4 unchanged sentences
Evaluation of disclosure controls and procedures
−Removed: Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
−Removed: Based on that evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.
+Added: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
+Added: Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.
Management’s annual report on internal control over financial reporting
7 unchanged sentences
Other Information.
+Added: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Directors, Executive Officers and Corporate Governance.
2 unchanged sentences
The information required by this item will be included in our 2022 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
−Removed: Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.
+Added: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be included in our 2022 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
3 unchanged sentences
The information required by this item will be included in our 2022 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
−Removed: Exhibits, Financial Statement Schedules.
+Added: Exhibits and Financial Statement Schedules.
(a)(1) Financial Statements
1 unchanged sentence
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Report of Independent Registered Public Accounting Firm
+Added: Report of Independent Registered Public Accounting Firm (PCAOB ID:
Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and December 31, 2020
−Removed: Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020 and December 31, 2019
+Added: Consolidated Statements of C hanges in Stockholders’ Equity for the Years Ended December 31, 2021 and December 31, 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and December 31, 2020
3 unchanged sentences
(a)(3) Exhibits
−Removed: The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
+Added: The following is a list of exhibits filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.
Exhibit Index
16 unchanged sentences
6, dated October 16, 2020, to Development and Commercial License Agreement by and between Les Laboratoires Servier, Institut de Recherches Internationales Servier and Precision BioSciences, Inc., dated February 24, 2016, as amended
+Added: Program Purchase Agreement by and among Les Laboratoires Servier, Institut de Recherches Internationales Servier, and Precision BioSciences, Inc., dated April 9, 2021
Development and License Agreement between Eli Lilly and Company and Precision BioSciences, Inc., dated November 19, 2020
+Added: First Amendment to Development and License Agreement between Precision BioSciences, Inc.
+Added: and Eli Lilly and Company, dated August 9, 2021
Stock Purchase Agreement between Eli Lilly and Company and Precision BioSciences, Inc., dated November 19, 2020
3 unchanged sentences
and Venable Tenant, LLC, dated April 5, 2010, as amended
−Removed: Lease Agreement between Elo Life Systems, Inc.
−Removed: and ARE‑NC Region No.
−Removed: 17, LLC, dated March 29, 2018, as amended
Lease Agreement between Precision BioSciences, Inc.
4 unchanged sentences
2019 Employee Stock Purchase Plan
−Removed: Employment Agreement between Precision BioSciences, Inc.
−Removed: and Matthew Kane, dated February 27, 2019
−Removed: Employment Agreement between Precision BioSciences, Inc.
+Added: 2021 Employment Inducement Incentive Award Plan and form of award agreements thereunder
+Added: Amended and Restated Executive Employment Agreement between Precision BioSciences, Inc.
and Derek Jantz, dated February 27, 2019
−Removed: Employment Agreement between Precision BioSciences, Inc.
−Removed: and David Thomson, dated February 27, 2019, as amended
−Removed: Employment Agreement between Precision BioSciences, Inc.
−Removed: and Fayaz Khazi, dated February 27, 2019
−Removed: Employment Agreement between Precision BioSciences, Inc.
−Removed: and Christopher Ryan Heery, dated April 1, 2019
−Removed: Employment Agreement between Precision BioSciences, Inc.
+Added: Executive Employment Agreement between Precision BioSciences, Inc.
and Dario Scimeca dated April 11, 2019
1 unchanged sentence
and its directors and officers
−Removed: Non‑Employee Director Compensation Plan
+Added: Non‑Employee Director Compensation Plan (as amended)
+Added: Transition and Separation Agreement between Precision BioSciences, Inc.
+Added: and Matthew Kane, dated April 5, 2021
+Added: Executive Employment Agreement between Precision BioSciences, Inc.
+Added: Alan List, dated April 26, 2021
+Added: Consulting Agreement between Precision BioSciences, Inc.
+Added: Chris Heery, dated April 23, 2021
+Added: Amended and Restated Executive Employment Agreement between Precision BioSciences, Inc.
+Added: and Alex Kelly, dated May 27, 2021
+Added: Executive Employment Agreement, dated September 18, 2021, by and between Michael Amoroso and Precision Biosciences, Inc
+Added: Consulting Agreement between Precision BioSciences, Inc.
+Added: David Thomson, dated July 2, 2021.
Subsidiaries of Precision BioSciences, Inc.
12 unchanged sentences
XBRL Taxonomy Extension Presentation Linkbase Document
+Added: Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101)
Filed herewith
2 unchanged sentences
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
−Removed: Denotes a management contract or compensation plan or arrangement
+Added: Denotes a management contract or compensatory plan or arrangement
Form 10-K Summary.
2 unchanged sentences
March 15, 2022
−Removed: /s/Matthew Kane
+Added: /s/ Michael Amoroso
+Added: Michael Amoroso
President, Chief Executive Officer and Director
+Added: (principal executive office and authorized signatory)
+Added: March 15, 2022
+Added: /s/ John Alexander Kelly
+Added: John Alexander Kelly
+Added: Chief Financial Officer
+Added: (principal financial officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
−Removed: /s/ Matthew Kane
+Added: /s/ Michael Amoroso
President, Chief Executive Officer and Director
1 unchanged sentence
March 15, 2022
−Removed: /s/ Derek Jantz
−Removed: Chief Scientific Officer and Director
−Removed: ( principal executive officer )
−Removed: March 18, 2021
−Removed: Derek Jantz, Ph.D.
+Added: Michael Amoroso
/s/ John Alexander Kelly
−Removed: Interim Chief Financial Officer
+Added: Chief Financial Officer
( principal financial officer )
5 unchanged sentences
March 15, 2022
+Added: /s/ Derek Jantz
+Added: Chief Scientific Officer and Director
+Added: March 15, 2022
+Added: Derek Jantz, Ph.D.
/s/ Raymond Schinazi
9 unchanged sentences
March 15, 2022
+Added: /s/ Stanley Frankel
March 15, 2022
−Removed: Tony Yao, M.D., Ph.D.
+Added: Stanley Frankel, M.D.
+Added: /s/ Shari Lisa Pir é
+Added: March 15, 2022
+Added: Shari Lisa Pir é, J.D.
+Added: /s/ Sam Wadsworth
+Added: March 15, 2022
+Added: Sam Wadsworth, Ph.D.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
2 unchanged sentences
We have audited the accompanying consolidated balance sheets of Precision BioSciences, Inc.
−Removed: and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").
+Added: and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
17 unchanged sentences
We have served as the Company's auditor since 2017.
−Removed: FINANCI AL INFORMATION
+Added: FINANCIAL INFORMATION
Financial Statements.
13 unchanged sentences
Right-of-use assets—net
+Added: Investment in equity securities
+Added: Equity method investments
+Added: Note receivable—net
Liabilities and Stockholders’ Equity
2 unchanged sentences
Accrued compensation
−Removed: Accrued clinical and research and development expenses
+Added: Accrued clinical research and development expenses
Deferred revenue
3 unchanged sentences
Deferred revenue
−Removed: Deferred rent
Lease liabilities
+Added: Long term debt—net
+Added: Contract liabilities
Other noncurrent liabilities
Total liabilities
−Removed: Commitments and contingencies (Note 7)
Stockholders’ equity:
20 unchanged sentences
Other income (expense), net:
−Removed: Change in fair value of convertible notes payable
+Added: Gain on changes in fair value
+Added: Gain on deconsolidation of subsidiary
+Added: Income from equity method investments
Interest expense
7 unchanged sentences
See notes to consolidated financial statements
−Removed: PRE CISION BIOSCIENCES, INC.
+Added: PRECISION BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
−Removed: STOCKHOLDERS’ EQUITY (DEFICIT)
+Added: STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
−Removed: Series A Convertible
−Removed: Preferred Stock
−Removed: Series B Convertible
−Removed: Preferred Stock
Stockholder's
Balance- January 1,
−Removed: Adjustment to beginning
−Removed: accumulated deficit
−Removed: from adoption of
−Removed: Conversion of convertible
−Removed: preferred stock into
−Removed: common stock upon
−Removed: initial public offering
−Removed: Issuance of common
−Removed: stock upon conversion
−Removed: of convertible notes
−Removed: Issuance of common
−Removed: stock in initial public
−Removed: offering, net of
−Removed: discounts and issuance
Stock option exercises
+Added: Issuance of common stock under employee
+Added: stock purchase plan
Balance- December 31,
2 unchanged sentences
stock purchase plan
+Added: Share-based compensation expense
+Added: Issuance of common stock to collaboration partners
+Added: Proceeds from issuance of common stock, net of issuance cost
Balance- December 31,
8 unchanged sentences
Share-based compensation
−Removed: Loss on disposal of property, equipment, and software
+Added: Loss on disposal of assets
Non-cash interest expense
−Removed: Change in fair value of convertible notes payable
Amortization of right-of-use assets
+Added: Non-cash consideration received from collaboration partners
+Added: Gain on changes in fair value
+Added: Gain on deconsolidation of subsidiary
+Added: Income from equity method investments
+Added: Amortization of discount on note receivable
Changes in operating assets and liabilities:
3 unchanged sentences
Accounts payable
−Removed: Other current liabilities
+Added: Other liabilities and other current liabilities
Deferred revenue
Lease liabilities and right-of-use assets
−Removed: Other noncurrent liabilities
+Added: Contract liabilities
Net cash used in operating activities
1 unchanged sentence
Purchases of property, equipment and software
+Added: Purchases of intangibles assets
Net cash used in investing activities
2 unchanged sentences
Proceeds from employee stock purchase plan
−Removed: Deferred offering costs
−Removed: Issuance of convertible notes payable
−Removed: Proceeds from IPO, net of underwriting discounts and commissions
+Added: Proceeds from issuance of common stock to collaboration partners
+Added: Proceeds from offering of common stock, net of issuance costs
+Added: Proceeds from issuance of term loan, net of issuance costs paid to lender
+Added: Debt issuance costs
+Added: Payment of term loan
+Added: Borrowings from revolving credit facility
Net cash provided by financing activities
3 unchanged sentences
Supplemental disclosures of noncash financing and investing activities:
−Removed: Common stock issued on conversion of convertible notes payable
Property, equipment and software additions included in accounts payable,
accrued expenses and other current liabilities
−Removed: Deferred offering costs included in accounts payable, accrued expenses
−Removed: and other current liabilities
+Added: Unsettled at-the-market issuances of common stock included in other current assets
+Added: Contract liability accrual related to Servier Program Purchase Agreement milestones
+Added: Non-cash consideration received from collaboration partners
See notes to consolidated financial statements
Precision BioSciences, Inc.
−Removed: Notes to C onsolidated Financial Statements
+Added: Notes to Consolidated Financial Statements
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2 unchanged sentences
(the “Company”) was incorporated on January 26, 2006 under the laws of the State of Delaware and is based in Durham, North Carolina.
−Removed: The Company is dedicated to improving life through the application of its pioneering, proprietary ARCUS genome editing platform to treat human diseases and create healthy and sustainable food and agricultural solutions.
−Removed: The Company is actively developing product candidates through two reportable segments:
−Removed: Therapeutics and Food.
−Removed: The Therapeutics segment is focused on allogeneic CAR T cell immunotherapy and in vivo gene correction.
−Removed: The Food segment focuses on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies.
+Added: The Company is a clinical stage gene editing company dedicated to improving life by developing ex vivo allogeneic CAR T immunotherapies and in vivo therapies for genetic and infectious diseases with the application of the Company’s wholly owned proprietary ARCUS genome editing platform.
The Company’s 100 % owned subsidiary, Precision PlantSciences, Inc., was incorporated on January 4, 2012 .
1 unchanged sentence
amended its certificate of incorporation on January 16, 2018 to change its name to Elo Life Systems, Inc.
−Removed: Elo Life Systems Australia Pty Ltd was incorporated on May 29, 2018 as a 100% owned subsidiary of Elo Life Systems, Inc.
−Removed: Additionally, the Company’s 100% owned subsidiary, Precision BioSciences UK Limited, was incorporated on June 17, 2019.
−Removed: The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries.
+Added: In December 2021, the Company entered into an agreement with a syndicate of investors, pursuant to which the Company contributed substantially all of the assets of Elo Life Systems, Inc.
+Added: In connection with the Elo Transaction, Elo Life Systems, Inc.
+Added: amended its certificate of incorporation on December 21, 2021 to change its name back to Precision PlantSciences, Inc.
+Added: in order to permit a newly formed entity (“New Elo”) to change its name to Elo Life Systems, Inc.
+Added: The Company’s 100 % owned subsidiary, Precision BioSciences UK Limited, was incorporated on June 17, 2019 .
+Added: The accompanying consolidated financial statements include the accounts of the Company and its subsidiary.
Intercompany balances and transactions have been eliminated in consolidation.
3 unchanged sentences
The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, obtain regulatory approval of its products, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations.
−Removed: On April 1, 2019, the Company completed its initial public offering (“IPO”) in which the Company issued and sold 9,085,000 shares of its common stock at a public offering price of $16.00 per share and received approximately $130.5 million in net proceeds, after deducting underwriting discounts and commission of approximately $10.2 million and issuance costs of approximately $4.6 million.
−Removed: In connection with the IPO, on March 15, 2019 the Company effected a reverse split of shares of the Company’s common stock on a 1-for-2.134686 basis (the “Reverse Stock Split”) of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for the Company’s Series A and Series B preferred stock.
−Removed: Accordingly, all common shares, stock option shares, and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this Reverse Stock Split and adjustment of the preferred stock conversion ratios.
−Removed: Authorized common shares were not affected by the Reverse Stock Split.
−Removed: Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 22,301,190 shares of common stock at the applicable ratio then in effect and the outstanding convertible notes payable, including accrued interest, were settled into 2,921,461 shares of common stock.
−Removed: Subsequent to the closing of the IPO, there were no shares of Series A or Series B convertible preferred stock or convertible notes payable outstanding.
Use of Estimates
7 unchanged sentences
During the year ended December 31, 2021, the Company incurred a net loss of $ 30.6 million and, as of December 31, 2021, has an accumulated deficit of $ 316.7 million.
−Removed: The Company has financed operations primarily through upfront payments from collaboration and licensing agreements, its initial public
−Removed: offering (“IPO”), and private placements of convertible preferred stock and convertible debt .
+Added: The Company has financed its operations primarily through proceeds from upfront and milestone payments from collaboration and licensing agreements, the Company’s IPO, private placements of convertible preferred stock and convertible debt financings, at-the-market offerings of common stock, and borrowings on credit facilities.
The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.
−Removed: Management believes that cash and cash equivalents as of December 31, 2020, cash payments received from Lilly in January 2021 in connection with the closing of the Development and License Agreement, expected operational receipts and available credit will allow the Company to continue its operations into 2023.
+Added: Management believes that, as of the date of this Annual Report on Form 10-K, existing cash and cash equivalents, expected operational receipts and available credit will allow the Company to fund its operating expense and capital expenditure requirements into mid-2023.
In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations.
3 unchanged sentences
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.
−Removed: As of December 31, 2020, the Company held an insignificant amount of cash equivalents.
−Removed: As of December 31, 2019, the Company held cash equivalents composed of money market funds and repurchase agreements that were purchased through repurchase intermediary banks and collateralized by deposits in the form of government securities and obligations.
+Added: As of December 31, 2021 and December 31, 2020 , the Company held an insignificant amount of cash equivalents.
Concentrations of Credit Risk
−Removed: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash.
+Added: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and notes receivable.
All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality.
3 unchanged sentences
The Company has not experienced any losses on cash and cash equivalents to date.
−Removed: Revenue from two development and license agreements accounted for 16% and 74% of revenue during 2020 and 60% and 33% of revenue during 2019.
−Removed: One development and license agreement accounted for 98% of deferred revenue as of December 31, 2020.
−Removed: Deferred Equity Offering Costs
−Removed: The Company capitalizes incremental legal, professional accounting and other third-party fees directly associated with the Company’s planned equity offerings as other current assets until the equity offering is consummated.
−Removed: After consummation, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital.
−Removed: If the equity offering is aborted, any costs deferred are expensed immediately.
+Added: Revenue from Lilly and Servier accounted for 18 % and 63 % of revenue during 2021, respectively.
+Added: Revenue from Gilead and Servier accounted for 16 % and 74 % of revenue during 2020, respectively.
+Added: Lilly accounted for 100 % of deferred revenue as of December 31, 2021.
Property, Equipment and Software
19 unchanged sentences
An impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the asset.
+Added: Fair Value Measurements
+Added: Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
+Added: When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk.
+Added: ASC 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and
+Added: the Company’s assumptions (unobservable inputs).
+Added: Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from our independent sources.
+Added: 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.
+Added: The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used to value the assets and liabilities:
+Added: Level 1 - Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities
+Added: Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly
+Added: Level 3 - Unobservable inputs for which there is little or no market date, which require the Company to develop its own assumptions
+Added: To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.
+Added: A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
+Added: The Company’s cash equivalents are reported at fair value within Level 1 as the prices are available from quoted prices in active markets.
+Added: The Company’s equity investment in iECURE is reported at fair value within Level 3 as the assessed fair value was based on significant unobservable inputs given iECURE equity is not traded on a public exchange.
+Added: Investments in Equity Securities
+Added: The Company carries investments in equity securities for which it does not possess the ability to exercise significant influence or control at fair value in the consolidated balance sheets and records changes in fair value in the consolidated statements of operations as a component of other income or expense.
+Added: As of December 31, 2021, the Company held common stock in iECURE with a fair value of $ 3.1 million.
+Added: As of December 31, 2020, the Company did no t hold any investments in equity securities.
+Added: Investments under the Equity Method
+Added: The Company utilizes the equity method to account for investments when it is determined that the Company possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee.
+Added: The ability to exercise significant influence is presumed when the investor possesses more than 20 % of the voting interests of the investee.
+Added: This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.
+Added: In applying the equity method, the Company will subsequently increase or decrease the carrying amount of the investment by the Company’s proportionate share of the net earnings or losses and other comprehensive income of the investee.
+Added: In the event that net losses of the investee reduce the carrying amount to zero , additional net losses may be recorded if other investments in the investee are at-risk, even if the Company has not committed to provide financial support to the investee.
+Added: Such additional equity method losses, if any, are based upon the change in the Company’s claim on the investee’s book value.
+Added: As of December 31, 2021, the Company accounted for its investment in New Elo under the equity method.
+Added: The Company will subsequently increase or decrease the carrying amount of the investment in New Elo by the Company’s proportionate share of the net earnings or losses and other comprehensive income of New Elo.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”), to enhance the transparency and comparability of financial reporting related to leasing arrangements.
5 unchanged sentences
Certain adjustments to the right-of-use asset were required for items such as prepaid and deferred rent.
−Removed: In calculating the present value of the lease payments, the Company has elected to apply the discount rate based on the remaining lease term as of the transition date, January 1, 2020.
+Added: In calculating the present value of the lease payments, the Company has elected to apply the discount rate based on the remaining lease term as of the transition
+Added: date, January 1, 2020.
As the rate implicit in the lease is not readily determinable, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
4 unchanged sentences
The Company’s revenues are generated primarily through collaborative research, license, development and commercialization agreements.
−Removed: Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No.
−Removed: 2014-09, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method.
−Removed: The Company applied the modified retrospective transition method to contracts that were not completed as of January 1, 2019.
ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards.
8 unchanged sentences
Goods or services that meet these criteria are considered distinct performance obligations.
−Removed: If both these criteria are not met, the goods and services are
−Removed: combined into a single performance obligation.
+Added: If both these criteria are not met, the goods and services are combined into a single performance obligation.
The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
3 unchanged sentences
The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.
−Removed: For the year ended December 31, 2020, the Company recorded cumulative catch up adjustments that reduced revenue recognition by $5.2 million, in addition to a contract liability adjustment, for changes in total estimated effort to be incurred in the future to satisfy the performance obligation and changes to the transaction price related to variable consideration for development milestones that were constrained in prior periods.
+Added: For the year ended December 31, 2021, the Company recorded cumulative catch up adjustments on its contracts with customers that increased revenue recognition by $ 61.2 million;
+Added: the cumulative catch-up adjustments resulted from a change in the transaction price related to variable consideration for development milestones as well as changes in total estimated effort required to satisfy performance obligations.
+Added: During the year ended December 31, 2021, the Company recorded $ 74.2 million in revenue that was included in deferred revenue as of December 31, 2020.
Invoices issued as stipulated in contracts prior to revenue recognition are recorded as deferred revenue.
24 unchanged sentences
This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.
−Removed: For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope
+Added: For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606.
For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.
3 unchanged sentences
Research and development costs are expensed as incurred.
−Removed: Research and development expenses are comprised of costs incurred in performing research and development activities including salaries, benefits, share-based compensation, allocations for rent and facility costs, depreciation, preclinical manufacturing expenses, costs of services provided by contract research organizations (“CROs”) in connection with preclinical trials and contract manufacturing organizations (“CMOs”) engaged to manufacture clinical trial material, costs of licensing technology, and costs of services provided by research organizations and service providers.
+Added: Research and development expenses are comprised of costs incurred in performing research and development activities including salaries, benefits, share-based compensation, allocations for rent and facility costs, depreciation, preclinical manufacturing expenses, costs of services provided by CROs in connection with preclinical trials and CMOs engaged to manufacture clinical trial material, costs of licensing technology, and costs of services provided by research organizations and service providers.
Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
3 unchanged sentences
The financial terms of these contracts are subject to negotiations and vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts.
−Removed: The Company’s objective is to reflect the appropriate research and development expenses in its consolidated financial statements by matching those expenses with the period in which the services and efforts are expended.
+Added: The Company’s objective is to reflect the appropriate research and development expenses in its consolidated statements of operations by matching those expenses with the period in which the services and efforts are expended.
There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense.
2 unchanged sentences
Comprehensive Loss
−Removed: Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders.
−Removed: For the years ended December 31, 2020 and December 31, 2019, there was no difference between net loss and comprehensive loss in the accompanying consolidated financial statements.
+Added: Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.
+Added: For the years ended December 31, 2021 and December 31, 2020 , there was no difference between net loss and comprehensive loss in the accompanying consolidated statement of operations.
Net Loss Per Share
1 unchanged sentence
Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.
−Removed: Diluted net loss per share is the same as basic net loss per share for the years ended December 31, 2020 and December 31, 2019 given all potential shares of common stock are anti-dilutive as a result of the net loss.
+Added: The Company’s diluted net loss per share is the same as basic net loss per share for the years ended December 31, 2021 and December 31, 2020, given all potential shares of common stock are anti-dilutive as a result of the net loss.
Share-Based Compensation
19 unchanged sentences
The Company will remain an “emerging growth company” until the earliest of (i) December 31, 2024, (ii) the last day of the fiscal year in which it has total annual gross revenues of $ 1.07 billion or more, (iii) the date on which it has issued more than $ 1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission (“SEC”), which generally is when it has more than $ 700 million in market value of its stock held by non-affiliates as of the prior June 30th.
−Removed: In February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”).
−Removed: This standard was issued in order to improve comparability among organizations by recognizing lease assets and liabilities for all leases, with certain exceptions, on the balance sheet.
−Removed: The Company elected to early adopt ASC 842 on January 1, 2020, or the effective date, and used the effective date as its date of initial application.
−Removed: As such, the Company did not adjust prior period amounts.
−Removed: The Company also elected to utilize various practical expedients upon transition, which permits companies to not reassess lease identification, classification, and initial direct costs under ASC 842 for leases that commenced prior to the effective date.
−Removed: Upon adoption, the Company recorded lease liabilities of $11.6 million, right-of-use assets of $6.8 million, and a reduction of existing deferred rent balances of $4.8 million on the balance sheet as of January 1, 2020.
−Removed: In May 2014, the FASB, issued ASC 606, which superseded the revenue requirements in ASC 605.
−Removed: In 2015 and 2016, the FASB issued additional ASUs related to ASC 606 that delayed the effective date of the guidance and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, and licensing, and they include other improvements and practical expedients.
−Removed: Effective January 1, 2019, the Company adopted ASC 606 using the modified retrospective transition method.
−Removed: As a result of adopting ASC 606, the Company recorded a $1.0 million transition adjustment in the first quarter of 2019 to reduce the opening balance of accumulated deficit as of January 1, 2019 primarily as a result of the treatment of the up-front consideration received from the Company’s collaboration agreements under prior revenue recognition guidance.
−Removed: During the year ended December 31, 2020, the Company recorded $19.5 million in revenue that was included in deferred revenue as of December 31, 2019.
Other accounting standards updates issued, but not effective until after December 31, 2021, are not expected to have a material effect on the Company’s consolidated financial position, statements of operations or cash flows.
15 unchanged sentences
Amortization expense of intangible assets was less than $ 0.1 million for the years ended December 31, 2021 and December 31, 2020.
−Removed: Amortization expense for intangible assets with definite lives will be less than $0.1 million for each of the next five years with the remaining $0.7 million amortized to expense in 2026 and beyond.
+Added: Amortization expense for intangible assets with definite lives will be $ 0.1 million for each of the next five years with the remaining $ 1.5 million amortized to expense in 2027 and beyond.
STOCKHOLDERS’ EQUITY
Capital Structure
−Removed: Upon the closing of the IPO, all of the Company’s outstanding shares of the Series A and Series B convertible preferred stock automatically converted into 22,301,190 shares of common stock and the Company’s outstanding convertible notes payable, including accrued interest, converted into 2,921,461 shares of common stock at the applicable conversion ratio.
−Removed: Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding.
On April 1, 2019, the Company filed an amendment to its amended and restated certificate of incorporation pursuant to which, among other things, the Company increased its authorized shares to 210,000,000 shares of capital stock, of which 200,000,000 shares were designated as $ 0.000005 par value common stock and 10,000,000 shares were designated as $ 0.0001 par value preferred stock.
7 unchanged sentences
The 2019 Plan provides for an annual increase to the number of shares of common stock available for issuance on the first day of each calendar year beginning January 1, 2020 and ending on and including January 1, 2029 by an amount equal to the lesser of (i) 4 % of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the board of directors.
−Removed: As of January 1, 2021, the aggregate number of shares available for issuance under the 2019 Plan has been increased by 4,153,915 pursuant to this provision.
+Added: As of December 31, 2021, the aggregate number of shares available for issuance under the 2019 Plan has been increased by 4,153,915 pursuant to this provision.
Any shares that are subject to awards outstanding under the Company’s 2006 Plan and 2015 Plan as of the effective date of the 2019 Plan that expire, lapse, or are terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, to the extent so unused, will become available for award grants under the 2019 Plan.
As of December 31, 2021, 2,692,171 shares were available to be issued under the 2019 Plan.
−Removed: The 2019 Plan had 5,512,422 stock options outstanding as of December 31, 2020.
+Added: The 2019 Plan had 5,991,710 stock options and 749,295 RSUs outstanding as of December 31, 2021.
Up to 525,000 shares of the Company’s common stock were initially reserved for issuance under the 2019 ESPP.
The 2019 ESPP provides for an annual increase to the number of shares available for issuance on the first day of each calendar year beginning January 1, 2020 and ending on and including January 1, 2029 by an amount equal to the lesser of (i) 1 % of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by our board of directors.
−Removed: As of January 1, 2021, the aggregate number of shares available for issuance under the 2019 ESPP has been increased by 1,038,478 shares pursuant to this provision.
+Added: As of December 31, 2021, the aggregate number of shares available for issuance under the 2019 ESPP has been increased by 1,038,478 shares pursuant to this provision.
No more than 5,250,000 shares of our common stock may be issued under our 2019 ESPP.
2 unchanged sentences
As of December 31, 2021, 1,310,363 shares were available to be issued under the 2019 ESPP.
−Removed: The Company recognized share-based compensation expense related to the ESPP of $0.4 million and less than $0.1 million during the years ended December 31, 2020 and December 31, 2019, respectively.
+Added: The Company recognized share-based compensation expense related to the ESPP of $ 0.3 million and $ 0.4 million during the years ended December 31, 2021 and December 31, 2020, respectively.
+Added: On August 9, 2021, the Company’s board of directors approved the adoption of the Precision BioSciences, Inc.
+Added: 2021 Employment Inducement Incentive Award Plan (“Inducement Award Plan”).
+Added: The Inducement Award Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards to newly hired employees who have not previously been an employee or member of the board, or an employee who is being rehired following a bona fide period of non-employment by the Company.
+Added: The number of shares available for issuance under the Inducement Award Plan is 3,000,000 shares of Common Stock.
+Added: As of December 31, 2021, 2,125,792 shares were available to be issued under the Inducement Award Plan.
+Added: The Inducement Award plan had 850,000 stock options and 24,208 restricted stock units outstanding as of December 31, 2021.
The Company recorded employee and nonemployee share-based compensation expense as follows (in thousands):
15 unchanged sentences
The Company does not have sufficient history of exercising stock options to estimate the expected term of employee stock options and thus utilizes a weighted value considering actual history and estimated expected term based on the midpoint of final vest date and expiration date.
−Removed: The risk-free rate is based on the United States Treasury yield curve during the expected life of the option.
−Removed: The following table summarizes activity in the Company’s stock option plans for the year s ended December 31, 2020 and December 31, 2019 :
+Added: The risk-free rate is based on the U.S.
+Added: Treasury yield curve during the expected life of the option.
+Added: The following table summarizes activity in the Company’s stock option plans for the years ended December 31, 2021 and December 31, 2020:
Exercise Price
5 unchanged sentences
The intrinsic value of stock options exercised was $ 15.5 million and $ 10.3 million during the years ended December 31, 2021 and December 31, 2020, respectively.
−Removed: There was approximately $30.5 million of total unrecognized compensation cost related to unvested stock options as of December 31, 2020, which is expected to be recognized over a weighted-average period of 2.5 years.
+Added: During the year ended December 31, 2021, the Company granted 849,780 RSUs with a grant date fair value of $ 9.6 million.
+Added: The fair value of each award was determined based on the market price of the Company’s common stock on the date of grant.
+Added: The fair value of the RSUs will be recognized as expense over the requisite vesting period.
+Added: The following table summarizes the Company’s RSU activity for the year ended December 31, 2021:
+Added: Weighted-Average Grant Date Fair Value
+Added: Unvested RSUs as of January 1, 2021
+Added: Unvested RSUs as of December 31, 2021
+Added: There was approximately $ 35.3 million of total unrecognized compensation cost related to unvested stock options and RSUs as of December 31, 2021, which is expected to be recognized over a weighted-average period of 2.6 years.
The following table summarizes certain information about stock options granted under the stock option plans which are vested or expected to vest as of December 31, 2021 and December 31, 2020.
6 unchanged sentences
Currently exercisable
−Removed: The following table summarizes certain information about stock options outstanding under the stock option plans for the years ending December 31, 2020 and December 31, 2019, respectively:
+Added: The following table summarizes certain information about stock options outstanding under the stock option plans for the years ended December 31, 2021 and December 31, 2020, respectively:
Year Ended December 31, 2021
32 unchanged sentences
In March 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic.
−Removed: The Company has taken steps in line with guidance from the U.S.
−Removed: Centers for Disease Control and Prevention (“CDC”) and the State of North Carolina to protect the health and safety of its employees and the community.
−Removed: The Company is working closely with its clinical sites, physician partners and the patient community to monitor and manage the ongoing impact of the COVID-19 pandemic.
−Removed: The Company remains committed to its clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic have caused delays in the Company’s clinical trial site activation and impacted its ability to enroll patients.
−Removed: The Company may also experience other difficulties, disruptions or delays in conducting preclinical studies or initiating, enrolling, conducting or completing its planned and ongoing clinical trials, and the Company may incur other unforeseen costs as a result.
−Removed: While the extent to which COVID-19 may continue to impact the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.
−Removed: The Company is continuing to assess the impact of the COVID-19 pandemic to best mitigate risk and continue the operations of its business.
+Added: The Company has taken steps in line with guidance from the CDC and the State of North Carolina to protect the health and safety of its employees and the community.
+Added: The Company is working closely with its clinical sites, physician partners and the patient community to monitor and manage the ongoing impact of the COVID-19 pandemic and variants thereof.
+Added: The Company remains committed to its clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic and variants thereof have caused delays in the Company’s clinical trial site activation and impacted its ability to enroll patients.
+Added: The Company may also experience other difficulties, disruptions or delays in conducting preclinical studies, initiating, enrolling, conducting or completing its planned and ongoing clinical trials or supply chain disruptions, and the Company may incur other unforeseen costs as a result.
+Added: While the extent to which the COVID-19 pandemic and variants thereof may continue to impact the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.
+Added: Servier Program Purchase Agreement
+Added: On April 9, 2021, the Company entered into a program purchase agreement with Les Laboratoires Servier and Institut de Recherches Internationales Servier (collectively, “Servier”), pursuant to which the Company reacquired all of its global development and commercialization rights previously granted to Servier pursuant to the Development and Commercial License Agreement by and between Servier and the Company, dated February 24, 2016, as amended (the “Servier Agreement”), and mutually terminated the Servier Agreement (the “Program Purchase Agreement”).
+Added: The Program Purchase Agreement requires the Company to make certain payments to Servier based on the achievement of regulatory and commercial milestones for each product, and a low- to mid-single-digit percentage royalty (subject to certain reductions) based on net sales of approved products, if any, resulting from any continued development and commercialization of the programs by the Company, for a period not to exceed ten years after first commercial sale of the applicable product in the United States or certain countries in Europe.
+Added: If the Company enters into specified product partnering transactions, the Program Purchase Agreement requires the Company to pay to Servier a portion of certain consideration received pursuant to such product partnering transactions in lieu of the foregoing milestones (with the exception of a one-time clinical phase development milestone) and royalties.
+Added: Regulatory and Commercial Milestones
+Added: Management assessed the likelihood of each of the regulatory and commercial milestones included in the Program Purchase Agreement in accordance with ASC 450, Contingencies (“ASC 450”).
+Added: If the assessment of a contingency indicates that it is probable that the milestone will be achieved and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated balance sheets.
+Added: Accordingly, a $ 10.0 million financial contract liability charged to research and development expense is included in the consolidated financial statements as of and for the year ended December 31, 2021.
+Added: Product Partnering Transaction Consideration Due to Servier
+Added: Per the terms of the Program Purchase Agreement, should the Company enter into a product partnering transaction with respect to any of the targets previously nominated by Servier, the Company will pay Servier a percentage of the proceeds received.
+Added: In accordance with ASC 450, management concluded that the amount of proceeds due to Servier as a result of a future product partnering transaction, if any, cannot be reasonably estimated as of the date of this Annual Report on Form 10-K.
+Added: As such, no contingency for this provision was included in the consolidated financial statements as of December 31, 2021.
The Company has operating leases for real estate in North Carolina and does not have any finance leases.
Many of the Company’s leases contain options to renew and extend lease terms and options to terminate leases early.
−Removed: Reflected in the right-of-use asset and lease liabilities on the Company’s consolidated balance sheet are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain to not exercise.
−Removed: The Company has existing leases that include variable lease payments that are not included in the right-of-use asset and lease liabilities and are reflected as an expense in the period incurred.
+Added: Reflected in the right-of-use assets and lease liabilities on the Company’s consolidated balance sheets are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain to not exercise.
+Added: The Company has existing leases that include variable lease payments that are not included in the right-of-use assets and lease liabilities and are reflected as an expense in the period incurred.
Such payments primarily include common area maintenance charges and fluctuations in rent payments that are driven by factors such as future changes in an index (e.g.
the Consumer Price Index).
−Removed: The Company has existing leases in which the non-lease components (e.g., common area maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset s and lease liabilit ies but rather reflected as an expense in the period incurred.
+Added: The Company has existing leases in which the non-lease components (e.g., common area maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use assets and lease liabilities but rather reflected as an expense in the period incurred.
The elements of lease expense were as follows:
+Added: For the Years Ended December 31,
(in thousands)
−Removed: Year Ended December 31, 2020
Operating lease cost
9 unchanged sentences
Weighted average discount rate
−Removed: Future lease payments under non-cancelable leases with terms of greater than one year as of December 31, 2020, were as follows:
+Added: Future lease payments under non-cancelable operating leases with terms of greater than one year as of December 31, 2021, were as follows:
(in thousands)
6 unchanged sentences
The Company enters into contracts in the normal course of business with CMOs for the manufacture of clinical trial materials and CROs for clinical trial services.
−Removed: These agreements provide for termination at the request of either party with less than one-year notice and are, therefore, cancelable contracts and, if canceled, are not anticipated to have a material effect on the consolidated financial condition, results of operations, or cash flows of the Company.
+Added: These agreements provide for termination at the request of either party with less than one-year notice and are, therefore, cancelable contracts and, if canceled, are not anticipated to have a material effect on the c onsolidated financial condition, results of operations, or cash flows of the Company.
NET LOSS PER SHARE
−Removed: The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.
+Added: The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect of inclusion would be to reduce the net loss per share.
Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
−Removed: The Company excluded the following potential shares of common stock from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:
Years Ended December 31,
−Removed: Outstanding share-based compensation awards
−Removed: In March 2019, the Company entered into a note purchase agreement pursuant to which it sold and issued an aggregate of $39.6 million of convertible notes payable (the “2019 Notes”).
−Removed: The 2019 Notes accrued interest at a rate of 6% per annum.
−Removed: The 2019 Notes were settled in 2,921,461 shares of common stock in connection with the closing of the Company’s IPO (see Note 1) at a settlement price of $13.60 per share (equal to 85% of the IPO price per share).
−Removed: On issuance, the Company elected to account for the 2019 Notes at fair value with any changes in fair value being recognized through the consolidated statements of operations until the 2019 Notes were settled.
−Removed: The fair value of the 2019 Notes was determined to be $39.6 million on issuance and $49.4 million as of April 1, 2019, the settlement date.
−Removed: For the year ended December 31, 2019, the Company recognized $9.8 million of expense as changes in fair value and $0.2 million of interest expense.
+Added: Net loss attributable to common stockholders (in thousands)
+Added: Weighted average shares outstanding - basic and diluted
+Added: Net loss per share - basic and diluted
+Added: The following weighted-average common stock equivalents were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive:
+Added: Years Ended December 31,
+Added: Unvested Restricted Stock Units
+Added: Stock Options
+Added: Unsettled ESPP Contributions
+Added: Total common stock equivalents excluded from diluted net loss per share
+Added: On May 19, 2021, Elo entered into the Elo Loan in the amount of $ 2.5 million.
+Added: In connection with the Elo Loan, the Company issued warrants to PWB (the “Warrants”).
+Added: For further discussion of accounting for the Warrants, see Note 12, “Fair Value Measurements.”
+Added: The Elo Loan discount less than $ 0.1 million upon issuance and includes debt issuance costs incurred by the Company as well as the fair value of the Warrants on the issuance date.
+Added: On December 14, 2021, the Company repaid all outstanding principal and interest on the Elo Loan with proceeds from the Revolving Line.
Revolving Line
−Removed: On June 23, 2020, the Company and Pacific Western Bank (“Bank”) entered into the Third Amendment to Loan and Security Agreement to the revolving line of credit agreement dated as of May 15, 2019 (as amended, the “Pacific Western Loan”).
−Removed: The aggregate availability under the Pacific Western Loan is $30.0 million.
−Removed: The Pacific Western Loan matures on June 23, 2023 as a result of the events discussed in Note 14, Subsequent Events.
+Added: Pursuant to the terms of the loan and security agreement with Pacific Western Bank (the “Revolving Line”) the Company may request advances on a revolving line of credit of up to an aggregate principal of $ 30.0 million.
+Added: The Revolving Line matures on June 23, 2023 .
All outstanding principal amounts are due on the maturity date.
−Removed: The Company must also maintain an aggregate balance of unrestricted cash at Bank (not including amounts in certain specified accounts) equal to or greater than $10.0 million.
−Removed: The interest rate under the Pacific Western Loan is a variable annual rate equal to the greater of (a) 2.75% above the Prime Rate (as defined in the Pacific Western Loan), or (b) 6.00%.
−Removed: There have been no borrowings under the Pacific Western Loan as of the date of this Annual Report on Form 10-K.
−Removed: The Company was in compliance with its financial covenants under the Pacific Western Loan as of December 31, 2020.
+Added: The Company must also maintain an aggregate balance of unrestricted cash at Pacific Western bank (“PWB”) (not including amounts in certain specified accounts) equal to or greater than $ 10.0 million.
+Added: The interest rate under the Revolving Line is a variable annual rate equal to the greater of (a) 2.75 % above the Prime Rate (as defined in the Revolving Line), or (b) 6.00 %.
+Added: As of December 31, 2021, the stated interest rate on the Revolving line was 6.0 % and the effective interest rate was 6.8 %.
+Added: On December 14, 2021, the Company borrowed $ 2.5 million under the Revolving Line to pay all outstanding principal on the Elo Loan.
+Added: The borrowing was concluded to be a modification of the Elo Loan under ASC 470, Debt .
+Added: As such, the remaining unamortized discount on the Elo Loan will be amortized to interest expense over the life of the Revolving Line.
+Added: As of December 31, 2021, no other borrowings have been made under the Revolving Line.
The Company recorded no federal income tax expense and due to the operating losses incurred for the years ended December 31, 2021 and December 31, 2020.
−Removed: The Company recorded less than $0.1 million and no state income expense for the years ended December 31, 2020 and December 31, 2019, respectively.
+Added: The Company recorded no state income tax expense and less than $ 0.1 million state income expense for the years ended December 31, 2021 and December 31, 2020, respectively.
Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows (in thousands):
10 unchanged sentences
Property and equipment
+Added: Investments and other
Right of use asset
2 unchanged sentences
As of December 31, 2021 and December 31, 2020, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the net deferred tax assets is not determined to be more likely than not.
−Removed: The net increase in the valuation allowance for the year ended December 31, 2020 of $31.5 million is comprised of an increase in the valuation allowance recorded against the deferred tax assets, primarily related to tax credits and net operating loss carryforwards for the year.
+Added: The net increase in the valuation allowance for the year ended December 31, 2021 of $ 14.8 million is comprised of an increase in the valuation allowance recorded against the deferred tax assets, primarily related to tax credits and NOL carryforwards for the year.
The reasons for the difference between actual income tax benefit for the years ended December 31, 2021 and December 31, 2020 and the amount computed by applying the statutory federal income tax rate to losses before income tax benefit are as follows (in thousands):
4 unchanged sentences
Non-deductible expenses
+Added: Stock compensation - nondeductible
R&D and orphan drug credits
2 unchanged sentences
Income tax (benefit) expense
−Removed: As of December 31, 2020, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $172.7 million, $116.5 million, and $0.6 million respectively.
As of December 31, 2021, the Company had federal, state, and foreign NOL carryforwards of approximately $ 181.0 million, $ 122.2 million, and $ 0.4 million respectively.
+Added: As of December 31, 2020, the Company had federal, state, and foreign NOL carryforwards of approximately $ 172.7 million, $ 116.5 million, and $ 0.6 million, respectively.
Federal NOL carryforwards of $ 19.7 million begin to expire in 2030 while the remaining federal NOL carryforward of $ 161.2 million carries forward indefinitely.
1 unchanged sentence
The foreign NOLs carryforward indefinitely.
−Removed: At December 31, 2020, the Company had federal and state research and development (“R&D”) tax credits of $9.9 million and an amount less than $0.1 million, which begin to expire in 2027 and 2030, respectively.
+Added: At December 31, 2021, the Company had federal and state R&D tax credits of $ 11.4 million and an amount less than $ 0.1 million, which
+Added: begin to expire in 2027 and 2030 , respectively.
At December 31, 2020 , the Company had federal and state tax R&D credits of $ 9.9 million and an amount less than $0.1 million which begin to expire in 2027 and 2030, respectively.
−Removed: As of December 31, 2020 and December 31, 2019, the Company had federal Orphan Drug credits of $6.0 million and $1.8 million, respectively, which begin to expire in 2038.
−Removed: At December 31, 2020 and December 31, 2019, the Company had federal contribution carryforwards of $0.2 million and $0.1 million, respectively, which begin to expire in 2021.
+Added: A s of December 31, 2021 and December 31, 2020 , the Company had federal Orphan Drug credits of $ 9.5 million and $ 6.0 million, respectively, which begin to expire in 2038 .
+Added: At December 31, 2021 and December 31, 2020 , the Company had federal contribution carryforwards of $ 0.2 million which begin to expire in 202 2 .
The Company incorporated a subsidiary in Australia in 2018.
−Removed: However, the subsidiary has had minimal losses since inception.
−Removed: As such, there are no undistributed earnings as of December 31, 2020 and December 31, 2019.
−Removed: The Company incorporated a subsidiary in the United Kingdom in 2019.
+Added: However, in 2021, as part of the ELO transaction, the subsidiary was transferred to New Elo.
+Added: There are no undistributed earnings as of December 31, 2021 and December 31, 2020.
+Added: The Company incorporated a subsidiary in the UK in 2019.
However, the subsidiary has had minimal activity since inception.
11 unchanged sentences
As of December 31, 2021 and December 31, 2020, the Company had no unrecognized income tax benefits.
−Removed: The Company’s policy for recording interest and penalties relating to uncertain income tax positions is to record
−Removed: them as a component of income tax expense in the accompanying consolidated statements of operations.
+Added: The Company’s policy for recording interest and penalties relating to uncertain income tax positions is to record them as a component of income tax expense in the accompanying consolidated statements of operations.
As of December 31, 2021 and December 31, 2020, the Company had no such accruals.
−Removed: The Tax Cuts and Jobs Act of 2017 subjects a U.S.
+Added: In November 2021, North Carolina enacted the 2021 Appropriations Act, which included a gradual corporate income tax rate decrease from the current 2.5 % to 0 % by 2030.
+Added: Due to the uncertainty of projecting income through 2030, the Company calculated, before consideration of the valuation allowance, its North Carolina net operating losses using the current 2.5% rate which is in effect through 2024.
+Added: The Company will continue to monitor its future North Carolina taxable income and its ability to utilize its deferred tax asset for its net operating loss carryover.
+Added: If the Company does not become profitable in North Carolina prior to 2025, or it becomes more certain that the Company will not be able to utilize its North Carolina net operating losses before the tax rate drops to 0%, the Company will then remeasure its deferred tax asset at that time.
+Added: The TCJA of 2017 subjects a U.S.
shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries.
3 unchanged sentences
The Company does not have a GILTI inclusion in years ends December 31, 2021 or December 31, 2020 and therefore, no GILTI tax has been recorded for the years then ended.
+Added: Elo Transaction
+Added: On December 17, 2021, the Company and its wholly owned subsidiary, Elo Life Systems, Inc., entered into an agreement pursuant to which the Company contributed substantially all of the assets of the Company’s food segment to New Elo.
+Added: In connection with the contribution, the Company also granted New Elo an exclusive license to certain of the Company’s intellectual property for use in non-medical applications with respect to plants, farm animals and certain other organisms.
+Added: In addition, all of the Company’s employees in its Food segment, including its management, became employees of New Elo.
+Added: Promissory Note
+Added: As partial consideration for the assets contributed and license granted by the Company to New Elo , the Company received a $ 10.0 million promissory note payable from New Elo (the “Note”).
+Added: The Note matures on the earlier of (i) December 1, 2028 or (ii) a Deemed Liquidation Event (as defined in the New Elo’s Amended and Restated Certificate of Incorporation).
+Added: The Note accrues interest at 2.00 % per annum , and is payable annually on December 17th.
+Added: At acquisition, the Company classified the Note as held-to-maturity as it was concluded the Company has the intent and ability to hold the Note to its maturity date.
+Added: As the Elo Transaction was concluded to be a nonmonetary transaction per ASC 845, Nonmonetary Transactions, the Note was initially recorded at fair value, as the fair value of the Note was deemed more clearly evident than the fair value of the assets surrendered.
+Added: The fair value was determined by discounting the future cash flows using the market interest rate of similar debt as of the date of the Elo Transaction.
+Added: The fair value of the Note at acquisition was $ 6.9 million.
+Added: The note discount of $ 3.1 million will be amortized to interest income over the life of the Note.
+Added: Investment in New Elo
+Added: As partial consideration for the assets contributed and license granted by the Company to New Elo, the Company received Common Stock in New Elo.
+Added: It was determined that the noncontrolling shareholders of New Elo have substantive rights to participate in the financial and operating decisions of New Elo.
+Added: As such, it was determined that the Company does not possess control over New Elo or have significant decision-making authority.
+Added: Accordingly, New Elo will not be consolidated in the Company’s financial statements.
+Added: However, as the Company obtained approximately 55 % of the voting shares in New Elo, it was determined that the Company possesses the ability to exercise significant influence over the operating and financial policies of New Elo.
+Added: As such, the Company accounts for its investment in New Elo under the equity method.
+Added: Per ASC 323, Investments—Equity Method and Joint Ventures, upon the transfer of a subsidiary or group of assets that is a business accounted for under the equity method, the initial carrying value should be recorded based upon the fair value as of the transaction date.
+Added: As such, the initial carrying value of the Company’s investment in New Elo was determined to be the fair value of the Company’s common stock in New Elo as of December 17, 2021, the transaction date.
+Added: The Company’s proportionate share of New Elo’s net income for the period of December 18, 2021 to December 31, 2021 was $ 0.2 million, resulting in an increase in the carrying value of the Investment in New Elo and corresponding income from equity method investments.
+Added: Gain on Deconsolidation of Subsidiary
+Added: The gain on deconsolidation of subsidiary was determined based on the difference between the $ 4.4 million book value of the net assets that the Company contributed to New Elo and the $ 10.4 million combined fair value of the Note and the Company’s ownership in New Elo as of December 17, 2021.
FAIR VALUE MEASUREMENTS
4 unchanged sentences
Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly
−Removed: Level 3—Unobservable inputs for which there is little or no market date, which require the Company to develop its own assumptions
−Removed: The Company classifies investments in money market funds within Level 1 as the prices are available from quoted prices in active markets.
−Removed: Investments in repurchase agreements are classified within Level 2 as these instruments are valued using observable market inputs including reported trades, broker/dealer quotes, bids and/or offers.
−Removed: As of December 31, 2020, the Company held an insignificant amount of cash equivalents.
−Removed: As of December 31, 2019, the Company held cash equivalents which were composed of money market funds and repurchase agreements that were purchased through repurchase intermediary banks and collateralized by deposits in the form of government securities and obligations.
+Added: Level 3—Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions
+Added: Cash Equivalents
+Added: As of December 31, 2021 and December 31, 2020, the Company held an insignificant amount of cash equivalents which were composed of investments in money market funds.
+Added: The Company classifies investments in money market funds within Level 1 of the fair value hierarchy as the prices are available from quoted prices in active markets.
+Added: Investment in iECURE
+Added: In August 2021, the Company entered into an Equity Issuance Agreement with iECURE, pursuant to which iECURE granted the Company partial equity ownership in iECURE (the “iECURE equity”) as partial consideration for a license to the Company’s PCSK9-directed ARCUS nuclease to develop gene-insertion therapies for four other rare genetic diseases, including OTC deficiency, Citrullinemia Type 1, PKU, and another program focused on liver disease (the “PCSK9 license”).
+Added: On issuance, the Company accounted for the iECURE equity at fair value under ASC 825.
+Added: Accordingly, the Company adjusts the carrying value of the iECURE equity to fair value each reporting period with any changes in fair value recorded to other income (expense).
+Added: The Company classifies the iECURE equity within Level 3 of the fair value hierarchy as the assessed fair value was based on significant unobservable inputs given iECURE equity is not traded on a public exchange.
+Added: For additional discussion of accounting for the Company’s Development and License agreement with iECURE and the Equity Issuance Agreement, refer to Note 13, “Collaboration and License Agreements.”
+Added: Warrant Liability
+Added: In connection with the Elo Loan, the Company issued $ 50,000 of warrants to PWB on May 19, 2021 (the “Warrants”).
+Added: The Company accounted for the Warrants in accordance with the guidance contained in ASC 815, under which the Warrants do not meet the criteria for equity treatment and are recorded as a liability.
+Added: Accordingly, the Company classified the Warrants as a non-current liability at their fair value and adjusted the warrant liability to fair value each reporting period with any changes in fair value recognized in the statement of operations.
+Added: The Company utilized the Black-Scholes option pricing model to value the warrant liability each reporting period and recorded changes in value to other income (expense).
+Added: Upon the closing of the Elo Transaction, the Warrants transferred to New Elo.
+Added: Accordingly, the warrant liability was marked to fair value as of December 17, 2021 and included in the book value of net assets transferred to New Elo upon deconsolidation.
The following represents assets measured at fair value on a recurring basis by the Company (in thousands):
1 unchanged sentence
Money market funds
−Removed: Repurchase agreements
+Added: Investment in iECURE
December 31, 2020
Money market funds
−Removed: Repurchase agreements
+Added: The following represents a reconciliation of assets measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the year ended December 31, 2021 (in thousands):
+Added: Investment in iECURE
+Added: Balance December 31, 2020
+Added: Gains included in earnings
+Added: Balance December 31, 2021
+Added: The following represents a reconciliation of liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the year ended December 31, 2021 (in thousands):
+Added: Warrant Liability
+Added: Balance December 31, 2020
+Added: Gains included in earnings
+Added: Balance December 31, 2021
COLLABORATION AND LICENSE AGREEMENTS
−Removed: Development and Commercial License Agreement with Servier
−Removed: On February 24, 2016, the Company entered into a development and commercial license agreement, as subsequently amended, with predecessor entities to Servier.
−Removed: This agreement establishes a collaboration between the Company and Servier to develop allogeneic chimeric antigen receptor T (“CAR T”) cell therapies for up to six unique antigen targets selected by Servier.
−Removed: Servier selected one target at the agreement’s inception and, in 2020, selected two additional hematological cancer targets beyond CD19 and two new solid tumor targets.
−Removed: Servier is required to make a milestone payment to the Company upon achievement of an early-stage pre- investigational new drug application (“IND”) development milestone event completed for each of the four targets selected after execution of the contract.
−Removed: The Company granted Servier a development license and will perform early-stage R&D on the selected targets and develop the resulting therapeutic product candidates through Phase 1 clinical trials and manufacture clinical trial material
−Removed: for use in Phase 2 clinical trials.
−Removed: Also, the Company and Servier have formed a joint steering committee (“JSC”) to provide high-level oversight and decision making regarding the activities covered under the agreement .
−Removed: The Company received an upfront payment of $105.0 million under the agreement in 2016.
−Removed: At the Phase 2 readiness stage for any product candidate, Servier may exercise a commercial option, subject to payment of commercial option exercise fees, to proceed with development and commercialization of the product candidate and perform late-stage R&D, including Phase 2 and Phase 3 clinical trials and obtaining regulatory approvals.
−Removed: The Company has the ability to receive total payments, in the aggregate across all five targets selected by Servier, of up to approximately $1.4 billion, including the upfront payment of $105.0 million and up to $1.3 billion in milestone payments, consisting of up to $329.3 million in development milestone payments and up to $925.0 million in commercial milestone payments.
−Removed: The Company is also entitled to receive tiered royalties ranging from the mid-single digit percentages to the sub-teen percentages on worldwide net sales of any products developed, subject to customary potential reductions.
−Removed: The Company also has the right to opt in and participate in the development and commercialization of any products resulting from the collaboration through a 50/50 co-development and co-promotion option in the United States.
−Removed: This will require the Company to pay a co-development and co-promotion option fee on each licensed product for which the Company elects to participate.
−Removed: This option is exercisable at the Phase 2 readiness stage and only after Servier exercises its commercial option.
+Added: Development and License Agreement with Eli Lilly
+Added: On November 19, 2020, the Company, entered into the Development and License Agreement with Lilly to collaborate to discover and develop in vivo gene editing products incorporating the Company’s ARCUS nucleases.
+Added: Lilly has initially nominated Duchenne muscular dystrophy, a liver-directed target and a CNS directed target.
+Added: Under the terms of the Development and License Agreement, Lilly has the right to nominate up to three additional gene targets for genetic disorders over the Nomination Period.
+Added: Lilly may extend the Nomination Period for an additional two years from the date on which such initial Nomination Period ends, upon Lilly’s election and payment of an extension fee.
+Added: Additionally, under the terms of the Development and License Agreement, Lilly has the option to replace up to two gene targets upon Lilly’s election and payment of a replacement target fee.
+Added: Under the terms of the Development and License Agreement, Lilly will receive an exclusive license to research, develop, manufacture and commercialize the resulting licensed products to diagnose, prevent and treat any and all diseases by in vivo gene editing directed against the applicable gene target.
+Added: The Development and License Agreement provides that the Company will be responsible for conducting certain pre-clinical research and investigational new drug application (“IND”) enabling activities with respect to the gene targets nominated by Lilly to be subject to the collaboration, including manufacture of initial clinical trial material for the first licensed product.
+Added: Lilly will be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration, and may engage the Company for additional clinical and/or initial commercial manufacture of licensed products.
+Added: Upon closing of the Development and License Agreement on January 6, 2021, the Company received an upfront cash payment of $ 100.0 million.
+Added: The Company will also be eligible to receive milestone payments of up to an aggregate of $ 420.0 million per licensed product as well as nomination fees for additional targets and certain research funding.
+Added: If licensed products resulting from the collaboration are approved and sold, the Company will also be entitled to receive tiered royalties ranging from the mid-single digit percentages to the low-teens percentages on world-wide net sales of the licensed products, subject to customary potential reductions.
+Added: Lilly’s obligation to pay royalties to the Company expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product.
+Added: Simultaneously with the entry into the Development and License Agreement, the Company and Lilly entered into a Share Purchase Agreement (the “Share Purchase Agreement”), pursuant to which Lilly purchased 3,762,190 shares of the Company’s common stock for a purchase price of $ 35.0 million.
+Added: Management concluded that the Lilly Share Purchase Agreement is to be combined with the Development and License Agreement (together, the “Combined Agreements”) for accounting purposes.
+Added: Of the total $ 135.0 million upfront compensation, the Company applied equity accounting guidance to measure the $ 27.7 million recorded in equity upon the issuance of the shares, and $ 107.3 million was identified as the transaction price allocated to the revenue arrangement.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the promises in the agreement represent transactions with a customer.
−Removed: The Company has determined that the promises associated with the research and development activities for each of the five targets are not distinct because they are all based on the ARCUS proprietary genome editing platform.
−Removed: The Company has concluded that the agreement with Servier contains the following promises:
−Removed: (i) a development license;
−Removed: (ii) performance of early-stage R&D services, (iii) the manufacture of clinical trial material for use in Phase 2 clinical trials, and (iv) JSC participation.
−Removed: The Company determined that the license, manufacture of clinical trial material, and R&D services were not distinct from each other, as the license, pre-clinical and clinical supply, and R&D services are highly interdependent upon one another.
−Removed: Participation on the JSC to oversee the research and development activities are combined into the single performance obligation as these activities are highly interdependent with the other R&D services.
+Added: The Company has determined that the promises associated with the research and development activities for each of the targets are not distinct because they are all based on the ARCUS proprietary genome editing platform.
+Added: The Company has concluded that the agreement with Lilly contains the following promises:
+Added: (i) license of intellectual property;
+Added: (ii) performance of R&D services, (iii) the manufacture of pre-clinical supply, (iv) Joint Steering Committee (“JSC”) Participation, and (v) regulatory responsibilities.
+Added: The Company determined that the license of intellectual property, R&D services, manufacture of pre-clinical development material, and regulatory responsibilities were not distinct from each other, as the license, R&D services, pre-clinical supply, and regulatory responsibilities are highly interdependent upon one another.
+Added: The JSC participation was determined to be an immaterial promise as the time commitment and related cost associated with performance of JSC participation is expected to be inconsequential to the total consideration in the contract.
As such, the Company determined that these promises should be combined into a single performance obligation.
−Removed: Under the agreement with Servier, in order to evaluate the appropriate transaction price, the Company determined that the upfront amount of $105.0 million constituted the entire consideration to be included in the transaction price as of the outset of the arrangement.
−Removed: As such, this amount was allocated to the single performance obligation.
−Removed: The commercial option exercise fees that may be received are excluded from the transaction price until each customer option is exercised as it was determined that the options are not material rights.
−Removed: The potential development milestone payments that the Company is eligible to receive prior to the exercise of the options as well as commercial milestones, were excluded from the transaction price at the outset of the arrangement, as all milestone amounts were fully constrained based on the probability of achievement, since the milestones relate to successful achievement of certain developmental goals, which might not be achieved.
−Removed: None of the future royalty payments were included in the transaction price, as the potential payments represent sales-based consideration.
−Removed: The Company will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.
−Removed: The Company recognizes revenue from the upfront payment of $105.0 million and variable consideration related to development milestones achieved on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation, which is based on the actual time of R&D activities performed relative to expected time to be incurred in the future to satisfy the performance obligation.
−Removed: Management evaluates and adjusts the total expected research effort for the performance obligation on a quarterly basis based upon actual research accomplishments and the probability of continuing research efforts in the future.
+Added: The Company recognizes revenue from the $ 100.0 million upfront cash payment, $ 7.3 million allocated to the transaction price from the Stock Purchase Agreement, and variable consideration on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation, which is based on the actual time of R&D activities performed relative to expected time to be incurred in the future to satisfy the performance obligation.
+Added: Management evaluates and adjusts the total expected research effort for the performance obligation on a quarterly basis based upon actual research progress to date relative to research progress forecasts.
The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.
−Removed: The remaining performance obligation is expected to be satisfied over approximately a five year period as of December 31, 2020.
−Removed: During the years ended December 31, 2020 and December 31, 2019, the Company recognized revenue under the agreement with Servier of approximately $18.0 million and $7.3 million, respectively.
−Removed: Deferred revenue related to the agreement with Servier amounted to $82.9 million and $80.9 million as of December 31, 2020 and December 31, 2019, respectively, of which $28.9 million and $15.0 million, respectively, is included in current liabilities.
+Added: During the year ended December 31, 2021, the Company recognized revenue under the agreement with Lilly of approximately $ 21.0 million.
+Added: The Company recognized no revenue under the agreement with Lilly during the year ended December 31, 2020.
+Added: revenue related to the agreement with Lilly amounted to $ 88.3 million as of December 31, 2021, of which $ 21.2 million was included in current liabilities.
+Added: No deferred revenue related to the Development and License Agreement with Lilly was recorded as of December 31, 2020.
+Added: Development and License Agreement with iECURE
+Added: In August 2021, the Company entered into a development and license agreement with iECURE under which iECURE plans to advance the Company’s PBGENE-PCSK9 candidate through a Phase 1 clinical trial as partial consideration for the PCSK9 License.
+Added: Pursuant to the iECURE Agreement, the Company retains the rights to PBGENE-PCSK9, including all products developed for indications with increased risk of severe cardiovascular events such as Familial Hypercholesterolemia.
+Added: Simultaneously with the entry into the iECURE Agreement, the Company and iECURE entered into an Equity Issuance Agreement, pursuant to which iECURE granted the Company partial equity ownership in iECURE as partial consideration for the license to use its PCSK9-directed ARCUS nuclease.
+Added: Management concluded that the iECURE Equity Issuance Agreement is to be combined with the development and license agreement with iECURE for accounting purposes.
+Added: Additionally, the Company is eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.
+Added: The Company assessed the iECURE Agreements in accordance with ASC 606 and concluded that the promises in the iECURE Agreements represent a transaction with a customer.
+Added: The Company has concluded that the iECURE Agreements contain the following promises:
+Added: (i) the PCSK9 license and (ii) JSC Participation.
+Added: The JSC participation was determined to be an immaterial promise as the time commitment and related cost associated with performance of JSC participation is expected to be inconsequential to the total consideration in the contract.
+Added: Accordingly, the Company concluded that the promise of the PCSK9 license is the sole performance obligation in the iECURE Agreements.
+Added: The fair value of the iECURE equity and the estimated fair value of the costs to be incurred by iECURE to progress the Company’s PBGENE-PCSK9 candidate through Phase 1 studies were concluded to be non-cash consideration, and as such were included in the transaction price of the iECURE Agreements.
+Added: The Company concluded the PCSK9 license represents functional intellectual property in accordance with ASC 606 given the Company will not be providing any additional services to iECURE outside of the right to use the PCSK9 license.
+Added: Therefore, the fair value of the iECURE equity and the fair value of the costs to be incurred by iECURE to progress the Company’s PBGENE-PCSK9 candidate through a Phase 1 clinical trial was recognized at the inception of the iECURE Agreements.
+Added: The fair value of the iECURE equity at inception of the iECURE agreements was assessed to be $ 0.5 million and was initially recorded to the investment in equity securities line item of the consolidated balance sheets.
+Added: As further discussed in Note 12, “Fair Value Measurements,” on issuance, Management elected to account for the iECURE equity at fair value under ASC 825.
+Added: Accordingly, the Company adjusts the carrying value of the iECURE equity to fair value each reporting period with any changes in fair value recorded to other income (expense).
+Added: The fair value of the costs to be incurred by iECURE to progress the Company’s PBGENE-PCSK9 candidate through a Phase 1 clinical trial (the “PCSK9 Prepaid”) was assessed to be $ 17.4 million and was recorded to the prepaid expenses and other assets line items of the consolidated balance sheets.
+Added: The PCSK9 Prepaid is amortized to research and development expense on a pro-rata basis as iECURE incurs costs to progress the PBGENE-PCSK9 candidate through a Phase 1 clinical trial.
+Added: During the year ended December 31, 2021, the Company recognized revenue under the iECURE agreements of $ 17.9 million and $ 4.4 million of research and development expense related to amortization of the PCSK9 Prepaid.
+Added: As of December 31, 2021, the remaining balance of the PCSK9 Prepaid was $ 13.0 million, which is included in the prepaid expenses and other assets line items of the consolidated balance sheets in the amounts of $ 10.4 million and $ 2.6 million, respectively.
+Added: Development and Commercial License Agreement with Servier
+Added: The Company has developed certain allogeneic CAR T candidates, including PBCAR0191 and the stealth cell PBCAR19B, each targeting CD19, as well as four additional product targets under the Servier Agreement.
+Added: Pursuant to the terms of the Program Purchase Agreement, the Company regained full global rights to research, develop, manufacture and commercialize products resulting from such programs, with sole control over all activities.
+Added: Additionally, per the terms of the Program Purchase Agreement the Company does not have an obligation to continue development of the Servier Targets.
+Added: With respect to products directed to CD19, Servier has certain rights of negotiation, which may be exercised during a specified time period if the Company elects to initiate a process or entertain third party offers for partnering such products.
+Added: Pursuant to the terms of the Program Purchase Agreement, the Company made a payment of $ 1.25 million in cash to Servier and agreed to waive earned milestones totaling $ 18.75 million that would have been otherwise payable to the Company.
+Added: The $ 1.25 million cash payment to Servier is classified as research and development expense in the consolidated statement of operations for the year
+Added: ended December 31, 2021.
+Added: The waiver of earned milestones resulted in a $ 18.75 million reduction in accounts receivable and deferred revenue.
+Added: The Program Purchase Agreement also requires the Company to make certain payments to Servier based on the achievement of regulatory and commercial milestones for each product, and a low- to mid-single-digit percentage royalty (subject to certain reductions) based on net sales of approved products, if any, resulting from any continued development and commercialization of the programs by the Company, for a period not to exceed ten years after first commercial sale of the applicable product in the United States or certain countries in Europe.
+Added: If the Company enters into specified product partnering transactions, the Program Purchase Agreement requires the Company to pay to Servier a portion of certain consideration received pursuant to such product partnering transactions in lieu of the foregoing milestones (with the exception of a one-time clinical phase development milestone) and royalties.
+Added: For additional discussion of accounting for payment obligations arising from the Program Purchase Agreement, refer to Note 7, “Commitments and Contingencies.”
+Added: Upon the closing of the Program Purchase Agreement, management concluded that the combined performance obligation associated with the Servier Agreement was fully satisfied as the Company is no longer required to perform research and development work on the Servier targets and the Company regained all of its global development and commercialization rights previously granted to under the Servier Agreement.
+Added: Accordingly, all remaining deferred revenue related to the Servier agreement was recognized as revenue in the year ended December 31, 2021.
+Added: During the year ended December 31, 2021 and 2020, the Company recognized revenue under the agreement with Servier of approximately $ 72.9 million and $ 18.0 million, respectively.
+Added: The Company did no t have deferred revenue related to the agreement with Servier as of December 31, 2021.
+Added: Deferred revenue related to the agreement with Servier amounted to $ 82.9 million as of December 31, 2020, of which $ 28.9 million was included in current liabilities.
Collaboration and License Agreement with Gilead
−Removed: On July 6, 2020 (the “Termination Notice Date”), Gilead Sciences (“Gilead”) notified the Company of its termination of the Collaboration and License Agreement between Gilead and the Company, dated September 10, 2018, as subsequently amended by Amendment No.
−Removed: 1 to the Collaboration and License Agreement, dated March 10, 2020 (as amended, the “Gilead Agreement”).
−Removed: Pursuant to the termination notice, the Gilead Agreement terminated on September 4, 2020, upon which the Company regained full
−Removed: rights and all data it generated for the in vivo chronic hepatitis B virus (“HBV”) program developed under the Gilead Agreement.
−Removed: The Company is exploring partnership or alternative opportunities to enable the continued development of ARCUS-based HBV therapies, the progression toward the submission of an IND for this product candidate and the reassessment of the timing of such IND submission.
+Added: On July 6, 2020, Gilead notified the Company of its termination of the Gilead Agreement.
+Added: Pursuant to the termination notice, the Gilead Agreement terminated on September 4, 2020, upon which the Company regained full rights and all data it generated for the in vivo chronic HBV program developed under the Gilead Agreement.
Revenue associated with the combined performance obligation was recognized on a straight-line basis as the R&D services were provided through the Termination Notice Date.
−Removed: During the years ended December 31, 2020 and 2019, the Company recognized revenue under the Gilead Agreement of approximately $3.9 million and $13.3 million, respectively.
−Removed: The Company did not have deferred revenue related to the Gilead Agreement as of December 31, 2020.
−Removed: Deferred revenue was $1.5 million as of December 31, 2019.
−Removed: No development or sales-based milestone payments were received during the twelve months ended December 31, 2020.
+Added: During the years ended December 31, 2021 and 2020, the Company recognized no revenue and approximately $ 3.9 million of revenue under the Gilead Agreement, respectively.
+Added: The Company did no t have deferred revenue related to the Gilead Agreement as of December 31, 2021 or December 31, 2020.
+Added: No development or sales-based milestone payments were received under the Gilead Agreement.
SEGMENT REPORTING
−Removed: The Company has developed a genome editing platform and performed related research for human therapeutic and agricultural applications.
−Removed: The Company’s Chief Operating Decision Maker (“CODM”) evaluates the Company’s financial performance based on two reportable segments:
+Added: The Company has determined that the Chief Executive Officer (“CEO”) is the Company’s chief operating decision maker (“CODM”) as the CEO makes decisions as it relates to allocation of resources and key market strategies.
+Added: Prior to the Elo Transaction, the CODM reviewed financial results disaggregated by our therapeutics and food businesses.
+Added: As such, prior to December 18, 2021, the Company operated in two reportable segments:
Therapeutics and Food.
−Removed: The Therapeutics segment is focused on the development of products in the field of immuno-oncology and of novel products outside immuno-oncology to treat human diseases.
−Removed: The Food segment is focused on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies.
−Removed: The CODM reviews segment performance and allocates resources based upon segment revenue and segment operating loss of the Therapeutics and Food reportable segments.
−Removed: Segment operating loss is derived by deducting operational cash expenditures, net, from GAAP revenue.
+Added: The legacy Therapeutics segment included our development of products in the field of immuno-oncology and of novel products outside immuno-oncology to treat human diseases.
+Added: The legacy Food segment focused on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies.
+Added: Following the Elo Transaction on December 17, 2021, in which the Company contributed substantially all of the assets of the Food segment to a newly formed entity, the CODM now reviews financial information presented on a consolidated basis and resource allocation and key market strategy decisions are made by the CODM based on consolidated results.
+Added: As such, the Company has concluded that following the Elo Transaction on December 17, 2021, the Company now operates as one segment.
+Added: Given the Company was managed under the legacy segment structure of Therapeutics and Food for the majority of the year ended December 31, 2021, segment results for both Therapeutics and Food have been presented in this Annual Report on Form 10-K.
+Added: Segment operating income (loss) is derived by deducting operational cash expenditures, net, from GAAP revenue.
Operational cash expenditures are cash disbursements made that are directly attributable to the reportable segment (including directly attributable research and development and property, equipment, and software expenditures).
−Removed: The Company previously allocated centralized research and development expenditures for early stage research, nuclease development and the purchase of general laboratory supplies to the Therapeutics and Food segments based on headcount and presented such allocated expenditures separately from segment operational cash expenditures.
−Removed: Beginning January 1, 2020, such allocated expenditures are included within segment operational cash expenditures.
−Removed: Prior period information was presented consistent with the current period presentation.
−Removed: In January 2019, the Food segment moved into a new leased facility at Research Triangle Park, North Carolina.
−Removed: The Company determined that the Food segment is no longer deriving benefit from the Company’s centralized research and development expenditures for early stage research, nuclease development and the purchase of general laboratory supplies and, as such, all these expenditures are allocated to the Therapeutics segment.
−Removed: Certain reclassifications have been made to the presentation of reportable segments as centralized research and development expenditures are no longer reported separately.
−Removed: The reportable segment operational cash expenditures include cash disbursements for compensation, laboratory supplies, purchases of property, equipment and software and procuring services from CROs, CMOs and research organizations.
+Added: The reportable segment operational cash expenditures
+Added: include cash disbursements for compensation, laboratory supplies, purchases of property, equipment and software and procuring services from CROs, CMOs and research organizations.
Certain cost items are not allocated to the Company’s reportable segments.
10 unchanged sentences
Total segment operational cash expenditures
−Removed: Segment operating loss:
−Removed: Total segment operating loss
+Added: Segment operating income (loss):
+Added: Total segment operating income (loss)
Adjustments to reconcile segment operating loss to consolidated loss from operations
2 unchanged sentences
Depreciation and amortization
−Removed: Amortization of right-of-use asset
Share-based compensation
Loss on disposal of assets
+Added: Non-cash interest expense
+Added: Amortization of right-of-use assets
Adjustments to reconcile cash expenditures to GAAP expenses
Total consolidated loss from operations
−Removed: Subsequent Events
−Removed: Closing of Development and License Agreement and Stock Purchase Agreement with Eli Lilly and Company
−Removed: On January 6, 2021, the Company and Eli Lilly and Company (“Lilly”) closed their previously announced Development and License Agreement (“the Development and License Agreement”) following clearance under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and completed the transactions under their previously announced Stock Purchase Agreement (the “Stock Purchase Agreement”).
−Removed: In connection with the closing, the Company received an upfront cash payment of $100.0 million pursuant to the Development and License Agreement and received $35.0 million from Lilly’s purchase of 3,762,190 newly issued shares of the Company’s common stock pursuant to the Stock Purchase Agreement.
−Removed: Under the Development and License Agreement, the Company will collaborate with Lilly to discover and develop in vivo gene editing products incorporating the Company’s ARCUS nucleases.
−Removed: Lilly has initially nominated Duchenne muscular dystrophy and two gene targets for other genetic disorders, and has the right to nominate up to three additional gene targets for genetic disorders over the first four years of the Development and License Agreement (the “Nomination Period”).
−Removed: Lilly may extend the Nomination Period for an additional two years from the date on which such initial Nomination Period ends, upon Lilly’s election and payment of an extension fee.
−Removed: Under the terms of the Development and License Agreement, Lilly will receive an exclusive license to research, develop, manufacture and commercialize the resulting licensed products to diagnose, prevent and treat any and all diseases by in vivo gene editing directed against the applicable gene target.
−Removed: The Development and License Agreement provides that the Company will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to the gene targets nominated by Lilly to be subject to the collaboration, including manufacture of initial clinical trial material for the first licensed product.
−Removed: Lilly will be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration, and may engage the Company for additional clinical and/or initial commercial manufacture of licensed products.
−Removed: Pursuant to the Development and License Agreement, the Company will also be eligible to receive milestone payments of up to an aggregate of $420.0 million per licensed product as well as nomination fees for additional targets and certain research funding.
−Removed: If licensed products resulting from the collaboration are approved and sold, the Company will also be entitled to receive tiered royalties ranging from the mid-single digit percentages to the low-teens percentages on world-wide net sales of the licensed products, subject to customary potential reductions.
−Removed: Lilly’s obligation to pay royalties to the Company expires on a country-by-country and licensed
−Removed: product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product.
−Removed: No revenue was recognized under the Development and License agreement in the twelve months ended December 31 , 2020.
−Removed: As a result of the closing of the Development and License Agreement in January 2021, we will be required to make payments under the Duke License of $3.0 million in 2021, net of any outstanding credits.
−Removed: Extension of Maturity date of Revolving Line with Pacific Western bank
−Removed: Pursuant to the terms of the Pacific Western Loan regarding the Company receiving cash from the issuance of the Company’s equity securities and/or from strategic partnerships, the maturity date of the Revolving Line was extended from June 23, 2022 to June 23, 2023 as a result of the proceeds received from Lilly in connection with the closing of the Development and License Agreement and Stock Purchase Agreement in January 2021.
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.