Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and the accompanying notes thereto and other disclosures included in this Quarterly Report on Form 10-Q, including the disclosures under Part II, Item 1A “Risk Factors,” and our audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission ( the “SEC”) on March 1, 2021 . Our unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and unless otherwise indicated are presented in U.S. dollars.
Overview
We are a leader in the field of gene therapy and seek to deliver to patients suffering from rare and other devastating diseases single treatments with potentially curative results. We are advancing a focused pipeline of innovative gene therapies, including product candidates for the treatment of hemophilia B, which effective May 6, 2021, we licensed to CSL Behring pursuant to the CSL Behring Agreement (as defined below), and Huntington’s disease. We believe our validated technology platform and manufacturing capabilities provide us distinct competitive advantages, including the potential to reduce development risk, cost, and time to market. We produce our Adeno-associated virus (“AAV”) -based gene therapies in our own facilities with a proprietary, commercial-scale, current good manufacturing practices (“cGMP”)-compliant, manufacturing process. We believe our Lexington, Massachusetts-based facility is one of the world’s most versatile gene therapy manufacturing facilities.
Business Developments
Below is a summary of our recent significant business developments:
Financing
As of December 31, 2020, a $35.0 million term loan was outstanding in accordance with the Second Amended and Restated Loan and Security Agreement (the “2018 Amended Facility”) between us and Hercules.
On January 29, 2021, we and Hercules amended the 2018 Amended Facility (“2021 Amended Facility”). Pursuant to the 2021 Amended Facility, Hercules agreed to an additional Facility of $100.0 million (“Tranche B”) increasing the aggregate principal amount of the term loan facilities from $35.0 million to up to $135.0 million. On January 29, 2021, we drew down $35.0 million of the Tranche B. We may draw down the remaining $65.0 million under the Tranche B in a series of one or more advances of not less than $20.0 million each until December 15, 2021. Advances under Tranche B bear interest at a rate equal to the greater of (i) 8.25% or (ii) 8.25% plus the prime rate, less 3.25% per annum. The principal balance and all accrued but unpaid interest on advances under Tranche B is due on June 1, 2023, which date may be extended by us by up to two twelve-month periods. Advances under the 2021 Amended Facility may not be prepaid until July 29, 2021, following which we may prepay all such advances without charge.
In addition to Tranche B, the 2021 Amended Facility also extends the interest only payment period of the previously funded $35.0 million term loan from January 1, 2022 to June l, 2023. End of term charges in respect of advances under the 2021 Amended Facility range from 1.65% to 6.85%, depending on the maturity date.
The 2021 Amended Facility extended the funding of our operations until the second half of 2022.
On March 1, 2021, we entered into a Sales Agreement with SVB Leerink LLC (“SVB Leerink”) with respect to an at-the-market (“ATM”) offering program, under which we may, from time to time in our sole discretion, offer and sell through SVB Leerink, acting as agent, our ordinary shares, up to an aggregate offering price of $200.0 million. We will pay SVB Leerink a commission equal to 3% of the gross proceeds of the sales price of all ordinary shares sold through it as a sales agent under the Sales Agreement.
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In March 2021, we issued 0.9 million ordinary shares at a weighted average price of $33.42 per share, with net proceeds of $27.6 million, after deducting underwriting discounts and net of offering expenses. This further extended the funding of our operations until the end of 2022.
CSL Behring commercialization and license agreement
On June 24, 2020, uniQure biopharma B.V., a wholly-owned subsidiary of uniQure N.V., entered into a commercialization and license agreement (as amended, the “CSL Behring Agreement”) with CSL Behring LLC (“CSL Behring”) pursuant to which CSL Behring will receive exclusive global rights to etranacogene dezaparvovec, our investigational gene therapy for patients with hemophilia B (the “Product”).
Under the terms of the CSL Behring Agreement, we are entitled to receive a $450.0 million upfront cash payment upon the closing of the CSL Behring Agreement and will be eligible to receive up to $1.6 billion in additional payments based on regulatory and commercial milestones. The CSL Behring agreement also provides that we will be eligible to receive tiered double-digit royalties in a range of up to a low-twenties percent of net sales of the Product based on sales thresholds.
Pursuant to the CSL Behring Agreement, we will be responsible for the completion of the HOPE-B clinical trial, manufacturing process validation, and the manufacturing supply of the Product until such time that these capabilities may be transferred to CSL Behring or its designated contract manufacturing organization. Concurrently with the execution of the CSL Behring Agreement, we and CSL Behring entered into a development and commercial supply agreement, pursuant to which, among other things, we will supply the Product to CSL Behring at an agreed-upon price. Clinical development and regulatory activities performed by us pursuant to the CSL Behring Agreement will be reimbursed by CSL Behring. CSL Behring will be responsible for global regulatory submissions and commercialization requirements for the Product.
The effectiveness of the transaction contemplated by the CSL Behring Agreement was contingent on completion of review under antitrust laws in the United States, Australia, and the United Kingdom. As of March 31, 2021, the transaction had been cleared by the Australian and United Kingdom antitrust authorities and on May 6, 2021, the CSL Behring Agreement became fully effective after the expiration of the waiting period under the HSR Act on May 5, 2021.
Under the CSL Behring Agreement, the upfront payment of $450.0 million was paid to us on May 7, 2021. We are also eligible to receive up to more than $300 million in regulatory and first commercial sale milestones, $1.3 billion in additional commercial milestones, and tiered double-digit royalties of up to a low-twenties percentage of net product sales arising from the collaboration. We contractually owe a single-digit percentage of revenue from the collaboration to our licensors. We expect to utilize a material portion of our net operating loss carryforwards in the Netherlands during 2021 as a result of closing the transaction. The upfront payment, net of payments owed to licensors and other parties, is expected to extend the funding of our operations into the second half of 2024 (assuming a full repayment of funds borrowed from Hercules Growth Capital, Inc. under our term loan facilities by 2023). The receipt of the near-term milestones would further expand the funding of our operations. However, we expect to continue to incur losses and to generate negative cash flows beyond 2021, the fiscal year in which we closed the transaction.
Hemophilia B program – Etranacogene dezaparvovec (AMT-061)
Etranacogene dezaparvovec is our lead gene therapy candidate and includes an AAV serotype 5 (together “AAV-5”) vector incorporating the functional human Factor IX (“FIX”) Padua variant. We are currently conducting a pivotal study in patients with severe and moderately-severe hemophilia B.
In December 2020, we announced top-line data from the HOPE-B trial. The 26-week follow-up date from the trial showed that FIX activity in the 54 patients increased after dosing from ≤ 2% to a mean of 37.2% at 26 weeks, meeting a first primary endpoint of the HOPE-B trial. No correlation between pre-existing neutralizing antibodies and FIX activity was found in patients with neutralizing antibody titers up to 678.2, a range expected to include more than 95% of the general population; one patient with a neutralizing antibody titer of 3,212.3 did not show an increase in FIX activity. Less than 1% of the general population is expected to have neutralizing antibody titers of greater than 3,000.
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During the 26-week period after dosing, 15 patients (28%) reported a total of 21 bleeding events, representing a reduction of 83% compared to the 123 bleeding events reported by 38 patients (70%) during the observational lead-in phase of the trial. Total bleeds include any bleeding event reported after the treatment of etranacogene dezaparvovec, including spontaneous, traumatic, and those associated with unrelated medical procedures, whether or not FIX treatment was required. Of the total bleeding events reported during the 26-week period after dosing, only three were classified as spontaneous bleeds requiring treatment, representing a reduction of 92% compared to the 37 such bleeding events reported during the observational lead-in phase. Mean annualized usage of FIX replacement therapy, a secondary endpoint in the clinical trial, declined by 96% during the 26-week period after dosing compared to the observational lead-in phase. Etranacogene dezaparvovec was generally well-tolerated. As of the November 2020 cut-off date, most adverse events were classified as mild (81.5%). The most common events included transaminase elevation treated with steroids per protocol (9 patients; 17%), infusion-related reactions (7 patients; 13%), headache (7 patients; 13%) and influenza-like symptoms (7 patients; 13%). Liver enzyme elevations resolved with a tapering course of corticosteroids and FIX activity remained in the mild range in the steroid treated patients. No relationship between safety and neutralizing antibody titers was observed. Based on interactions with the U.S. Food and Drug Administration (“FDA”) and the European Medicines Agency (“EMA”), we plan to incorporate FIX activity and bleeding rates at 52 weeks as additional co-primary endpoints in the study.
On December 21, 2020, our clinical trials of etranacogene dezaparvovec, including our HOPE-B trial were placed on clinical hold by the FDA. The clinical hold was initiated following the submission of a safety report in mid-December relating to a possibly related serious adverse event associated with a preliminary diagnosis of hepatocellular carcinoma (“HCC”), a form of liver cancer, in one patient in the HOPE-B trial that was treated with etranacogene dezaparvovec in October 2019. The patient has multiple risk factors associated with HCC, including a twenty-five-year history of hepatitis C, hepatitis B, evidence of non-alcoholic fatty liver disease and advanced age. Chronic infections with hepatitis B and C have been associated with approximately 80% of HCC cases. No other cases of HCC have been reported in our clinical trials conducted in more than 67 patients in hemophilia B, with some patients dosed more than 5 years ago.
On March 26, 2021, we submitted the results of a comprehensive investigation into the case of HCC to the FDA. The investigation found that it is highly unlikely the HCC was caused by etranacogene dezaparvovec. Multiple analyses conducted by an independent laboratory and reviewed by leading external experts in the field show that AAV vector integration in the patient’s tissue sample was extremely rare and accounted for 0.027% of the cells in the sample. The integration events were distributed randomly across the genome, and there was no evidence of clonal expansion or any dominant integration event. Additionally, whole genome sequencing of the tumor confirmed that the patient had several genetic mutations that are characteristic of HCC and are independent of vector integration. Finally, gene expression analysis of the tumor and adjacent tissue suggested a precancerous state in the liver consistent with several risk factors that predispose this patient to HCC. On April 23, 2021, the FDA informed us that the clinical hold on our hemophilia B gene therapy program is removed after determining that we had satisfactorily addressed all issues identified.
Etranacogene dezaparvovec has been granted Breakthrough Therapy Designation by the FDA and access to the current priority medicines (“PRIME”) initiative by the EMA.
Huntington’s disease program (AMT-130)
AMT-130 is our novel gene therapy candidate for the treatment of Huntington’s disease. AMT-130 utilizes our proprietary, gene-silencing miQURE platform and incorporates an AAV vector carrying a miRNA specifically designed to silence the huntingtin gene and the potentially highly toxic exon 1 protein fragment. AMT-130 has received orphan drug and Fast Track designations from the FDA and Orphan Medicinal Product Designation from the EMA.
In June 2020, we announced the completion of the first two patient procedures in the Phase I/II clinical trial of AMT-130 for the treatment of Huntington’s disease. In October 2020 we completed the third and fourth patients’ procedures. In February 2021, the independent Data Safety Monitoring Board (“DSMB”) overseeing the Phase I/II clinical trial of AMT-130 for the treatment of Huntington’s disease met. No significant safety concerns were noted to prevent further dosing. On April 5, 2021 we announced that we completed the procedures for the fifth to tenth patients completing the treatment of the first cohort.
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On April 5, 2021 we also announced the initiation of a Phase 1b/II clinical trial in Europe. The planned Phase Ib/II study is expected to begin enrolling patients in the second half of 2021. This open-label study will enroll 15 patients with early manifest Huntington’s disease across two dose cohorts. Together with the U.S. study, the European study is intended to establish safety, proof of concept, and the optimal dose of AMT-130 to take forward into Phase III development or into a confirmatory study should an accelerated registration pathway be feasible.
COVID-19 measures
The coronavirus disease (“COVID-19) caused by the severe acute respiratory syndrome coronavirus 2 (“Sars-CoV 2 virus”) was characterized as a pandemic by the World Health Organization (“WHO”) on March 11, 2020. During late 2020 various, potentially more infectious, variants of the Sars-CoV 2 virus causing COVID-19 were identified.
Starting March 2020, we implemented measures to address the impact of COVID-19 on our business. We mandated a work-from-home policy for all non-essential employees at our Amsterdam and Lexington facilities when the pandemic began. We implemented a series of protocols governing the operations of our Lexington facility to comply with the requirements of the various orders and guidance from the Commonwealth of Massachusetts and other related orders, guidance, laws, and regulations. We continue to monitor local government rules and recommendations and office protocols will be aligned with these rules and recommendations.
To align with the Dutch government’s measures, we implemented a mandatory work-from-home policy in Amsterdam. Employees based in Amsterdam who cannot perform their duties outside of our Amsterdam facility will continue to work at our Amsterdam facility. We adapted to operate our laboratories at our Amsterdam site to comply with social distancing rules and to ensure the health and wellbeing of our employees under the current circumstances. All other employees in Amsterdam will work from home through at least the end of August 2021, partly in conjunction with the ongoing expansion of our laboratory space.
As a biopharma research and development company, we were deemed to provide essential services under the “stay at home” advisory that was issued by the Governor of Massachusetts on March 23, 2020 and we therefore have maintained our manufacturing operations at our Lexington site. To ensure adequate social distancing in our Lexington facility, our COVID-19 protocols generally have limited occupancy to numbers below those allowed by the Massachusetts COVID-19 guidelines. In our Lexington facility, we currently have implemented an occupancy limitation of approximately 25%. Our employees that cannot perform their duties outside of our Lexington facility continue to work at our Lexington facility. All other employees are required to work remotely to the extent possible through at least the end of the second quarter of 2021. Our actual occupancy at the Lexington facility has been less than approximately 25% of our permitted occupancy during all phases of the Massachusetts reopening plan. We have also implemented a mandatory COVID-19 PCR testing protocol effective February 11, 2021 that requires employees to have tested negative for COVID-19 prior to entering the Lexington facility.
We have adapted our ongoing clinical research activities based on the directions and flexibility provided by the “FDA Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 Pandemic” issued on March 18, 2020 and updated throughout the pandemic to minimize any risk, disruption, or delay in either patient dosing or follow-up visits. These procedures occurred after a postponement that resulted from the COVID-19 pandemic and the associated states of emergency declarations in the United States.
The broader implications of COVID-19 on our results of operations and overall financial performance remain uncertain. The COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, and our third-party business partners conduct business. While we have experienced disruptions in our operations as a result of COVID-19, we are adapting to the current environment to minimize the effect to our business. However, we may experience more pronounced disruptions in our operations in the future.
Facility
In February 2021 we commenced the expansion of our Amsterdam site to build additional laboratories to support the expansions of our research and development activities as well the construction of a cleanroom designed to be capable of manufacturing cGMP materials at a 500-liter scale. In May 2021 we entered into a sublease agreement to let an additional approximately 1,080 square meters of office space to accommodate the hiring of additional full-time employees. The lease expires in October 2028 and includes a break option until October 2023.
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Financial Overview
Key components of our results of operations include the following:
Three months ended March 31,
2021
2020
(in thousands)
Total revenues
$
454
$
104
Research and development expenses
(32,656)
(26,013)
Selling, general and administrative expenses
(12,375)
(9,072)
Net loss
(41,556)
(27,999)
As of March 31, 2021, and December 31, 2020, we had cash and cash equivalents of $260.8 million and $244.9 million, respectively. We had a net loss of $41.6 million in the three months ended March 31, 2021, compared to $28.0 million for the same period in 2020. As of March 31, 2021, and December 31, 2020, we had accumulated deficits of $826.3 million and $784.7 million, respectively. Our losses will be materially impacted by the amount of license revenue that we will recognize in accordance with ASC 606 as a result of the closing of the transaction contemplated under the CSL Behring Agreement, which became fully effective on May 6, 2021.
We anticipate that our expenses will increase substantially as we:
● Advance the clinical development of AMT-130 for our Huntington’s disease gene therapy program;
● Advance multiple research programs related to gene therapy candidates targeting liver-directed and central nervous system (“CNS”) diseases;
● Acquire or in-license rights to new therapeutic targets or product candidates;
● Continue to expand, enhance and optimize our technology platform, including our manufacturing capabilities, next-generation viral vectors and promoters, and other enabling technologies;
● Continue to expand our employee base to support research and development, as well as general and administrative functions;
● Maintain, expand, and protect our intellectual property portfolio, including in-licensing additional intellectual property rights from third parties; and
● Build out our commercial and medical affairs infrastructure and seek marketing approval for any product candidates.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.
Critical Accounting Policies and Estimates
In preparing our consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules and regulations promulgated by the SEC we make assumptions, judgments and estimates that can have a significant impact on our net income/loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and judgments, including those related to the treatment of the CSL Behring Agreement, our arrangements with Bristol-Myers Squibb (“BMS”), including the amended collaboration and license agreement that we entered into with BMS in December 2020 (the “amended BMS CLA”), share-based payments, corporate income taxes related to valuation allowance and accounting for operating leases under ASC 842. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the three months ended March 31, 2021, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1, 2021 .
We believe that the assumptions, judgments, and estimates related to the treatment of the CSL Behring Agreement, the amended BMS CLA, share-based payments, corporate income taxes related to valuation allowance and accounting for operating leases under ASC 842 to be our critical accounting policies.
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The preparation of our consolidated financial statements for the three-month period ended March 31, 2021, required us to analyze the accounting treatment of the CSL Behring Agreement.
The effectiveness of the transaction contemplated by the CSL Behring Agreement was contingent on completion of review under antitrust laws in the United States, Australia, and the United Kingdom. The review processes in Australia and the United Kingdom were completed prior to January 6, 2021. As of March 31, 2021, regulatory approval in the United Sates had not occurred. On May 5, 2021, the waiting period under the HSR Act expired and the transaction became fully effective on May 6, 2021.
As of March 31, 2021, we concluded that we had no enforceable right to receive the $450.0 million upfront payment, in accordance with the CSL Behring Agreement as payment was contingent upon the successful completion of reviews under the HSR Act and the reviews were not completed by March 31, 2021. Therefore, we determined we would not recognize any revenue in relation to the upfront payment, the regulatory and sale milestone payments, or the royalties (together “CSL Behring License Revenue”) in accordance with ASC 606 during the three-month period ended March 31, 2021.
We recognize deferred tax assets to the extent that we determine that these assets are more likely than not to be realized. We determined that recognition of the CSL Behring License Revenue in 2021 will consume a material portion of our net operating loss carryforwards in the Netherlands. However, we expect to continue to record operating losses in the years thereafter. Accordingly, we expect to continue to record a full valuation allowance in relation to our net operating loss carryforwards in the Netherlands as of the end of the current fiscal year. We determined the impact which recognition of CSL Behring License Revenue is estimated to have, with regards to the expected effective tax rate of 0% that was applied with respect to our Dutch operations as of March 31, 2021, is immaterial. Accordingly, we continued to record a full valuation allowance as of March 31, 2021, in relation to our net operating loss carryforwards in the Netherlands.
Revenues
We recognize collaboration revenues associated with Collaboration Target-specific pre-clinical analytical development and process development activities that are reimbursable by BMS under the BMS CLA (as defined below) and the amended BMS CLA as well as other related agreements. Collaboration Revenue related to these contracted services is recognized when performance obligations are satisfied.
We recognized license revenues associated with the amortization of the non-refundable upfront payment and target designation fees we received from BMS in 2015. We evaluated our outstanding performance obligation following the amendment of the BMS CLA on December 1, 2020 and determined that our remaining performance obligation is immaterial. We updated our measure of progress accordingly and amortized the remaining balance of unrecognized revenue as of December 1, 2020. In accordance with the amended BMS CLA, we continue to be eligible to receive research, development, and regulatory milestone payments as well as sales milestone payments and royalties for each of the four active Collaboration Targets if defined milestones are achieved in relation to the license to our technology and know-how. We will recognize revenue from these payments when earned or as sales occur.
Research and development expenses
We expense research and development (“R&D”) expenses as incurred. Our R&D expenses generally consist of costs incurred for the development of our target candidates, which include:
● Employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
● Costs incurred for laboratory research, preclinical and nonclinical studies, clinical trials, statistical analysis and report writing, and regulatory compliance costs incurred with clinical research organizations and other third-party vendors;
● Costs incurred to conduct consistency and comparability studies;
● Costs incurred for the development and improvement of our manufacturing processes and methods;
● Costs associated with our research activities for our next-generation vector and promoter platform; and
● Facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.
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Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including manufacturing campaigns, regulatory submissions and enrollment of patients in clinical trials. The successful development of our product candidates is highly uncertain. Estimating the nature, timing or cost of the development of any of our product candidates involves considerable judgement due to numerous risks and uncertainties associated with developing gene therapies, including the uncertainty of:
● the scope, rate of progress and expense of our research and development activities;
● our ability to successfully manufacture and scale-up production;
● clinical trial protocols, speed of enrollment and resulting data;
● the effectiveness and safety of our product candidates;
● the timing of regulatory approvals; and
● our ability to agree to ongoing development budgets with collaborators who share the costs of our development programs.
A change in the outcome of any of these variables with respect to our product candidates that we may develop, including as a result of the COVID-19 pandemic, could mean a significant change in the expenses and timing associated with the development of such product candidate.
Selling, general and administrative expenses
Our general and administrative expenses consist principally of employee, office, consulting, legal and other professional and administrative expenses. We incur expenses associated with operating as a public company, including expenses for personnel, legal, accounting and audit fees, board of directors’ costs, directors' and officers' liability insurance premiums, Nasdaq listing fees, expenses related to investor relations and fees related to business development and maintaining our patent and license portfolio. Our selling costs include employee expenses as well as professional fees related to the preparation of a commercial launch of etranacogene dezaparvovec.
Other items, net
Our other income primarily consists of payments to subsidize our research and development efforts as well as income from the subleasing of our Amsterdam facility.
Our other expense primarily consists of expenses we incur in relation to our subleasing income.
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Results of Operations
Comparison of the three months ended March 31, 2021 and 2020
The following table presents a comparison of our results of operations for the three months ended March 31, 2021 and 2020.
Three months ended March 31,
2021
2020
2021 vs 2020
(in thousands)
Total revenues
$
454
$
104
$
350
Operating expenses:
Research and development expenses
(32,656)
(26,013)
(6,643)
Selling, general and administrative expenses
(12,375)
(9,072)
(3,303)
Total operating expenses
(45,031)
(35,085)
(9,946)
Other income
352
857
(505)
Other expense
(233)
(339)
106
Loss from operations
(44,458)
(34,463)
(9,995)
Other non-operating items, net
3,115
6,464
(3,349)
Net loss before income tax expense
$
(41,343)
$
(27,999)
$
(13,344)
Income tax expense
(213)
-
(213)
Net loss
$
(41,556)
$
(27,999)
$
(13,557)
Revenue
Our revenue for the three months ended March 31, 2021 and 2020 was as follows:
Three months ended March 31,
2021
2020
2021 vs 2020
(in thousands)
License Revenue
$
—
$
47
$
(47)
Collaboration Revenue
454
57
397
Total revenues
$
454
$
104
$
350
We recognized $0.0 million License Revenue related to upfront payments and target designation fees received from BMS in 2015 under the BMS CLA for the period ended March 31, 2020. We did not recognize any License Revenue from the December 1, 2020 amended BMS CLA for the period ended March 31, 2021.
We recognized $0.5 million Collaboration Revenue in the three months ended March 31, 2021, compared to $0.1 million for the same period in 2020.
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Research and development expenses
Research and development expenses for the three months ended March 31, 2021 were $32.7 million, compared to $26.0 million for the same period in 2020. Other research and development expenses are separately classified in the table below. These are not allocated as they are deployed across multiple projects under development.
Three months ended March 31,
2021
2020
2021 vs 2020
(in thousands)
Etranacogene dezaparvovec (AMT-060/061)
$
3,647
$
4,540
$
(893)
Huntington's disease (AMT-130)
1,971
1,060
911
Programs in preclinical development and platform related expenses
2,289
1,455
834
Total direct research and development expenses
$
7,907
$
7,055
$
852
Employee and contractor-related expenses
11,595
9,348
2,247
Facility expenses
4,624
4,016
608
Disposables
3,344
2,410
934
Share-based compensation expense
2,679
2,395
284
Other expenses
2,507
789
1,718
Total other research and development expenses
$
24,749
$
18,958
$
5,791
Total research and development expenses
$
32,656
$
26,013
$
6,643
Direct research and development expenses
Etranacogene dezaparvovec (AMT-060/061)
In the three months ended March 31, 2021 and 2020, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial. Following the completion of patient enrollment into our HOPE-B trial we also started incurring costs related to preparation of a Biologics License Application (“BLA”) and marketing authorization application (“MAA”) and for commercialization of etranacogene dezaparvovec.
We enrolled patients into a six-month lead in phase between January 2018 and September 2019 and dosed a total of 54 patients between January 2019 and March 2020. Our expenses related to etranacogene dezaparvovec were largely unaffected by the COVID-19 pandemic as we completed enrollment prior to the lockdowns in those countries that we enroll patients.
In addition, we continue to incur costs for the long-term follow-up of patients in our Phase I/II clinical trial of AMT-060 and our Phase IIb clinical trial of etranacogene dezaparvovec.
Huntington disease (AMT-130)
In the three months ended March 31, 2021 and March 31, 2020, our external costs for the development of Huntington’s disease were primarily related to the execution of our Phase I/II clinical trial.
Preclinical programs & platform development
In the three months ended March 31, 2021, we incurred $2.3 million of costs primarily related to our preclinical activities primarily associated with product candidates, SCA3 (AMT-150) and Fabry disease (AMT-190), as well as various other research programs and technology innovation projects, compared to costs of $1.5 million in the same period in 2020, which included costs related to our product candidate for Hemophilia A (AMT-180) that was subsequently deprioritized in June 2020.
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Other research & development expenses
● We incurred $11.6 million in personnel and contractor related expenses in the three months ended March 31, 2021, compared to $9.3 million for the same period in 2020. Our costs during the three months ended March 31, 2021 increased by $2.3 million as a result of the recruitment of personnel to support the development of our product candidates;
● We incurred $2.7 million in share-based compensation expenses in the three months ended March 31, 2021, compared to $2.4 million for the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel;
● We incurred $4.6 million in operating expenses and depreciation expenses related to our rented facilities in the three months ended March 31, 2021, compared to $4.0 million in the same period in 2020; and
● We incurred $2.5 million in other costs in the three months ended March 31, 2021, compared to $0.8 million for the same period in 2020 related to miscellaneous other costs we incur as a result of expanding our organization.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended March 31, 2021 were $12.4 million, compared to $9.1 million for the same period in 2020.
● We incurred $3.9 million in personnel and contractor related expenses in the three months ended March 31, 2021, compared to $3.2 million in the same period in 2020. The increase in the three months ended March 31, 2021, relates to the recruitment of personnel;
● We incurred $3.1 million in share-based compensation expenses in the three months ended March 31, 2021, compared to $1.9 million in the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel; and
● We incurred $2.9 million in professional fees in the three months ended March 31, 2021, compared to $1.2 million in the same period in 2020. We regularly incur accounting, audit and legal fees associated with operating as a public company. Additionally, in the three months ended March 31, 2021, we incurred professional fees in relation to our licensing transaction with CSL Behring.
Other items, net
We recognized $0.0 million in income from payments received from European authorities to subsidize our research and development efforts in the Netherlands in the three months ended March 31, 2021, compared $0.2 million for the same period in 2020.
Other non-operating items, net
We recognize interest income associated with our cash and cash equivalents.
We hold monetary items and enter into transactions in foreign currencies, predominantly in euros and U.S. dollars. We recognize foreign exchange results related to changes in these foreign currencies.
We issued warrants to BMS in 2015. We recognize changes in the fair value of these warrants within other non-operating income / (expense). Following the termination of the BMS warrants on December 1, 2020, we no longer recognize changes in the fair value of these warrants within other non-operating (expense) / income. As of the same date, we recognized a derivative financial liability related to a contingent payment due to BMS upon the consummation of a change of control transaction (“CoC-payment”) as described elsewhere in the Quarterly Report on Form 10-Q .
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Our other non-operating items, net, for the three months ended March 31, 2021 and 2020 were as follows:
Three months ended March 31,
2021
2020
2021 vs 2020
(in thousands)
Interest income
$
40
$
822
$
(782)
Interest expense - Hercules long-term debt
(1,551)
(975)
(576)
Foreign currency gains, net
4,626
4,602
24
Other non-operating gains
—
2,015
(2,015)
Total other non-operating income, net
$
3,115
$
6,464
$
(3,349)
We recognized a net foreign currency gain, related to our borrowings from Hercules and our cash and cash equivalents as well as loans between entities within the uniQure group, of $4.6 million during the three months ended March 31, 2021, compared to a net gain of $4.6 million during the same period in 2020.
In the three months ended March 31, 2021, we recognized income of nil as there was no change in the fair value of the BMS derivative financial liability for the CoC-payment, compared to income of $2.0 million during the same period in 2020 related to changes in the fair value of the BMS warrants from the BMS CLA.
Income tax
We recognized $0.2 million of deferred tax expense for the period ended March 31, 2021 and nil in the same period ended 2020.
Financial Position, Liquidity and Capital Resources
As of March 31, 2021, we had cash, cash equivalents and restricted cash of $263.5 million. We believe our cash and cash equivalents as of March 31, 2021, combined with the $100.0 million 2021 Amended Facility, will enable us to fund our operating expenses, including our debt repayment obligations, as they become due and capital expenditure requirements until the end of 2022. Following the receipt of the $450.0 million upfront payment, which was paid to us on May 7, 2021, we expect that our cash and cash equivalents will be sufficient to fund operations into the second half of 2024 (assuming a full repayment of funds borrowed from Hercules under our term loan facility by 2023). We are also eligible to receive up to $1.6 billion of milestones and tiered double-digit royalties in a range of up to a low-twenties percent of net sales of the Product based on sales thresholds, both of which are not included in the above guidance.
Three months ended March 31,
2021
2020
(in thousands)
Cash, cash equivalents and restricted cash at the beginning of the period
$
247,680
$
380,726
Net cash used in operating activities
(41,273)
(32,953)
Net cash used in investing activities
(3,876)
(2,890)
Net cash generated from financing activities
62,618
1,010
Foreign exchange impact
(1,620)
(943)
Cash, cash equivalents and restricted cash at the end of period
$
263,529
$
344,950
We have incurred losses and cumulative negative cash flows from operations since our business was founded by our predecessor entity AMT Therapeutics (“AMT”) Holding N.V. in 1998. We had a net loss of $41.6 million during the three months ended March 31, 2021, compared to a net loss of $28.0 million during the same period in 2020. As of March 31, 2021, we had an accumulated deficit of $826.3 million.
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Sources of liquidity
From our first institutional venture capital financing in 2006 through March 31, 2021, we funded our operations primarily through private and public placements of equity securities and convertible and other debt securities as well as payments from our collaboration partners.
On March 1, 2021, we entered into a Sales Agreement with SVB Leerink with respect to an ATM offering program, under which we may, from time to time in our sole discretion, offer and sell through SVB Leerink, acting as agent, our ordinary shares, up to an aggregate offering price of $200.0 million. We will pay SVB Leerink a commission equal to 3% of the gross proceeds of the sales price of all ordinary shares sold through it as a sales agent under the Sales Agreement. In March 2021 we issued 0.9 million ordinary shares for net proceeds of $27.6 million.
On December 6, 2018, we signed the 2018 Amended Facility with Hercules that both refinanced our then-existing $20.0 million credit facility and provided us with an additional unconditional commitment of $15.0 million as well as a conditional commitment of $15 million that expired on June 30, 2020. At signing, we drew down an additional $15.0 million, for a total outstanding amount of $35.0 million.
The 2018 Amended Facility extended the loan’s maturity date until June 1, 2023. The interest-only period was initially extended from November 2018 to January 1, 2021. The interest-only period was further extended to January 1, 2022 as a result of raising more than $90.0 million in equity financing in September 2019. The interest-only period was again further extended to June 1, 2023 as a result of the 2021 Amended Facility. The variable interest rate of the 2018 Amended Facility is equal to the greater of (i) 8.85% or (ii) 8.85% plus the prime rate less 5.50%. Under the 2018 Amended Facility, we paid a facility fee equal to 0.50% at signing of the $35.0 million loan outstanding and will owe a back-end fee of 4.95% of the outstanding debt. In addition, in May 2020, we paid a back-end fee of $1.0 million in relation to the 2016 Amended Facility.
On January 29, 2021, we and Hercules entered into the 2021 Amended Facility. Pursuant to the 2021 Amended Facility, Hercules agreed to an additional Facility of $100.0 million (“Tranche B”), increasing the aggregate principal amount of the term loan facilities from $35.0 million to up to $135.0 million. On January 29, 2021, we drew down $35.0 million of the Tranche B. We may draw down the remaining $65.0 million under the Tranche B in a series of one or more advances of not less than $20.0 million each until December 15, 2021. Advances under the Tranche B bear interest at a rate equal to the greater of (i) 8.25% or (ii) 8.25% plus the prime rate, less 3.25% per annum. The principal balance and all accrued but unpaid interest on advances under the Tranche B is due on June 1, 2023, which date may be extended by us by up to two twelve-month periods. Advances under the Tranche B may not be prepaid until six-months after the Closing Date, following which we may prepay all such advances without charge. As of March 31, 2021, $70.0 million was outstanding under the 2018 Amended Facility and the 2021 Amended Facility (December 31, 2020: $35.0 million under the 2018 Amended Facility).
We are subject to the same covenants under our 2018 Amended Facility and 2021 Amended Facility and may become subject to covenants under any future indebtedness that could limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, which could adversely impact our ability to conduct our business. In addition, our pledge of assets as collateral to secure our obligations under the 2018 Amended Facility and 2021 Amended Facility may limit our ability to obtain debt financing. To the extent we need to finance our cash needs through equity offerings or debt financings, such financing may be subject to unfavorable terms including without limitation, the negotiation and execution of definitive documentation, as well as credit and debt market conditions, and we may not be able to obtain such financing on terms acceptable to us or at all. If financing is not available when needed, including through debt or equity financings, or is available only on unfavorable terms, we may be unable to meet our cash needs. If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our 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, which could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
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Net Cash used in operating activities
Net cash used in operating activities was $41.3 million for the three months ended March 31, 2021 and consisted of a net loss of $41.6 million adjusted for non-cash items, including depreciation and amortization expense of $1.9 million, share-based compensation expense of $5.8 million, unrealized foreign exchange gains of $5.3 million and deferred tax expense of $0.2 million. Net cash used in operating activities also included unfavorable changes in operating assets and liabilities of $3.9 million. These changes primarily related to a net increase in accounts receivable, prepaid expenses, and other current assets and receivables of $8.0 million primarily related to the increase in a contract asset and receivable recorded for CSL expenses to be reimbursed as well as an increase in various prepayments for the year and a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $5.8 million primarily related to an increase in contract liability for CSL expenses to be reimbursed and an increase in accruals for services provided by vendors not yet billed offset by the pay-out of employee bonuses.
Net cash used in operating activities was $33.0 million for the three months ended March 31, 2020 and consisted of a net loss of $28.0 million adjusted for non-cash items, including depreciation and amortization expense of $1.7 million, share-based compensation expense of $4.4 million, fair value gains on derivative financial instruments of $2.0 million, unrealized foreign exchange gain of $4.8 million, and an increase in unamortized deferred revenue of $0.3 million. Net cash used in operating activities also included unfavorable changes in operating assets and liabilities of $4.5 million. These changes primarily related to a net increase in accounts receivable, prepaid expenses, and other current assets of $1.3 million primarily as a result of increase in prepayments for the year and a net decrease in accounts payable, accrued expenses and other liabilities of $3.2 million primarily related to pay-out of employee bonuses.
Net cash used in investing activities
In the three months ended March 31, 2021, we used $3.9 million in our investing activities compared to $2.9 million for the same period in 2020.
Three months ended March 31,
2021
2020
(in thousands)
Build out of Amsterdam site
$
(2,416)
$
(355)
Build out of Lexington site
(1,460)
(322)
Acquisition of licenses, patents, and other rights
—
(2,213)
Total investments
$
(3,876)
$
(2,890)
The build out of the Amsterdam site was $2.4 million for the three months ended March 31, 2021, compared to $0.4 million for the same period in 2020. The increase is a result of the construction of additional laboratories to support the expansions of our research and development activities as well as the construction of a cleanroom designed to be capable of manufacturing cGMP materials at a 500-liter scale.
Net cash generated from financing activities
In the three months ended March 31, 2021, we generated $62.6 million in our financing activities compared to $1.0 million for the same period in 2020.
Three months ended March 31,
2021
2020
(in thousands)
Cash flows from financing activities
Proceeds from loan increment, net of debt issuance costs
$
34,603
$
-
Proceeds from issuance of ordinary shares
28,734
-
Share issuance costs from issuance of ordinary shares
(1,161)
-
Proceeds from issuance of shares related to employee stock option and purchase plans
442
1,010
Net cash generated from financing activities
$
62,618
$
1,010
We received proceeds of $28.7 million associated with our ATM offering in March 2021, offset by fees of $1.2 million.
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In January 2021, we received $34.6 million net proceeds from the Hercules 2021 Amended Facility.
During the three months ended March 31, 2021, we received $0.4 million from the exercise of options to purchase ordinary shares in relation to our share incentive plans compared to $1.0 million for the same period in 2020.
Funding requirements
We believe our cash and cash equivalents as of March 31, 2021, combined with the $100.0 million 2021 Amended Facility as well as the upfront payment of $450.0 million that we became entitled to receive following the closing of our transaction with CSL Behring on May 6, 2021, will enable us to fund our operating expenses, including our debt repayment obligations, as they become due and capital expenditure requirements into the second half of 2024 (assuming a full repayment of funds borrowed from Hercules under our term loan facility by 2023). Our future capital requirements will depend on many factors, including but not limited to:
● achieving the milestones and royalties as defined within the CSL Behring Agreement;
● the extent to which we acquire or in-license other businesses, products, product candidates or technologies;
● the amount and timing of revenue, if any, we receive from commercial sales of any product candidates for which we, or our collaboration partner, receives marketing approval in the future;
● the amount and timing of revenue, if any, we receive from manufacturing products from CSL Behring.
● the scope, timing, results, and costs of our current and planned clinical trials, including those for AMT-130 in Huntington’s disease;
● the scope, timing, results and costs of preclinical development and laboratory testing of our additional product candidates;
● the need for additional resources and related recruitment costs to support the preclinical and clinical development of our product candidates;
● the need for any additional tests, studies, or trials beyond those originally anticipated to confirm the safety or efficacy of our product candidates and technologies;
● the cost, timing and outcome of regulatory reviews associated with our product candidates;
● our ability to enter into collaboration arrangements in the future;
● the costs and timing of preparing, filing, expanding, acquiring, licensing, maintaining, enforcing, and prosecuting patents and patent applications, as well as defending any intellectual property-related claims;
● the repayments of the principal and other fees associated with our venture debt loan with Hercules, which following the January 29, 2021 amendment will be due in June 2023;
● the costs associated with maintaining quality compliance and optimizing our manufacturing processes, including the operating costs associated with our Lexington, Massachusetts manufacturing facility;
● the costs associated with increasing the scale and capacity of our manufacturing capabilities; and
● the costs associated with process validation and inspection readiness of etranacogene dezaparvovec.
Contractual obligations and commitments
The table below sets forth our contractual obligations and commercial commitments as of March 31, 2021, that are expected to have an impact on liquidity and cash flows in future periods.
Less than 1
Between 1
Between 3
year
and 3 years
and 5 years
Over 5 years
Total
(in thousands)
Debt obligations (including $17.1 million interest payments)
$
6,068
$
81,028
$
—
$
—
$
87,096
Operating lease obligations
5,566
11,424
12,992
26,977
56,959
Total
$
11,634
$
92,452
$
12,992
$
26,977
$
144,055
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We also have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing of a BLA, approval by the FDA or product launch). We have not included these commitments on our balance sheet or in the table above because the achievement and timing of these milestones is not fixed and determinable. We also have obligations to make future payments that become due and payable upon the collection of the upfront payment or milestone payments from CSL Behring. We have not included these commitments on our balance sheet or in the table above because these payments only become due and payable after the CSL Behring Agreement became fully effective on May 6, 2021.
We enter into contracts in the normal course of business with clinical research organizations (“CROs”) for preclinical research studies and clinical trials, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.