What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 121 added, 96 removed, 567 unchanged (28% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

2 unchanged sentences

Cost sharing reimbursements due from related party 1,567 5,674

Accounts receivable, net 15,218 8,593

Prepaid expenses and other current assets 16,029 11,691

9 unchanged sentences

Accrued compensation 6,295 20,503

Accrued clinical costs 5,049 6,497

Accrued manufacturing costs 13,052 7,140

Other accruals and other current liabilities 8,299 8,315

Accrued clinical and other research & development costs 11,434 11,775

Other accrued costs and current liabilities 2,148 3,037

Operating lease liability, current 5,055 4,690

10 unchanged sentences

Convertible preferred stock, $ 0.01 par value;

40,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

0 shares issued and outstanding as of March 31, 2021 and December 31, 2020

40,000,000 shares authorized as of June 30, 2021 and December 31, 2020;

0 shares issued and outstanding as of June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value;

400,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

121,147,432 shares and 120,531,333 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

400,000,000 shares authorized as of June 30, 2021 and December 31, 2020;

121,531,952 shares and 120,531,333 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,556,679 1,503,660

7 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Collaboration revenue:

11 unchanged sentences

Loss before income taxes ( 60,691 ) ( 58,679 ) ( 130,732 ) ( 115,577 )

Income tax benefit — 135

Income tax benefit (expense) — ( 79 ) — 56

Net loss ( 60,691 ) ( 58,758 ) ( 130,732 ) ( 115,521 )

Other comprehensive income:

Net unrealized gain on marketable securities, net of tax 13 485

Other comprehensive income (loss):

Net unrealized gain (loss) on marketable securities, net of tax ( 136 ) ( 284 ) ( 123 ) 201

Comprehensive loss $ ( 60,827 ) $ ( 59,042 ) $ ( 130,855 ) $ ( 115,320 )

2 unchanged sentences

__________________________________________________

(1) Includes related party collaboration revenue from customer of $ 0.9 million for the three months ended March 31, 2021.

(2) Includes an offset to expense from related party cost reimbursement of $ 2.5 million for the three months ended March 31, 2021.

(1) Includes related party collaboration revenue from a customer of $ 0.8 million and $ 1.7 million for the three and six months ended June 30, 2021, respectively.

(2) Includes an offset to expense from related party cost reimbursement of $ 1.6 million and $ 4.1 million for the three and six months ended June 30, 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity

Three Months Ended March 31, 2021 Shares Amount

Shares Amount

Balance at December 31, 2020 120,531,333 $ 1,531 $ 1,503,660 $ ( 245 ) $ ( 354,415 ) $ 1,150,531

6 unchanged sentences

— — — — ( 130,732 ) ( 130,732 )

Other comprehensive income — — — 13 — 13

Other comprehensive loss — — — ( 123 ) — ( 123 )

Balance at June 30, 2021 121,531,952 $ 1,541 $ 1,556,679 $ ( 368 ) $ ( 485,147 ) $ 1,072,705

Balance at March 31, 2021 121,147,432 $ 1,537 $ 1,528,504 $ ( 232 ) $ ( 424,456 ) $ 1,105,353

Three Months Ended March 31, 2020

Issuances under equity incentive plans 317,878 3 7,040 — — 7,043

Vesting of restricted stock units 66,642 1 ( 1 ) — — —

Stock-based compensation — — 21,136 — — 21,136

Net loss — — — — ( 60,691 ) ( 60,691 )

Other comprehensive loss — — — ( 136 ) — ( 136 )

Balance at June 30, 2021 121,531,952 $ 1,541 $ 1,556,679 $ ( 368 ) $ ( 485,147 ) $ 1,072,705

Balance at December 31, 2019 96,189,935 $ 1,288 $ 818,803 $ 350 $ ( 425,551 ) $ 394,890

Issuance of common stock in follow-on offering, net of issuance costs of $ 632

Issuance of common stock upon public offering, net of issuance costs of $ 632

9,000,000 90 193,858 — — 193,948

Issuances under equity incentive plans 589,516 6 5,374 — — 5,380

259,569 3 1,963 — — 1,966

Vesting of restricted stock units 118,421 1 ( 1 ) — — —

Stock-based compensation — — 23,269 — — 23,269

Net loss — — — — ( 115,521 ) ( 115,521 )

Other comprehensive income — — — 201 — 201

Balance at June 30, 2020 105,897,872 $ 1,385 $ 1,041,303 $ 551 $ ( 541,072 ) $ 502,167

Balance at March 31, 2020 105,541,343 $ 1,382 $ 1,025,408 $ 835 $ ( 482,314 ) $ 545,311

Issuances under equity incentive plans

329,947 3 3,411 — — 3,414

Vesting of restricted stock units 26,582 — — — — —

Stock-based compensation

— — 12,484 — — 12,484

Other comprehensive income

— — — — ( 58,758 ) ( 58,758 )

Balance at March 31, 2020 105,541,343 $ 1,382 $ 1,025,408 $ 835 $ ( 482,314 ) $ 545,311

Other comprehensive loss — — — ( 284 ) — ( 284 )

Balance at June 30, 2020 105,897,872 $ 1,385 $ 1,041,303 $ 551 $ ( 541,072 ) $ 502,167

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating activities

17 unchanged sentences

Maturities and sales of marketable securities 923,000 281,057

Net cash used in investing activities ( 25,405 ) ( 13,333 )

Net cash provided by (used in) investing activities 72,132 ( 43,744 )

Financing activities

5 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 487,180 $ 138,684

Supplemental disclosures of cash flow information

Property and equipment purchases accrued but not yet paid $ 229 $ 2

See accompanying notes to unaudited condensed consolidated financial statements.

15 unchanged sentences

These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

During the three months ended March 31, 2021, except as discussed below in the section titled "Recently Adopted Accounting Pronouncement," there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2020 Annual Report on Form 10-K.

During the six months ended June 30, 2021, except as discussed below in the section titled "Recently Adopted Accounting Pronouncement," there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2020 Annual Report on Form 10-K.

For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2020 Annual Report on Form 10-K.

Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

For the Company and its subsidiary, the functional currency has been determined to be U.S.

For the Company and its subsidiaries, the functional currency has been determined to be U.S.

Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates.

5 unchanged sentences

Actual results could differ from those estimates, and such differences could be material to the Condensed Consolidated Balance Sheets and Statements of Operations and Comprehensive Loss.

Reclassifications

Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation.

Such reclassifications have not materially affected previously reported amounts.

Concentration of Credit Risk and Other Risks and Uncertainties

6 unchanged sentences

The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Condensed Consolidated Balance Sheets.

As of March 31, 2021 and December 31, 2020, the Company had no off balance sheet concentrations of credit risk.

As of June 30, 2021 and December 31, 2020, the Company had no off balance sheet concentrations of credit risk.

The Company is exposed to counterparty credit risk on all of its derivative financial instruments.

5 unchanged sentences

Credit risk associated with investments in securities may increase if any institution with which the Company has an investment is significantly impacted by the COVID-19 pandemic.

As of March 31, 2021, the Company has not realized any losses on its cash deposits or investments.

As of June 30, 2021, the Company has not realized any losses on its cash deposits or investments.

COVID-19 may impact the timelines and progress of the Company's preclinical activities and clinical trials, and may impact its ability to raise capital in the near term.

16 unchanged sentences

Accounts Receivable

Accounts receivable are included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

The accounts receivable balance represents amounts receivable from the Company's collaboration partners, net of an allowance for credit losses, if required.

The accounts receivable balance is primarily composed of amounts receivable from the Company's collaboration partners, net of an allowance for credit losses, if required.

Derivatives and Hedging Activities

3 unchanged sentences

A determination is made as to whether an arrangement is a lease at inception.

A right-of-use (“ROU”) asset an d operating lease liability is recognized for identified operating leases in the Condensed Consolidated Balance Sheets.

A right-of-use (“ROU”) asset and operating lease liability is recognized for identified operating leases in the Condensed Consolidated Balance Sheets.

The changes in operating lease ROU assets and operating lease liabilities are presented net within non-cash adjustment to operating lease expense in the Condensed Consolidated Statements of Cash Flows.

Certain amounts for the three months ended March 31, 2020 were reclassified to conform to the current period presentation.

ROU assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

61 unchanged sentences

Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):

March 31, 2021

June 30, 2021

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Money market funds $ 383,472 $ — $ — $ 383,472

government treasuries 49,999 — — 49,999

Commercial paper — 29,999 — 29,999

Short-term marketable securities:

27 unchanged sentences

Total $ — $ 11 $ — $ 11

The carrying amounts of prepaid expenses and other current assets, accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

The carrying amounts of accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

The Company’s Level 2 securities are valued using third-party pricing sources.

2 unchanged sentences

Marketable Securities

All marketable securities were considered available-for-sale at March 31, 2021 and December 31, 2020.

All marketable securities were considered available-for-sale at June 30, 2021 and December 31, 2020.

On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements".

The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):

March 31, 2021

June 30, 2021

Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value

22 unchanged sentences

(3) Unrealized holding losses on 6 securities with an aggregate fair value of $ 47.6 million.

(4) Unrealized holding losses on 4 securities with an aggregate fair value of $ 22.6 million.

December 31, 2020

23 unchanged sentences

(3) Unrealized holding losses on 1 security with an aggregate fair value of $ 20.1 million.

As of March 31, 2021 and December 31, 2020, some of the Company's marketable securities were in an unrealized loss position.

The Company has no t recognized an allowance for credit losses as of March 31, 2021 or December 31, 2020.

As of June 30, 2021 and December 31, 2020, some of the Company's marketable securities were in an unrealized loss position.

The Company has no t recognized an allowance for credit losses as of June 30, 2021 or December 31, 2020.

The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery.

1 unchanged sentence

All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than twelve months or the loss is not material.

The Company recorded unrealized gains on marketable securities in other comprehensive income for the three months ended March 31, 2020.

As a result, the Company recorded a tax benefit of $ 0.1 million for the three months ended March 31, 2020 on the Condensed Consolidated Statements of Operations and Comprehensive Loss and a corresponding tax charge in other comprehensive income.

The Company recorded an unrealized gain on marketable securities in other comprehensive income for the six months ended June 30, 2020.

As a result, the Company recorded a tax benefit of $ 0.1 million for the six months ended June 30, 2020 on the Condensed Consolidated Statements of Operations and Comprehensive Loss and a corresponding tax charge in other comprehensive income.

There was no unrealized gain on marketable securities in other comprehensive income for the three months ended June 30, 2020.

All of the Company’s marketable securities have an effective maturity of less than two years .

7 unchanged sentences

Information regarding the specific instruments used by the Company to hedge its exposure to foreign currency exchange rate fluctuations is provided below.

The following table summarizes the Company’s forward foreign currency exchange contracts outstanding as of March 31, 2021 and December 31, 2020, respectively (notional amounts in thousands):

The following table summarizes the Company’s forward foreign currency exchange contracts outstanding as of June 30, 2021 and December 31, 2020, respectively (notional amounts in thousands):

Foreign Exchange Contracts Number of Contracts Aggregate Notional (1) Amount in Foreign Currency

26 4,305 Apr 2021- Mar 2022

20 3,050 July 2021 - June 2022

British Pounds

11 963 Apr 2021- Nov 2021

Total at March 31, 2021

17 3,120 July 2021 - June 2022

Total at June 30, 2021

26 3,855 Jan 2021 - Nov 2021

4 unchanged sentences

(1) The notional amount represents the net amount of foreign currency that will be received upon maturity of the forward contracts.

A derivative liability balance of $ 0.2 million is recorded on the Condensed Consolidated Balance Sheets as of March 31, 2021 and an immaterial derivative liability balance is recorded on the Condensed Consolidated Balance Sheets as of December 31, 2020.

An immaterial derivative asset balance is recorded in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of March 31, 2021 and a derivative asset balance of $ 0.2 million is recorded in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of December 31, 2020.

A net loss of $ 0.2 million associated with the Company's derivative instruments is recognized in interest and other income, net on the Condensed Consolidated Statements of Operations and Comprehensive Loss for each of the three months ended March 31, 2021 and March 31, 2020.

Collaboration Agreements

24 unchanged sentences

In connection with the Provisional Biogen Collaboration Agreement, the Company entered into a common stock purchase agreement (the "Stock Purchase Agreement") with BIMA on August 5, 2020, pursuant to which the Company agreed to issue and sell, and BIMA agreed to purchase, 13,310,243 shares of the Company’s common stock (the “Shares”) for an aggregate purchase price of $ 465.0 million pursuant to the terms and conditions thereof.

Since the shares of common stock owned by Biogen as of March 31, 2021 represent more than 10% of the voting interest of the Company, Biogen is considered a related party as defined in ASC 850.

Since the shares of common stock owned by Biogen as of June 30, 2021 represent more than 10% of the voting interest of the Company, Biogen is considered a related party as defined in ASC 850.

Management determined that it was appropriate to account for the Provisional Biogen Collaboration Agreement and the SPA as one arrangement because they were entered into at the same time with interrelated financial terms.

7 unchanged sentences

Furthermore, Biogen is obligated to pay to the Company royalties in the mid-single digit to mid-teens percentages, depending on the program for which Biogen exercises its option and upon the achievement of certain sales thresholds.

In October 2020, the Company received upfront payments totaling $ 560.0 million pursuant to the Biogen Collaboration Agreement.

The Biogen Collaboration Agreement is considered a contract modification to the Provisional Biogen Collaboration Agreement and was accounted for as a termination of the provisional agreement and commencement of a new contract.

9 unchanged sentences

All potential future milestones and other payments were considered constrained at the inception of the Biogen Collaboration Agreement since the Company could not conclude it was probable that a significant reversal in the amount recognized would not occur.

From inception of the Biogen Collaboration Agreement through March 31, 2021, there was no change to the transaction price.

From inception of the Biogen Collaboration Agreement through June 30, 2021, there was no change to the transaction price.

The respective standalone value for each of the performance obligations was determined by applying the SSP method and the transaction price was allocated based on the relative SSP method with revenue recognition timing to be determined either by delivery, resolution of an option, or the provision of services.

4 unchanged sentences

The LRRK2 Development Activities cost sharing reimbursements or expenses will be recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed.

A related party contract liability of $ 296.5 million was recorded on the Consolidated Balance Sheet as of March 31, 2021.

A related party contract liability of $ 295.7 million was recorded on the Consolidated Balance Sheet as of June 30, 2021.

Approximately $ 288.9 million of this contract liability relates to the revenue allocated to the material right for an option under the ROFN and Option Agreement which is being deferred until resolution of the option which is expected to be several years from the balance sheet date, and $ 6.8 million of this contract liability relates to the portion of the Option Research Services performance obligation yet to be satisfied, with such amount to be recognized over the estimated period of the services, which is expected to be several years.

The Company recorded $ 2.5 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2021.

The Company recorded cost sharing reimbursements due from Biogen on the Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020 of $ 2.5 million and $ 5.7 million, respectively.

The Company recorded $ 1.6 million and $ 4.1 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Consolidated Statement of Operations and Comprehensive Income for the three and six months ended June 30, 2021, respectively.

The Company recorded cost sharing reimbursements due from Biogen on the Condensed Consolidated Balance Sheet as of June 30, 2021 and December 31, 2020 of $ 1.6 million and $ 5.7 million, respectively.

In assessing the Biogen Collaboration Agreement, management exercised considerable judgment in estimating revenue to be recognized, specifically related to estimating the discount for lack of marketability associated with the stock issuance, determining the separate performance obligations under the Biogen Collaboration Agreement, and estimating the standalone selling price of those performance obligations.

As of March 31, 2021, the Company had no t achieved any milestones or recorded any product sales under the Biogen Collaboration Agreement.

As of June 30, 2021, the Company had no t achieved any milestones or recorded any product sales under the Biogen Collaboration Agreement.

In October 2018, the Company entered into a Collaboration and License Agreement ("Sanofi Collaboration Agreement") with Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A.

22 unchanged sentences

All potential future milestones and other payments were considered constrained at the inception of the Sanofi Collaboration Agreement since the Company could not conclude it was probable that a significant reversal in the amount recognized would not occur.

The transaction price did no t increase in the three months ended March 31, 2021, and increased by $ 0.5 million for the three months ended March 31, 2020 related to costs incurred for Retained Activities that were no longer constrained.

The transaction price increased by $ 15.0 million in the three and six months ended June 30, 2021 related to the $ 15.0 million milestone triggered in June 2021 upon first patient in a Phase 2 study of DNL758 (SAR443122) in patients with cutaneous lupus erythematosus , and increased by $ 0.3 million and $ 0.8 million for the three and six months ended June 30, 2020, respectively, related to costs incurred for Retained Activities that were no longer constrained.

The respective standalone value for each of the performance obligations was determined by applying the SSP method and the transaction price allocated based on the relative SSP method with revenue recognition timing to be determined either by delivery or the provision of services.

4 unchanged sentences

For the Retained Activities, revenue is being recognized over time using the output method, based on amounts invoiced to Sanofi, since this is believed to directly correlate to the value of the services performed.

A contract liability of $ 3.4 million was recorded on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020.

A contract liability of $ 3.4 million was recorded on the Condensed Consolidated Balance Sheets as of both June 30, 2021 and December 31, 2020.

This contract liability relates to the portion of the Alzheimer's Disease Services performance obligation yet to be satisfied, with such amounts to be recognized over the estimated period of the services, which is expected to be several years.

The Company recorded no receivable associated with the Sanofi Collaboration Agreement on the Condensed Consolidated Balance Sheets as of March 31, 2021, and a receivable of $ 44,303 as of December 31, 2020.

The Company recorded a receivable of $ 15.0 million and $ 44,303 associated with the Sanofi Collaboration Agreement on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively.

In assessing the Sanofi Collaboration Agreement, management is required to exercise considerable judgment in estimating revenue to be recognized.

Managem ent applies judgment in determining the separate performance obligations, in estimating the selling price, in determining when control was transferred to Sanofi for the licenses, and in estimating total future costs when using the input method.

Through March 31, 2021, the Company has received milestone payments of $ 10.0 million and has no t recorded any product sales under the Sanofi Collaboration Agreement.

Through June 30, 2021, the Company has earned milestone payments of $ 25.0 million, including a $ 15.0 million milestone triggered in June 2021 which the Company received in July 2021.

The company has no t recorded any product sales under the Sanofi Collaboration Agreement.

In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"), pursuant to which the Company granted Takeda an option to develop and commercialize, jointly with the Company, certain biologic products that are enabled by the Company's BBB delivery technology and intended for the treatment of neurodegenerative disorders.

31 unchanged sentences

Revenue is being recognized over time using the input method, based on costs incurred to perform the research services, since the level of costs incurred over time is thought to best reflect the transfer of services to Takeda.

There were no material changes in estimates during the three months ended March 31, 2021 or March 31, 2020.

A contract liability of $ 40.8 million and $ 39.8 million was recorded on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.

This contract liability relates to the three performance obligations identified, with such amounts to be recognized over the estimated period of the pre-IND research services, which is expected to be several years.

In December 2020 and January 2021, GLP toxicology studies were initiated for PTV:PGRN and ATV:TREM2, respectively, triggering the second preclinical milestone payments of $ 8.0 million for each program, which were received in January and March 2021, respectively.

There was no receivable as of March 31, 2021 and a receivable of $ 8.0 million for the PTV:PGRN milestone as of December 31, 2020.

There were no material changes in estimates during the three and six months ended June 30, 2021 or June 30, 2020.

A contract liability of $ 33.7 million and $ 39.8 million was recorded on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively.

There was no receivable as of June 30, 2021 and a receivable of $ 8.0 million for a PTV:PGRN preclinical milestone as of December 31, 2020.

In assessing the Takeda Collaboration Agreement, management is required to exercise considerable judgment in estimating revenue to be recognized.

Management applies judgment in determining the separate performance obligations in the research period and estimating total future costs when using the input method.

There is some increase in the judgment required in estimating the timing of future costs due to the COVID-19 pandemic.

This is because it is challenging to predict the duration and extent of the impact of the COVID-19 pandemic on the third-party service providers assisting with the Company's ATV:Tau, ATV:TREM2 and PTV:PGRN programs.

This may impact the split between current and non-current contract liability on the Condensed Consolidated Balance Sheets in the future.

Through March 31, 2021, the Company had received $ 31.0 million in preclinical milestone payments from Takeda which are included in the transaction price described above, and had no t recorded any product sales under the Takeda Collaboration Agreement.

Through June 30, 2021, the Company has received $ 31.0 million in preclinical milestone payments from Takeda which are included in the transaction price described above, and has no t recorded any product sales under the Takeda Collaboration Agreement.

Collaboration Revenue

Revenue disaggregated by collaboration agreement and performance obligation is as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Takeda Collaboration Agreement (1)

1 unchanged sentence

Sanofi Collaboration Agreement

Peripheral Program License 15,000 — 15,000 —

Retained Activities — 274 — 808

3 unchanged sentences

Option Research Services (2)

794 — 1,686 —

Total Biogen Collaboration Revenue $ 794 $ — $ 1,686 $ —

Total Collaboration Revenue $ 22,939 $ 5,847 $ 30,862 $ 9,451

_________________________________________________

(1) $ 5.7 million of revenue for the three months ended March 31, 2021 and all of revenue for the three months ended March 31, 2020 was included in the contract liability balance at the beginning of the period.

(2) Revenue for the three months ended March 31, 2021 and March 31, 2020, where applicable, represent amounts that were included in the contract liability balance at the beginning of the respective period.

(1) $ 11.8 million of revenue for the six months ended June 30, 2021 was included in the contract liability balance at the beginning of the period.

All revenue for the three months ended June 30, 2021 and the three and six months ended June 30, 2020 was included in the contract liability balance at the beginning of the period.

(2) Revenue for the three and six months ended June 30, 2021 and June 30, 2020, where applicable, represent amounts that were included in the contract liability balance at the beginning of the respective period.

License Agreements

8 unchanged sentences

To date, the Company has paid Genentech $ 12.5 million in the aggregate, including an upfront fee, a technology transfer fee and a clinical milestone payment, all of which was recorded as research and development expense as incurred.

No expenses were recorded in the three months ended March 31, 2021 or 2020.

No expenses were recorded in the three and six months ended June 30, 2021 or 2020.

Commitments and Contingencies

5 unchanged sentences

The Company determined that this renewal was not reasonably certain at lease inception.

The remaining lease term was 8.1 years at March 31, 2021.

The remaining lease term was 7.8 years at June 30, 2021.

The Headquarters Lease Amendment provides for monthly base rent amounts escalating over the term of the lease.

In addition, the Headquarters Lease Amendment provided a tenant improvement allowance ("TIA") of up to $ 25.9 million, which was fully utilized, of which $ 4.4 million will be repaid to the landlord in the form of additional monthly rent.

This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020.

This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020.

The Company is also required to pay the operating expenses for the New Premises, such as taxes and insurance, which are treated as variable lease payments.

2 unchanged sentences

To estimate the incremental borrowing rate, management considered observable debt yields of comparable market instruments, as well as benchmarks within the Headquarters Lease Amendment that may be indicative of the rate implicit in the lease.

Total operating lease costs, including variable and short-term lease costs, were $ 2.8 million and $ 2.6 million for the three months ended March 31, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2021 and March 31, 2020 of $ 2.5 million and $ 2.2 million, respectively, was included in net cash used in operating activities in the Company's Condensed Consolidated Statements of Cash Flows.

The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating lease liabilities recorded in the Condensed Consolidated Balance Sheet as of March 31, 2021 (in thousands):

Total operating lease costs, including variable and short-term lease costs, were $ 2.8 million and $ 5.6 million for the three and six months ended June 30, 2021, respectively, and $ 2.9 million and $ 5.5 million for the three and six months ended June 30, 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2021 and June 30, 2020 of $ 5.1 million and $ 4.7 million, respectively, was included in net cash used in operating activities in the Company's Condensed Consolidated Statements of Cash Flows.

Year Ended December 31:

2021 (nine months) $ 7,855

2021 (six months) $ 5,237

Thereafter 42,148

5 unchanged sentences

The Company also passes through a portion of the operating expenses, such as taxes and insurance for the New Premises to the sublessee, which are treated as variable sublease income.

Total sublease income, including rent and variable sublease cost reimbursements, was $ 0.9 million for both the three months ended March 31, 2021 and 2020.

The following table details the future undiscounted cash inflows relating to the Sublease Agreement as of March 31, 2021 (in thousands):

Total sublease income, including rent and variable sublease cost reimbursements, was $ 1.0 million for both the three months ended June 30, 2021 and 2020, and $ 1.9 million for both the six months ended June 30, 2021 and 2020.

The following table details the future undiscounted cash inflows relating to the Sublease Agreement as of June 30, 2021 (in thousands):

Year Ended December 31:

2021 (nine months) $ 2,209

2021 (six months) $ 1,474

Total undiscounted sublease receipts $ 8,455

6 unchanged sentences

Unless earlier terminated, the DMSA will expire on September 6, 2022.

As of March 31, 2021 and December 31, 2020, the Company had open purchase orders for biological product development and manufacturing costs totaling $ 33.4 million and $ 33.0 million, respectively.

As of June 30, 2021 and December 31, 2020, the Company had open purchase orders for biological product development and manufacturing costs totaling $ 32.5 million and $ 33.0 million, respectively.

The activities under these purchase orders are expected to be completed by February 2028.

As of March 31, 2021 and December 31, 2020, the Company had total non-cancellable purchase commitments under the DMSA of $ 28.5 million and $ 27.1 million, respectively, under the DMSA.

During the three months ended March 31, 2021 and 2020, the Company incurred costs of $ 5.2 million and $ 1.0 million, respectively, and made payments of $ 0.7 million and $ 3.2 million, respectively, for the development and manufacturing services rendered under the DMSA.

As of June 30, 2021 and December 31, 2020, the Company had total non-cancellable purchase commitments under the DMSA of $ 28.4 million and $ 27.1 million, respectively, under the DMSA.

During the three months ended June 30, 2021 and 2020, the Company incurred costs of $ 3.2 million and $ 3.8 million, respectively, and made payments of $ 5.7 million and $ 2.0 million, respectively, for the development and manufacturing services rendered under the DMSA.

During the six months ended June 30, 2021 and 2020, the Company incurred costs of $ 8.4 million and $ 4.8 million, respectively, and made payments of $ 6.4 million and $ 5.2 million, respectively, for the development and manufacturing services rendered under the DMSA.

Contingencies

1 unchanged sentence

The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.

On September 10, 2020, the Company and all Directors were named in a shareholder derivative action filed in the Delaware Court of Chancery challenging the compensation paid to the Company's Directors since the initial public offering ("IPO") in December 2017.

On September 10, 2020, the Company and all Directors were named in a shareholder derivative action filed in the Delaware Court of Chancery ("the Court") challenging the compensation paid to the Company's Directors since the initial public offering ("IPO") in December 2017.

On January 13, 2021, the parties to the derivative action entered into a settlement agreement, the terms of which were disclosed in a Form 8-K filed on February 5, 2021.

The settlement agreement was approved by the Court on April 16, 2021.

Amounts owed by the Company pursuant to the settlement agreement are not material to the Company.

Amounts paid by the Company pursuant to the settlement agreement were determined to not be material.

Stock-Based Awards

1 unchanged sentence

Stock Option Activity

The following table summarizes stock option activity for the three months ended March 31, 2021:

The following table summarizes stock option activity for the six months ended June 30, 2021:

Number of Options

5 unchanged sentences

( 131,100 ) 32.76

Balance at March 31, 2021 14,230,277 $ 23.22

Vested and expected to vest at March 31, 2021 13,357,914 $ 24.69

Exercisable at March 31, 2021 7,013,040 $ 14.01

Balance at June 30, 2021 13,993,984 $ 23.60

Vested and expected to vest at June 30, 2021

13,121,621 $ 25.13

Exercisable at June 30, 2021 7,487,043 $ 14.67

The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model using the following assumptions:

Three Months Ended March 31,

Six Months Ended June 30,

Expected term (in years)

6 unchanged sentences

Restricted Stock Activity

The following table summarizes restricted stock unit ("RSU") activity for the three months ended March 31, 2021:

The following table summarizes restricted stock unit ("RSU") activity for the six months ended June 30, 2021:

Number of RSU shares Weighted-Average Fair Value at Date of Grant per Share

3 unchanged sentences

Forfeited ( 63,050 ) 35.03

Unvested at March 31, 2021 2,699,107 $ 40.24

Expected to vest at March 31, 2021 2,699,107 $ 40.24

Unvested at June 30, 2021 2,646,901 $ 41.13

Expected to vest at June 30, 2021 2,646,901 $ 41.13

Stock-Based Compensation Expense

The Company’s results of operations include expenses relating to stock-based compensation as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Research and development

2 unchanged sentences

8,627 5,338 17,341 10,069

$ 21,136 $ 12,484 $ 42,164 $ 23,269

Net Loss Per Share

1 unchanged sentence

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

Three Months Ended March 31,

Three and Six Months Ended June 30,

Options issued and outstanding and ESPP shares issuable

3 unchanged sentences

16,703,624 16,024,847

Related Party Transactions

On September 22, 2020, upon becoming an owner of record of more than 10% of the voting interest in the Company, Biogen became a related party under ASC 850.

Refer to Note 5, "Collaboration Agreements" for further information.

Subsequent Event

In July 2021, a side letter was executed to the Company's agreements with F-star, which are disclosed in footnote 5 in the 2020 Annual Report on Form 10-K.

This side letter confirmed the completion of the research services performed by F-star Ltd that were funded by the Company.

The execution of the side letter is not expected to have any impact on the financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements