SELECTA BIOSCIENCES INC [SELB] Filings

10-Q 1 selb-20230331.htm 10-Q selb-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


☐			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: 001-37798

Selecta Biosciences, Inc.

(Exact name of registrant as specified in its charter)


			Delaware			26-1622110
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

			65 Grove Street, Watertown, MA			02472
			(Address of principal executive offices)			(Zip Code)

(617) 923-1400

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	SELB	The Nasdaq Stock Market LLC

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 þ 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 þ 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 þ

As of April 28, 2023, the registrant had 153,426,983 shares of common stock, par value $0.0001 per share, outstanding.


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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	4
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	4
	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months ended March 31, 2023 and 2022	5
	Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three Months ended March 31, 2023 and 2022	6
	Consolidated Statements of Cash Flows for the Three Months ended March 31, 2023 and 2022	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, the plans and objectives of management for future operations and future results of anticipated products, the impact of the COVID-19 pandemic on our business and operations and our future financial results, and the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the following:

•our ability to execute our development plans and manage operating expenses;

•our status as a development-stage company and our expectation to incur losses in the future;

•our future capital needs and our need to raise additional funds;

•our ability to build a pipeline of product candidates and develop and commercialize such pipeline;

•our unproven approach to therapeutic intervention;

•our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;

•our ability to access manufacturing facilities and to receive or manufacture sufficient quantities of our product candidates;

•our ability to maintain our existing or future collaborations or licenses;

•the continuing impact of the COVID-19 pandemic on our operations, the continuity of our business, including our preclinical studies and clinical trials, and general economic conditions;

•our ability to protect and enforce our intellectual property rights;

•federal, state, and foreign regulatory requirements, including U.S. Food and Drug Administration, or FDA, regulation of our product candidates;

•our ability to obtain and retain key executives and attract and retain qualified personnel;

•developments relating to our competitors and our industry, including the impact of government regulation; and

•our ability to successfully manage our growth.

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

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Selecta Biosciences, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except share data and par value)


	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	125,925	$	106,438

Marketable securities	—		28,164
Accounts receivable	6,839		6,596
Unbilled receivables	1,843		3,162
Prepaid expenses and other current assets	3,785		3,778
Total current assets	138,392		148,138
Non-current assets:
Property and equipment, net	2,765		2,794
Right-of-use asset, net	11,201		11,617
Long-term restricted cash	1,311		1,311
Investments	2,000		2,000
Other assets	24		26
Total assets	$	155,693	$	165,886
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,063	$	316
Accrued expenses	9,347		14,084
Loan payable	10,218		8,476
Lease liability	1,671		1,608

Deferred revenue	4,232		593

Total current liabilities	26,531		25,077
Non-current liabilities:

Loan payable, net of current portion	16,228		17,786
Lease liability	9,617		10,055
Deferred revenue	5,519		—
Warrant liabilities	23,219		19,140

Total liabilities	81,114		72,058
Commitments and contingencies (Note 17)








Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, $0.0001 par value; 350,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 153,426,983 and 153,042,435 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	15		15
Additional paid-in capital	495,733		493,308

Accumulated deficit	(416,600)		(394,937)
Accumulated other comprehensive loss	(4,569)		(4,558)
Total stockholders’ equity	74,579		93,828
Total liabilities and stockholders’ equity	$	155,693	$	165,886

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

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Selecta Biosciences, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands, except share and per share data)


	Three Months Ended March 31,
	2023		2022
Collaboration and license revenue	$	5,938	$	33,999
Operating expenses:
Research and development	18,624		17,689
General and administrative	5,695		5,537
Total operating expenses	24,319		23,226
Operating (loss) income	(18,381)		10,773
Investment income	1,331		15

Foreign currency transaction, net	19		28
Interest expense	(808)		(707)
Change in fair value of warrant liabilities	(4,079)		18,515
Other income, net	255		154


Net (loss) income	$	(21,663)	$	28,778

Other comprehensive income (loss):
Foreign currency translation adjustment	(22)		(32)
Unrealized gain on marketable securities	11		—
Total comprehensive income (loss)	$	(21,674)	$	28,746



Net (loss) income per share:
Basic	$	(0.14)	$	0.23
Diluted	$	(0.14)	$	0.08
Weighted average common shares outstanding:
Basic	153,345,554		124,232,799
Diluted	153,345,554		127,573,485

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

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Selecta Biosciences, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Amounts in thousands, except share data)


								Accumulated
				Additional				other
	Common stock			paid-in		Accumulated		comprehensive		Stockholders’
	Shares	Amount		capital		deficit		loss		equity
Balance at December 31, 2022	153,042,435	$	15	$	493,308	$	(394,937)	$	(4,558)	$	93,828
Issuance of common stock under Employee Stock Purchase Plan	108,068	—		149		—		—		149

Issuance of vested restricted stock units	276,480	—		—		—		—		—


Stock-based compensation expense	—	—		2,276		—		—		2,276
Currency translation adjustment	—	—		—		—		(22)		(22)
Unrealized gain on marketable securities	—	—		—		—		11		11
Net loss	—	—		—		(21,663)		—		(21,663)
Balance at March 31, 2023	153,426,983	$	15	$	495,733	$	(416,600)	$	(4,569)	$	74,579

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

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Selecta Biosciences, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Amounts in thousands, except share data)



								Accumulated
				Additional				other
	Common stock			paid-in		Accumulated		comprehensive		Stockholders’
	Shares	Amount		capital		deficit		loss		equity
Balance at December 31, 2021	123,622,965	$	12	$	457,391	$	(430,316)	$	(4,566)	$	22,521
Issuance of common stock under Employee Stock Purchase Plan	81,057	—		127		—		—		127
Issuance of common stock upon exercise of options	11,262	—		21		—		—		21
Issuance of vested restricted stock units	89,142	—		—		—		—		—
Issuance of common stock through at-the-market offering, net	576,418	—		1,675		—		—		1,675
Other financing fees	—	—		(79)		—		—		(79)
Stock-based compensation expense	—	—		2,753		—		—		2,753
Currency translation adjustment	—	—		—		—		(32)		(32)

Net income	—	—		—		28,778		—		28,778
Balance at March 31, 2022	124,380,844	$	12	$	461,888	$	(401,538)	$	(4,598)	$	55,764

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

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Selecta Biosciences, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net (loss) income	$	(21,663)	$	28,778
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	206		351
Amortization of premiums and discounts on marketable securities	(79)		1
Non-cash lease expense	416		293
Gain on disposal of property and equipment	—		(147)
Stock-based compensation expense	2,276		2,753
Non-cash interest expense	398		383
Warrant liabilities revaluation	4,079		(18,515)


Changes in operating assets and liabilities:
Accounts receivable	(243)		2,761
Unbilled receivable	1,319		—
Prepaid expenses, deposits and other assets	(20)		853
Accounts payable	747		18
Income taxes payable	—		(281)
Deferred revenue	9,158		(26,890)

Accrued expenses and other liabilities	(5,359)		(2,222)
Net cash used in operating activities	(8,765)		(11,864)
Cash flows from investing activities
Proceeds from maturities of marketable securities	28,254		10,000



Purchases of property and equipment	(130)		(455)


Net cash provided by investing activities	28,124		9,545
Cash flows from financing activities





Debt amendment fee included in debt discount	—		(110)

Net proceeds from issuance of common stock- at-the-market offering	—		1,690




Proceeds from exercise of stock options	—		21
Proceeds from issuance of common stock under Employee Stock Purchase Plan	149		127
Net cash provided by financing activities	149		1,728
Effect of exchange rate changes on cash	(21)		(29)
Net change in cash, cash equivalents, and restricted cash	19,487		(620)
Cash, cash equivalents, and restricted cash at beginning of period	108,038		115,436
Cash, cash equivalents, and restricted cash at end of period	$	127,525	$	114,816
Supplemental cash flow information
Cash paid for interest	$	625	$	494
Noncash investing and financing activities



Purchase of property and equipment not yet paid	$	48	$	91
Equity offering costs in accrued liabilities	$	—	$	94

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

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Selecta Biosciences, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Description of the Business

Selecta Biosciences, Inc., or the Company, was incorporated in Delaware on December 10, 2007, and is based in Watertown, Massachusetts. The Company is a clinical-stage biotechnology company leveraging the Company's ImmTOR® platform to develop tolerogenic therapies that selectively mitigate unwanted immune responses. With a proven ability to induce tolerance to highly immunogenic proteins, the Company believes ImmTOR has the potential to amplify the efficacy of biologic therapies, including redosing of life-saving gene therapies, as well as restore the body's natural self-tolerance in autoimmune diseases. The Company has several proprietary and partnered programs in its pipeline focused on enzyme therapies, gene therapies, and autoimmune diseases.

In April 2023, in light of current market conditions, the Company’s Board of Directors, or the Board, took steps to extend cash runway by pausing further development of SEL-302 for the treatment of methylmalonic acidemia, or MMA, and conducting a targeted headcount reduction of approximately 25%. The Company intends to continue evaluating its development programs and operating expenses on an ongoing basis. As part of this ongoing evaluation, the Company may also seek collaboration partners for one or more of its development programs. In particular, the Company plans to prioritize the Company’s support of its collaboration with Swedish Orphan Biovitrum AB (publ.), or Sobi, for SEL-212, the development of ImmTOR-IL for diseases of the liver and the Company’s support of its collaboration with Astellas Gene Therapies, or Astellas, for Xork.

Since inception, the Company has devoted its efforts principally to research and development of its technology and product candidates, recruiting management and technical staff, acquiring operating assets, and raising capital. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. 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 infrastructure and extensive compliance-reporting capabilities.

The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements for the three months ended March 31, 2023 and 2022 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 2, 2023. The unaudited interim financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary for a fair statement of the Company’s financial position as of March 31, 2023, the consolidated results of operations for the three months ended March 31, 2023, and cash flows for the three months ended March 31, 2023. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023.

Liquidity and Management’s Plan

The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain and sustain profitable operations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful development of its product candidates, raising additional capital with favorable terms, protection of proprietary technology and market acceptance of any approved future products. The successful development of product candidates requires substantial working capital, which may not be available to the Company on favorable terms or at all.

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To date, the Company has financed its operations primarily through public offerings and private placements of its securities, funding received from research grants, collaboration and license arrangements and its credit facility. The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future. To date, the Company’s revenue has primarily been from collaboration and license agreements. The Company has devoted substantially all of its financial resources and efforts to developing its ImmTOR platform, identifying potential product candidates and conducting preclinical studies and clinical trials. The Company is in the early stages of development of its product candidates, and it has not completed development of any ImmTOR-enabled therapies.

As of March 31, 2023, the Company’s cash, cash equivalents and restricted cash were $127.5 million, of which $1.6 million was restricted cash related to lease commitments and $0.2 million was held by its Russian subsidiary designated solely for use in its operations. In April 2023, in light of current market conditions, the Board took steps to extend cash runway by pausing further development of SEL-302 for the treatment of MMA and conducting a targeted headcount reduction of approximately 25%. The Company intends to continue evaluating its development programs and operating expenses on an ongoing basis. The Company believes the cash, cash equivalents and restricted cash as of March 31, 2023 will enable it to fund its current planned operations for at least the next twelve months from the date of issuance of these financial statements, though it may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies. Management’s expectations with respect to its ability to fund current and long term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand or maintain its operations or otherwise capitalize on its commercialization of its product candidates. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research and development of its product candidates and its administrative organization.

Guarantees and Indemnifications

As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at the Company. Through March 31, 2023, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

2. Summary of Significant Accounting Policies

The Company disclosed its significant accounting policies in Note 2 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2023, with the exception of the matters discussed in recent accounting pronouncements.

Recent Accounting Pronouncements

Recently Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. Subsequently, in November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses. This ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted the new standard effective January 1, 2023, using a modified retrospective transition method, and there was no impact on its consolidated financial statements or results of operations upon adoption.

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3. Marketable Securities and Investments

No marketable securities were held as of March 31, 2023. The following table summarizes the marketable securities held as of December 31, 2022 (in thousands):


	Amortized cost		Unrealized losses		Fair value







December 31, 2022
U.S. government agency securities and treasuries	$	13,566	$	(9)	$	13,557
Corporate bonds	$	1,953	$	(2)	$	1,951
Commercial paper	12,656		—		12,656

Total	$	28,175	$	(11)	$	28,164

Investments

As of March 31, 2023 and December 31, 2022, the Company has a $2.0 million investment in Cyrus Biotechnology, Inc., or Cyrus, pursuant to an investment agreement entered into in connection with the Collaboration and License Agreement with Cyrus. The Company’s maximum exposure to loss related to this variable interest entity is limited to the carrying value of the investment.

4. Net (Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share for the three months ended March 31, 2023 and 2022 (in thousands, except share and per-share data):


	Three Months Ended March 31,
	2023		2022
Numerator:
Net (loss) income	$	(21,663)	$	28,778
Less: Change in fair value of liability warrants	—		(18,515)
Adjusted net (loss) income	$	(21,663)	$	10,263
Denominator:
Weighted-average common shares outstanding - basic	153,345,554		124,232,799
Dilutive effect of employee equity incentive plans and outstanding warrants	—		3,340,686
Weighted-average common shares used in per share calculations - diluted	153,345,554		127,573,485
Net (loss) income per share:
Basic	$	(0.14)	$	0.23
Diluted	$	(0.14)	$	0.08

The following table represents the potential dilutive shares of common stock excluded from the computation of the diluted net (loss) income per share for all periods presented, as the effect would have been anti-dilutive:


	Three Months Ended March 31,
	2023	2022
Options, RSUs and ESPP shares	23,204,649	15,292,967
Warrants to purchase common stock	31,228,279	292,469
Total	54,432,928	15,585,436

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5. Fair Value Measurements

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash equivalents)	$	82,393	$	82,393	$	—	$	—





Total assets	$	82,393	$	82,393	$	—	$	—

Liabilities:
Warrant liabilities	$	23,219	$	—	$	—	$	23,219
Total liabilities	$	23,219	$	—	$	—	$	23,219


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash equivalents)	$	53,552	$	53,552	$	—	$	—
Marketable securities:
U.S. government agency securities and treasuries	13,557		—		13,557		—
Corporate bonds	1,951		—		1,951		—
Commercial paper	12,656		—		12,656		—

Total assets	$	81,716	$	53,552	$	28,164	$	—

Liabilities:
Warrant liabilities	$	19,140	$	—	$	—	$	19,140
Total liabilities	$	19,140	$	—	$	—	$	19,140

There were no transfers within the fair value hierarchy during the three months ended March 31, 2023 or year ended December 31, 2022.

Cash, Cash Equivalents, and Restricted Cash

As of March 31, 2023 and December 31, 2022, money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase.

As of March 31, 2023, the Company had restricted cash balances relating to a secured letter of credit in connection with its lease for the Company’s headquarters. Short-term restricted cash is included within prepaid expenses and other current assets in the consolidated balance sheets. The Company’s consolidated statements of cash flows include the following as of March 31, 2023 and 2022 (in thousands):


	March 31,
	2023		2022
Cash and cash equivalents	$	125,925	$	113,437
Short-term restricted cash	289		—
Long-term restricted cash	1,311		1,379
Total cash, cash equivalents, and restricted cash	$	127,525	$	114,816

Marketable Securities

No marketable securities were held as of March 31, 2023. As of December 31, 2022, marketable securities classified as Level 2 within the valuation hierarchy consist of U.S. government agency securities and treasuries, corporate bonds and commercial paper which are available-for-sale securities in accordance with the Company’s investment policy. The Company estimates the fair value of these marketable securities by taking into consideration valuations that include market pricing based on real-time trade data for the same or similar securities, and other observable inputs. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts.

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Loans Payable

At March 31, 2023, in light of the issuance of the first tranche under the Company’s term loan pursuant the Loan and Security Agreement, dated August 31, 2020, as amended, among the Company, Oxford Finance LLC, or Oxford, as Collateral Agent and a Lender, and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), or SVB, as a Lender, or the Loan and Security Agreement, the Company believes the carrying value approximates the fair value of the loan.

Warrants

In December 2019, the Company issued warrants to purchase common stock in connection with a private placement of shares of common stock, or the 2019 Warrants. Pursuant to the terms of the 2019 Warrants, the Company could be required to settle the 2019 Warrants in cash in the event of certain acquisitions of the Company and, as a result, the 2019 Warrants were required to be measured at fair value and reported as a liability on the balance sheet. On December 20, 2022, the Company amended the terms of the outstanding 2019 Warrants held by certain members of the Board, or the Amended 2019 Warrants, to remove the cash settlement provision. As a result, the Amended 2019 Warrants were remeasured at fair value on December 20, 2022 and reclassified from a liability to equity on the balance sheet. See Note 10 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion on the equity-classified Amended 2019 Warrants.

In April 2022, the Company issued warrants in connection with an underwritten offering of shares of common stock and warrants to purchase shares of common stock, or the 2022 Warrants. Pursuant to the terms of the 2022 Warrants, the Company could be required to settle the 2022 Warrants in cash in the event of an acquisition of the Company under certain circumstances and, as a result, the 2022 Warrants are required to be measured at fair value and reported as a liability on the balance sheet.

The Company recorded the fair value of the 2019 Warrants and the 2022 Warrants upon issuance using the Black-Scholes valuation model and is required to revalue the 2019 Warrants and the 2022 Warrants at each reporting date, with any changes in fair value recorded in the statement of operations and comprehensive income (loss). The valuations of the 2019 Warrants and the 2022 Warrants are classified as Level 3 of the fair value hierarchy due to the need to use assumptions in the valuations that are both significant to the fair value measurement and unobservable, including the stock price volatility and the expected life of the 2019 Warrants and the 2022 Warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.

The estimated fair values of the 2019 Warrants and the 2022 Warrants were determined using the following inputs to the Black-Scholes simulation valuation:

Estimated fair value of the underlying stock. The Company estimates the fair value of the common stock based on the closing stock price at the end of each reporting period.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption.

Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

Expected life. The expected life of the 2019 Warrants and the 2022 Warrants is assumed to be equivalent to their remaining contractual terms which expire on December 23, 2024 and April 11, 2027, respectively.

Volatility. The Company estimates stock price volatility based on the Company’s historical volatility and the historical volatility of peer companies for a period of time commensurate with the expected remaining life of the warrants.

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2019 Warrants liability is as follows:


	March 31,		December 31,
	2023		2022
Risk-free interest rate	4.06	%	4.74	%
Dividend yield	—		—
Expected life (in years)	1.73		1.98
Expected volatility	78.69	%	79.92	%

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2022 Warrants liability is as follows:

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	March 31,		December 31,
	2023		2022
Risk-free interest rate	3.60	%	4.22	%
Dividend yield	—		—
Expected life (in years)	4.03		4.28
Expected volatility	91.39	%	98.05	%

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 10 to these unaudited consolidated financial statements), for the three months ended March 31, 2023 (in thousands):


	Warrant liabilities
Fair value as of December 31, 2022	$	19,140


Change in fair value	4,079
Fair value as of March 31, 2023	$	23,219

6. Property and Equipment

Property and equipment consists of the following (in thousands):


	March 31,		December 31,
	2023		2022
Laboratory equipment	$	6,253	$	6,001
Computer equipment and software	702		697
Leasehold improvements	61		57
Furniture and fixtures	453		453
Office equipment	196		192
Construction in process	492		599
Total property and equipment	8,157		7,999
Less accumulated depreciation	(5,392)		(5,205)
Property and equipment, net	$	2,765	$	2,794

Depreciation expense was $0.2 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

7. Accrued Expenses

Accrued expenses consist of the following (in thousands):


	March 31,		December 31,
	2023		2022
Payroll and employee related expenses	$	2,206	$	4,242

Accrued patent fees	594		696
Accrued external research and development costs	4,724		7,274
Accrued professional and consulting services	1,132		985
Accrued interest	215		222
Other	476		665
Accrued expenses	$	9,347	$	14,084

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8. Leases

For the three months ended March 31, 2023 and 2022, the components of lease costs were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	696	$	506
Variable lease cost	142		220
Short-term lease cost	3		3
Less sublease income	(255)		—
Total lease cost	$	586	$	729

The maturity of the Company’s operating lease liabilities as of March 31, 2023 were as follows (in thousands):


	March 31,
	2023
2023 (remainder)	$	2,015
2024	2,740
2025	2,818
2026	2,902
2027	2,990
Thereafter	946
Total future minimum lease payments	14,411
Less imputed interest	3,123
Total operating lease liabilities	$	11,288

The supplemental disclosure for the statement of cash flows related to operating leases was as follows (in thousands):


	March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:	$	653	$	457

The changes in the Company’s right-of-use assets and lease liabilities for the three months ended March 31, 2023 and 2022 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.

The following summarizes additional information related to operating leases:


	March 31,
	2023		2022
Weighted-average remaining lease term	5.1 years		6.1 years
Weighted-average discount rate	9.7	%	8.9	%

9. Debt

2020 Term Loan

On August 31, 2020, the Company entered into the Loan and Security Agreement with Oxford and Silicon Valley Bank. On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or the FDIC, was appointed as receiver. On March 13, 2023, the FDIC announced that all of Silicon Valley Bank’s deposits and substantially all of its assets had been transferred to a newly created, full-service, FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A., or SVBB. SVBB assumed all loans that were previously held by Silicon Valley Bank. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC, including the Loan and Security Agreement.

On March 31, 2023, the Company entered into a Fourth Amendment to Loan and Security Agreement or the Fourth Amendment, with Oxford as Collateral Agent and a Lender and SVB. The Fourth Amendment relieved the Company of the requirement to maintain all Collateral Accounts (as such term is defined in the Loan and Security Agreement) with SVB and

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instead requires us to hold an amount equal to the lesser of (i) 100% of our consolidated cash and (ii) 150% of the then-outstanding Obligations (as such term is defined in the Loan and Security Agreement) in Collateral Accounts with SVB that are subject to a Control Agreement (as such term is defined in the Loan and Security Agreement) in favor of SVB.

As of March 31, 2023 and December 31, 2022, the outstanding principal balance under the 2020 Term Loan was $25.0 million.

Total 2020 Term Loan and unamortized debt discount balances as of March 31, 2023 are as follows (in thousands):


Face value	$	25,000
Venture debt termination fee	2,250
Less: Debt discount	(804)
Less: Current portion of loan payable	(10,218)
Loan payable, net of current portion	$	16,228

Future minimum principal payments on the 2020 Term Loan as of March 31, 2023 are as follows (in thousands):


Year ended:
2023 (remainder)	$	7,759
2024	10,345
2025	6,896
Total minimum principal payments	$	25,000

10. Equity

Equity Financings

“At-the-Market” Offerings

On October 25, 2021, the Company entered into a Sales Agreement, or the 2021 Sales Agreement, with SVB Leerink LLC (now known as SVB Securities LLC), or SVB Leerink, pursuant to which the Company may sell shares of the Company’s common stock, from time to time, through an “at the market” equity offering program under which SVB Leerink will act as sales agent. The shares of common stock sold pursuant to the 2021 Sales Agreement will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-241692), for aggregate gross sales proceeds of up to $75.0 million.

During the year ended December 31, 2022, the Company sold 774,544 shares of its common stock pursuant to the 2021 Sales Agreement for aggregate net proceeds of $2.1 million, after deducting commissions and other transaction costs.

During the three months ended March 31, 2023, the Company sold no shares of its common stock pursuant to the 2021 Sales Agreement.

Warrants

During the three months ended March 31, 2022, there were no warrants issued, exercised, or canceled. See Note 10 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion of the terms related to the Company’s warrants.


	Number of Warrants
	Equity classified	Liability classified	Total	Weighted average exercise price




Outstanding at March 31, 2023	2,236,326	28,991,953	31,228,279	$	1.53

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Reserved Shares

The Company has authorized shares of common stock for future issuance as of March 31, 2023 as follows:





Exercise of warrants			31,228,279
Shares available for future stock incentive awards			7,497,840
RSUs reserved for issuance			713
Unvested restricted stock units			2,454,915
Outstanding common stock options			20,646,905
Total			61,828,652

11. Stock Incentive Plans

The Company maintains the 2008 Stock Incentive Plan, or the 2008 Plan, for employees, consultants, advisors, and directors. The 2008 Plan provided for the granting of incentive and non-qualified stock option and restricted stock awards as determined by the Board.

In June 2016, the Company’s stockholders approved the 2016 Incentive Award Plan, or the 2016 Plan, which authorized 1,210,256 shares of common stock for future issuance under the 2016 Plan and the Company ceased granting awards under the 2008 Plan. Upon the effective date of the 2016 Plan, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan. Awards granted under the 2008 Plan that expire, lapse or terminate become available under the 2016 Plan as shares available for future grants.

Additionally, pursuant to the terms of the 2016 Plan, the Board is authorized to grant awards with respect to common stock, and may delegate to a committee of one or more members of the Board or executive officers of the Company the authority to grant options and restricted stock units. On December 9, 2020, the Board established a Stock Option Committee authorized to grant awards to certain employees and consultants subject to conditions and limitations within the 2016 Plan. In January 2023, the number of shares of common stock that may be issued under the 2016 Plan was increased by 6,121,697 shares. As of March 31, 2023, 2,011,908 shares remain available for future issuance under the 2016 Plan.

In September 2018, the Company’s 2018 Employment Inducement Incentive Award Plan, or the 2018 Inducement Incentive Award Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules, which authorized 1,175,000 shares of its common stock for issuance. In March 2019, the Board approved the amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance thereunder. As of March 31, 2023, there are 425,858 shares available for future grant under the 2018 Inducement Incentive Award Plan.

Stock-Based Compensation Expense

Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive income (loss) was as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Research and development	$	1,192	$	1,018
General and administrative	1,084		1,735
Total stock-based compensation expense	$	2,276	$	2,753

Stock Options

The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:


	Three Months Ended March 31,
	2023			2022
Risk-free interest rate	3.95		%	1.48		%
Dividend yield	—			—
Expected term	5.94			6.03
Expected volatility	94.64		%	91.84		%
Weighted-average fair value of common stock	$	1.15		$	3.26

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The expected term of the Company's stock options granted to employees has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options. Under the simplified method, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards.

The weighted average grant date fair value of stock options granted to employees was $0.90 and $2.45 during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, total unrecognized compensation expense related to unvested employee stock options was $15.1 million, which is expected to be recognized over a weighted average period of 2.9 years.

The following table summarizes the stock option activity under the 2008 Plan, the 2016 Plan, and the 2018 Inducement Incentive Award Plan:


				Weighted-average
				remaining	Aggregate
	Number of	Weighted-average		contractual term	intrinsic value
	options	exercise price ($)		(in years)	(in thousands)
Employees








Outstanding at December 31, 2022	15,578,412	$	3.44	7.57	$	4
Granted	5,437,200	$	1.15

Forfeited	(634,946)	$	3.10
Outstanding at March 31, 2023	20,380,666	$	2.84	8.15	$	1,507

Vested at March 31, 2023	8,528,078	$	3.98	6.77	$	2
Vested and expected to vest at March 31, 2023	18,819,248	$	2.93	8.05	$	1,257

Non-employee consultants








Outstanding at December 31, 2022	266,239	$	8.05	5.08	$	—



Outstanding at March 31, 2023	266,239	$	8.05	4.83	$	—

Vested at March 31, 2023	266,239	$	8.05	4.83	$	—
Vested and expected to vest at March 31, 2023	266,239	$	8.05	4.83	$	—

Restricted Stock Units

During the three months ended March 31, 2023, the Company granted 1,054,600 restricted stock awards with a weighted average fair value of $1.13 per share based on the closing price of the Company’s common stock on the date of grant to employees under the 2016 Plan, which will vest over a four-year term. Forfeitures are estimated at the time of grant and are adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated a forfeiture rate of 10% for restricted stock awards to employees based on historical experience.

Unrecognized compensation expense for all restricted stock units was $3.4 million as of March 31, 2023, which is expected to be recognized over a weighted average period of 2.8 years.

The following table summarizes the Company’s restricted stock units under the 2016 Plan and 2018 Inducement Incentive Award Plan:


	Number of shares	Weighted average grant date fair value ($)
Unvested at December 31, 2022	1,705,558	$	2.62
Granted	1,054,600	1.13
Vested	(277,193)	3.22

Forfeited	(28,050)	2.06
Unvested at March 31, 2023	2,454,915	$	1.92

Employee Stock Purchase Plan

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In June 2016, the Company approved the 2016 Employee Stock Purchase Plan, or the ESPP, which authorized 173,076 shares of common stock for future issuance under the ESPP to participating employees. In January 2023, the number of shares of common stock authorized for issuance under the ESPP was increased by 1,530,424 shares. During the three months ended March 31, 2023, the Company issued 108,068 shares of common stock under the ESPP. As of March 31, 2023, 5,060,074 shares remain available for future issuance under the ESPP.

For each of the three months ended March 31, 2023 and 2022, the Company recognized less than $0.1 million of stock-based compensation expense under the ESPP.

12. Revenue Arrangements

Astellas Gene Therapies

In January 2023, the Company entered into a License and Development Agreement, or the Astellas Agreement, with Audentes Therapeutics, Inc., doing business as Astellas. Under the Astellas Agreement, the Company granted Astellas an exclusive license to the Company’s IdeXork technology arising from Xork (defined below), to develop and commercialize Xork for use in Pompe Disease in combination with an Astellas gene therapy investigational or authorized product. Xork, Genovis’ IgG Protease, is licensed by the Genovis Agreement, as described in Note 14 to these consolidated financial statements, Astellas paid a $10.0 million upfront payment to the Company upon signing of the Astellas Agreement, and the Company is entitled to receive up to $340.0 million in future additional payments over the course of the partnership that are contingent on the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales where Xork is used as a pre-treatment for an Astellas investigational or authorized product, and tiered royalty payments ranging from low to high single digits.

Pursuant to the Astellas Agreement, the Company will have the exclusive right and responsibility to complete research and development of Xork products and to conduct all preclinical studies and clinical trials for Xork for use in Pompe Disease with an Astellas gene therapy investigational or authorized product, or the Xork Development Services. Astellas will reimburse the Company for 25% of all budgeted costs incurred to complete the development of Xork for use in Pompe Disease with an Astellas gene therapy investigational or authorized product. The Company will have control and responsibility over regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications relating to the licensed product. Astellas will have the exclusive right and responsibility to research, develop, and commercialize Astellas products used in combination with Xork and will have control and responsibility over all regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications, relating to Astellas products and Astellas products used in combination with Xork.

The Company determined the Astellas Agreement represents a service arrangement under the scope of ASC 606. The Company determined that the sublicense of Xork to Astellas, the licensed know-how, and the Xork Development Services represent a single promise and performance obligation to be transferred to Astellas over time due to the nature of the promises in the contract. As such, the Company will recognize the transaction price as revenue utilizing the input method to measure the progress of satisfying the single performance obligation to Astellas.

In determining the transaction price, the Company concluded the upfront payment of $10.0 million and development cost reimbursements of $5.5 million will be included in the initial transaction price. All other development milestones will be fully constrained and will only be included in the transaction price when the applicable milestone is deemed probable of achievement. Each of these variable consideration items were evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt and timing of such development milestones is outside the control of the Company and probability of success criteria is estimated. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. In accordance with ASC 606, the Company will only recognize revenue associated with sales-based milestones and royalties when the subsequent sales thresholds are reached and underlying sales occur, respectively. The Company determined that a significant financing component does not exist in its arrangement with Astellas. The Company also determined the options to negotiate additional fields, enter into a clinical supply agreement, and enter into a commercial supply agreement do not represent material rights under the Astellas Agreement. Astellas has the right to terminate the Astellas Agreement in its entirety or on a field-by-field basis, upon 90 days’ written notice to the Company.

As of March 31, 2023, the Company recorded $4.1 million as a short-term contract liability and $5.5 million as a long-term contract liability, representing deferred revenue associated with the Astellas Agreement. As of March 31, 2023, the Company recorded a receivable of $0.2 million, representing billings for the Xork Development Services that are subject to reimbursement by Astellas. Revenue of $0.6 million related to the Astellas Agreement was recognized during the three months ended March 31, 2023.

Takeda Pharmaceuticals USA, Inc.

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License and Developme

SELECTA BIOSCIENCES INC [SELB] Filings
10-Q	[2023-05-04]
10-K	[2023-03-02]
10-Q	[2022-11-03]
10-Q	[2022-08-08]
10-Q	[2022-05-05]
10-K	[2022-03-10]
10-Q	[2021-11-09]
10-Q	[2021-08-12]
10-Q	[2021-05-13]
10-K	[2021-03-12]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-03-12]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-15]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-09]
10-K	[2018-03-15]
10-Q	[2017-11-07]
10-Q	[2017-08-11]
10-Q	[2017-05-11]
10-K	[2017-03-28]
10-Q	[2016-11-10]
10-Q	[2016-08-09]
S-1	[2016-05-24]