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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022  

OR

 

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

For the transition period from            to

Commission File Number: 001-39941

 

Sana Biotechnology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-1381173

(State or other jurisdiction of

incorporation or organization)

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

188 East Blaine Street, Suite 400

Seattle, Washington 98102

(Address of principal executive offices)

Registrant’s telephone number, including area code: (206) 701-7914

 

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

 

SANA

 

Nasdaq Global Select Market

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

 

As of May 6, 2022, the registrant had 189,667,928 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Operations

6

 

Condensed Consolidated Statements of Comprehensive Loss

7

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

8

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

93

Item 3.

Defaults Upon Senior Securities

93

Item 4.

Mine Safety Disclosures

93

Item 5.

Other Information

93

Item 6.

Exhibits

94

 

Signatures

95

 

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report could be deemed forward-looking statements, including those statements highlighted below. In some cases, you can identify these statements by forward-looking words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should,” “would,” or “will,” the negative of these terms, and other comparable terminology. These forward-looking statements, which are subject to risks, include, but are not limited to, statements about:

 

our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future product candidates, if approved for commercial use;

 

our clinical and regulatory development plans;

 

our expectations with regard to the results of our preclinical studies, future clinical trials, and research and development programs, including the timing and availability of data from such studies and trials;

 

the timing of commencement of future preclinical studies, clinical trials, and research and development programs;

 

our ability to acquire, discover, and develop product candidates and advance them into, and successfully complete, clinical trials;

 

our intentions with respect to and our ability to establish collaborations or partnerships;

 

the timing or likelihood of regulatory filings and approvals for our product candidates;

 

our commercialization, marketing, and manufacturing expectations, including with respect to the buildout of our manufacturing facility and capabilities and the timing thereof;

 

impact of future regulatory, judicial, and legislative changes or developments in the United States and foreign countries;

 

our intentions with respect to the commercialization of our product candidates;

 

the pricing and reimbursement of our product candidates, if approved;

 

the potential effects of public health crises, such as the ongoing COVID-19 pandemic, on our preclinical and clinical programs and business;

 

our expectations regarding the impact of the ongoing COVID-19 pandemic on our business;

 

the implementation of our business model and strategic plans for our business and product candidates, including additional indications which we may pursue;

 

our ability to effectively manage our growth, including our ability to retain and recruit personnel and maintain our culture;

 

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected terms of patent protection;

 

estimates of our expenses, future revenue, capital requirements, needs for additional financing, and ability to obtain additional capital;

 

our expected use of our existing cash, cash equivalents, and marketable securities;

 

the performance of our third-party suppliers and manufacturers;

 

our future financial performance;

 

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); and

 

developments and projections relating to our competitors and our industry, including competing products.

We have based these forward-looking statements largely on our current expectations, estimates, forecasts, and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, 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, or implied by, any forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Sana Biotechnology, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

188,517

 

 

$

253,029

 

Marketable securities

 

 

323,861

 

 

 

297,967

 

Prepaid expenses and other current assets

 

 

10,842

 

 

 

7,105

 

Total current assets

 

 

523,220

 

 

 

558,101

 

Long-term marketable securities

 

 

145,014

 

 

 

195,881

 

Property and equipment, net

 

 

68,693

 

 

 

65,464

 

Operating lease right-of-use assets

 

 

97,145

 

 

 

96,320

 

Restricted cash

 

 

8,819

 

 

 

8,819

 

Intangible asset

 

 

59,195

 

 

 

59,195

 

Goodwill

 

 

140,627

 

 

 

140,627

 

Other non-current assets

 

 

4,900

 

 

 

5,000

 

TOTAL ASSETS

 

$

1,047,613

 

 

$

1,129,407

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,765

 

 

$

2,219

 

Accrued compensation

 

 

16,889

 

 

 

21,131

 

Accrued expenses and other current liabilities

 

 

11,321

 

 

 

10,344

 

Operating lease liabilities

 

 

9,635

 

 

 

9,159

 

Contingent consideration

 

 

50,900

 

 

 

51,382

 

Success payment liabilities

 

 

-

 

 

 

5,000

 

Total current liabilities

 

 

93,510

 

 

 

99,235

 

Operating lease liabilities, net of current portion

 

 

102,518

 

 

 

101,784

 

Contingent consideration, net of current portion

 

 

102,315

 

 

 

102,361

 

Success payment liabilities, net of current portion

 

 

47,615

 

 

 

97,525

 

Total liabilities

 

 

345,958

 

 

 

400,905

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 50,000 shares authorized; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 750,000 shares authorized; 186,632 and 184,929 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

19

 

 

 

18

 

Additional paid-in capital

 

 

1,523,616

 

 

 

1,515,210

 

Accumulated other comprehensive loss

 

 

(5,172

)

 

 

(1,366

)

Accumulated deficit

 

 

(816,808

)

 

 

(785,360

)

Total stockholders' equity

 

 

701,655

 

 

 

728,502

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,047,613

 

 

$

1,129,407

 

 

See accompanying notes.

 

5


 

 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

72,689

 

 

$

41,880

 

Research and development related success payments and contingent consideration

 

 

(55,438

)

 

 

127,050

 

General and administrative

 

 

14,434

 

 

 

11,821

 

Total operating expenses

 

 

31,685

 

 

 

180,751

 

Loss from operations

 

 

(31,685

)

 

 

(180,751

)

Interest income, net

 

 

339

 

 

 

121

 

Other income (expense), net

 

 

(102

)

 

 

13

 

Net loss

 

$

(31,448

)

 

$

(180,617

)

Net loss per common share - basic and diluted

 

$

(0.17

)

 

$

(1.52

)

Weighted-average number of common shares - basic and diluted

 

 

185,955

 

 

 

119,131

 

 

See accompanying notes.

6


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(31,448

)

 

$

(180,617

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities, net

 

 

(3,806

)

 

 

26

 

Total comprehensive loss

 

$

(35,254

)

 

$

(180,591

)

 

See accompanying notes.

7


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

(unaudited)

(in thousands)

 

 

 

Convertible Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

-

 

 

$

-

 

 

 

 

184,929

 

 

$

18

 

 

$

1,515,210

 

 

$

(1,366

)

 

$

(785,360

)

 

$

728,502

 

Vesting of restricted stock

 

 

-

 

 

 

-

 

 

 

 

1,419

 

 

 

1

 

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

284

 

 

 

-

 

 

 

652

 

 

 

-

 

 

 

-

 

 

 

652

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

7,755

 

 

 

-

 

 

 

-

 

 

 

7,755

 

Unrealized loss on marketable

securities, net

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,806

)

 

 

-

 

 

 

(3,806

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(31,448

)

 

 

(31,448

)

Balance as of March 31, 2022

 

 

-

 

 

$

-

 

 

 

 

186,632

 

 

$

19

 

 

$

1,523,616

 

 

$

(5,172

)

 

$

(816,808

)

 

$

701,655

 

 

 

 

Convertible Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

134,113

 

 

$

852,897

 

 

 

 

16,170

 

 

$

2

 

 

$

8,216

 

 

$

30

 

 

$

(429,432

)

 

$

(421,184

)

Conversion of convertible preferred stock into common stock upon initial public offering

 

 

(134,113

)

 

 

(852,897

)

 

 

 

134,113

 

 

 

13

 

 

 

852,884

 

 

 

-

 

 

 

-

 

 

 

852,897

 

Issuance of common stock in initial

public offering, net of $49,220 in

offering costs

 

 

-

 

 

 

-

 

 

 

 

27,025

 

 

 

3

 

 

 

626,402

 

 

 

-

 

 

 

-

 

 

 

626,405

 

Vesting of restricted stock

 

 

-

 

 

 

-

 

 

 

 

1,428

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

205

 

 

 

-

 

 

 

298

 

 

 

-

 

 

 

-

 

 

 

298

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

4,158

 

 

 

-

 

 

 

-

 

 

 

4,158

 

Unrealized gain on marketable

securities, net

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

26

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(180,617

)

 

 

(180,617

)

Balance as of March 31, 2021

 

 

-

 

 

$

-

 

 

 

 

178,941

 

 

$

18

 

 

$

1,491,958

 

 

$

56

 

 

$

(610,049

)

 

$

881,983

 

 

 

See accompanying notes.

8


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(31,448

)

 

$

(180,617

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

3,614

 

 

 

2,247

 

Stock-based compensation expense

 

 

7,755

 

 

 

4,158

 

Change in the estimated fair value of contingent consideration

 

 

(528

)

 

 

11,393

 

Change in the estimated fair value of success payment liabilities

 

 

(54,910

)

 

 

115,657

 

Non-cash expense for operating lease right-of-use assets

 

 

2,606

 

 

 

1,398

 

Other non-cash items, net

 

 

(1,437

)

 

 

(1,013

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(3,191

)

 

 

(1,614

)

Operating lease right-of-use assets and liabilities

 

 

372

 

 

 

-

 

Accounts payable

 

 

1,917

 

 

 

1,599

 

Accrued expenses and other liabilities

 

 

(2,459

)

 

 

(3,121

)

Net cash used in operating activities

 

 

(77,709

)

 

 

(49,913

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(25,675

)

 

 

(44,811

)

Proceeds from maturities of marketable securities

 

 

45,753

 

 

 

100,342

 

Purchases of property and equipment

 

 

(7,533

)

 

 

(6,440

)

Net cash provided by investing activities

 

 

12,545

 

 

 

49,091

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from initial public offering, net of issuance costs

 

 

-

 

 

 

626,405

 

Proceeds from employee stock purchase plan and exercise of stock options, net

 

 

652

 

 

 

298

 

Net cash provided by financing activities

 

 

652

 

 

 

626,703

 

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

 

 

(64,512

)

 

 

625,881

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

261,848

 

 

 

126,949

 

Cash, cash equivalents, and restricted cash at end of period

 

$

197,336

 

 

$

752,830

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for lease obligations

 

$

3,431

 

 

$

-

 

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

 

$

3,425

 

 

$

3,157

 

Cash received for amounts related to tenant improvement allowances

 

$

541

 

 

$

-

 

 

 

See accompanying notes.

9


 

Sana Biotechnology, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization

Sana Biotechnology, Inc. (the Company or Sana) is a biotechnology company focusing on utilizing engineered cells as medicines. The Company’s operations to date have included identifying and developing potential product candidates, executing preclinical studies, establishing manufacturing capabilities, acquiring technology, organizing and staffing the Company, developing and executing the Company’s business plan, establishing the Company’s intellectual property portfolio, raising capital, and providing general and administrative support for these operations.  

Liquidity and capital resources

The Company is subject to a number of risks and uncertainties similar to other biotechnology companies in the development stage, including, but not limited to, those related to the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, building out internal and external manufacturing capabilities, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, the need to protect the Company’s intellectual property and proprietary technologies, and the need to attract and retain key scientific and management personnel. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations with the proceeds from additional equity or debt financings or capital obtained in connection with strategic collaborations or licensing or other arrangements. In the event that additional financing is required, the Company may not be able to raise it on terms acceptable to it or at all.

In February 2021, the Company successfully completed the initial public offering (IPO) of its common stock. In connection with the IPO, the Company issued 27.0 million shares of its common stock, including 3.5 million shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price of $25.00 per share, and received $626.4 million in net proceeds, after deducting underwriting discounts and commissions of $45.2 million and offering expenses of $4.0 million. At the closing of the IPO, 134.1 million shares of convertible preferred stock then outstanding were automatically converted into shares of common stock. The related carrying value of the converted preferred stock of $852.9 million was reclassified to common stock and additional paid in-capital.

The Company has incurred operating losses each year since inception and expects such losses to continue for the foreseeable future. As of March 31, 2022, the Company had cash, cash equivalents, and marketable securities of $657.4 million, and an accumulated deficit of $816.8 million, which includes cumulative non-cash charges related to the revaluation of the success payment liabilities and contingent consideration of $45.2 million and $102.0 million, respectively.

2. Basis of presentation and significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. Certain prior period amounts have been reclassified to conform to current period presentation.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (SEC) on March 16, 2022 (2021 Annual Report).

Significant accounting policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are consistent with those discussed in Note 2 in the 2021 Annual Report.

Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company evaluates its estimates and

10


 

assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates. The most significant estimates in the Company’s condensed consolidated financial statements relate to success payment liabilities, contingent consideration, business combinations, accrued expenses, operating lease right-of-use assets and liabilities, and the valuation of stock options.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards has had or may have a material impact on its condensed consolidated financial statements or disclosures.

3. Acquisitions

Cobalt Biomedicine, Inc.

In February 2019, the Company acquired 100% of the outstanding equity in Cobalt Biomedicine, Inc. (Cobalt), a privately-held early-stage biotechnology company that was developing a platform technology using its fusogen technology to specifically and consistently deliver various biological payloads to cells.

As part of the Cobalt acquisition, the Company recorded an intangible asset of $59.2 million, which consists of in-process research and development that is classified as indefinite-lived until the successful development of the associated research and development technology, at which point it becomes a finite-lived asset and will be amortized over its estimated useful life. If the research and development technology is abandoned, an impairment charge will be recorded. The Company is actively developing the fusogen technology and, accordingly, development of the intangible asset is not complete. Amortization will begin when regulatory approval is obtained in a major market, typically either the United States or the European Union.

The Company recognized $140.6 million of goodwill as a result of the Cobalt acquisition, which is primarily attributable to the value the acquisition provides the Company by complementing the Company’s ex vivo portfolio with in vivo cell engineering technology and furthering the Company’s research in using engineered cells as medicines. The goodwill is not deductible for income tax purposes. There were no impairments of the intangible asset or goodwill since the acquisition.

 

Pursuant to the terms and conditions in the Cobalt acquisition agreement, the Company has an obligation to pay certain former Cobalt stockholders up to an aggregate of $500.0 million in contingent consideration (Cobalt Contingent Consideration) upon the achievement of certain pre-specified development milestones, and a success payment (Cobalt Success Payment) of up to $500.0 million, payable in cash or stock. The Cobalt Success Payment is payable if, at pre-determined valuation measurement dates which include the closing of the Company’s IPO and periodically thereafter, the Company’s market capitalization equals or exceeds $8.1 billion, and the Company is advancing a program based on the fusogen technology in a clinical trial pursuant to an investigational new drug application, or has filed for, or received approval for, a biologics license application or new drug application. The Cobalt Success Payment can be achieved over a maximum of 20 years from the date of the acquisition, but this period could be shorter upon the occurrence of certain events. As of March 31, 2022, a Cobalt Success Payment had not been triggered.

A valuation measurement date would also be triggered upon a change of control of the Company if at least one Company product based on the fusogen technology is the subject of an active research program at the time of such change of control. If there is a change of control and the Company’s market capitalization is below $8.1 billion as of the date of the change of control, the amount of the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt Contingent Consideration will increase.

11


 

The following table sets forth various thresholds for the Company’s market capitalizations as of the date of a change of control and the resulting potential Cobalt Success Payment and additional potential Cobalt Contingent Consideration:

 

Sana market capitalization upon a change of control and resulting impact to Cobalt Success

Payment and additional potential Cobalt Contingent Consideration

 

Cobalt Success

Payment

 

 

Additional

potential Cobalt

Contingent

Consideration

 

 

 

(in millions)

 

Equal to or exceeds $8.1 billion

 

$

500

 

 

$

-

 

Equal to or exceeds $7.4 billion, but less than $8.1 billion

 

 

150

 

 

 

350

 

Equal to or exceeds $6.8 billion, but less than $7.4 billion

 

 

100

 

 

 

400

 

Less than $6.8 billion

 

 

-

 

 

 

500

 

 

The Cobalt Success Payment and Cobalt Contingent Consideration liabilities are carried at fair value, with changes in fair value recognized in the condensed consolidated statements of operations in research and development related success payments and contingent consideration. As of March 31, 2022 and December 31, 2021, the estimated fair value of the Cobalt Success Payment liability was $41.5 million and $88.3 million, respectively, and was recorded in long-term liabilities in the balance sheets. In connection with the change in the estimated fair value of the Cobalt Success Payment, the Company recognized a gain of $46.8 million and an expense of $91.8 million for the three months ended March 31, 2022 and 2021, respectively.

 

As of March 31, 2022, the estimated fair value of the Cobalt Contingent Consideration was $153.2 million, of which $50.9 million was recorded in short-term liabilities and $102.3 million was recorded in long-term liabilities in the balance sheet. As of December 31, 2021, the estimated fair value of the Cobalt Contingent Consideration was $153.7 million, of which $51.4 million was recorded in short-term liabilities and $102.3 million was recorded in long-term liabilities in the balance sheet. In connection with the change in the estimated fair value of the Cobalt Contingent Consideration, the Company recognized a gain of $0.5 million and an expense of $11.4 million for the three months ended March 31, 2022 and 2021, respectively.

 

4. License and collaboration agreements

Beam Therapeutics Inc.

In October 2021, the Company entered into an option and license agreement (Beam Agreement) with Beam Therapeutics Inc. (Beam), pursuant to which the Company was granted a non-exclusive license to use Beam’s proprietary CRISPR Cas12b nuclease editing technology to research, develop, and commercialize engineered cell therapy products that (i) are directed to certain antigen targets, with respect to the Company’s allogeneic T cell programs, or (ii) comprise certain human cell types, with respect to the Company’s stem cell-derived programs. The Company made an upfront cash payment of $50.0 million to Beam, which was recorded in research and development expense for the year ended December 31, 2021. Additionally, under the terms of the agreement, the Company may be obligated to pay up to $65.0 million for each licensed product in specified developmental and commercial milestone payments and royalties on licensed products. A member of the Company’s board of directors was, at the time of entry into the Beam Agreement, a beneficial owner of Beam, and is affiliated with a member of the board of directors of Beam.

President and Fellows of Harvard College

In March 2019, the Company entered into an exclusive license agreement with the President and Fellows of Harvard College (Harvard) to access certain intellectual property for the development of hypoimmune cells.

Under the terms of the agreement, the Company may be required to pay to Harvard up to an aggregate of $175.0 million in success payments, payable in cash, based on increases in the fair value of the Company’s common stock (Harvard Success Payments). The potential Harvard Success Payments are based on multiples of increased value ranging from 5x to 40x, based on a comparison of the fair market value of the Company’s common stock relative to the original issuance price of $4.00 per share at pre-determined valuation measurement dates which include dates occurring subsequent to the IPO, the date of the consummation of a merger, an asset sale, or the sale of the majority of the shares held by the Company’s Series A convertible preferred stockholders, and the last day of the term of the Harvard Success Payments. As of March 31, 2022, a Harvard Success Payment had not been triggered.

The aggregate amount of the Harvard Success Payments will not exceed an aggregate of $175.0 million, which payment amount would only occur upon a 40x increase in the fair value of the Company’s common stock based on a comparison of the fair market

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value of the Company’s common stock relative to the original issuance price of $4.00 per share. If a higher success payment tier is first met at the same time a lower tier is first met, both tiers will be owed.

Any previous success payments made to Harvard would be credited against the success payment owed as of any valuation measurement date so that Harvard does not receive multiple success payments in connection with the same threshold. The Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement.

The following table summarizes the potential success payments and common stock price required for payment:

 

Multiple of Equity Value at Issuance

 

5x

 

 

10x

 

 

20x

 

 

30x

 

 

40x

 

Per share common stock price required for payment

 

$

20.00

 

 

$

40.00

 

 

$

80.00

 

 

$

120.00

 

 

$

160.00

 

Success payment(s) (in millions)

 

$

5.0

 

 

$

15.0

 

 

$

30.0

 

 

$

50.0

 

 

$

75.0

 

 

The Harvard Success Payment liabilities are carried at fair value, with changes in fair value recognized on the condensed consolidated statements of operations in research and development related success payments and contingent consideration. As of March 31, 2022, the estimated fair value of the Harvard Success Payment liability was $6.1 million, which was recorded in long-term liabilities in the balance sheet. As of December 31, 2021, the estimated fair value of the Harvard Success Payment liability was $14.2 million, of which $5.0 million was recorded in short-term liabilities and $9.2 million was recorded in long-term liabilities in the balance sheet. For the three months ended March 31, 2022 and 2021, the Company recognized a gain of $8.1 million and an expense of $23.9 million, respectively, in connection with the change in the estimated fair value of the Harvard Success Payment liability.

5. Restricted cash

As of March 31, 2022 and December 31, 2021, the Company maintained standby letters of credit of $8.8 million and $8.8 million, respectively, which are collateralized with a bank account at a financial institution in accordance with the applicable lease agreements.

 

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6. Fair value measurements

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy:

 

 

 

 

 

March 31, 2022

 

 

 

Valuation

Hierarchy

 

Amortized Cost

 

 

Gross

Unrealized

Holding Gains

 

 

Gross

Unrealized

Holding Losses

 

 

Estimated

Fair Value

 

 

 

 

 

(in thousands)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

79,955

 

 

$

-

 

 

$

-

 

 

$

79,955

 

U.S. government and agency securities

 

Level 2

 

 

57,744

 

 

 

2

 

 

 

(1

)

 

 

57,745

 

Corporate debt securities

 

Level 2

 

 

250

 

 

 

-

 

 

 

-