UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___ to ___
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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 2, 2024, there were
REGENXBIO INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
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Item 1. |
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3 |
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Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 |
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4 |
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Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 |
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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30 |
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Item 4. |
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30 |
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Item 1. |
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32 |
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Item 1A. |
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32 |
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Item 2. |
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Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 5. |
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32 |
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Item 6. |
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33 |
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34 |
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes such as “anticipate,” “assume,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or variations of such words or by similar expressions. We have based these forward-looking statements on our current expectations, estimates and assumptions and analyses in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, uncertainties, assumptions and other important factors, including, but not limited to:
1
You should carefully read the factors discussed in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the factors discussed elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other filings with the U.S. Securities and Exchange Commission (the SEC) for additional discussion of the risks, uncertainties, assumptions and other important factors that could cause our actual results or developments to differ materially and adversely from those projected in the forward-looking statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on us or our businesses or operations. Such statements are not guarantees of future performance, and actual results or developments may differ materially and adversely from those projected in the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we disclaim any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Available Information
Our principal offices are located at 9804 Medical Center Drive, Rockville, MD 20850, and our telephone number is (240) 552-8181. Our website address is www.regenxbio.com. The information contained in, or that can be accessed through, our website is not a part of, or incorporated by reference in, this Quarterly Report on Form 10-Q. We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Exchange Act. You may obtain any reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.
You also may view and download copies of our SEC filings free of charge at our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and is not considered part of, this Quarterly Report on Form 10-Q. Investors should also note that we use our website, as well as SEC filings, press releases, public conference calls and webcasts, to announce financial information and other material developments regarding our business. We use these channels, as well as any social media channels listed on our website, to communicate with investors and members of the public about our business. It is possible that the information that we post on our social media channels could be deemed material information. Therefore, we encourage investors, the media and others interested in our company to review the information that we post on our social media channels.
As used in this Quarterly Report on Form 10-Q, the terms “REGENXBIO,” “we,” “us,” “our” or the “Company” mean REGENXBIO Inc. and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.
AAVIATE, AFFINITY BEYOND, AFFINITY DUCHENNE, ALTITUDE, ATMOSPHERE, CAMPSIITE, NAV, NAVXCELL, REGENXBIO and the REGENXBIO logos are our registered trademarks. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
REGENXBIO INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share data)
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March 31, 2024 |
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December 31, 2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Marketable securities |
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Accounts receivable |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Operating lease liabilities |
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Liability related to sale of future royalties |
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Total current liabilities |
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Operating lease liabilities |
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Liability related to sale of future royalties |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share data)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Revenues |
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License and royalty revenue |
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$ |
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$ |
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Total revenues |
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Operating Expenses |
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Cost of revenues |
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Research and development |
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General and administrative |
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Impairment of long-lived assets |
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— |
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Other operating expenses (income) |
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Total operating expenses |
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Loss from operations |
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Other Income (Expense) |
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Interest income from licensing |
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Investment income |
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Interest expense |
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Total other income (expense) |
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Net loss |
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$ |
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$ |
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Other Comprehensive Income |
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Unrealized gain on available-for-sale securities, net |
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Total other comprehensive income |
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Comprehensive loss |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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Weighted-average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
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Three Months Ended March 31, 2024 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units, net of tax |
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— |
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( |
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— |
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— |
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( |
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Exercise of stock options, net of tax |
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— |
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— |
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— |
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Issuance of common stock under employee |
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— |
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— |
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— |
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Issuance of common stock and pre-funded warrants |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balances at March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Three Months Ended March 31, 2023 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Vesting of restricted stock units, net of tax |
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— |
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( |
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— |
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— |
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( |
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Exercise of stock options, net of tax |
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— |
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— |
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— |
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Issuance of common stock under employee |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
REGENXBIO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Stock-based compensation expense |
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Depreciation and amortization |
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Net amortization of premiums (accretion of discounts) on marketable debt securities |
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Impairment of long-lived assets |
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Non-cash interest expense |
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( |
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Other non-cash adjustments |
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( |
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( |
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Changes in operating assets and liabilities |
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Accounts receivable |
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Prepaid expenses |
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( |
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Other current assets |
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( |
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( |
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Operating lease right-of-use assets |
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Other assets |
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( |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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( |
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( |
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Deferred revenue |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Other liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of marketable debt securities |
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( |
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Maturities of marketable debt securities |
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Purchases of property and equipment |
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( |
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( |
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Net cash provided by investing activities |
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Cash flows from financing activities |
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Proceeds from exercise of stock options |
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Taxes paid related to net settlement of stock-based awards |
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( |
) |
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( |
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Proceeds from issuance of common stock under employee stock purchase plan |
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Proceeds from public offering of common stock and pre-funded warrants, |
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Offering expenses related to at-the-market offering program |
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( |
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Repayments under liability related to sale of future royalties, net of imputed interest |
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( |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Net increase (decrease) in cash and cash equivalents and restricted cash |
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( |
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Cash and cash equivalents and restricted cash |
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Beginning of period |
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End of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
REGENXBIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Business
REGENXBIO Inc. (the Company) is a clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. The Company's investigational gene therapies use adeno-associated virus (AAV) vectors from its proprietary gene delivery platform (NAV Technology Platform). The NAV® Technology Platform consists of exclusive rights to a large portfolio of AAV vectors, including commonly used AAV8 and AAV9. The Company has developed a broad pipeline of gene therapy product candidates using the NAV Technology Platform as a one-time treatment to address an array of diseases. In addition to its internal product development efforts, the Company also selectively licenses the NAV Technology Platform to other leading biotechnology and pharmaceutical companies (NAV Technology Licensees). As of March 31, 2024, the NAV Technology Platform was being applied by NAV Technology Licensees in one commercial product, Zolgensma®, and in the preclinical and clinical development of a number of other licensed products. Additionally, the Company has licensed intellectual property rights to collaborators for the joint development and commercialization of certain product candidates. The Company was formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland.
The Company has incurred cumulative losses since inception and as of March 31, 2024, had generated an accumulated deficit of $
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 27, 2024. Certain information and footnote disclosures required by GAAP, which are normally included in the Company’s annual consolidated financial statements, have been omitted pursuant to SEC rules and regulations for interim reporting. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year, any other interim periods, or any future year or period. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. Management bases its estimates on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates. Significant estimates are used in the following areas, among others: license and royalty revenue, the allowance for credit losses, accrued research and development expenses and other accrued liabilities, stock-based compensation expense, interest expense under the liability related to the sale of future royalties, income taxes and fair value measurements.
7
Reclassifications
Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassifications are not material and have no effect on previously reported financial position, results of operations and cash flows.
Restricted Cash
Restricted cash consists of deposits held at financial institutions that are used to collateralize irrevocable letters of credit required under the Company’s lease agreements and certain other agreements with third parties.
|
|
As of March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash and cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
Accounts Receivable
Accounts receivable primarily consist of consideration due to the Company resulting from its license agreements with customers. Accounts receivable include amounts invoiced to licensees as well as rights to consideration which have not yet been invoiced, including unbilled royalties, and for which payment is conditional solely upon the passage of time. If a licensee elects to terminate a license prior to the end of the license term, the licensed intellectual property is returned to the Company and any accounts receivable from the licensee which are not contractually payable to the Company are charged off as a reduction of license revenue in the period of the termination. Accounts receivable which are not expected to be received by the Company within 12 months from the reporting date are stated net of a discount to present value and recorded as non-current assets on the consolidated balance sheets. The present value discount is recognized as a reduction of revenue in the period in which the accounts receivable are initially recorded and is accreted as interest income from licensing over the term of the receivables.
Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. Management assesses the collectability of its accounts receivable using the specific identification of account balances, and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions. If necessary, an allowance for credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. Please refer to Note 9 for further information regarding the allowance for credit losses related to accounts receivable.
Leases
The Company accounts for its lease arrangements in accordance with Accounting Standards Codification (ASC) 842, Leases (ASC 842). Under ASC 842, the Company classifies its leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the Company. Lease classification is evaluated at the inception of the lease agreement. Regardless of classification, the Company records a right-of-use asset and a lease liability for all leases with a term greater than 12 months. All of the Company’s leases have been classified as operating leases. Operating lease expense is recognized on a straight-line basis over the term of the lease, with the exception of variable lease expenses which are recognized as incurred.
The Company identifies leases in its contracts if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company does not allocate lease consideration between lease and nonlease components and records a lease liability equal to the present value of the remaining fixed consideration under the lease. The interest rates implicit in the Company’s leases are generally not readily determinable. Accordingly, the Company uses its estimated incremental borrowing rate at the commencement date of the lease to determine the present value discount of the lease liability. The Company estimates its incremental borrowing rate for each lease based on an evaluation of its expected credit rating and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the term of the lease. The right-of-use asset for each lease is equal to the lease liability, adjusted for unamortized initial direct costs and lease incentives and prepaid or accrued rent. Initial direct costs of entering into a lease are included in the right-of-use asset and amortized as lease expense over the term of the lease. Lease incentives, such as tenant improvement allowances, are recorded as a reduction of the right-of-use asset and amortized as a reduction of lease expense over the term of the lease. The Company excludes options to extend or terminate leases from the calculation of the lease liability unless it is reasonably certain the option will be exercised.
8
The Company evaluates its right-of-use assets for impairment in accordance with its policy for long-lived assets. To the extent an impairment of a right-of-use asset is recognized, the remaining carrying value of the asset is subsequently amortized as lease expense on a straight-line basis from the date of impairment to the earlier of the end of the right-of-use asset’s useful life or the end of the lease term.
The Company determines the classification of subleases at the inception of the sublease, as well as whether the Company has been relieved of its primary obligation under the original lease. All of the Company's subleases have been classified as operating leases and, in each case, the Company has not been relieved of its primary obligation under the original lease and continues to account for the original lease as it did prior to the commencement of the sublease. Sublease income is recognized on a straight-line basis over the term of the sublease as a reduction of the related lease expense of the original lease. Initial direct costs of entering into a sublease are deferred and amortized on a straight-line basis over the term of the sublease as a reduction of sublease income.
Impairment of Long-lived Assets
The Company's long-lived assets consist primarily of property and equipment and operating lease right-of-use assets. The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparison of the book values of the assets to estimated future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. Please refer to Note 5 and Note 6 for further information on impairment of long-lived assets.
Fair Value Measurements
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for assets and liabilities categorized in Level 3. The level within the fair value hierarchy of an asset or liability measured at fair value is based on the lowest level of any input that is significant to the fair value measurement. The fair values of the Company’s Level 2 financial instruments are based on quoted market prices or broker or dealer quotations for similar assets. These investments are initially valued at the transaction price and subsequently valued utilizing third-party pricing providers or other market observable data. Please refer to Note 4 for further information on the Company's fair value measurements.
Pre-funded Warrants
Warrants are accounted for based on the specific terms of the warrant agreements. The Company's pre-funded warrants are indexed to the Company's common stock and meet the criteria to be classified as equity. Proceeds from the issuance of pre-funded warrants are recorded within additional paid-in capital and are not subject to remeasurement. Please refer to Note 8 for further information regarding pre-funded warrants issued by the Company.
9
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of computing both basic and diluted net loss per share, pre-funded warrants are considered outstanding shares upon issuance because the shares may be issued for nominal consideration and are exercisable after the original issuance date. Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net loss per share until the contingency has been fully met. For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation of diluted net loss per share if their effect would be anti-dilutive.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company did not adopt any new accounting standards during the three months ended March 31, 2024 and 2023 which had a material impact on the consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances certain interim and annual disclosure requirements of reportable segment information, including information about significant segment expenses. Additionally, the standard requires entities with a single reportable segment to provide all disclosures required by ASC 280, Segment Reporting. The standard is effective for the Company for annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosure of an entity's effective tax rate reconciliation and requires the disclosure of income taxes paid to be disaggregated by jurisdiction. The standard is effective for the Company beginning January 1, 2025, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its financial statement disclosures.
3. Marketable Securities
The following tables present a summary of the Company’s marketable securities, which consist solely of available-for-sale debt securities (in thousands):
|
|
Amortized Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
Amortized Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of March 31, 2024 and December 31, 2023,
10
As of March 31, 2024 and December 31, 2023, the balance in accumulated other comprehensive loss consisted solely of unrealized gains and losses on available-for-sale debt securities, net of reclassification adjustments for realized gains and losses and income tax effects. The Company uses the aggregate portfolio approach to release the tax effects of unrealized gains and losses on available-for-sale debt securities in accumulated other comprehensive loss. Realized gains and losses from the sale or maturity of marketable securities are based on the specific identification method and are included in results of operations as investment income. The Company did
The following tables present the fair values and unrealized losses of available-for-sale debt securities held by the Company in an unrealized loss position for less than 12 months and 12 months or greater (in thousands):
|
|
Less than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
||||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Certificates of deposit |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Corporate bonds |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
|
|
Less than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
|
Fair Value |
|
|
Unrealized |
|
||||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agency securities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Certificates of deposit |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Corporate bonds |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
As of March 31, 2024, available-for-sale debt securities held by the Company in an unrealized loss position consisted of
4. Fair Value Measurements
Financial instruments reported at fair value on a recurring basis include cash equivalents and marketable securities.
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
prices |
|
|
other |
|
|
Significant |
|
|
|
|
||||
|
|
in active |
|
|
observable |
|
|
unobservable |
|
|
|
|
||||
|
|
markets |
|
|
inputs |
|
|
inputs |
|
|
|
|
||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market mutual funds |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total cash equivalents |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Certificates of deposit |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total marketable securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total cash equivalents and marketable securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
11
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
prices |
|
|
other |
|
|
Significant |
|
|
|
|
||||
|
|
in active |
|
|
observable |
|
|
unobservable |
|
|
|
|
||||
|
|
markets |
|
|
inputs |
|
|
inputs |
|
|
|
|
||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market mutual funds |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total cash equivalents |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agency securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Certificates of deposit |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total marketable securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total cash equivalents and marketable securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Management estimates that the carrying values of its current accounts receivable, other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value due to the short-term nature of those instruments. Accounts receivable which contain non-current portions and certain non-current payables reported as other liabilities are recorded at their present values using a discount rate that is based on prevailing market rates on the date the amounts were initially recorded. Management does not believe there have been any significant changes in market conditions or credit quality that would cause the discount rates initially used to be materially different from those that would be used as of March 31, 2024 to determine the present value of these instruments. Accordingly, management estimates that the carrying values of its non-current accounts receivable and other liabilities approximate the fair value of those instruments. Management estimates that the carrying value of the liability related to the sale of future royalties approximates fair value. As discussed in Note 7, the carrying value of the liability related to the sale of future royalties is based on the Company’s estimate of future royalties expected to be paid by the Company over the life of the arrangement, which are considered Level 3 inputs.
Long-lived assets, if determined to be not recoverable and impaired, are measured at fair value on a nonrecurring basis using Level 3 inputs. Please refer to Note 6 for further information on nonrecurring fair value measurements of long-lived assets during the three months ended March 31, 2024.
5. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Laboratory and manufacturing equipment |
|
$ |
|
|
$ |
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
In March 2024, the Company entered into an agreement to sublease its office facilities in New York, New York. In connection with the sublease, the Company recorded impairment of property and equipment of $
6. Leases
New York Sublease
In May 2016, the Company entered into an operating lease for office space in New York, New York (the New York Lease), which has since been amended to include additional office space and extend the term of the lease. The lease term commenced in July 2016 and expires in April 2027.
12
In March 2024, the Company entered into an agreement to sublease its office space under the New York Lease (the New York Sublease) to a third-party subtenant. The sublease term commenced in April 2024 and will expire in April 2027 concurrent with the expiration of the New York Lease. Monthly payments under the New York Sublease are expected to begin in mid-2024 and escalate annually in accordance with the sublease agreement. As of March 31, 2024, total undiscounted future minimum lease payments to be received by the Company over the term of the New York Sublease were $
The New York Sublease is classified as an operating lease and the Company was not relieved of its primary obligation under the New York Lease. The Company will continue to account for the New York Lease as it did prior to the commencement of the sublease.
As a result of the New York Sublease, the Company determined an impairment indicator was present related to the long-lived asset group subject to the sublease, which includes the right-of-use asset under the New York Lease, leasehold improvements and other property and equipment allocable to the New York Sublease. The Company concluded the carrying value of the asset group as of March 31, 2024 was not recoverable, as it exceeded the sum of the estimated undiscounted cash flows to be generated by the assets over their remaining lives. The Company estimated the fair value of the asset group using a discounted cash flow method, which incorporated unobservable inputs including the net identifiable cash flows over the term of the New York Sublease and an estimated borrowing rate of a market participant subtenant. The estimated fair value of the asset group represents a Level 3 nonrecurring fair value measurement. The Company concluded the carrying value of the asset group of $
|
|
Impairment Losses |
|
|
March 31, 2024 |
|
|
|
|
Property and equipment, net |
|
$ |
|
|
Operating lease right-of-use assets |
|
|
|
|
Total impairment of long-lived assets |
|
$ |
|
|
7. Liability Related to Sale of Future Royalties
In December 2020, the Company entered into a royalty purchase agreement (the Royalty Purchase Agreement) with entities managed by Healthcare Royalty Management, LLC (collectively, HCR). Under the Royalty Purchase Agreement, HCR purchased the Company’s rights to a capped amount of Zolgensma royalty payments under the Company’s license agreement (the Novartis License) with Novartis Gene Therapies, Inc. (formerly AveXis, Inc.) (Novartis Gene Therapies), including $
Pursuant to the Royalty Purchase Agreement, the total amount of royalty payments to be received by HCR is subject to an increasing cap (the Cap Amount) equal to (i) $
The Company has a call option to repurchase its rights to the purchased royalties from HCR for a repurchase price equal to, as of the option exercise date, $
The proceeds received from HCR of $
13
arrangement using the effective interest method. Due to its continuing involvement in the Novartis License, the Company continues to recognize royalty revenue on net sales of Zolgensma and records the royalty payments to HCR as a reduction of the liability when paid. As such payments are made to HCR, the balance of the liability will be effectively repaid over the life of the Royalty Purchase Agreement.
The Company estimates the effective interest rate used to record interest expense under the Royalty Purchase Agreement based on its estimate of future royalty payments to be received by HCR. As of March 31, 2024, the estimated effective interest rate under the Royalty Purchase Agreement was
The following table presents the changes in the liability related to the sale of future royalties under the Royalty Purchase Agreement with HCR (in thousands):
|
|
Liability Related to |
|
|
|
|
Sale of Future Royalties |
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Zolgensma royalties paid to HCR |
|
|
( |
) |
Interest expense recognized |
|
|
|
|
Balance at March 31, 2024 |
|
|
|
|
Current portion of liability related to sale of future royalties |
|
|
( |
) |
Liability related to sale of future royalties, non-current |
|
$ |
|
|
8. Capitalization
March 2024 Public Offering
In March 2024, the Company completed a public offering of
The rights and privileges of the pre-funded warrants issued under the March 2024 offering are set forth in the warrant agreement between the Company and each of the respective warrant holders. The pre-funded warrants are exercisable at the option of the warrant holder at any time and do not expire. However, as set forth in the warrant agreements with each holder, the number of pre-funded warrants that may be exercised at any given time may be limited if, upon exercise, the warrant holder and any of its affiliates would beneficially own more than
The Company evaluated the pre-funded warrants issued under the March 2024 offering and concluded the warrants are indexed to the Company's common stock, meet the criteria to be classified as equity and are not subject to remeasurement. The proceeds received from the issuance of the pre-funded warrants were recorded as additional paid-in capital. As of March 31, 2024,
At-the-Market Offering Program
In September 2023, the Company entered into an ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. (BofA) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $
14
9. License and Collaboration Agreements
License and Royalty Revenue
As of March 31, 2024, the Company’s NAV Technology Platform was being applied by NAV Technology Licensees in
License and royalty revenue consisted of the following (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Zolgensma royalties |
|
$ |
|
|
$ |
|
||
Other license and royalty revenue |
|
|
|
|
|
|
||
Total license and royalty revenue |
|
$ |
|
|
$ |
|
||
Outstanding development milestone payments are evaluated each reporting period and are only included in the transaction price of each license and recognized as license revenue to the extent the milestones are considered probable of achievement. Sales-based milestones are excluded from the transaction price of each license agreement and recognized as royalty revenue in the period of achievement. As of March 31, 2024, the Company’s license agreements, excluding additional licenses that could be granted upon the exercise of options by licensees, contained unachieved milestones which could result in aggregate milestone payments to the Company of up to $
Changes in Accounts Receivable, Contract Assets and Deferred Revenue
The following table presents the balances of the Company’s net accounts receivable, contract assets and deferred revenue, as well as other information regarding revenue recognized during the periods presented (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Accounts receivable, net, current and non-current: |
|
|
|
|
|
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
End of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Contract assets: |
|
|
|
|
|
|
||
Beginning of period |
|
$ |
— |
|
|
$ |
— |
|
End of period |
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
||
Deferred revenue: |
|
|
|
|
|
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
End of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Revenue recognized during the period from: |
|
|
|
|
|
|
||
Amounts included in deferred revenue at beginning of period |
|
$ |
|
|
$ |
|
||
Performance obligations satisfied in previous periods |
|
$ |
|
|
$ |
|
||
15
As of March 31, 2024, the Company had recorded deferred revenue of less than $
Revenue recognized from performance obligations satisfied in previous periods, as presented in the table above, was primarily attributable to Zolgensma royalties and changes in the transaction prices of the Company’s license agreements. Changes in transaction prices were primarily attributable to development milestones achieved or deemed probable of achievement during the periods which were previously not considered probable of achievement, resulting in a cumulative catch-up adjustment to revenue. Revenue recognized during the three months ended March 31, 2024 and 2023 included
Accounts Receivable, Contract Assets and the Allowance for Credit Losses
Accounts receivable, net consisted of the following (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Current accounts receivable: |
|
|
|
|
|
|
||
Billed to customers |
|
$ |
|
|
$ |
|
||
Unbilled Zolgensma royalties |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Other unbilled |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Current accounts receivable, net |
|
|
|
|
|
|
||
Non-current accounts receivable: |
|
|
|
|
|
|
||
Other unbilled |
|
|
|
|
|
|
||
Non-current accounts receivable, net |
|
|
|
|
|
|
||
Total accounts receivable, net |
|
$ |
|
|
$ |
|
||
The following table presents the changes in the allowance for credit losses related to accounts receivable and contract assets for the three months ended March 31, 2024 (in thousands):
|
|
Allowance for Credit Losses |
|
|||||
|
|
Accounts Receivable |
|
|
Contract Assets |
|
||
Balance at December 31, 2023 |
|
$ |
|
|
$ |
— |
|
|
Changes in present value discount of receivables |
|
|
|
|
|
— |
|
|
Balance at March 31, 2024 |
|
$ |
|
|
$ |
— |
|
|
The Company’s allowance for credit losses as of March 31, 2024 and December 31, 2023 was related solely to accounts receivable from Abeona Therapeutics Inc. (Abeona). Please refer to the section below, "Settlement Agreement with Abeona Therapeutics", for further information regarding amounts due from Abeona and the associated allowance for credit losses. The Company did
Zolgensma License with Novartis Gene Therapies
In March 2014, the Company entered into an exclusive license agreement (as amended, the Novartis License) with Novartis Gene Therapies. Under the Novartis License, the Company granted Novartis Gene Therapies an exclusive, worldwide commercial license, with rights to sublicense, to the NAV Technology Platform, as well as other certain rights, for the treatment of spinal muscular atrophy (SMA) in humans by in vivo gene therapy. In 2019, Novartis Gene Therapies launched commercial sales of Zolgensma, a licensed product under the Novartis License. In accordance with the Novartis License, the Company receives royalties on net sales of Zolgensma.
16
The Company recognized the following amounts under the Novartis License (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Zolgensma royalties |
|
$ |
|
|
$ |
|
||
Total license and royalty revenue |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Interest income from licensing |
|
$ |
|
|
$ |
|
||
As of March 31, 2024 and December 31, 2023, the Company had recorded total accounts receivable of $
Settlement Agreement with Abeona Therapeutics
In November 2021, the Company entered into a settlement agreement and mutual release with Abeona (the Settlement Agreement) related to claims associated with a license agreement between the parties which was terminated in May 2020. The Settlement Agreement resolved all arbitration and legal proceedings and mutually released each party from any and all claims under the terminated license agreement. Pursuant to the Settlement Agreement, Abeona will pay the Company a total of $
As of March 31, 2024 and December 31, 2023, the Company had recorded accounts receivable of $
Collaboration Agreements
AbbVie Collaboration and License Agreement
In September 2021, the Company entered into a collaboration and license agreement with AbbVie Global Enterprises Ltd. (AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize ABBV-RGX-314, the Company’s product candidate for the treatment of wet age-related macular degeneration (wet AMD), diabetic retinopathy (DR) and other chronic retinal diseases (the AbbVie Collaboration Agreement).
Pursuant to the AbbVie Collaboration Agreement, the Company granted AbbVie a co-exclusive license to develop and commercialize ABBV-RGX-314 in the United States and an exclusive license to develop and commercialize ABBV-RGX-314 outside the United States. The Company and AbbVie will collaborate to develop ABBV-RGX-314 in the United States, and AbbVie will be responsible for the development of ABBV-RGX-314 in specified markets outside the United States. Through December 31, 2022, the Company was responsible for the development expenses related to certain ongoing clinical trials of ABBV-RGX-314 and the parties shared the additional development expenses related to ABBV-RGX-314. Beginning on January 1, 2023, AbbVie became responsible for the majority of all ABBV-RGX-314 development expenses.
17
The Company will lead the manufacturing of ABBV-RGX-314 for clinical development and U.S. commercial supply, and AbbVie will lead the manufacturing of ABBV-RGX-314 for commercial supply outside the United States. Manufacturing expenses will be allocated between the parties in accordance with the terms of the AbbVie Collaboration Agreement and supply agreements determined in accordance with the agreement. If requested by AbbVie, the Company will manufacture up to a specified portion of ABBV-RGX-314 for commercial supply outside the United States at a price specified in the agreement. AbbVie will lead the commercialization of ABBV-RGX-314 globally, and the Company will participate in U.S. commercialization efforts as provided under a commercialization plan determined in accordance with the agreement. The Company and AbbVie will share equally in the net profits and net losses associated with the commercialization of ABBV-RGX-314 in the United States. Outside the United States, AbbVie will be responsible, at its sole cost, for the commercialization of ABBV-RGX-314.
In consideration for the rights granted under the AbbVie Collaboration Agreement, AbbVie paid the Company an up-front fee of $
The Company applied the requirements of ASC 606, Revenue from Contracts with Customers (ASC 606) to the AbbVie Collaboration Agreement for the units of account in which AbbVie was deemed to be a customer. The Company determined that there is only one material performance obligation under the agreement for the delivery of the intellectual property license to develop and commercialize ABBV-RGX-314 globally. The intellectual property licensed to AbbVie includes the rights to certain patents, data, know-how and other rights developed and owned by the Company, as well as other intellectual property rights exclusively licensed by the Company from various third parties. As of March 31, 2024 and December 31, 2023, the transaction price of the AbbVie Collaboration Agreement was $
The Company applied the requirements of ASC 808, Collaborative Arrangements (ASC 808) to the AbbVie Collaboration Agreement for the units of account which were deemed to be a collaborative arrangement. Both the Company and AbbVie will perform various activities related to the development, manufacturing and commercialization of ABBV-RGX-314 in the United States. Development costs are shared between the parties in accordance with the terms of the AbbVie Collaboration Agreement, and the parties will share equally in the net profits and losses derived from sales of ABBV-RGX-314 in the United States. The Company accounts for payments to and from AbbVie for the sharing of development and commercialization costs in accordance with its accounting policy for collaborative arrangements. Amounts owed to AbbVie for the Company’s share of development costs or commercialization costs incurred by AbbVie are recorded as research and development expense or general and administrative expense, respectively, in the period the costs are incurred. Amounts owed to the Company for AbbVie’s share of development costs or commercialization costs incurred by the Company are recorded as a reduction of research and development expense or general and administrative expense, respectively, in the period the costs are incurred. At the end of each reporting period, the Company records a net amount due to or from AbbVie as a result of the cost-sharing arrangement. As of March 31, 2024 and December 31, 2023, the Company had recorded $
The Company recognized the following amounts under the AbbVie Collaboration Agreement (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cost reimbursement to (from) AbbVie included in: |
|
|
|
|
|
|
||
Research and development expense |
|
$ |
( |
) |
|
$ |
( |
) |
General and administrative expense |
|
|
|
|
|
|
||
Total net cost reimbursement to (from) AbbVie |
|
$ |
( |
) |
|
$ |
( |
) |
18
10. Stock-based Compensation
Effective in January 2024, an additional
Stock-based Compensation Expense
The Company’s stock-based compensation expense by award type was as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
$ |
|
|
$ |
|
||
Restricted stock units |
|
|
|
|
|
|
||
Employee stock purchase plan |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
As of March 31, 2024, the Company had $
The Company recorded aggregate stock-based compensation expense in the consolidated statements of operations and comprehensive loss as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Stock Options
The following table summarizes stock option activity under the 2014 Plan and 2015 Plan (in thousands, except per share data):
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
||||
|
|
|
|
|
|
|
|
average |
|
|
|
|
||||
|
|
|
|
|
Weighted- |
|
|
Remaining |
|
|
|
|
||||
|
|
|
|
|
average |
|
|
Contractual |
|
|
Aggregate |
|
||||
|
|
|
|
|
Exercise |
|
|
Life |
|
|
Intrinsic |
|
||||
|
|
Shares |
|
|
Price |
|
|
(Years) |
|
|
Value (a) |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Cancelled or forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
(a) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at the dates reported.
The weighted-average grant date fair value per share of options granted during the three months ended March 31, 2024 was $
19
Restricted Stock Units
The following table summarizes restricted stock unit activity under the 2015 Plan (in thousands, except per share data):
|
|
|
|
|
Weighted-average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
Unvested balance at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Unvested balance at March 31, 2024 |
|
|
|
|
$ |
|
||
The total intrinsic value of restricted stock units vested during the three months ended March 31, 2024 was $
Employee Stock Purchase Plan
As of March 31, 2024, the total number of shares of common stock authorized for issuance under the 2015 ESPP was
11. Income Taxes
The Company evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets as of March 31, 2024 and December 31, 2023. Based on the Company’s history of operating losses, and other relevant facts and circumstances, the Company concluded that it was more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company provided a full valuation allowance for its net deferred tax assets as of March 31, 2024 and December 31, 2023.
12. Restructuring
In November 2023, the Company implemented a strategic pipeline prioritization and corporate restructuring designed to reduce operating expenses and prioritize the development of ABBV-RGX-314, RGX-202 for the treatment of Duchenne muscular dystrophy, and RGX-121 for the treatment of Mucopolysaccharidosis Type II (MPS II), while pursuing strategic alternatives for the Company's other clinical stage programs. The restructuring included a reduction in workforce and other planned operating expenses, primarily in rare neurodegenerative disease development, early research and other general and administrative areas.
As a result of the restructuring, the Company implemented a reduction in workforce of approximately
The following table presents the details of the Company's restructuring liability, which is included in accrued expenses and other current liabilities on the consolidated balance sheet as of March 31, 2024 (in thousands):
|
|
Restructuring Liability |
|
|
Balance at December 31, 2022 |
|
$ |
— |
|
Restructuring charges |
|
|
|
|
Cash payments |
|
|
( |
) |
Balance at December 31, 2023 |
|
|
|
|
Cash payments |
|
|
( |
) |
Other adjustments |
|
|
( |
) |
Balance at March 31, 2024 |
|
$ |
|
|
20
13. Net Loss Per Share
Since the Company incurred net losses for the three months ended March 31, 2024 and 2023, common stock equivalents were excluded from the calculation of diluted net loss per share for such periods as their effect would be anti-dilutive. Accordingly, basic and diluted net loss per share were the same for such periods. The weighted-average number of common shares outstanding used in the basic and diluted net loss per share calculations includes the weighted-average effect of
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options issued and outstanding |
|
|
|
|
|
|
||
Unvested restricted stock units outstanding |
|
|
|
|
|
|
||
Employee stock purchase plan |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
14. Supplemental Disclosures
Other Current Assets
Other current assets consisted of the following (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Net cost reimbursement due from collaborators |
|
$ |
|
|
$ |
|
||
Accrued interest on investments |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Accrued external research and development expenses |
|
$ |
|
|
$ |
|
||
Accrued personnel costs |
|
|
|
|
|
|
||
Accrued sublicense fees and royalties |
|
|
|
|
|
|
||
Accrued external general and administrative expenses |
|
|
|
|
|
|
||
Accrued purchases of property and equipment |
|
|
|
|
|
|
||
Other accrued expenses and current liabilities |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Supplemental Disclosures of Non-cash Investing and Financing Activities
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities were $
Issuance costs for the public offering of common stock and pre-funded warrants included in accounts payable and accrued expenses and other liabilities as of March 31, 2024 were $
Offering expenses for the ATM Program included in accounts payable and accrued expenses and other liabilities as of March 31, 2024 were $
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the SEC on February 27, 2024. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a leading clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. Our investigational gene therapies are designed to deliver functional genes to address genetic defects in cells, enabling the production of therapeutic proteins or antibodies that are intended to impact disease. Through a single administration, gene therapy could potentially alter the course of disease significantly and deliver improved patient outcomes with long-lasting effects.
Overview of Product Candidates
We have developed a broad pipeline of gene therapy programs using our proprietary adeno-associated virus (AAV) gene therapy delivery platform (NAV Technology Platform) as a one-time treatment to address an array of diseases. Our lead programs and product candidates are described below:
Subretinal Delivery for Treatment of Wet AMD: Enrollment continues to be on track in the ATMOSPHERE® and ASCENT™ pivotal trials for the treatment of patients with wet AMD using subretinal delivery. These trials are expected to support global regulatory submissions with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) in the first half of 2026.
Suprachoroidal Delivery for Treatment of Wet AMD: The AAVIATE® trial is a multi-center, open label, randomized, controlled, dose-escalation Phase II trial to evaluate the efficacy, safety and tolerability of suprachoroidal delivery of ABBV-RGX-314 for the treatment of wet AMD. In January 2024, we presented data from the trial demonstrating that, at six months, patients treated with ABBV-RGX-314 continue to demonstrate stable vision and retinal anatomy while a meaningful reduction in anti-VEGF treatment burden was observed. The highest reduction was seen in dose level 3, demonstrating an 80% reduction in annualized injection rate with 50% of patients remaining injection-free. We expect to share new program and data updates for the AAVIATE trial in the third quarter of 2024.
Suprachoroidal Delivery for Treatment of DR: The ALTITUDE® trial is a multi-center, open label, randomized, controlled, dose-escalation Phase II trial to evaluate the efficacy, safety and tolerability of ABBV-RGX-314 for the treatment of DR. Based on positive interim results from the trial to date, design and evaluation of two pivotal trials is on-going and in support of further discussion with the FDA at an end-of-Phase II (EOP2) meeting anticipated in the first quarter of 2025 that can enable rapid acceleration towards pivotal development. We expect to initiate the first pivotal trial in the first half of 2025.
22
AFFINITY DUCHENNE® is a multicenter, open-label dose evaluation and dose expansion clinical trial to evaluate the safety, tolerability and clinical efficacy of a one-time intravenous (IV) dose of RGX-202 in patients with Duchenne. In March 2024, we reported additional interim safety and efficacy data from the trial in patients ages 4 to 11 years old, including RGX-202 microdystrophin from dose level 2.
As of May 3, 2024, RGX-202 continues to be well tolerated in all patients with no serious adverse events. In new data from the second patient, aged 8.1 years, who received RGX-202 at dose level 2, RGX-202 microdystrophin expression was measured to be 20.9% compared to control at three months. A reduction from baseline in serum creatinine kinase (CK) levels of 90% was observed at 10 weeks. Dose level 2 has been selected as the pivotal dose and the positive interim results enable rapid acceleration into pivotal development. We are now enrolling patients in an expedited dose level 2 expansion phase of the AFFINITY DUCHENNE trial accepted by the FDA, and recently dosed two additional boys aged 5.8 and 8.5 years old. We expect to enroll up to a total of seven patients at the pivotal dose through early third quarter 2024. An EOP2 meeting with the FDA in early third quarter 2024 is expected to support a final pivotal trial design. We plan to use RGX-202 microdystrophin expression as a surrogate endpoint likely to predict clinical benefit to support a Biologics License Application (BLA) filing using the accelerated approval pathway. Initiation of the pivotal trial is expected in late third quarter 2024 to early fourth quarter 2024. We also continue to expect to share initial strength and functional assessment data for both dose levels of the AFFINITY DUCHENNE trial in the second half of 2024.
CAMPSIITE® is a Phase I/II/III multi-center, open-label trial to evaluate the efficacy, safety, tolerability and pharmacodynamics of RGX-121 in patients with MPS II aged 4 months up to 5 years old. We continue to follow patients in the trial, and in February 2024, we reported that the pivotal phase of the CAMPSIITE trial achieved its primary endpoint. We plan to use levels of cerebrospinal fluid D2S6 as a surrogate endpoint for accelerated approval and we are completing remaining activities in order to support a BLA submission in 2024. We believe that RGX-121 is likely to be eligible for priority review, especially if no other gene therapy product for MPS II is approved before submission of a BLA for RGX-121, and potential approval of the Company's planned BLA for RGX-121 could result in receipt of a Rare Pediatric Disease Priority Review Voucher in 2025, assuming the statutory criteria are met.
Overview of Our NAV Technology Platform
In addition to our internal product development efforts, we also selectively license the NAV Technology Platform to other leading biotechnology and pharmaceutical companies, which we refer to as NAV Technology Licensees. As of March 31, 2024, our NAV Technology Platform was being applied in one commercial product, Zolgensma®, and the preclinical and clinical development of a number of other licensed products. Licensing the NAV Technology Platform allows us to maintain our internal product development focus on our core disease indications and therapeutic areas while still expanding the NAV gene therapy pipeline, developing a greater breadth of treatments for patients, providing additional technological and potential clinical proof-of-concept for our NAV Technology Platform and creating potential additional revenue opportunities.
Financial Overview
Revenues
Our revenues to date consist primarily of license and royalty revenue resulting from the licensing of our NAV Technology Platform and other intellectual property rights. We have not generated any revenues from commercial sales of our own products. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval and adequate labeling, our ability to generate future revenues will be materially compromised.
We license our NAV Technology Platform and other intellectual property rights to other biotechnology and pharmaceutical companies, including collaborators for the joint development and commercialization of our product candidates. The terms of the licenses vary, and licenses may be exclusive or non-exclusive and may be sublicensable by the licensee. Licenses may grant intellectual property rights for purposes of internal and preclinical research and development only, or may include the rights, or options to obtain future rights, to commercialize drug therapies for specific diseases using the NAV Technology Platform and other licensed rights. License agreements generally have a term at least equal to the life of the underlying patents, but are terminable at the option of the licensee. Consideration from licensees under our license agreements may include: (i) up-front and annual fees, (ii) milestone payments based on the achievement of certain development and sales-based milestones, (iii) sublicense fees, (iv) royalties on sales of licensed products and (v) other consideration payable upon optional goods and services purchased by licensees.
23
Future license and royalty revenues are dependent on the successful development and commercialization of licensed products, which is uncertain, and revenues may fluctuate significantly from period to period. Additionally, we may never receive consideration in our license agreements that is contemplated on option fees, development and sales-based milestone payments, royalties on sales of licensed products or sublicense fees, given the contingent nature of these payments. Our revenues are concentrated among a low number of licensees and licenses are terminable at the option of the licensee. The termination of our licenses by licensees may materially impact the amount of revenue we recognize in future periods.
Zolgensma Royalties
Royalty revenue to date consists primarily of royalties on net sales of Zolgensma, which is marketed by Novartis Gene Therapies, Inc. (formerly AveXis, Inc.) (Novartis Gene Therapies), a wholly owned subsidiary of Novartis AG (Novartis), for the treatment of spinal muscular atrophy (SMA). Zolgensma is a licensed product under our license agreement with Novartis Gene Therapies for the development and commercialization of treatments for SMA using the NAV Technology Platform.
Collaboration and License Agreement with AbbVie
In September 2021, we entered into a collaboration and license agreement with AbbVie Global Enterprises Ltd. (AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize ABBV-RGX-314 (the AbbVie Collaboration Agreement). The AbbVie Collaboration Agreement may materially impact our future revenues, research and development expenses, other operating expenses and operating cash flows associated with the development and commercialization of ABBV-RGX-314. For additional information regarding the AbbVie Collaboration Agreement, please refer to Note 9, “License and Collaboration Agreements—AbbVie Collaboration and License Agreement” to the accompanying unaudited consolidated financial statements.
Operating Expenses
Our operating expenses consist primarily of cost of revenues, research and development expenses and general and administrative expenses. Personnel costs including salaries, wages, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general and administrative expenses. We allocate indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costs between research and development and general and administrative categories based on employee headcount and the nature of work performed by each employee or using other reasonable allocation methodologies.
Cost of Revenues
Our cost of revenues consists primarily of upstream fees due to our licensors as a result of revenue generated from the licensing of our NAV Technology Platform and other intellectual property rights, including sublicense fees and royalties on net sales of licensed products. Sublicense fees are based on a percentage of license fees received by us from licensees and are recognized in the period that the underlying license revenue is recognized. Royalties are based on a percentage of net sales of licensed products by licensees and are recognized in the period that the underlying sales occur. Future costs of revenues are uncertain due to the nature of our license agreements and significant fluctuations in cost of revenues may occur from period to period.
Research and Development Expense
Our research and development expenses consist primarily of:
24
Up-front fees incurred in obtaining technology licenses for research and development activities, as well as associated milestone payments, are charged to research and development expense as incurred if the technology licensed has no alternative future use.
We expect to continue to incur significant research and development expenses for the foreseeable future as we continue the development of our product candidates and engage in early research and development for prospective product candidates and new technologies. The following table summarizes our research and development expenses incurred during the three months ended March 31, 2024 and 2023 (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Direct Expenses |
|
|
|
|
|
|
||
ABBV-RGX-314 |
|
$ |
8,791 |
|
|
$ |
5,036 |
|
RGX-202 |
|
|
2,967 |
|
|
|
4,577 |
|
RGX-121 |
|
|
4,293 |
|
|
|
1,795 |
|
Other product candidates |
|
|
1,021 |
|
|
|
1,670 |
|
Total direct expenses |
|
|
17,072 |
|
|
|
13,078 |
|
Unallocated Expenses |
|
|
|
|
|
|
||
Platform and new technologies |
|
|
7,447 |
|
|
|
11,349 |
|
Personnel-related |
|
|
22,168 |
|
|
|
25,475 |
|
Facilities and depreciation expense |
|
|
7,080 |
|
|
|
7,077 |
|
Other unallocated |
|
|
1,077 |
|
|
|
1,537 |
|
Total unallocated expenses |
|
|
37,772 |
|
|
|
45,438 |
|
Total research and development |
|
$ |
54,844 |
|
|
$ |
58,516 |
|
Direct expenses related to the development of ABBV-RGX-314 for the three months ended March 31, 2024 and 2023 include $25.0 million and $18.5 million, respectively, in net cost reimbursement from AbbVie under our eye care collaboration which were recorded as a reduction of research and development expenses. Net cost reimbursement from AbbVie includes reimbursement of personnel and overhead costs attributable to the development of ABBV-RGX-314, the underlying costs of which are reported as unallocated expenses in the table above. We typically utilize our employee and infrastructure resources across our development programs. As a result, we generally do not allocate personnel and other internal costs, such as facilities and other overhead costs, to specific product candidates or development programs.
Platform and new technologies reported in the table above include direct costs not identifiable with a specific lead product candidate, including costs associated with our research and development platform used across programs, process development, manufacturing analytics and early research and development for prospective product candidates and new technologies.
Direct expenses related to the development of product candidates for which we have discontinued internal development are included in other product candidates in the table above. We expect to continue to incur minor development expenses associated with long-term follow up studies for certain discontinued product candidates.
General and Administrative Expense
Our general and administrative expenses consist primarily of salaries, wages and personnel-related costs, including benefits, travel and stock-based compensation, for employees performing functions other than research and development. This includes certain personnel in executive, commercial, corporate development, finance, legal, human resources, information technology, facilities and administrative support functions. Additionally, general and administrative expenses include facility-related and overhead costs not otherwise allocated to research and development expense, professional fees for accounting, legal, commercial and other advisory services, expenses associated with obtaining and maintaining patents, insurance costs, costs of our information systems and other general corporate activities. We expect that our general and administrative expenses will increase as we continue to develop, and potentially commercialize, our product candidates.
Other Income (Expense)
Interest Income from Licensing
In accordance with our revenue recognition policy, interest income from licensing consists of imputed interest recognized from significant financing components identified in our license agreements with NAV Technology Licensees as well as interest income accrued on unpaid balances due from licensees.
25
Investment Income
Investment income consists of interest income earned and gains and losses realized from our cash equivalents, marketable securities and non-marketable equity securities. Cash equivalents are comprised of money market mutual funds and highly liquid debt securities with original maturities of 90 days or less at acquisition. Marketable securities are comprised of available-for-sale debt securities.
Interest Expense
Interest expense consists primarily of interest imputed on the liability related to the sale of future Zolgensma royalties to entities managed by Healthcare Royalty Management, LLC (collectively, HCR). Interest expense is recognized using the effective interest method, based on our estimate of total royalty payments expected to be received by HCR under the royalty purchase agreement. For further information regarding the royalty purchase agreement with HCR, please refer to Note 7, “Liability Related to Sale of Future Royalties” to the accompanying unaudited consolidated financial statements.
Critical Accounting Policies and Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Our significant accounting policies are fully described in Note 2 to the accompanying unaudited consolidated financial statements and in Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes in our critical accounting policies and estimates since December 31, 2023.
Results of Operations
Our consolidated results of operations were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|||
License and royalty revenue |
|
$ |
15,622 |
|
|
$ |
19,138 |
|
|
$ |
(3,516 |
) |
Total revenues |
|
|
15,622 |
|
|
|
19,138 |
|
|
|
(3,516 |
) |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
4,283 |
|
|
|
4,112 |
|
|
|
171 |
|
Research and development |
|
|
54,844 |
|
|
|
58,516 |
|
|
|
(3,672 |
) |
General and administrative |
|
|
18,291 |
|
|
|
22,634 |
|
|
|
(4,343 |
) |
Impairment of long-lived assets |
|
|
2,101 |
|
|
|
— |
|
|
|
2,101 |
|
Other operating expenses (income) |
|
|
(34 |
) |
|
|
33 |
|
|
|
(67 |
) |
Total operating expenses |
|
|
79,485 |
|
|
|
85,295 |
|
|
|
(5,810 |
) |
Loss from operations |
|
|
(63,863 |
) |
|
|
(66,157 |
) |
|
|
2,294 |
|
Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|||
Interest income from licensing |
|
|
37 |
|
|
|
70 |
|
|
|
(33 |
) |
Investment income |
|
|
2,469 |
|
|
|
2,166 |
|
|
|
303 |
|
Interest expense |
|
|
(1,973 |
) |
|
|
(2,755 |
) |
|
|
782 |
|
Total other income (expense) |
|
|
533 |
|
|
|
(519 |
) |
|
|
1,052 |
|
Net loss |
|
$ |
(63,330 |
) |
|
$ |
(66,676 |
) |
|
$ |
3,346 |
|
26
Comparison of the Three Months Ended March 31, 2024 and 2023
License and Royalty Revenue. License and royalty revenue decreased by $3.5 million, from $19.1 million for the three months ended March 31, 2023 to $15.6 million for the three months ended March 31, 2024. The decrease was primarily attributable to non-recurring development milestone revenue recognized in the first quarter of 2023 and Zolgensma royalty revenues, which decreased by $0.9 million, from $16.1 million for the first quarter of 2023 to $15.2 million for the first quarter of 2024. As reported by Novartis, sales of Zolgensma in the first quarter of 2024 were $295 million, a decrease of 5% from the first quarter of 2023, and established markets continue to treat mainly incident patients.
Research and Development Expense. Research and development expenses decreased by $3.7 million, from $58.5 million for the three months ended March 31, 2023 to $54.8 million for the three months ended March 31, 2024. The decrease was primarily attributable to the following:
The decrease in research and development expenses was partially offset by an increase of $9.2 million in costs associated with clinical trial activities, largely driven by clinical trial expenses for ABBV-RGX-314, RGX-202 and RGX-121.
General and Administrative Expense. General and administrative expenses decreased by $4.3 million, from $22.6 million for the three months ended March 31, 2023 to $18.3 million for the three months ended March 31, 2024. The decrease was primarily attributable to the following:
Liquidity and Capital Resources
Sources of Liquidity
As of March 31, 2024, we had cash, cash equivalents and marketable securities of $380.5 million, which were primarily derived from the sale of our common stock and pre-funded warrants described below and license fees received under the AbbVie Collaboration Agreement. We expect that our cash, cash equivalents and marketable securities as of March 31, 2024, will enable us to fund our operating expenses and capital expenditure requirements, and are sufficient to meet our financial commitments and obligations, for at least the next 12 months from the date of this report based on our current business plan.
In March 2024, we completed a public offering of 4,565,260 shares of our common stock at a price of $23.00 per share and 1,521,740 pre-funded warrants to purchase shares of our common stock at a price of $22.9999 per pre-funded warrant, which equaled the public offering price per share of the common stock less the $0.0001 exercise price of each pre-funded warrant. The aggregate net proceeds received from the offering were $131.1 million, net of underwriting discounts and commissions and offering expenses.
We intend to devote the majority of our current capital to preclinical research, clinical development, seeking regulatory approval of our product candidates and, if approved, commercialization of our product candidates, as well as additional capital expenditures needed to support these activities. Because of the numerous risks and uncertainties associated with the development and commercialization of gene therapy product candidates, we are unable to estimate the total amount of operating expenditures and capital outlays necessary to complete the development of our product candidates. While we expect the pipeline prioritization and corporate restructuring implemented in November 2023 to result in cost savings, we may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the restructuring. In addition, we may not achieve the expected benefits of any cost reduction measures on our currently anticipated timeline, or at all. Furthermore, our estimates are based on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect which could accelerate our liquidity needs.
27
At-the-Market Offering Program
In September 2023, we entered into an ATM Equity OfferingSM Sales Agreement with BofA Securities, Inc. (BofA) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million from time to time through BofA, acting as our sales agent (the ATM Program). We intend to use proceeds obtained from the sale of shares under the ATM Program, if any, for general corporate purposes. As of March 31, 2024, no shares of common stock had been sold under the ATM Program.
Cash Flows
Our consolidated cash flows were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(55,455 |
) |
|
$ |
(80,918 |
) |
Net cash provided by investing activities |
|
|
13,183 |
|
|
|
63,094 |
|
Net cash provided by (used in) financing activities |
|
|
120,725 |
|
|
|
(9,037 |
) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
$ |
78,453 |
|
|
$ |
(26,861 |
) |
Cash Flows from Operating Activities
Our net cash used in operating activities for the three months ended March 31, 2024 decreased by $25.5 million from the three months ended March 31, 2023, largely as a result of lower operating expenses and increased cost reimbursement received from AbbVie under our ABBV-RGX-314 collaboration in the first quarter of 2024. We expect to continue to incur regular net cash outflows from operations for the foreseeable future as we continue the development and advancement of our product candidates and other research programs.
For the three months ended March 31, 2024, our net cash used in operating activities of $55.5 million consisted of a net loss of $63.3 million and unfavorable changes in operating assets and liabilities of $8.2 million, offset by adjustments for non-cash items of $16.0 million. The changes in operating assets and liabilities include a net decrease in total accounts payable and accrued expenses and other current liabilities of $8.6 million, which were driven primarily by decreases in accrued sublicense fees, royalties and personnel-related expenses, and an increase in other current assets of $6.8 million, which was driven primarily by an increase in net cost reimbursement due from AbbVie under our ABBV-RGX-314 collaboration. Other changes in operating working capital occurred in the normal course of business. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $9.6 million and depreciation and amortization expense of $4.2 million.
For the three months ended March 31, 2023, our net cash used in operating activities of $80.9 million consisted of a net loss of $66.7 million and unfavorable changes in operating assets and liabilities of $29.6 million, offset by adjustments for non-cash items of $15.4 million. The changes in operating assets and liabilities include a decrease in total accounts payable and accrued expenses and other current liabilities of $18.5 million, which were driven primarily by decreases in accrued sublicense fees, royalties and personnel-related expenses, and an increase in total prepaid expenses and other current assets of $15.3 million, which was driven primarily by an increase in net cost reimbursement due from AbbVie under our ABBV-RGX-314 collaboration. Other changes in operating working capital occurred in the normal course of business. Adjustments for non-cash items primarily consisted of stock-based compensation expense of $11.2 million and depreciation and amortization expense of $4.2 million.
Cash Flows from Investing Activities
For the three months ended March 31, 2024, our net cash provided by investing activities consisted of $68.9 million in maturities of marketable debt securities, offset by $55.2 million to purchase marketable debt securities and $0.6 million to purchase property and equipment.
For the three months ended March 31, 2023, our net cash provided by investing activities consisted of $67.9 million in maturities of marketable debt securities, offset by $4.8 million to purchase property and equipment.
28
Cash Flows from Financing Activities
For the three months ended March 31, 2024, our net cash provided by financing activities primarily consisted of $131.6 million in net proceeds received from the public offering of common stock and pre-funded warrants completed in March 2024, net of underwriting discounts and commissions and other offering expenses paid during the period, and $1.3 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan. Our net cash provided by financing activities was partially offset by $11.2 million of Zolgensma royalties paid to HCR, net of imputed interest, under our royalty purchase agreement.
For the three months ended March 31, 2023, our net cash used in financing activities primarily consisted of $9.7 million of Zolgensma royalties paid to HCR, net of imputed interest, under our royalty purchase agreement, and was partially offset by $1.1 million in proceeds received from the exercise of stock options and issuance of common stock under our employee stock purchase plan.
Additional Capital Requirements
Our material capital requirements from known contractual and other obligations primarily relate to vendor service contracts and purchase commitments, in-license agreements, operating lease agreements and our Zolgensma royalty purchase agreement with HCR. Our material commitments and obligations are further described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, and in the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Other than the changes described in the notes to the unaudited consolidated financial statements accompanying this Quarterly Report on Form 10-Q, including Note 6, “Leases,” there have been no material changes to our commitments and obligations since December 31, 2023.
Future Funding Requirements
We have incurred cumulative losses since our inception and had an accumulated deficit of $768.4 million as of March 31, 2024. Our transition to recurring profitability is dependent upon achieving a level of revenues adequate to support our cost structure, which depends heavily on the successful development, approval and commercialization of our product candidates. We do not expect to achieve such revenues, and expect to continue to incur losses, for at least the next several years. We expect to continue to incur significant research and development and general and administrative expenses for the foreseeable future as we continue the development of, and seek regulatory approval for, our product candidates. Subject to obtaining regulatory approval for our product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. Additionally, we expect to continue to incur capital expenditures associated with building out additional laboratory and manufacturing capacity to further support the development of our product candidates and potential commercialization efforts. As a result, we will need significant additional capital to fund our operations, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements.
Our future capital requirements will depend on many factors, including:
29
Many of these factors are outside of our control. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory and marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, and any commercial milestones or royalty payments under our licensing agreements, will be derived from or based on sales of products that may not be commercially available for many years, if at all. In addition, revenue from our NAV Technology Platform licensing is dependent in part on the clinical and commercial success of our licensing partners, including the commercialization of Zolgensma, and on maintaining our license agreements with our licensor partners, including GlaxoSmithKline LLC and The Trustees of the University of Pennsylvania. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.
The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. Adequate additional financing may not be available to us on acceptable terms, or at all. We also could be required to seek funds through arrangements with partners or otherwise that may require us to relinquish rights to our intellectual property, our product candidates or otherwise agree to terms unfavorable to us.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
For information regarding market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our exposure to market risk during the three months ended March 31, 2024.
Item 4. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.
30
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
31
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we are party to various lawsuits, claims or other legal proceedings that arise in the normal course of our business. We do not believe that we are currently party to any pending legal actions that could reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 1A. Risk Factors.
Our material risk factors are disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes from the risk factors previously disclosed in such filing.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
Rule 10b5-1 Trading Plans
The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our Section 16 officers and directors for the three months ended March 31, 2024, each of which is intended to satisfy the affirmative defense of Rule 10b5-1(c) ("Rule 10b5-1 Plan"), were as follows:
|
|
|
|
|
|
|
|
|
|
Rule 10b5-1 Trading Plan |
|
Aggregate # of |
|
|
|
|
|
|
|
|
Scheduled |
|
Provides for |
|
Securities to be |
Name |
|
Title |
|
Action |
|
Date Adopted |
|
Expiration Date |
|
Purchase/Sale |
|
Purchased/Sold (a) |
|
|
|
|
|
Sale |
|
||||||
|
|
|
|
|
Sale |
|
||||||
|
|
|
|
|
Sale |
|
||||||
|
|
|
|
|
Sale |
|
(a) The aggregate number of shares in this column includes shares that may be forfeited or withheld to satisfy exercise price and tax withholding obligations at the time of vesting.
Other than as described above, during the three months ended March 31, 2024, none of our
32
Item 6. Exhibits.
|
|
|
|
Incorporated by Reference |
|
|
||||
Exhibit Number |
|
Description |
|
Form |
|
Exhibit Number |
|
Filing Date |
|
Filed or Furnished Herewith |
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
8-K |
|
3.1 |
|
6/7/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
8-K |
|
3.2 |
|
9/22/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
8-K |
|
4.1 |
|
3/11/24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101 |
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The following materials from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (ii) Consolidated Statements of Operations and Comprehensive Loss (iii) Consolidated Statements of Stockholders’ Equity (iv) Consolidated Statements of Cash Flows (v) Notes to Consolidated Financial Statements |
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104 |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 formatted in Inline XBRL (included in Exhibit 101) |
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The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the SEC and is not to be incorporated by reference into any filing of REGENXBIO Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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REGENXBIO Inc. |
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Dated: May 8, 2024 |
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/s/ Kenneth T. Mills |
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Kenneth T. Mills |
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President and Chief Executive Officer (Principal Executive Officer) |
Dated: May 8, 2024 |
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/s/ Vittal Vasista |
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Vittal Vasista |
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Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
34
EXHIBIT 31.1
CERTIFICATION
I, Kenneth T. Mills, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of REGENXBIO Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2024 |
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/s/ Kenneth T. Mills |
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Kenneth T. Mills President and Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, Vittal Vasista, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of REGENXBIO Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2024 |
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/s/ Vittal Vasista |
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Vittal Vasista Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION
In connection with the Quarterly Report of REGENXBIO Inc. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kenneth T. Mills, President, Chief Executive Officer and Director of the Registrant, and Vittal Vasista, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their respective knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: May 8, 2024 |
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/s/ Kenneth T. Mills |
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Kenneth T. Mills |
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President and Chief Executive Officer (Principal Executive Officer) |
Date: May 8, 2024 |
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/s/ Vittal Vasista |
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Vittal Vasista |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the United States Securities and Exchange Commission or its staff upon request.
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.