions and marketable securities. Investments with a remaining maturity when purchased of greater than three months are classified as short-term investments in the consolidated balance sheet and consist primarily of U.S. Treasury and other government agency obligations. As the Company’s entire investment portfolio is considered available for use in current operations, the Company classifies all investments as available-for-sale and as current assets, even though the stated maturity date may be one year or more beyond the current consolidated balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary.

Concentration of Business Risk

The Company operates in one reportable business segment and has two customers. The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a significant concentration of credit risk, consist primarily of cash and cash equivalents and investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits and investments are held.

Revenue Recognition

The Company’s revenues to date have been generated primarily through collaboration and license agreements. The Company’s collaboration and license agreements may contain multiple elements including intellectual property licenses and research, and development services. Consideration the Company receives under these arrangements may include upfront payments, research and development funding, cost reimbursements, research, development, regulatory and commercial milestone payments, and royalty payments.

The Company applies Accounting Standard Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), issued by the Financial Accounting Standards Board (“FASB”) to account for its contracts with customers. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services. The Company analyzes the nature of these performance obligations in the context of individual collaboration and license agreements in order to assess the distinct performance obligations. The Company evaluates its contracts with customers for proper classification in the consolidated statements of operations based on the nature of the underlying activity. Transactions with customers recorded in the Company’s consolidated statements of operations are recorded on either a gross or net basis, depending on the characteristics of the collaborative relationship.

To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. The Company allocates the transaction price to individual performance obligations on their relative standalone selling price basis. Standalone selling prices are based on observable prices at which the Company separately sells the

9


products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services.

The Company receives payments from its collaborators based on terms established in each contract. Upfront payments and other payments may require deferral of revenue recognition to a future period until the Company satisfies its performance obligations under the contract.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on short-term investments. Comprehensive gains (losses) have been reflected in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for all periods presented.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Note 3. Composition of Certain Balance Sheet Components

Property and equipment, net

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

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Laboratory equipment

 

$

21,733

 

 

$

21,271

 

Leasehold improvements

 

 

14,113

 

 

 

14,113

 

Computer equipment and software

 

 

1,355

 

 

 

1,355

 

Furniture and fixtures

 

 

1,352

 

 

 

1,125

 

Total property and equipment

 

 

38,553

 

 

 

37,864

 

Less: Accumulated depreciation and amortization

 

 

(20,189

)

 

 

(18,809

)

Total property and equipment, net

 

$

18,364

 

 

$

19,055

 

 

Depreciation and amortization expense associated with property and equipment was $1.4 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively.

Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Contract research services

 

$

16,595

 

 

$

14,621

 

Payroll and related expense

 

 

5,224

 

 

 

13,076

 

Other

 

 

4,475

 

 

 

3,395

 

Total accrued expenses and other liabilities

 

$

26,294

 

 

$

31,092

 

 

10


Note 4. Financial Instruments

The following table summarizes the amortized cost and fair value of available-for-sale securities (in thousands):

 

 

 

Maturity

 

Amortized
Cost/Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

At March 31, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

1 year or less

 

$

49,855

 

 

$

 

 

$

 

 

$

49,855

 

U.S. government agency securities and treasuries

 

1 year or less

 

 

145,396

 

 

 

14

 

 

 

(61

)

 

 

145,349

 

Total

 

 

 

$

195,251

 

 

$

14

 

 

$

(61

)

 

$

195,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

1 year or less

 

$

37,590

 

 

$

 

 

$

 

 

$

37,590

 

U.S. government agency securities and treasuries

 

1 year or less

 

 

167,604

 

 

 

158

 

 

 

(32

)

 

 

167,730

 

Total

 

 

 

$

205,194

 

 

$

158

 

 

$

(32

)

 

$

205,320

 

 

The Company has classified all of its short-term investments as available-for-sale as the sale of such securities may be required prior to maturity to implement management strategies, and therefore, they are carried at fair value. No available-for-sale debt securities held as of March 31, 2024, had remaining maturities greater than one year. Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. As of March 31, 2024, none of the Company’s securities were in material unrealized loss positions.

The Company reviews its investment holdings at the end of each reporting period and evaluates any unrealized losses using the expected credit loss model to determine if the unrealized loss is a result of a credit loss or other factors. The Company also evaluates its investment holdings for impairment using a variety of factors including the Company’s intent to sell the underlying securities prior to maturity and whether it is more likely than not that the Company would be required to sell the securities before the recovery of their amortized basis. During the three months ended March 31, 2024 and 2023, the Company did not recognize any impairment or realized gains or losses on sales of investments, and the Company did not record an allowance for, or recognize, any expected credit losses.

Note 5. Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity)

The Company classifies its money market funds and U.S. treasury securities, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

11


The following table summarizes the Company’s valuation hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

At March 31, 2024:

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

49,855

 

 

$

 

 

$

 

U.S. government agency securities and treasuries

 

 

145,349

 

 

 

 

 

 

 

Total

 

$

195,204

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

37,590

 

 

$

 

 

$

 

U.S. government agency securities and treasuries

 

 

167,730

 

 

 

 

 

 

 

Total

 

$

205,320

 

 

$

 

 

$

 

 

Note 6. Strategic Investment

Astellas

Terms of the Agreement

On August 4, 2023 (the “Signing Date”), the Company entered into a series of agreements (collectively, the “Astellas Agreements”) with Astellas US, LLC (“Astellas”) as described below.

Securities Purchase and Registration Rights Agreement

Pursuant to a securities purchase agreement (the “Securities Purchase Agreement”), the Company agreed to issue and sell to Astellas in a private placement (the “Private Placement”) an aggregate of 8,333,333 shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, at a purchase price of $3.00 per Share, for aggregate gross proceeds of $25.0 million. The Private Placement closed on August 7, 2023 (the “Closing Date”).

The Company also entered into a registration rights agreement with Astellas (the “Registration Rights Agreement”), pursuant to which the Company agreed to register the resale by Astellas of the Shares no later than the 250th day after the Closing Date.

Strategic Rights Letter Agreement

On the Signing Date, the Company also entered into a strategic rights letter agreement (the “Astellas Strategic Rights Letter”) with Astellas, pursuant to which, the Company agreed to the following: (i) grant Astellas the right to an observer seat on the Company’s board of directors, any committee of the Company’s board of directors, and the Company’s scientific advisory board; (ii) for a period of 18 months, grant Astellas a right of notification with respect to a Change in Control (as defined in the Astellas Strategic Rights Letter); (iii) during the period beginning on the Closing Date and ending on the 12-month anniversary of the Closing Date (the “Exclusivity Period”), not to (1) solicit, knowingly encourage, negotiate or otherwise enter into bona fide discussions about a Program Transaction (as defined below) with any third party, (2) provide access to any confidential information of the Company relating to P-MUC1C-ALLO1, the Company’s fully allogeneic CAR-T product candidate for multiple solid tumor indications (the “Program”), for purposes of knowingly facilitating a Program Transaction, or (3) enter into any letter of intent, contract or other commitment for a Program Transaction (a “Program Transaction” being an exclusive or co-exclusive license or co-promote or co-marketing arrangement or granting of commercial rights to sell, promote or market one or more products of the Program for any indication in the world); (iv) provide notice to Astellas (1) if the Company receives a bona fide proposal for a Change in Control transaction from a third party, unless such proposal is rejected by the Company’s board of directors, or (2) of the commencement of a process approved by the Company’s board of directors for a Change in Control, (3) if the Company receives a bona fide proposal for a Program Transaction from a third party unless the proposal is rejected by the Company’s board of directors (a “Program Transaction Proposal”) or, (4) following the Exclusivity Period, the commencement of substantive discussions for a Program Transaction with a third party in connection with a process approved by the Company’s board of directors for a Program Transaction (a “Program Process”). In connection with a notice related to (x) a Program Transaction Proposal, Astellas shall have a right of first refusal to provide a competing proposal that is in aggregate more favorable to the Company than the Program Transaction Proposal, and thereby have a right to negotiate exclusively a possible Program Transaction for a specified period and (y) a Program Process, Astellas shall have a right of first offer to negotiate a Program Transaction for a specified period before the Company engages with any third party in

12


meaningful substantive discussions, in each case, in accordance with the procedures and subject to the conditions set forth in the Astellas Strategic Rights Letter.

As partial consideration for the rights granted to Astellas under the Astellas Strategic Rights Letter, Astellas paid the Company a one-time payment in the amount of $25.0 million (the “Upfront Payment”). In connection with a Change in Control transaction or Program Transaction between the Company and Astellas, some, all or none of the Upfront Payment may be offset against payments owed by Astellas in a tiered basis to the Company dependent on certain factors set forth in the Astellas Strategic Rights Letter.

The Astellas Strategic Rights Letter shall terminate upon the earliest to occur of (i) the 18-month anniversary of the Closing Date, (ii) such time that Astellas owns fewer than 8,000,000 shares of common stock (subject to adjustment for any stock splits, stock dividends or recapitalizations) and (iii) the consummation of a Change in Control.

Revenue Recognition

The Securities Purchase Agreement and the Registration Rights Agreement are not within the scope of ASC 606 and were accounted for as an equity issuance with the deemed fair value of the shares issued scoped out of the transaction price. See Note 10 for further detail of the equity issuance. The rights granted under the Astellas Strategic Rights Letter were assessed under ASC 606, as the agreement represents a contract with a customer. The rights were deemed to not transfer any control to Astellas but give Astellas a right in the future, as all or a portion of the Upfront Payment of $25.0 million is creditable to Astellas towards a future potential transaction within the restrictions and time frames specified in the letter. Therefore, the full amount allocated to the rights is treated as a non-refundable payment.

The Company recorded the issuance of common stock at its estimated fair value on the date of issuance of $14.4 million, which reflects a discount for the lack of marketability (“DLOM”) of the shares. The DLOM was applied due to the inability to trade the shares until they are registered. The $10.6 million difference between the $25.0 million paid by Astellas for the Securities Purchase Agreement and the fair market value of shares issued was allocated to the rights granted under the Astellas Strategic Rights Letter for a total amount allocable of $35.6 million. The amount will be recognized when the likelihood of Astellas exercising its remaining rights becomes remote, or when the proportionate amount of the tiered creditable amounts expire.

The Company recognized $11.9 million of revenue from the Astellas Agreements for the three months ended March 31, 2024. The Company has $23.7 million of deferred revenue on its condensed consolidated balance sheet as of March 31, 2024, expected to be recognized in tiered amounts by February 2025.

Note 7. Collaboration and License Agreements

Roche

Terms of the Agreement

In July 2022, the Company entered into a collaboration and license agreement (the “Roche Collaboration Agreement”) with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (collectively, “Roche”), pursuant to which the Company granted to Roche: (i) an exclusive, worldwide license under certain Company intellectual property to develop, manufacture and commercialize allogeneic CAR-T cell therapy products from each of the Company’s existing P-BCMA-ALLO1 and P-CD19CD20-ALLO1 programs (each a “Tier 1 Program”); (ii) an exclusive option to acquire an exclusive, worldwide license under certain Company intellectual property to develop, manufacture and commercialize allogeneic CAR-T cell therapy products from each of the Company’s existing P-BCMACD19-ALLO1 and P-CD70-ALLO1 programs (each, a “Tier 2 Program”); (iii) an exclusive license under certain Company intellectual property to develop, manufacture and commercialize allogeneic CAR-T cell therapy products from the up to six Collaboration Programs (as defined below) designated by Roche; (iv) an option for a non-exclusive, commercial license under certain limited Company intellectual property to develop, manufacture and commercialize certain Roche proprietary cell therapy products for up to three solid tumor targets to be identified by Roche (“Licensed Products”); and (v) the right of first offer for two (2) early-stage existing programs within hematologic malignancies. The Roche Collaboration Agreement became effective in September 2022 upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

For each Tier 1 Program, the Company will perform development activities through a Phase 1 dose escalation clinical trial, and Roche is obligated to reimburse a specified percentage of certain costs incurred by the Company in its performance of such activities, up to a specified reimbursement cap for each Tier 1 Program. For Tier 1 Program activities beyond the Phase 1 dose escalation, Roche is obligated to reimburse all costs incurred for the program. For each Tier 2 Program, the Company will perform research and development activities either through selection of a development candidate for IND-enabling studies or, subject to Roche’s election and payment of an option maintenance fee, through completion of a Phase 1 dose escalation clinical trial. In addition, for each Tier 2 Program for which Roche exercises its option for an exclusive license, Roche is obligated to pay an option exercise fee. For each Tier

13


1 Program and Tier 2 Program, the Company will perform manufacturing activities until the completion of a technology transfer to Roche.

The parties are conducting an initial two-year research program to explore and preclinically test a specified number of agreed-upon next generation therapeutic concepts relating to allogeneic CAR-T cell therapies. Subject to Roche’s election and payment of a specified fee, the parties would subsequently conduct a second research program of 18 months under which the parties could extend the existing work being performed under the initial term, and/or would explore and preclinically test a specified number of additional agreed-upon next generation therapeutic concepts relating to allogeneic CAR-T therapies. Roche may designate up to six heme malignancy-directed, allogeneic CAR-T programs from the two research programs, for each of which the Company will perform research and development activities through selection of a development candidate for IND-enabling activities (each, a “Collaboration Program”). Upon its designation of each Collaboration Program, Roche is obligated to pay a designation fee. After the Company’s completion of lead optimization activities for a Collaboration Program, Roche may elect to transition such program to Roche with a payment to the Company or terminate it. Alternatively, Roche may elect, for a limited number of Collaboration Programs, to have the Company conduct certain additional development and manufacturing activities through the completion of a Phase 1 dose escalation clinical trial, in which case Roche will pay certain milestones and reimburse a specified percentage of the Company’s costs incurred in connection with such development and manufacturing activities. For each Collaboration Program, the Company will perform manufacturing activities until the completion of a technology transfer to Roche.

In consideration for the rights granted to Roche under the Roche Collaboration Agreement, the Company received an upfront payment of $110.0 million. In addition, subject to Roche exercising its Tier 2 Program options, designating Collaboration Programs, and exercising its option for the Licensed Products commercial license and further contingent on, among other things, achieving specified objectives, the Company is eligible to receive up to (i) $1.5 billion in aggregate payments for Tier 1 Programs comprised of research funding, feasibility fees and $1.4 billion in development, regulatory and net sales milestones, (ii) $1.1 billion in aggregate payments for Tier 2 Programs comprised of option exercise and maintenance fees and $1.0 billion in development, regulatory and net sales milestones, (iii) $2.9 billion in aggregate payments for the Collaboration Programs comprised of certain reimbursements, fees and milestone payments; and (iv) $415.0 million in payments for the Licensed Products comprised of certain reimbursements, fees and milestone payments.

The Company is further entitled to receive, on a product-by-product basis, tiered royalty payments in the mid-single to low double digits on net sales of products from the Tier 1 Programs, optioned Tier 2 Programs and Collaboration Programs and in the low to mid-single digits for Licensed Products, in each case, subject to certain customary reductions and offsets. Royalties will be payable, on a product-by-product and country-by-country basis, until the latest of the expiration of the licensed patents covering such product in such country or ten years from first commercial sale of such product in such country.

The Roche Collaboration Agreement will continue in effect on a product-by-product and country-to-country basis until there is no remaining royalty or other payment obligations. The Roche Collaboration Agreement includes standard termination provisions, including for material breach or insolvency and for Roche’s convenience. Certain of these termination rights can be exercised with respect to a particular product or license, as well as with respect to the entire Roche Collaboration Agreement.

Effective November 7, 2023, the Roche Collaboration Agreement was amended to, among other things: (i) reallocate certain existing manufacturing-related fees payable to us by Roche to add new manufacturing process development and implementation transfer fees for each of our existing Tier 1 Programs; and (ii) reallocate amounts in certain development milestone payments payable to us by Roche for each Tier 1 Program. The amendment also provided for the ability for the existing two-year research program to be extended for an additional 18 months with the payment of a $15.0 million milestone. All performance obligations and payment terms under the Roche Collaboration Agreement otherwise remained unchanged.

Revenue Recognition

At contract inception, the Company has identified six performance obligations under the Roche Collaboration Agreement: (i) licenses associated with the Tier 1 Programs, (ii) research and development efforts for the Tier 1 Programs, (iii) clinical drug supply for the Tier 1 Programs, (iv) manufacturing process development program for the Tier 1 Programs, (v) research and development efforts for the Tier 2 Programs, and (vi) research and development efforts for the Collaboration Programs. The Company concluded that Roche’s options within the Roche Collaboration Agreement do not represent material rights and are not considered performance obligations as they do not contain a significant and incremental discount. The licenses associated with the Tier 1 Programs were delivered at the beginning of the agreement term and deemed capable of being distinct as the Company concluded that Roche has the knowledge and capabilities to continue development work and fully utilize the licenses without the Company’s involvement.

In order to determine the transaction price, the Company evaluated all the payments to be received during the term of the Roche Collaboration Agreement. Certain milestones and additional fees were considered variable consideration, which were not included in

14


the initial transaction price based on the most likely amount method. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company determined that the transaction price at the inception of the Roche Collaboration Agreement was $185.0 million, which consists of the upfront payment of $110.0 million, future research funding for the Tier 1 Programs of $40.0 million and a $35.0 million milestone achieved in September 2022 for the Tier 1 Programs. In the fourth quarter of 2023, the Company achieved a developmental milestone of $30.0 million, and in accordance with ASC 606, the Company determined that the achieved milestone represented an increase in the initial transaction price for its manufacturing process development program for the Tier 1 Programs in the form of the receipt of variable consideration that was previously constrained. The Company recognized revenue associated with the milestone in an amount equal to the proportional percentage of the actual costs incurred under the manufacturing process development programs since its inception as a percentage of the total costs expected to be incurred over the expected term of conduct of the manufacturing process development program. The remaining unrecognized revenue associated with the milestone is included within deferred revenue and is being recognized as revenue over the expected term of conduct of the manufacturing process development program. All other future potential milestone payments were excluded from the estimated total transaction price as they were considered constrained.

 

The performance obligation associated with the licenses for the Tier 1 Programs was satisfied as of the effective date of the Roche Collaboration Agreement. All other performance obligations will be recognized on a proportional basis as the underlying services are provided based on actual costs incurred as a percentage of total estimated costs. The Company determined that the cost-based input method most faithfully depicts the pattern in which these performance obligations are satisfied. Any cumulative effect of revisions to estimated costs to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. This approach requires the Company to use significant judgment and make estimates of future expenditures. If the Company’s estimates or judgments change over the course of the collaboration, they may affect the timing and amount of revenue that it recognizes in the current and future periods.

Takeda

In October 2021, the Company entered into a collaboration and license agreement (the “Takeda Collaboration Agreement”) with Takeda Pharmaceuticals USA, Inc. (“Takeda”), pursuant to which the Company granted to Takeda a worldwide exclusive license under the Company’s certain platform technologies including piggyBac, Cas-CLOVER, biodegradable DNA and RNA nanoparticle delivery technology and other proprietary genetic engineering platforms to research, develop, manufacture and commercialize gene therapy products for certain indications. Under the Takeda Collaboration Agreement, the Company received an upfront payment of $45.0 million and R&D reimbursement payments during the term of the agreement.

On May 31, 2023, the Company received written notice from Takeda of its election to terminate the Takeda Collaboration Agreement, effective July 30, 2023 (the “Termination Date”). Until the Termination Date, the parties performed their respective obligations under the Collaboration Agreement and upon the Termination Date, the Company’s exclusivity obligations under the Collaboration Agreement terminated. In addition, the licenses granted to Takeda by the Company, and the licenses granted to the Company by Takeda to perform research activities under the Collaboration Agreement terminated.

Deferred Revenue Reconciliation

While the Company’s entry into the Astellas Strategic Rights Letter was a strategic investment, for purposes of recognizing the remaining amount, it has been determined to be revenue, and as such, reference to remaining deferred revenue for these agreements is included in the following table. There were no contract assets as of March 31, 2024 related to the Roche Collaboration Agreement, Takeda Collaboration Agreement or Astellas Strategic Rights Letter. A contract asset of $30.0 million for the Roche Collaboration Agreement was netted against deferred revenue for the year ended December 31, 2023. There were no contract assets as of December 31, 2023 related to the Takeda Collaboration Agreement or Astellas Strategic Rights Letter.

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A reconciliation of the closing balance of deferred revenue related to the agreements is as follows (in thousands):

 

 

 

Roche Collaboration Agreement

 

 

Takeda Collaboration Agreement

 

 

Astellas Strategic Rights Letter

 

 

Total

 

Balance as of December 31, 2022

 

$

31,749

 

 

$

9,307

 

 

$

 

 

$

41,056

 

Amounts received/invoiced

 

 

30,741

 

 

 

5,111

 

 

 

35,583

 

 

 

71,435

 

Revenue recognized

 

 

(50,285

)

 

 

(14,418

)

 

 

 

 

 

(64,703

)

Balance as of December 31, 2023

 

$

12,205

 

 

$

 

 

$

35,583

 

 

$

47,788

 

Amounts received/invoiced

 

 

42,027

 

 

 

 

 

 

 

 

 

42,027

 

Revenue recognized

 

 

(16,281

)

 

 

 

 

 

(11,861

)

 

 

(28,142

)

Balance as of March 31, 2024

 

$

37,951

 

 

$

 

 

$

23,722

 

 

$

61,673

 

 

Note 8. California Institute of Regenerative Medicine Award

The Company has been awarded funding from the California Institute of Regenerative Medicine (“CIRM”) to develop certain internal programs. Under the terms of the funding, both CIRM and the Company have co-funded specified programs, under which funding is provided in developmental milestones determined as a part of the award. The Company is obligated to share potential future revenues for the related programs with CIRM. The percentage of revenues due to CIRM in the future is dependent on the amount of the award received and whether revenue is generated from product sales or through license fees. The maximum revenue sharing amount the Company may be required to pay to CIRM is equal to nine times the total amount awarded and paid to the Company. As an alternative to revenue sharing, the Company has the option to convert any award to a loan, which such option the Company must exercise on or before ten business days after the U.S. Food and Drug Administration (“FDA”) notifies the Company that it has accepted the Company’s application for marketing authorization. In the event the Company exercises its right to convert any award to a loan, it would be obligated to repay the loan within ten business days of making such election. Repayment amounts due to CIRM vary dependent on when the award is converted to a loan, ranging from 60% of the award granted to the full amount received plus interest at the rate of the three-month LIBOR rate plus 10% per annum. Since the Company may be required to repay some or all of the amounts awarded by CIRM, the Company accounts for this award as a liability as the Company’s intention is to convert the award into a loan. Given the uncertainty in amounts due upon repayment, the Company has recorded amounts received without any discount or interest recorded, upon determination of amounts that would become due, the Company will adjust accordingly.

In September 2018, the Company was granted an award in the amount of $4.0 million from CIRM to support the Company’s preclinical studies for its P-PSMA-101 program. The Company received the full amount of the award based on achievement of specific developmental milestones. In the third quarter of 2023, the Company decided not to pursue additional clinical or other development activities of the P-PSMA-101 program, which resulted in write off of the amount previously included in the deferred CIRM grant liability as the Company no longer intends to repay the award and which amount is included in other income in the accompanying consolidated statement of operations.

Note 9. Term Debt

In 2017, the Company entered into a loan and security agreement with Oxford Finance LLC (“Oxford”), which was subsequently amended (“Amended Loan Agreement”), pursuant to which the Company borrowed a total amount of $30.0 million.

In February 2022, the Company entered into a new Loan and Security Agreement (“2022 Loan Agreement”) with Oxford. Pursuant to the terms of the 2022 Loan Agreement, the Company borrowed $60.0 million in term loans (the “Term Loans”), of which $31.6 million was used to repay the balance outstanding under the Amended Loan Agreement, including $0.2 million of accrued interest. Under the 2022 Loan Agreement the initial interest-only period was through April 1, 2025, followed by 23 equal monthly payments of principal and applicable interest. In September 2022, a qualifying equity event, as defined in the 2022 Loan Agreement, was achieved which extended the interest-only period through April 1, 2026, followed by 11 equal monthly payments of principal and applicable interest. As a result, all amounts outstanding under the 2022 Loan Agreement will mature on February 1, 2027 (the “Maturity Date”). In connection with the repayment of the balance outstanding under the Amended Loan Agreement, the Company incurred amendment and final payment fees of $1.5 million previously due on the earlier of (i) the maturity date, (ii) acceleration of any Amended Loan Agreement loans, or (iii) the prepayment of any Amended Loan Agreement loans.

The Company accounted for this amendment as debt modification in accordance with ASC Topic 470, Debt because the modification was not considered substantial.

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The balance outstanding under the 2022 Loan Agreement initially bore interest at a floating per annum rate equal to 7.83% plus the greater of (a) the 30-day U.S. Dollar (USD) LIBOR rate and (b) 0.11%. The interest rate applicable to the Term Loans as of March 31, 2024 was 13.25% per annum. The 2022 Loan Agreement included a provision addressing replacement of LIBOR with an alternate benchmark rate, when LIBOR was phased out in June 2023. Effective July 1, 2023, the balance outstanding under the 2022 Loan Agreement bears interest at a floating per annum rate equal to the greater of (a) 7.94% and (b) the sum of (i) the 1-Month CME Term Secured Overnight Financing Rate (“SOFR”) on the last business day of the month that immediately precedes the month in which the interest will accrue, (ii) 0.10% and (iii) 7.83%. The Company is required to make a final payment fee of 7.5% of the principal balance outstanding, payable on the earlier of (i) the Maturity Date, (ii) acceleration of any Term Loan, or (iii) the prepayment of the Term Loan. As of March 31, 2024, there was $60.0 million outstanding under the Term Loans. In connection with the Amended Loan Agreement, the Company previously incurred debt issuance costs of $1.5 million, which have been recorded as a debt discount and are being accreted to interest expense over the term of the Term Loans. Interest on the Term Loans, consisting of the stated interest rate, final payment fee and amortization of the discount, is being recognized under the effective interest method using a rate of 14.74%. As of March 31, 2024, the balance of the unamortized debt discount was $1.3 million. The balance of the accrued final payment fee was $2.7 million as of March 31, 2024 and is presented as other long-term liability in the accompanying condensed consolidated balance sheet.

The Company has an option to repay the outstanding debt under the 2022 Loan Agreement at any time in increments of $5.0 million, with no prepayment penalty.

The Company may use the proceeds from the Term Loans solely for its working capital requirements and to fund its general business operations. The Company’s obligations under the 2022 Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than its intellectual property. In addition, the Company has also agreed not to encumber its intellectual property assets, except as permitted by the 2022 Loan Agreement. While any amounts are outstanding under the 2022 Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding dispositions of property, business combinations or acquisitions, among other customary covenants. The Company is also restricted from declaring dividends or making other distributions or payments on its capital stock in excess of $0.3 million per calendar year, subject to limited exceptions. As of March 31, 2024, the Company was in compliance with all covenants under the 2022 Loan Agreement.

Note 10. Stockholders’ Equity

 

Authorized Shares

In connection with the completion of the Company’s initial public offering in July 2020, the Company amended its certificate of incorporation to authorize 250,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.0001 per share, that may be issued from time to time by the Company’s board of directors in one or more series. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors. Since the Company’s inception, there have been no dividends declared.

Warrants

Pursuant to the Amended Loan Agreement, the Company issued Oxford (i) in 2017, a warrant to purchase 93,518 shares of common stock at an exercise price of $4.28 per share, which will expire in 2027 unless earlier exercised and (ii) in 2018 and 2019, warrants to purchase an aggregate of 27,604 shares of common stock at an exercise price of $7.25 per share, which will expire in 2028 and 2029, respectively, unless earlier exercised.

Sale of Common Stock

On August 4, 2023, the Company entered into a securities purchase agreement with Astellas, pursuant to which the Company agreed to issue and sell to Astellas in the Private Placement an aggregate of 8,333,333 shares of common stock at a purchase price of $3.00 per Share, for aggregate gross proceeds of $25.0 million. The Private Placement closed on August 7, 2023. The Company recorded the issuance of common stock at its estimated fair value on the date of issuance of $14.4 million, which reflects a DLOM of the shares. The DLOM was applied due to the inability to trade the shares until they are registered. The issuance of the equity shares was recorded upon the delivery of the underlying shares, with the associated fair value recorded within equity on the Company’s condensed consolidated balance sheet.

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At the Market Facility

In August 2021, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) to sell shares of common stock, from time to time, through an “at the market offering” program having an aggregate offering price of up to $85.0 million through which Cantor would act as sales agent. During the three months ended March 31, 2024, the Company did not issue any shares of common stock under the “at the market offering” program. During the three months ended March 31, 2023, the Company issued and sold an aggregate of 119,000 shares of common stock under the “at the market offering” program at a weighted average price of $8.04 per share for net proceeds of approximately $0.9 million.

Note 11. Stock-Based Compensation

In July 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Equity Incentive Plan (the “2020 Plan”). Under the 2020 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash-based awards to individuals who are current employees, officers, directors or consultants of the Company. A total of 11,183,476 shares of common stock were approved to be initially reserved for issuance under the 2020 Plan. The number of shares that remained available for issuance under the Company’s previous equity incentive plan as of the effective date of the 2020 Plan and shares subject to outstanding awards under the Company’s previous equity incentive plan as of the effective date of the 2020 Plan that are subsequently canceled, forfeited or repurchased by the Company are added to the shares reserved under the 2020 Plan. The number of shares of common stock available for issuance under the 2020 Plan is automatically increased on the first day of each calendar year during the ten-year term of the 2020 Plan, beginning with January 1, 2021 and ending with January 1, 2030, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors.

In February 2022, the Company’s board of directors approved and adopted the 2022 Inducement Plan (the “Inducement Plan”). Under the Inducement Plan, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards to individuals not previously employees or non-employee directors of the Company, as an inducement toward entering into employment with the Company. Under the Inducement Plan approved in February 2022, the maximum number of shares of common stock initially approved to be issued was 2,000,000 shares. In December 2023, the Compensation Committee of the Company’s board of directors approved an amendment to the Inducement Plan which increased the pool to a maximum of 3,517,105 shares.

Stock Options

The following is a summary of the Company’s stock option activity for the three months ended March 31, 2024:

 

 

 

Shares

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Term
(Years)

 

 

Aggregate
Intrinsic
Value
(thousands)

 

Balance at January 1, 2024

 

 

14,909,912

 

 

$

6.84

 

 

 

 

 

 

 

Granted

 

 

3,143,177

 

 

 

4.00

 

 

 

 

 

 

 

Exercised

 

 

(12,823

)

 

 

2.49

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 

(82,284

)

 

 

6.21

 

 

 

 

 

 

 

Balance at March 31, 2024

 

 

17,957,982

 

 

$

6.35

 

 

 

7.89

 

 

$

1,312

 

Options vested and expected to vest as of
   March 31, 2024

 

 

17,957,982

 

 

$

6.35

 

 

 

7.89

 

 

$

1,312

 

Options vested and exercisable as of
   March 31, 2024

 

 

8,780,735

 

 

$

7.88

 

 

 

6.92

 

 

$

718

 

 

The weighted-average grant date fair value of options granted during the three months ended March 31, 2024 and 2023 was $2.90 and $3.92, respectively. The aggregate intrinsic value of options exercised was $13 thousand and $0.1 million during each of the three months ended March 31, 2024 and 2023, respectively, determined as of the date of exercise. The Company received $32 thousand and $0.1 million in cash from options exercised during each of the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, total unrecognized compensation cost related to stock options was $29.4 million, and the weighted-average period over which this cost is expected to be recognized was approximately 2.6 years.

18


The fair value of options granted is estimated at the date of grant using the Black-Scholes option pricing model. Forfeitures are accounted for as incurred as a reversal of any share-based compensation expense related to options that will not vest. The assumptions that the Company used to determine the fair value of options granted to employees, non-employees and directors were as follows:

 

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Risk-free interest rate

 

4.2%

 

4.2%

Expected volatility

 

84.2%

 

82.8%

Expected term (years)

 

5.8

 

6.0

Dividend yield

 

 

Restricted Stock Units

The following is a summary of the Company’s restricted stock unit (“RSU”) activity for the three months ended March 31, 2024:

 

 

 

Shares

 

 

Weighted
Average
Grant Date
Fair Value

 

Balance at January 1, 2024

 

 

4,555,099

 

 

$

4.35

 

Granted

 

 

2,262,809

 

 

 

4.00

 

Vested

 

 

(990,034

)

 

 

4.85

 

Forfeited/Cancelled

 

 

(38,779

)

 

 

4.66

 

Balance at March 31, 2024

 

 

5,789,095

 

 

$

4.13

 

RSU awards are share awards that, upon vesting, will deliver to the holder shares of the Company’s common stock. The RSUs granted to employees and non-employee directors vest up to four years from the grant date. The grant-date fair value is recognized as compensation expense over the vesting period. As of March 31, 2024, total unrecognized compensation cost related to RSUs was $22.3 million, and the weighted-average period over which this cost is expected to be recognized was approximately 3.0 years.

2020 Employee Stock Purchase Plan

In July 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Employee Stock Purchase Plan (the “ESPP”), which became effective as of the pricing of the Company’s initial public offering. A total of 615,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. The number of shares of common stock available for issuance under the ESPP is automatically increased on the first day of each calendar year during the first ten-years of the term of the ESPP, beginning with January 1, 2021 and ending with January 1, 2030, by an amount equal to the lessor of (i) 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year, (ii) 1,230,000 shares of common stock or (iii) such lesser amount as determined by the Company’s board of directors. Under the 2020 ESPP, substantially all employees can elect to have up to 15% of their annual compensation withheld to purchase up to 3,000 shares of common stock per purchase period, subject to certain limitations. The shares of common stock can be purchased over an offering period of six months and at a price of 85% of the fair market value per share of common stock on the first trading day of the applicable offering period or on the exercise date of the applicable offering period, whichever is less. Under applicable accounting guidance, the 2020 ESPP is classified as a compensatory plan. During the three months ended March 31, 2024, a total of 310,054 shares were purchased by the Company’s employees under the 2020 ESPP resulting in net proceeds of $0.5 million.

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The Company uses the Black-Scholes pricing model to estimate the fair value of the purchase rights issued under the ESPP on each offering date. The assumptions that the Company used to determine the fair value of the purchase rights issued to employees were as follows:

 

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Risk-free interest rate

 

5.4%

 

5.0%

Expected volatility

 

95.3%

 

73.2%

Expected term (years)

 

0.5

 

0.5

Dividend yield

 

 

The Company recorded total stock-based compensation expense related to stock options, RSUs and the ESPP in the following expense categories of the accompanying condensed consolidated statements of operations and comprehensive income (loss) (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

3,006

 

 

$

2,749

 

General and administrative

 

 

2,377

 

 

 

4,731

 

Total stock-based compensation expense

 

$

5,383

 

 

$

7,480

 

 

Note 12. Commitments and Contingencies

Operating Leases

As of March 31, 2024, the Company had operating leases consisting of approximately 110,000 square feet of manufacturing, laboratory and office space in San Diego, California, including 87,000 square feet under a lease that expires on December 31, 2029, which contains a clinical manufacturing facility adjacent to office and laboratory space. The lease agreements include two options to extend the term for a period of 5 years each.

In October 2021, the Company entered into a sublease agreement for a facility in San Diego, California consisting of approximately 23,000 square feet to be used for research and administrative activities. The lease term commenced in March 2022 and will expire on December 31, 2025.

During the three months ended March 31, 2024 and 2023, the Company recognized $1.4 million and $1.5 million, respectively, of operating lease expense. During the three months ended March 31, 2024, the Company paid $1.5 million for its operating leases. As of March 31, 2024, the weighted-average remaining lease term and weighted-average discount rate for operating leases were 5.4 years and 8.9%, respectively.

As of March 31, 2024, maturities of lease liabilities were as follows (in thousands):

 

Year ending December 31,

 

 

 

2024 (remaining 9 months)

 

$

4,670

 

2025

 

 

6,374

 

2026

 

 

5,107

 

2027

 

 

5,260

 

2028

 

 

5,418

 

Thereafter

 

 

5,581

 

Total future lease payments

 

 

32,410

 

Imputed interest

 

 

(6,540

)

Total lease liability balance

 

 

25,870

 

Less current portion of lease liability

 

 

5,995

 

Lease liability, net of current portion

 

$

19,875

 

 

20


Indemnification Agreements

In the ordinary course of business, the Company 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 from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and certain of its executive officers that require the Company, 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 the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Legal Contingencies

In the ordinary course of business, the Company may face claims brought by third parties against the Company. The Company believes that there are currently no lawsuits, threats of litigation, or asserted or unasserted claims pending that could, individually or in the aggregate, have a material adverse effect on the Company’s results of operations or financial condition.

Note 13. Net Loss Per Share

Basic net loss (income) per share is computed by dividing net loss (income) attributable to common stockholders for the period by the weighted-average number of common shares outstanding during the period. Diluted net loss (income) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options and from purchases under the ESPP, as well as from the possible exercise of the outstanding warrants.

The Company’s potentially dilutive securities, which include warrants to purchase common stock, common stock options, restricted stock units and common stock from the ESPP, have been excluded from the computation of diluted net loss per share 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.

The Company 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 because including them would have had an anti-dilutive effect:

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Outstanding stock options and RSUs

 

 

23,747,077

 

 

 

19,089,987

 

Warrants to purchase common stock

 

 

121,122

 

 

 

121,122

 

ESPP Shares

 

 

30,656

 

 

 

16,829

 

 

 

 

23,898,855

 

 

 

19,227,938

 

 

Note 14. Subsequent Event

On April 30, 2024, the Company and Xyphos Biosciences, Inc., a wholly-owned subsidiary of Astellas Pharma Inc. (“Xyphos”), entered into a collaboration and license agreement (the “Collaboration Agreement”), pursuant to which the Company will grant to Xyphos (i) an exclusive license under certain Company intellectual property to conduct activities under two research plans, to create one Company-developed CAR-T construct to form the basis of two convertibleCAR® product candidates targeting solid tumors, which will be generated by using both parties’ platform technology (each a “Research Product”), where each Research Product will bind to a human tumor-associated antigen, and may also bind to a human antigen associated with a tumor microenvironment, (ii) an exclusive license under certain Company intellectual property to develop, and commercialize up to two Research Products that have been designated as licensed products following receipt of the applicable IND-enabling data package, and (iii) an exclusive license under certain Company intellectual property to manufacture the products once manufacturing technology transfer has been completed.

For each research plan, the Company will perform development activities through the generation of an IND-enabling data package and Xyphos is obligated to reimburse the Company for FTE costs and expenses incurred by the Company in its performance of certain activities, up to an agreed annual cap. Xyphos may request that the Company transfer the manufacturing process for a product to Xyphos, or that, subject to the payment of a fee, the Company manufacture the Allo-T Cells forming part of such product for use in the first Phase 1 trial of such product.