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Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-13 · 160 added, 235 removed, 129 unchanged (75% of the section changed)

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Overview and Pipeline

We are a clinical stage genetic medicines company focused on developing transformative therapies for central nervous system, or CNS, disorders with limited or no approved treatment options.

Our vision is to fulfill the promise of gene therapy by developing groundbreaking therapies that transform the lives of patients with CNS diseases.

The field of genetic medicine is rapidly expanding and we believe we have a differentiated approach to developing treatments for CNS disorders that enables us to select and advance product candidates with a higher probability of technical and regulatory success.

We have entered into a strategic research collaboration with the Trustees of the University of Pennsylvania’s, or Penn’s, Gene Therapy Program, or GTP, headed by Dr.

We are a clinical stage genetic medicines company on a mission to improve the lives of patients with neurodegenerative diseases.

Our primary focus is the development and advancement of cutting-edge, one-time gene therapies designed to target critical underlying pathologies in these conditions.

We believe we have developed a differentiated approach to developing treatments for central nervous system, or CNS, disorders that allows us to select and advance product candidates with a higher probability of technical and regulatory success.

Our lead clinical product candidate, PBFT02, seeks to elevate progranulin levels to enhance lysosomal function and slow disease progression across a variety of neurodegenerative diseases.

PBFT02 utilizes an adeno-associated virus serotype 1, or AAV1, capsid to deliver a functional granulin gene, or GRN , encoding progranulin, or PGRN, to the brain via intra cisterna magna, or ICM, administration.

The lead indication for PBFT02 is frontotemporal dementia, or FTD, caused by progranulin deficiency, or FTD- GRN .

We believe this clinical product candidate has the potential to provide patients with significantly improved outcomes given the rigorous capsid and transgene selection process, and our chosen route of ICM administration, which provides the potential for enhanced benefits due to widespread vector delivery to the brain and spinal cord and an improved safety profile compared with systemic administration due to the lower doses required.

We are currently studying PBFT02 in FTD- GRN , for which there are currently no approved disease-modifying therapies.

In addition to the continued clinical development of PBFT02 to treat FTD- GRN , we intend to pursue PBFT02 in additional adult neurodegenerative diseases where we believe increasing PGRN levels could provide benefit.

Third-party preclinical studies have shown that increased PGRN levels reduce the pathologic accumulation of TAR DNA binding protein 43, or TDP-43.

TDP-43 pathology is a hallmark of multiple neurodegenerative conditions, including FTD due to mutations in the C9orf72 gene, or FTD- C9orf72 , approximately 95% of sporadic amyotrophic lateral sclerosis, or ALS, and approximately 50% of sporadic FTD.

Additionally, we believe restoration of PGRN has the potential to modulate Alzheimer’s disease, or AD, in patients that are carriers of the PGRN-lowering GRN rs5848 single nucleotide polymorphism, or SNP.

Individuals with this polymorphism have reduced PGRN levels and are at an increased risk for AD.

In the second half of 2024, we expect to obtain regulatory feedback on the clinical pathway to treating FTD- C9orf72 and ALS patients with PBFT02.

We have a research collaboration with the Trustees of the University of Pennsylvania’s, or Penn’s, Gene Therapy Program, or GTP, headed by Dr.

James Wilson, a leader in the genetic medicines field.

We also leverage our close working relationship with Penn’s Orphan Disease Center, or ODC, to develop historical and prospective comparable natural history patient profiles for comparison to participants in interventional trials.

Through this collaboration we have assembled a strong portfolio of genetic medicine product candidates, for which we retain global rights, the details of which are outlined in the below table:

Our research collaboration with GTP provides us with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates.

We are purposefully focusing on neurodegenerative diseases for which we believe our genetic medicine approach provides distinct technical advantages based on decades of research by GTP.

GTP at Penn conducts rigorous discovery and preclinical studies to identify promising product candidates.

Under our research collaboration, we have exclusive development and global commercial rights to product candidates for certain rare monogenic and certain non-rare, non-monogenic, or large, CNS disorders, subject to certain limitations.

We also have access to platform technologies related to development of novel capsids, toxicity reduction technologies, and optimization approaches for delivery and formulation for product candidates in the CNS indications that we select.

We have progressed four product candidates sourced from our research collaboration with GTP to the clinical stage of development and have eight remaining options to license additional programs from GTP until August 2026.

Through our collaboration with GTP, we have one active preclinical program in Huntington’s disease.

As announced in December 2023, we are pursuing potential out-licensing opportunities for clinical-stage pediatric programs in GM1 gangliosidosis, or GM1, Krabbe disease, and metachromatic leukodystrophy, or MLD.

We have a gene therapy pipeline with the potential to address multiple neurodegenerative diseases.

Our development programs consist of:

*8 additional CNS pipeline license options remain;

3 license options were previously exercised, and rights were subsequently returned to the University of Pennsylvania.

† Program includes ongoing natural history study of infantile and juvenile GM1 gangliosidosis patients

PBGM01 for the Treatment of GM1

We are currently developing PBGM01, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GLB1 gene encoding β-galactosidase, or β-gal, for infantile GM1.

Infantile GM1 is the most common and severe form of GM1, in which patients have mutations in the GLB1 gene that produce little or no residual β-gal enzyme activity.

β-gal is an enzyme that catalyzes the first step in the natural degradation of GM1 ganglioside as well as other glycan substrates.

Reduced β-gal activity results in the accumulation of toxic levels of GM1 ganglioside in neurons throughout the brain, causing rapidly progressive neurodegeneration, with a life expectancy of less than two years in the most severe form of the disease, early infantile GM1.

Currently, there are no disease-modifying therapies approved for the treatment of GM1.

Early infantile GM1 is characterized by onset in the first six months of life, while late infantile GM1 is characterized by onset between 6 and 24 months.

We believe PBGM01 could provide patients with significantly improved outcomes.

In preclinical studies we observed meaningful transgene expression in both the CNS and in peripheral organs affected in GM1.

We are conducting a clinical trial using an ICM method of administration, which involves an injection at the craniocervical junction.

We have an active Investigational New Drug application, or IND, from the U.S.

Food and Drug Administration, or FDA, and approved clinical trial authorizations, or CTAs, in multiple countries for PBGM01, and we are actively proceeding with our Imagine-1 Trial, an international, multi-center, open-label, single-arm, Phase 1/2 clinical trial of PBGM01 in patients with a diagnosis of early and late infantile GM1.

Part 1 of the Imagine-1 Trial is a dose ranging phase of the study exploring different doses of PBGM01 across early infantile and late infantile GM1.

We have completed dosing of the initial four cohorts.

This includes a total of eight patients, as follows:

Cohort 1 for late infantile GM1 treated with the low dose of PBGM01, or dose 1, Cohort 2 for late infantile GM1 treated with the former high dose of PBGM01, or dose 2, Cohort 3 for early infantile GM1 treated with dose 1, and Cohort 4 for early infantile GM1 treated with dose 2.

To date, we have reported interim safety and biomarker data for the initial four cohorts of our Imagine-1 trial.

The safety data showed that PBGM01 was well tolerated with no serious adverse events related to study treatment and no evidence of dorsal root ganglion toxicity or complications related to the ICM injection.

At dose 2, PBGM01 has shown the ability to achieve healthy control levels of β-gal activity and GM1 gangliosides in the cerebral spinal fluid, or CSF, and maintain these effects up to 12 months.

A key objective of the initial phase of the Imagine-1 trial is to determine the optimal dose for the confirmatory phase of the study.

Based on the favorable safety profile of PBGM01 observed to date, the observed dose-response in key biomarkers, such as CSF β-gal activity and GM1 ganglioside levels, and that our preclinical studies showed no safety signals at doses higher than currently being evaluated in the ongoing clinical trial, we amended the protocol for Imagine-1 study to treat patients at a new higher dose of PBGM01, or dose 3.

The Imagine-1 clinical trial protocol amendment will treat six patients at dose 3, which is two times higher than dose 2, with three late infantile GM1 gangliosidosis patients in Cohort 5 and three early infantile GM1 gangliosidosis patients in Cohort 6.

In July 2023, we dosed the first patient at dose 3.

Results from all 3 doses will inform dose selection for the confirmatory cohorts of the trial.

We expect to report initial safety and biomarker data from patients at dose 3 by mid-2024.

The FDA has granted Orphan Drug Designation, or ODD, Rare Pediatric Disease Designation, or RPDD, and Fast Track Designation, to PBGM01 for the treatment of GM1.

The European Commission has granted Orphan designation and Advanced Therapy Medicinal Product, or ATMP, designation for PBGM01.

Through our manufacturing partners, we have manufactured the PBGM01 clinical supply and have established a clinical supply chain to support global clinical trials.

† US/EU prevalence per third-party sources

PBFT02 for the Treatment of FTD-GRN

We are currently developing PBFT02, which utilizes an AAV1 capsid to deliver a functional copy of the granulin gene, or GRN , encoding for human progranulin, or PGRN, for the treatment of FTD caused by progranulin deficiency, or FTD- GRN .

FTD- GRN is an inheritable form of FTD in which patients have mutations in the GRN gene, causing a deficiency in PGRN.

PGRN is a complex and highly conserved protein thought to have multiple roles in cell

homeostasis, neurodevelopment, and inflammation.

Emerging evidence suggests that PGRN deficiency in FTD and other neurodegenerative disorders may contribute to lysosomal dysfunction.

We are currently developing PBFT02, which utilizes an AAV1 capsid to deliver a functional copy of GRN encoding for PGRN, for the treatment of FTD- GRN .

FTD- GRN is an inheritable form of FTD caused by reductions in PGRN production due to mutations in the GRN gene.

PGRN is a complex and highly conserved protein with multiple roles in cell homeostasis, neurodevelopment, and inflammation.

In FTD- GRN , PGRN deficiency results in lysosomal dysfunction, neuroinflammation, and neurodegeneration.

Currently, there are no disease-modifying therapies approved for the treatment of FTD- GRN .

Based on findings in preclinical studies, we believe that PBFT02 may provide FTD- GRN patients with significantly improved outcomes.

We selected the AAV1 capsid and ICM administration for PBFT02 because this approach led to extensive and robust expression of human PGRN throughout the brain and spinal cord of non-human primates, or NHPs, and due to the higher PGRN levels in CSF using AAV1 as compared with other serotypes tested.

ICM administration of AAV1 to NHPs resulted in supraphysiologic CSF levels of human PGRN compared to levels in healthy human subjects’ CSF, and in excess of levels achieved in NHPs with AAVhu68 or AAV5.

In a preclinical mouse model of FTD, higher levels of CSF PGRN were associated with incremental improvements in some measures of downstream pathology.

We have an active IND from the FDA and approved CTAs in multiple countries for PBFT02, which allows us to proceed with our upliFT-D Trial, an international, multi-center, open-label, single-arm Phase 1/2 clinical trial of PBFT02 in patients with a diagnosis of early symptomatic FTD- GRN .

In August 2022, we dosed the first patient in our upliFT-D trial.

We expect to report initial safety and biomarker data from three patients in Cohort 1 in the fourth quarter of 2023.

The FDA has granted ODD and Fast Track Designation to PBFT02 for the treatment of FTD-GRN and the European Commission granted Orphan designation for PBFT02.

Through our manufacturing partners, we have manufactured the PBFT02 clinical supply and have established a clinical supply chain to support global clinical trials.

We selected the AAV1 capsid and ICM administration for PBFT02 because this approach led to extensive and robust vector delivery throughout the brain and spinal cord of non-human primates, or NHPs, and due to the higher PGRN levels in cerebrospinal fluid, or CSF, achieved using AAV1 as compared with other serotypes tested.

ICM administration of AAV1 to NHPs resulted in elevated CSF levels of human PGRN when compared with CSF levels in healthy human subjects, and in excess of levels achieved in NHPs with AAVhu68 or AAV5.

We have an active Investigational New Drug application, or IND, from the U.S.

Food and Drug Administration, or FDA, and approved clinical trial authorizations, or CTAs, in multiple countries for PBFT02.

We are conducting our upliFT-D trial, an international, multi-center, open-label, single-arm Phase 1/2 clinical trial of PBFT02 in patients with a diagnosis of symptomatic FTD- GRN .

We reported initial safety and biomarker data from three patients in Cohort 1 of our upliFT-D trial in December of 2023 and May 2024.

In this trial, Dose 1 of PBFT02 treatment was generally well-tolerated in study participants who received an enhanced immunosuppression regimen.

Dose 1 of PBFT02 resulted in consistent elevated levels of CSF PGRN with concentrations ranging from 10.7 to 17.3 ng/mL at 30 days post-treatment (n=3) and 21.7 to 27.3 ng/mL at 6 months post-treatment (n=2), higher than the range found in healthy adult controls of 3.3 to 8.2 ng/mL (mean=4.8 ng/mL;

In contrast, following PBFT02 treatment, plasma PGRN levels were unaltered, remaining similar to baseline concentrations and below levels found in healthy adult controls throughout the available follow-up period across all three patients.

We have completed dosing of Cohort 1 (n=5) and expect to initiate dosing of Cohort 2 (n=3-5) in the second quarter of 2024.

Based on the robust PGRN expression observed in the initial patients in Cohort 1, including from the first two patients to reach six months post PBFT02 administration, we plan to continue studying Dose 1 in Cohort 2 of the upliFT-D trial, pending review of the safety data from the Cohort 1 study population with the Independent Data Monitoring Committee or IDMC.

We expect to report six-month safety and biomarker data from Cohort 1 FTD- GRN patients of the upliFT-D trial in the second half of 2024, and report 12-month follow-up data from Cohort 1 patients and initial safety and biomarker data from Cohort 2 patients in the first half of 2025.

The FDA has granted Orphan Drug Designation and Fast Track Designation to PBFT02 for the treatment of FTD- GRN and the European Commission has granted Orphan designation for PBFT02.

PBFT02 for the treatment of FTD-C9orf72 and ALS

We intend to pursue PBFT02 in additional adult neurodegenerative diseases where we believe elevated PGRN levels could provide benefits.

This approach stems from PGRN’s pleiotropic cellular effects including the regulation of microglial activation and lysosomal function, and in particular its potential to ameliorate TDP-43 pathology.

TDP-43 is a ribonucleic acid / deoxyribonucleic acid, or RNA/DNA, binding protein that normally resides in the nucleus where it regulates gene expression, RNA splicing, RNA trafficking, and mRNA turnover.

Cytoplasmic TDP-43 pathology is a hallmark of multiple neurodegenerative conditions including FTD- GRN , FTD- C9orf72 , approximately 95% of sporadic ALS, and approximately 50% of sporadic FTD.

In these disorders, hyperphosphorylated TDP-43 accumulates in the cytoplasm of cell bodies and dendritic processes of neurons and glia, suggesting that loss of TDP-43's normal nuclear function contributes to the neurodegenerative process.

The potential for benefit of increased PGRN in disorders with TDP-43 pathology has been demonstrated by third-party preclinical studies in mice and zebrafish which showed that increased PGRN levels reduced TDP-43 pathology and associated toxicities.

We anticipate that elevating neuronal PGRN levels in diseases with TDP-43 pathology may provide significant benefits to patients.

We expect to obtain regulatory feedback on the clinical pathway to treating FTD- C9orf72 and ALS patients with PBFT02 in the second half of 2024.

PBFT02 for the treatment of AD

We believe that elevating PGRN levels has the potential to improve the course of AD in patients who carry the GRN rs5848 single nucleotide polymorphism, or GRN SNP.

The GRN SNP is associated with reduced PGRN levels and is present within approximately 30% of the population.

Its presence has been shown to confer an increased risk for AD onset.

Within symptomatic AD patients, GRN SNP carriers not only have lower levels of PGRN, but also higher levels of CSF tau, which correlates with increased AD pathology in the brain and more rapid disease progression.

Third party preclinical studies in animal models have demonstrated that low levels of PGRN may exacerbate AD pathology and, conversely, high levels of PGRN may reduce AD pathology.

We plan to initiate preclinical studies in AD to extend these initial observations.

Other Clinical Product Candidates

We have two clinical product candidates, PBKR03 and PBML04, for which, in order to reduce operating expenses, we have stopped further clinical development and are exploring strategic alternatives for these assets.

PBKR03 utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GALC gene encoding the hydrolytic enzyme galactosylceramidase to treat Krabbe disease.

Krabbe disease is an autosomal recessive lysosomal storage disease caused by mutations in the GALC gene, which provides instructions for making an enzyme called galactosylceramidase, which breaks down certain fats, including galactosylceramide and psychosine.

This results in the accumulation of galactolipids such as psychosine, resulting in widespread death of myelin-producing cells in the CNS and in the peripheral nervous system, or PNS.

We have an active IND from the FDA and approved CTAs in multiple countries for PBKR03 to support our GALax-C Trial, an international, multi-center, open-label, single-arm Phase 1/2 clinical trial of PBKR03 in patients with a diagnosis of infantile Krabbe disease.

In March 2022, we dosed the first patient in our GALax-C Trial.

In November 2022, we announced plans to stop further clinical development of PBKR03 in order to reduce operating expenses, and are exploring strategic alternatives for this asset.

PBML04 utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional arylsulfatase A gene, or ARSA , encoding the ARSA enzyme to treat Metachromatic Leukodystrophy, or MLD.

MLD is a rare, autosomal recessive lysosomal storage disease caused by mutations in the ARSA gene, resulting in little or no functional activity of the ARSA enzyme, which is essential for the degradation of sphingolipid cerebroside-3-sulfate, or sulfatide.

When the ARSA enzyme is lacking, sulfatides accumulate in lysosomal storage deposits in microglia, oligodendrocytes, and Schwann cells, leading to widespread demyelination.

Our preclinical data in ARSA -/- mice and in NHPs support the ability of PBML04 administration into CSF to result in dose-dependent increases in brain and CSF levels of functional human ARSA enzyme, leading to improved biochemical, histopathological, behavioral, survival endpoints, and with no safety or toxicity signs up to the highest tested dose in NHPs.

Preclinical findings were presented by GTP in 2021.

In April 2022, we submitted an IND for PBML04 to support clinical development in MLD.

On May 20, 2022, the FDA cleared our IND application for PBML04, which supports PBML04-001, an international, multi-center, open-label, single-arm clinical trial of PBML04 in patients with a diagnosis of late onset infantile MLD.

November 2022, we announced plans to stop further clinical development of PBML04 in order to reduce operating expenses, and are exploring strategic alternatives for this asset.

Research Programs

We have two programs in preclinical research stages under our license agreement with Penn:

PBAL05 for ALS and, an unnamed program for Huntington’s disease.

PBAL05 is targeting patients with ALS who have a gain-of-function mutation in the C9orf72 gene.

Our unnamed program is focused on the treatment of Huntington’s disease, a repeat expansion disorder.

Beyond this portfolio, through our research collaboration with GTP, we also have the option to license programs for eight additional new indications in CNS diseases along with certain rights and licenses to new gene therapy technologies developed by Penn, such as novel capsids, toxicity reduction technologies and delivery and formulation.

We also have an exploratory research program with GTP for larger non-monogenic indications, currently focused on temporal lobe epilepsy, or TLE, which can be expanded to other large CNS diseases upon mutual agreement with GTP.

We have three additional clinical product candidates, PBGM01, PBKR03 and PBML04.

In order to reduce operating expenses, we have stopped further clinical development and are pursuing out-licensing opportunities for these product candidates.

Active Research Programs

We have one unnamed preclinical research program through our license agreement with GTP, which is exploring multiple potential treatment targets for Huntington’s disease.

Beyond this program, through our research collaboration with GTP, we also have the option to license programs for eight additional new indications in CNS diseases along with certain rights and licenses to new gene therapy technologies developed by GTP, such as novel capsids, toxicity reduction technologies, and approaches to optimize delivery and formulation.

Paused Research Programs

We have a preclinical research program, PBAL05, under our license agreement with Penn for patients with ALS who have a gain-of-function mutation in the C9orf72 gene.

We also have a program under our exploratory research program with GTP for Temporal Lobe Epilepsy.

In order to reduce operating expenses, we have paused development of both of these programs.

Business Overview

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Historically, we have funded our operations through the sale of convertible preferred stock and public offerings of common stock.

Our net losses were $27.1 million and $26.7 million for the three months ended September 30, 2023 and 2022, respectively, and $85.3 million and $109.1 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $577.7 million.

Our net losses were $16.7 million and $34.3 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of $611.2 million.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

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If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

In July 2023, we implemented an organizational restructuring to better align our resources with our previously announced focused research and development strategy and further extend our cash runway.

In connection with the organizational restructuring, we reduced our workforce by approximately 26 percent, primarily in our CMC group.

We will also have decreased operating expenses through ongoing cash management initiatives.

As of September 30, 2023, we had cash, cash equivalents and marketable securities of $132.8 million.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $104.5 million.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025.

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We have a research, collaboration and licensing agreement with Penn, as amended, or the Penn Agreement, for research and development collaborations and exclusive license rights to patents for certain products and technologies.

Under the Penn Agreement, we have the obligation to fund certain research relating to the preclinical development of selected products in research programs as well as exploratory research programs in non-rare and/or non-monogenic, or large CNS indications.

In addition, we will fund discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery research for our products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

Under the Penn Agreement, we have the option to obtain exclusive licenses to, and to fund, certain research relating to the preclinical development of selected products in research programs in rare monogenic CNS indications.

We have eight remaining options available to commence additional licensed programs for CNS indications until August 3, 2026.

The Penn Agreement includes an exploratory research program to identify targets and early product candidates in certain agreed upon non-monogenic, non-rare, or large, CNS indications.

The initial term of the exploratory research program is three years, or until August 2024, which term can be extended by mutual agreement.

During such term, we will have an exclusive right of first negotiation to include additional targets to the exploratory research program in the agreed upon large CNS indications.

Under the exploratory research program, we will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets that arise from the exploratory research programs by exercising one of our remaining eight options.

We currently do not have any active exploratory research programs.

If we were to exercise any of the remaining options, we would owe Penn a non-refundable aggregate fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone.

We also fund discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to platform technologies resulting from the discovery research for our products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

This funding commitment for the discovery research is $5.0 million annually, paid in quarterly increments of $1.3 million through June 2026.

The Penn Agreement includes an exploratory research program focused on discovering targets and novel gene therapy candidates for certain large CNS indications and can be expanded to other large CNS diseases upon mutual agreement.

The initial term of the exploratory research program is until August 2024, which term can be extended by mutual agreement.

Under the exploratory research program, we will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets (and any future large CNS diseases that are mutually agreed upon) that may arise from the exploratory research programs on substantially the same terms of the current Penn Agreement.

Under the Penn Agreement, we have eight remaining options available to commence additional licensed programs for CNS indications and have until August 3, 2026, to exercise these options.

If we were to exercise any of these options, we would owe Penn a non-refundable upfront fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone.

We have the obligation to fund certain research relating to the preclinical development of each licensed program.

The Penn Agreement requires that we make payments of up to (i) $16.5 million per product candidate for rare, monogenic disorders in the aggregate and (ii) $39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications.

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Collaboration and Manufacturing and Supply Agreements

In June 2019, we entered into a collaboration agreement, or the Collaboration Agreement, with Catalent.

As part of the Collaboration Agreement, we were required to pay an annual fee for five years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite.

In June 2019, we entered into a collaboration agreement, or the Collaboration Agreement, with Catalent Maryland, a unit of Catalent, Inc., or Catalent.

As part of the Collaboration Agreement, we were required to pay an annual fee for five

years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite.

In April 2020, we entered into a development services and clinical supply agreement, or the Manufacturing and Supply Agreement, with Catalent to secure clinical scale manufacturing capacity for batches of active pharmaceutical ingredients for our gene therapy product candidates.

The Manufacturing and Supply Agreement confirms the terms contemplated by the Collaboration Agreement and the Collaboration Agreement continues to be in effect pursuant to its terms.

Under the terms of the Manufacturing and Supply Agreement, Catalent agreed to manufacture batches of drug product for our gene therapy product candidates at the Clean Room Suite at a Catalent facility provided for in the Collaboration Agreement.

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The Manufacturing and Supply Agreement also included minimum annual purchase commitments.

We have the right to terminate the Manufacturing and Supply Agreement for convenience or other reasons specified in the Manufacturing and Supply Agreement upon prior written notice.

If we terminate the Manufacturing and Supply Agreement, we will be obligated to pay an early termination fee to Catalent.

Under both the Collaboration Agreement and the Manufacturing and Supply Agreement, we had an annual minimum commitment of $10.6 million per year owed to Catalent for five years from the validation of the Clean Room Suite, subject to certain inflationary adjustments.

On March 31, 2023, we entered into certain letter agreements amending each of (i) the Collaboration Agreement and (ii) the Manufacturing and Supply Agreement, together with the Collaboration Agreement, the Existing Agreements.

Letter agreement I, or Agreement I, eliminated the minimum annual purchase obligation and the obligation to pay an annual fee for use of the Clean Room Suite, thereby eliminating the annual minimum commitment of $10.6 million per year owed to Catalent through November 2025 under the Existing Agreements.

In consideration of Agreement I, we agreed to make aggregate payments to Catalent of $6.0 million between June 30, 2023 and May 1, 2024.

Letter agreement II, or Agreement II, and together with Agreement I, the Letter Agreements, extended the term of the Existing Agreements until November 6, 2030, and established a limited exclusive relationship between us and Catalent for the manufacture of bulk drug substance and drug product for our adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1.

The limited exclusive relationship under Agreement II converts to a non-exclusive relationship (i) in the event Catalent fails to meet certain performance standards and (ii) following certain conditional events related to the divestiture by us of either FTD or GM1, in which case, if such events occur, we would pay Catalent certain fees.

In addition, in the event of certain transactions, we may terminate the Existing Agreements for convenience with respect to such products, in which case, we would pay to Catalent a certain termination fee.

Under both the Collaboration Agreement and the Manufacturing and Supply Agreement, we had an annual minimum commitment of $10.6 million per year owed to Catalent for five years from November 2020 subject to certain inflationary adjustments.

On March 31, 2023, we entered into certain letter agreements, the Letter Agreements, amending each of (i) the Collaboration Agreement and (ii) the Manufacturing and Supply Agreement, together with the Collaboration Agreement, the Original Catalent Agreements.

On November 9, 2023, to supersede and implement the terms of the Letter Agreements, we entered into an amended and restated collaboration agreement and an amended and restated manufacturing and supply agreement, together the Amended Catalent Agreements.

The Amended Catalent Agreements eliminate the minimum annual purchase obligation and the obligation to pay an annual fee for use of the Clean Room Suite, thereby eliminating the annual minimum commitment of $10.6 million per year owed to Catalent through November 2025 under the Original Catalent Agreements.

In consideration of this, we had an obligation to make aggregate payments to Catalent of $6.0 million between June 30, 2023 and May 1, 2024.

The Amended Catalent Agreements extend the term of the Original Catalent Agreements until November 6, 2030, and establish a limited exclusive relationship between us and Catalent for the manufacture of bulk drug substance and drug product for our adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1.

The limited exclusive relationship under the Amended Catalent Agreements converts to a non-exclusive relationship (i) in the event Catalent fails to meet certain performance standards and (ii) following certain conditional events related to the divestiture by us of either FTD or GM1, in which case, if such events occur, we would pay Catalent certain fees.

In addition, in the event of certain transactions, we may terminate the Amended Catalent Agreements for convenience with respect to such products, in which case, we would pay to Catalent a certain termination fee.

Immediately prior to the execution of the Letter Agreements, we had a $5.3 million prepaid asset related to upfront payments made to secure the Clean Room Suite.

In connection with the Letter Agreements, we no longer have exclusive access to the Clean Room Suite at Catalent and, as a result, we recognized an expense of $5.3 million related to the elimination of the prepaid asset during the nine months ended September 30, 2023.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the nine months ended September 30, 2023, as both amounts do not directly relate to the future advancement of our research and development programs.

As of September 30, 2023, we made payments of $2.0 million under the Letter Agreements.

The remaining $4.0 million of aggregate payments due to Catalent under the Letter Agreements are included in accrued expenses and other current liabilities.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the three months ended March 31, 2023, as both amounts did not directly relate to the future advancement of our research and development programs.

As of March 31, 2024, we made payments of $4.0 million under the Amended Catalent Agreements.

The remaining $2.0 million of aggregate payments due to Catalent under the Amended Catalent Agreements are included in accrued expenses and other current liabilities as of March 31, 2024, and were paid in May 2024.

Components of Results of Operations

Research and Development and Acquired In-Process Research and Development

Research and Development

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates.

These expenses include:

● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval, including payments to Penn for preclinical research and development;

● expenses incurred in obtaining technology licenses related to technology that has not reached technological feasibility and has no alternative future use, which are classified as acquired in-process research and development;

● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval, including payments to clinical research organizations, or CROs, and payments to GTP for preclinical research and development;

● personnel expenses, including salaries, benefits and share-based compensation expense for employees engaged in research and development functions;

● expenses related to funding research performed by third parties, including pursuant to agreements with clinical research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

● expenses incurred under agreements with contract manufacturing organizations, or CMOs, including the cost of acquiring and manufacturing preclinical study and clinical trial materials;

● expenses incurred under agreements with contract development and manufacturing organizations, or CDMOs, including the cost of acquiring and manufacturing preclinical study and clinical trial materials;

● expenses and fees paid to consultants who assist with research and development activities;

● expenses incurred at and for our lab facilities, including rent, utilities, depreciation, and maintenance.

We track outsourced development expenses and other external research and development expenses to specific product candidates on a program-by-program basis, such as expenses incurred under our collaboration with Penn, fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities.

We track outsourced development expenses and other external research and development expenses to specific product candidates on a program-by-program basis, such as expenses incurred under our collaboration with Penn, fees paid to CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities.

However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation and other expenses which are deployed across multiple projects under development.

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Product candidates in later stages of clinical development generally have higher development expenses than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect our research and development expenses to remain consistent or decrease in the near future.

We expect our research and development expenses to remain consistent in the near future.

If our product candidate portfolio progresses into later-stage clinical trials, we expect that our research and development expenses will increase in the future to support our continued research and development activities and production of clinical supply.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance, accounting, legal, information technology, commercial, quality, regulatory, operations and human resource functions.

General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation and maintenance, legal expenses related to intellectual property and corporate matters, insurance expense, expenses related to contract modifications or terminations, and expenses for accounting and consulting services.

We expect our general and administrative expenses to remain consistent or decrease in the near future, after excluding the impacts of our recent Letter Agreements with Catalent.

If our product candidate portfolio progresses into later-stage clinical trials, we expect that our general and administrative expenses will increase in the future to support our continued research and development activities, potential commercialization efforts, and increased expenses of operating as a public company.

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance, accounting, legal, information technology, product strategy, quality, regulatory, operations and human resource functions.

General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation and maintenance, legal expenses related to intellectual property, litigation and corporate matters, insurance expense, expenses related to contract modifications or terminations, software expenses, expenses incurred to engage with patient advocacy organizations, recruitment related expenses, and expenses for other professional and consulting services.

We expect our general and administrative expenses to remain consistent in the near future.

These increases will likely include increased expenses related to the hiring of additional personnel in general and administrative functions, and expenses related to pre-commercialization efforts.

If any of our current or future product candidates obtain regulatory approval,

we expect that we would incur significantly increased expenses associated with building a commercial sales and marketing team.

Impairment of long-lived assets

Impairment of long-lived assets consists of non-cash impairment charges recorded to the Company’s assets.

The Company reviews long-lived assets, such as the right of use assets or property and equipment, for impairments when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

During the nine months ended September 30, 2023, we recognized impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

These impairment expenses represent the proportional allocation of total impairments recognized for the asset groups subject to impairment testing in connection with the Company’s sublease agreements.

If any of our current or future product candidates obtain regulatory approval, we expect that we would incur significantly increased expenses associated with building a commercial sales and marketing team.

Other Income (Expense), Net

Other income (expense), net consists of interest earned on our cash equivalents and marketable securities, and amortization of premium and discount on our marketable securities.

Additionally, in the nine months ended September 30, 2023, we recognized other income related to the sale of certain tax credits.

Additionally, in the three months ended March 31, 2023, we recognized other income related to the sale of certain tax credits.

Results of Operations

Comparison of the three months ended September 30, 2023 and 2022

The following table sets forth our results of operations for the three months ended September 30, 2023 and 2022:

Three months ended

September 30,

(in thousands)

Operating expenses:

Research and development

Acquired in‑process research and development

General and administrative

Impairment of long-lived assets

Loss from operations

Other income (expense), net

Research and Development Expenses

Research and development expenses decreased by $0.3 million to $15.1 million for the three months ended September 30, 2023 from $15.4 million for the three months ended September 30, 2022.

This was primarily due to decreases of $0.5 million in wages and benefits related to reductions in headcount, $0.3 million in clinical operations, $0.2 million in professional services and consulting, and $0.8 million related to a reduction in Penn expenses.

Expenses associated with the Penn Agreement will continue to vary from quarter to quarter based on our selection and prioritization of preclinical product candidates, the status of our preclinical pipeline, and timing of preclinical work performed.

These amounts were offset by increases of $0.9 million in share-based compensation expense, $0.4 million for clinical manufacturing, and $0.2 million for facilities and other expenses.

We track outsourced development, outsourced personnel expenses and other external research and development costs of specific programs.

We do not track our internal research and development expenses on a program by program basis.

Research and development expenses are summarized by program in the table below:

Comparison of the three months ended March 31, 2024 and 2023

The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023:

Three months ended

September 30,

(in thousands)

Program Specific Expenses

PBFT02 (FTD‑GRN)

PBKR03 (Krabbe)

Other Programs and Discovery

Unallocated Internal Expenses

Personnel-related (including share-based compensation)

Acquired In-Process Research and Development Expenses

During the three months ended September 30, 2023, we did not make any payments for acquired in-process research and development.

During the three months ended September 30, 2022, we made payments under the Penn Agreement for acquired in-process research and development of $1.5 million related to the achievement of a development milestone.

General and Administrative Expenses

General and administrative expenses decreased by $2.5 million to $8.2 million for the three months ended September 30, 2023 from $10.7 million for the three months ended September 30, 2022.

The decrease was due to decreases of $2.2 million in facilities and other expenses, and $0.5 million and $0.9 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount.

These decreases were partially offset by an increase of $1.1 million in professional services and consulting fees.

Impairment of long-lived assets

During the three months ended September 30, 2023, we recorded $5.4 million of impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

The impairment charges consisted of $2.2 million and $3.2 million recorded to the right of use assets and property and equipment, net, respectively.

During the three months ended September 30, 2022, we did not record any impairment expense.

Other income (expense), net

Other income (expense), net was $1.6 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively.

Other income (expense), net for the three months ended September 30, 2023 consisted of $0.8 million attributable to interest income earned on cash, cash equivalents and marketable securities and $0.8 million attributable to the amortization of premium and discount on our marketable securities.

Comparison of the nine months ended September 30, 2023

The following table sets forth our results of operations for the nine months ended September 30, 2023 and 2022:

Nine months ended

September 30,

(in thousands)

Operating expenses:

Research and development

Acquired in‑process research and development

General and administrative

Impairment of long-lived assets

Loss from operations

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Research and Development Expenses

Research and development expenses decreased by $19.1 million to $49.3 million for the nine months ended September 30, 2023 from $68.4 million for the nine months ended September 30, 2022.

The decrease was primarily due to a decrease of $14.3 million in clinical manufacturing expenses, which were higher in 2022 to support clinical trial start up across the portfolio, a decrease of $1.6 million for clinical operations, a decrease of $0.7 million in professional fees, and decreases of $3.8 million and $1.7 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount.

These amounts were partially offset by a $0.3 million increase in facility and other expenses and a $2.7 million increase in Penn expenses.

We track outsourced development, outsourced personnel expenses and other external research and development costs of specific programs.

We do not track our internal research and development expenses on a program by program basis.

Research and development expenses are summarized by program in the table below:

Nine months ended

September 30,

(in thousands)

Program Specific Expenses

PBFT02 (FTD‑GRN)

PBKR03 (Krabbe)

Other Programs and Discovery

Unallocated Internal Expenses

Personnel-related (including share-based compensation)

Acquired In-Process Research and Development Expenses

During the nine months ended September 30, 2023, we did not make any payments for acquired in-process research and development.

During the nine months ended September 30, 2022, we made payments under the Penn Agreement for acquired in-process research and development of $3.0 million related to the achievement of development milestones.

Research and development expenses decreased by $5.3 million to $11.5 million for the three months ended March 31, 2024 from $16.8 million for the three months ended March 31, 2023.

The decrease was primarily due to the following:

● a decrease of $1.3 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, for which we are pursuing out-licensing opportunities;

● a decrease of $1.1 million in wages and benefits related to reductions in headcount;

● a decrease of $1.1 million in Penn expenses.

Expenses associated with the Penn Agreement will continue to vary from year to year based on our selection and prioritization of preclinical product candidates, the status of our preclinical pipeline and timing of preclinical work performed;

● a decrease of $0.8 million in chemistry, manufacturing and control expenses primarily related to lower external manufacturing expenses, most significantly related to (i) reduced external manufacturing activities for our GM1 program and (ii) reduced expenses for Clean Room Suite fees related to the Amended Catalent Agreements;

● a decrease of $0.8 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.5 million in professional fees.

These decreases were partially offset by:

● an increase of $0.3 million in facility and other expenses.

General and Administrative Expenses

General and administrative expenses decreased by $3.5 million to $35.3 million for the nine months ended September 30, 2023 from $38.8 million for the nine months ended September 30, 2022.

The decrease was due to decreases of $6.9 million and $4.4 million in wages and benefits and share-based compensation expense, respectively, related to reductions in headcount, a $1.7 million decrease in our professional fees, and a $1.8 million decrease in facilities and other expenses.

These amounts were partially offset by the current year expense of $11.3 million related to the Letter Agreements.

Excluding the $11.3 million related to the Letter Agreements, our general and administrative expenses decreased by $14.8 million.

Impairment of long-lived assets

During the nine months ended September 30, 2023, we recorded $5.4 million of impairment expense in connection with Sublease Agreement A and Sublease Agreement B.

The impairment charges consisted of $2.2 million and $3.2 million recorded to the right of use assets and property and equipment, net, respectively.

During the nine months ended September 30, 2022, we did not record any impairment expense.

General and administrative expenses decreased by $12.5 million to $6.5 million for the three months ended March 31, 2024 from $19.0 million for the three months ended March 31, 2023.

The decrease was primarily due to the following:

● a decrease of $11.3 million related to expenses incurred in conjunction with the Amended Catalent Agreements during the three months ended March 31, 2023;

● a decrease of $0.7 million in wages and benefits related to reductions in headcount;

● a decrease of $0.4 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.1 million in facility and other expenses.

Other Income (Expense), Net

Other income (expense), net was $4.6 million and $1.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Other income (expense), net for the nine months ended September 30, 2023 consisted of $2.1 million attributable to interest income earned on cash, cash equivalents and marketable securities, $2.0 million attributable to the amortization of premium and discount on our marketable securities and $0.5 million related to the sale of certain tax credits.

Other income (expense), net decreased by $0.2 million to $1.3 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, 2023.

The decrease was primarily due to the following:

● a decrease of $0.4 million attributable to the sale of certain tax credits during the three months ended March 31, 2023.

The decrease was partially offset by:

● an increase of $0.2 million attributable to interest income and the amortization of premium and discount on the Company’s marketable securities.

Liquidity and Capital Resources

As of September 30, 2023, we had $132.8 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $577.7 million.

As of March 31, 2024, we had $104.5 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $611.2 million.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expense and capital expenditures into the fourth quarter of 2025.

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● the expenses and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

● the expenses related to general and administrative functions to support our product candidates;

● our ability to establish additional collaborations on favorable terms, if at all;

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If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, further reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

On March 5, 2021, we entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which we may, but are not obligated to, offer and sell, from time to time, shares of our common stock with an aggregate offering price up to $125.0 million through Cowen, as sales agent.

No sales of common stock have been made pursuant to this Sales Agreement to date.

On March 5, 2021, we entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, relating to the applicable terms of at-the-market equity offerings, or the ATM Facility, pursuant to which we may, but are not obligated to, offer and sell, from time to time, shares of our common stock with an aggregate offering price up to $125.0 million through Cowen, as sales agent in ATM Facility.

During the three months ended March 31, 2024, we issued 6,000,000 shares of common stock under the ATM Facility, resulting in net proceeds of $8.7 million after deducting offering costs of $0.3 million.

The following table shows a summary of our cash flows for the periods indicated:

Nine months ended

September 30,

Three months ended

(in thousands)

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Net increase (decrease) in cash and cash equivalents

Net Cash Used in Operating Activities

During the nine months ended September 30, 2023, we used $58.7 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $85.3 million, partially offset by a net decrease in our operating assets of $9.6 million and net non-cash charges of $17.0 million primarily related to share-based compensation, depreciation, amortization, impairment of long-lived assets, and amortization of premium and discount, net.

Net Cash Provided by (Used in) Operating Activities

During the three months ended March 31, 2024, we used $18.9 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $16.7 million and a net increase in our operating assets of $4.2 million, partially offset by non-cash charges of $2.0 million related to depreciation, amortization, share-based compensation, and amortization of premium and discount, net.

The primary use of cash was to fund our operations related to the development of our product candidates.

During the nine months ended September 30, 2022, we used $94.2 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $109.1 million and a net increase in our operating assets of $7.5 million, partially offset by $3.0 million of charges for acquired in-process research and development and non-cash charges of $19.4 million related to share-based compensation, depreciation, and the amortization of premium and discount, net.

During the three months ended March 31, 2023, we used $22.4 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $34.3 million and a net decrease in our operating assets of $8.2 million, partially offset by non-cash charges of $3.7 million related to share-based compensation, depreciation, amortization, and amortization of premium and discount, net.

The primary use of cash was to fund our operations related to the development of our product candidates.

Net Cash Provided by (Used in) Investing Activities

During the nine months ended September 30, 2023 , we purchased $101.6 million in marketable securities, and had sales and maturities of $159.4 million in marketable securities.

Purchases of property and equipment were $0.1 million for the nine months ended September 30, 2023.

During the nine months ended September 30, 2022, we purchased $116.3 million in marketable securities, had sales and maturities of $149.7 million in marketable securities, purchased $1.8 million of property and equipment, and paid $3.0 million for technology licenses.

During the three months ended March 31, 2024 , we purchased $13.8 million in marketable securities, and had sales and maturities of $39.1 million in marketable securities.

We did not make any purchases of property and equipment for the three months ended March 31, 2024.

During the three months ended March 31, 2023, we purchased $51.4 million in marketable securities, and had sales and maturities of $72.6 million in marketable securities.

Purchases of property and equipment were de minimus for the three months ended March 31, 2023.

Net Cash Provided by (Used in) Financing Activities

During the nine months ended September 30, 2023, we received $0.1 million in proceeds from the issuance of common stock under the ESPP.

During the nine months ended September 30, 2022, we received $0.1 million from the exercise of stock options, received $0.2 million in proceeds from the issuance of common stock under the ESPP and paid $1.1 million for short-term insurance premium financing.

During the three months ended March 31, 2024, we received $8.7 million in net proceeds from the issuance of common stock under the ATM Facility.

We received gross proceeds of $9.0 million, net of offering costs of $0.3 million.

During the three months ended March 31, 2023, we had no gross receipts or outflows of cash related to financing activities.

Contractual Obligations and Other Commitments

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The aggregate estimated rent payments due over the initial term of the lease is $11.8 million, with rent payments that began in 2022.

Sublease Agreement A and Sublease Agreement B do not relieve us from our primary obligations under the 2005 Market Street Lease Agreement, however, we do expect cash inflows from the agreements to partially offset our future obligations for the duration of the sublease agreements.

We lease approximately 62,000 square feet of laboratory space in Hopewell, NJ, or the Laboratory Lease Agreement.

Our sublease agreements do not relieve us from our primary obligations under the 2005 Market Street Lease Agreement, however, we do expect cash inflows from the agreements to partially offset our future obligations for the duration of the sublease agreements.

We sublease approximately 16,000 square feet of office space in Philadelphia, Pennsylvania, or the 1835 Market Street Sublease Agreement.

The sublease will expire in August 2025.

We have an option to extend the term of the sublease by three and a half years through February 2029.

The aggregate estimated rent payments due over the initial term of the sublease is approximately $0.5 million, with rent payments that began in 2024.

We lease approximately 62,000 square feet of laboratory space in Hopewell, New Jersey, or the Laboratory Lease Agreement.

The lease will expire in March 2036.

The aggregate estimated rent payments due over the initial term of the lease is approximately $40.3 million, with rent payments that began in 2021.

As a result of the Letter Agreements, under both the Collaboration Agreement and the Manufacturing and Supply Agreement with Catalent, we no longer have an annual minimum commitment of $10.6 million per year owed to Catalent through November 2025.

As of September 30, 2023, the Company made payments of $2.0 million under the Letter Agreements.

In addition, the Company will make aggregate payments to Catalent of $4.0 million between October 1, 2023 and May 1, 2024.

Under the Penn Agreement, we agreed to fund discovery research conducted by Penn for five years, which began in May 2020.

Our funding commitment is $5.0 million a year through June 2026.

As a result of the Amended Catalent Agreements, we no longer have an annual minimum commitment of $10.6 million per year owed to Catalent through November 2025.

As of March 31, 2024, the Company has made payments of $4.0 million under the Amended Catalent Agreements and made the final payment of $2.0 million in May 2024.

Under the Penn Agreement, we agreed to fund discovery research conducted by GTP for five years, which began in May 2020.

Our funding commitment is $5.0 million annually through June 2026.

These contractual obligations and commitments are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

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Critical Accounting Policies and Estimates

During the nine months ended September 30, 2023, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2022 Annual Report filed on Form 10-K, except for those described below.

Long-Lived Assets:

We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable.

We measure the recoverability of assets that we will continue to use in our operations by comparing the carrying value of the asset groups to our estimate of the related total future undiscounted net cash flows.

If an asset group’s carrying value is not recoverable through the related undiscounted cash flows, the asset group is considered to be impaired.

In the event the carrying value exceeds the future undiscounted net cash flows, we estimate the fair values using either the income approach, market approach, or a combination of the two.

The income approach is based on the present value of future cash flows of each asset group, while the market approach is based on industry and economic conditions, including estimates on prevailing prices and rates for similar assets.

The approaches are asset group specific and may incorporate a number of market participant assumptions in assessing fair value including future growth rates, discount rates, and market activity.

We measure the impairment by comparing the difference between the asset group’s carrying value and its fair value.

Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows.

During the three months ended September 30, 2023, we recorded impairments of long-lived assets (property and equipment and right of use assets) of $5.4 million based upon impairment testing in connection with Sublease Agreement A and Sublease Agreement B.

Actual future net cash flows are uncertain, subject to risks, and may change depending upon several factors, including industry or economic trends.

If our estimates of future net cash flows differ from actual future net cash flows, our estimates of fair value could materially change.

Additionally, future events or changes in circumstances could indicate that the carrying value of our long-lived assets may not be recoverable and lead to future impairments.

As of September 30, 2023, we had property and equipment, net of $16.1 million and right of use assets of $17.0 million recorded on our balance sheet.

During the three months ended March 31, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2023 Annual Report filed on Form 10-K.

JOBS Act Accounting Election

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We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

If we are a smaller reporting

company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis