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:
Acquisition of Corlieve Therapeutics
On June 21, 2021, we entered into a share and purchase agreement (“SPA”) to acquire all outstanding shares of Corlieve Therapeutics S.A.S (“Corlieve”). Corlieve’s lead gene therapy program employs miRNA silencing technology to target suppression of aberrantly expressed kainate receptors in the hippocampus of patients with temporal lobe epilepsy (“TLE”). TLE affects approximately 1.3 million people in the U.S. and Europe alone, of which approximately 800,000 patients are unable to adequately control acute seizures with currently approved anti-epileptic therapies. Patients with refractory TLE experience increased morbidity, excess mortality, and poor quality of life. The lead program will be known as AMT-260.
The transaction is subject to customary closing conditions as well as review by the French Ministry of Economy, Finance and Recovery (Ministère de l’Economie, des Finances et de la Relance) pursuant to articles L.151-3 and R.151-1 and seq. of the French Code Monétaire et Financier. Currently, the transaction is anticipated to be completed early in the third quarter of 2021. Upon closing of the Corlieve Transaction we expect to pay EUR 46.3 million in cash to acquire all outstanding ordinary shares of Corlieve. In accordance with the SPA we owe up to EUR 43.7 million in development milestones through Phase I/II and EUR 160.0 million in milestones associated with Phase III development and the approvals of AMT-260 in the U.S and European Union. At our election we can pay up to 25% of such milestone payments in our ordinary shares. The Corlieve transaction is expected to be accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date.
Corlieve has an established license and collaboration agreement with REGENXBIO Inc. that includes an exclusive license to AAV9 for the specific genetic target of AMT-260. Under the license and collaboration agreement, REGENXBIO Inc. is eligible to receive milestone payments and royalties on net sales of AMT-260.
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CSL Behring commercialization and license agreement
On June 24, 2020, (“Signing”), 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 received exclusive global rights to etranacogene dezaparvovec, our investigational gene therapy for patients with hemophilia B (the “Product”).
The effectiveness of the transaction contemplated by the CSL Behring Agreement was contingent on the completion of review under the antitrust laws in the United States, Australia, and the United Kingdom. The transaction had previously been cleared by the Australian and United Kingdom antitrust authorities and became fully effective on May 6, 2021, after the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired on May 5, 2021.
As from May 6, 2021, CSL Behring will be responsible for the development and commercialization of the Product. We agreed to complete the validation of the current manufacturing process as well as to complete the development and validation of a next generation manufacturing process. We will be entitled to receive a development milestone payment if we complete these activities in accordance with an agreed development plan and timeline. CSL Behring will also be reimbursing us for our services to facilitate the completion of the HOPE-B clinical trial.
On Signing, we and CSL Behring also 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 commensurate with the stand-alone selling price (“SSP”). We will be responsible to supply the Product until such time that these capabilities may be transferred to CSL Behring or its designated contract manufacturing organization.
We recorded $462.4 million, including a $450.0 million upfront cash payment following the closing of the CSL Behring Agreement as license revenue in the three and six months ended June 30, 2021. We are eligible to receive more than $0.3 billion in regulatory, development, 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. Upon closing, we contractually owed to our licensors $16.7 million of the upfront payment received from CSL Behring. The payments we received significantly increased our cash and cash equivalents position to $677.3 million as of June 30, 2021. This is expected to fund our operations into the first half of 2024 (assuming a full repayment of funds borrowed from Hercules Growth Capital, Inc. under our term loan facilities by 2023, as well as payments we expected to make in relation to our acquisition of Corlieve). We expect that the achievement of the $0.3 billion regulatory, first commercial sales and development milestones would further extend our runway by 12 to 18 months.
Hemophilia B program – Etranacogene dezaparvovec (AMT-061)
Etranacogene dezaparvovec is our lead gene therapy candidate and includes an AAV serotype 5 (“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.
On June 22, 2021, we presented new data from the HOPE-B pivotal study related to the 52-week period post-infusion. Data showed that participants continued to demonstrate durable, sustained increases in FIX activity at 52-weeks post-infusion with a mean FIX activity of 41.5 percent of normal, as measured by a one-stage APTT-based clotting assay, compared to a mean FIX activity of 39.0 percent of normal at 26-weeks of follow-up.
During the 52-week period, a single dose of etranacogene dezaparvovec significantly reduced the annualized rate of bleeding requiring treatment by 80 percent from a prospectively collected 3.39 at baseline to 0.68 bleeding episodes per year (p-value <0.0001). The annualized rate of spontaneous bleeding requiring treatment was also significantly reduced by 85 percent from a prospectively collected 1.16 at baseline to 0.18 bleeds per year during the 52-week period (p-value <0.0001). Usage of FIX replacement therapy (IU/year and infusions/year) in all patients declined 96 percent during the 52-week period, with 52 of 54 patients (96 percent) successfully discontinuing their prophylactic infusions. As previously announced, of the two non-responders, one patient only received a partial dose (less than 10 percent of the dosage) due to an infusion reaction and a second patient had an unusually high pre-existing NAb titer of 3,212, which is expected in less than 1 percent of the general population. We expect all patients to complete their 78-week follow-up visits by the end of the third quarter of 2021, and we expect a BLA to be submitted to the FDA and a MAA to be submitted to EMA in the first quarter of 2022.
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On December 21, 2020, our clinical trials of etranacogene dezaparvovec had been placed on clinical hold by the FDA following a preliminary diagnosis of hepatocellular carcinoma (“HCC”), a form of liver cancer, in one patient in the HOPE-B trial who was treated with etranacogene dezaparvovec.
On March 26, 2021, we submitted to the FDA the results of a comprehensive investigation that found it is highly unlikely the HCC was caused by etranacogene dezaparvovec. On April 23, 2021, the FDA informed us that the clinical hold on our hemophilia B gene therapy program was 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.
On April 5, 2021 we announced the completion of enrollment of all ten patients in the first dose cohort of our Phase Ib/II clinical trial of AMT-130. On May 27, 2021, we announced that the study’s independent Data Safety Monitoring Board (“DSMB”) recommended we continue patient dosing after reviewing safety data from all 10 patients in the first dose cohort. On June 16, 2021, we announced that the first two patient procedures were completed in the second, higher-dose cohort, which will include 16 patients. The Phase I/II study is a double-blinded, randomized, and controlled clinical trial being conducted in the United States. To date, seven patients have been treated with AMT-130 across both dose cohorts, and five patients have received an imitation surgical procedure that will serve as a control.
On April 5, 2021 we also announced the initiation of a Phase Ib/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.
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Research and Development Day
On June 22, 2021, we held a research and development day to outline our vision and strategy of leveraging our AAV engine to deliver gene therapies within our key focus areas. We provided updates on our Fabry (AMT-191) and SCA3 (AMT-150) programs and announced additional new product candidates, including AMT-210 for Parkinson’s disease, AMT-240 for Alzheimer’s disease, and AMT-161 for Amyotrophic Lateral Sclerosis (“ALS”). These new programs are key components of our plan to expand our clinical pipeline. We also announced our plans to construct a second cGMP manufacturing facility located in Amsterdam, The Netherlands.
Covid pandemic
The coronavirus disease (“Covid”) 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. Since then, various, potentially more infectious, variants of the Sars-CoV 2 virus causing Covid have been identified.
Throughout the pandemic, we have been implementing measures to address the impact of Covid on our business. We have 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. Accordingly, we had mandated a work-from-home policy since March 2020 for all non-essential employees at our Amsterdam and Lexington facilities and had implemented additional protocols for our essential employees.
Effective May 29, 2021, Massachusetts has lifted all industry restrictions, with the exceptions of remaining face-covering requirements for all public and private transportation systems and facilities housing vulnerable populations, and capacity has been increased to 100% for all industries. Furthermore, the state of emergency was lifted on June 15, 2021. Implementation of adequate cleaning and hygiene protocols are still encouraged. We have implemented a mandatory Covid PCR testing protocol in our Lexington facility effective February 11, 2021 that requires employees to have tested negative for Covid prior to entering the facility. Also in our Lexington facility, allowed occupancy has been increased to 100% in line with the permitted capacity guidelines and all employees are allowed to work at the Lexington facility subject to social distancing protocols, and a daily health screening and compliance with our Covid PCR testing policy for unvaccinated employees. All employees that are not essential employees, however, remain able to work remotely until December 31, 2021, and we have been operating significantly below 100% capacity. At least until August 1, 2021, for purposes of monitoring Covid surges due to relaxation of requirements, no employee or contractor may enter the Lexington facility unless they are either: (i) fully vaccinated; or (ii) have taken an approved test for Covid and obtained a negative result.
On June 26, 2021, the Dutch government announced updated measures. Since July 1, we allow for an occupancy rate of 50% at our Amsterdam site as well as the limited presence of visitors. We continue to operate our laboratories at our Amsterdam site to comply with social distancing rules and to ensure the health and well-being of our employees under the current circumstances. Employees that can continue to work from home are encouraged to do so through at least August 2021, partly in conjunction with the ongoing expansion of our laboratory space.
The broader implications of Covid, including the implications from the various variants, on our results of operations and overall financial performance remain uncertain. We have experienced increased lead times in the delivery of equipment and disposables that we use to manufacture materials for our various programs. Currently, these have not materially impacted our development timelines and we continue to adapt to the current environment to minimize the effect to our business. However, we may experience more pronounced disruptions in our operations in the future.
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 Capital, Inc. (“Hercules”).
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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.
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.
In March and April of 2021, we issued 921,730 ordinary shares at a weighted average price of $33.52 per share, with net proceeds of $29.6 million, after deducting underwriting discounts and net of offering expenses.
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 an option to break the lease on October 31, 2023.
Organization
On May 17, 2021, Pierre Caloz was appointed as Chief Operating Officer. Mr. Caloz oversees all manufacturing operations, global CMC development and innovation, supply chain, and facilities.
On June 15, 2021, Christian Klemt was appointed as Chief Financial Officer. Mr. Klemt was our Chief Accounting Officer from August 2017 to June 2021, and he will continue to serve as general manager of our Amsterdam site. Matthew Kapusta, who has been our Chief Executive Officer since December 2016 and had been our Chief Financial Officer from January 2015 to June 2021, will continue to serve as our Chief Executive Officer. In connection with his transition to Chief Financial Officer, Mr. Klemt will also serve as our Principal Financial Officer.
On June 16, 2021, our shareholders voted to approve the reappointment of Mr. David Meek and Ms. Paula Soteropoulos as non-executive directors of the Board of Directors. Mr. Meek has been appointed chairman of the Board. Mr. Philip Astley-Sparke did not stand for reappointment and retired from the Board on June 16, 2021.
Intellectual Property
On May 11, 2021, Pfizer, Inc. filed three petitions seeking Inter Partes Review of U.S. Patent Nos. 9,982,248 (the “’248 Patent”) and 10,465,180 (the “’180 Patent” and together with the ‘248 Patent, the “Patents”). The petitions collectively seek to invalidate all claims of the Patents, which relate to the expression of factor IX protein using a modified “Padua” polypeptide having a leucine in position 338. We are in the process of responding to the petitions.
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Financial Overview
Key components of our results of operations include the following:
Three months ended June 30,
Six months ended June 30,
2021
2020
2021
2020
(in thousands)
(in thousands)
Total revenues
$
463,868
$
1,535
$
464,322
$
1,639
Cost of contract revenue
(23,178)
—
(23,178)
—
Research and development expenses
(32,747)
(28,401)
(64,777)
(54,414)
Selling, general and administrative expenses
(17,299)
(11,511)
(30,300)
(20,583)
Net income / (loss)
399,468
(42,551)
357,912
(70,550)
As of June 30, 2021, and December 31, 2020, we had cash and cash equivalents of $677.3 million and $244.9 million, respectively. We had a net income of $399.5 million and $357.9 million in the three and six months ended June 30, 2021, compared to a net loss of $42.6 million and $70.6 million for the same periods in 2020. As of June 30, 2021, and December 31, 2020, we had accumulated deficits of $426.8 million and $784.7 million, respectively. We recorded a net income in the three and six months ended June 30, 2021 as a result of the closing of the CSL Behring transaction 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;
● Continue to expand our employee base to support research and development, as well as general and administrative functions;
● 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; and
● Maintain, expand, and protect our intellectual property portfolio, including in-licensing additional intellectual property rights from third parties.
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 six months ended June 30, 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 , with the exception of determining the accounting treatment in accordance with ASC 606 related to the CSL Behring Agreement as discussed below.
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- and six- month period ended June 30, 2021, required us to analyze the accounting treatment of the CSL Behring Agreement that we entered into on June 24, 2020 (“Signing”). The effectiveness of the transaction had been contingent on completion of review under antitrust laws in the United States, Australia, and the United Kingdom. The transaction had previously been cleared by the Australian and United Kingdom antitrust authorities and became fully effective on May 6, 2021 (“Closing”), after the waiting period under the HSR Act expired on May 5, 2021.
We identified two material performance obligations related to the CSL Behring Agreement:
(i) Sale of the exclusive global rights to the Product (“License”); and
(ii) Generate information to support the regulatory approval of the current and next generation manufacturing process of Product and to provide any such information generated to CSL Behring (“Manufacturing Development”).
We continued to develop the Product between Signing and Closing and performed certain reimbursable activities to fulfill the transfer of the global rights (“Additional Covenants” and together with the License the “License Sale”). We determined that the fixed upfront payment of $450.0 million and the $12.4 million that we received in relation to the Additional Covenants should be allocated to the License Sale. In addition, we concluded that variable milestone payments, sales milestone payments and royalties should be allocated to the License Sale performance obligation as well. We determined that the sale of the License was completed on May 6, 2021, when we transferred the License and CSL Behring assumed full responsibility for the development and commercialization of the Product. At Closing we evaluated the amount of potential payments and the likelihood that the payments will be received. We utilized the most likely amount method to estimate the variable consideration to be included in the transaction price. Since we cannot control the achievement of regulatory and first commercial sales milestones, we concluded that the potential payments are constrained as of Closing. We determined that we would recognize revenue related to these payments, only to the extent that it becomes probable that no significant reversal of recognized cumulative revenue will occur thereafter. We will include payments related to sales milestones in the transaction price when their achievement becomes probable, and we will include royalties on the sale of Product once these have been earned. We recognized $462.4 million of revenues related to the License Sale in the three and six months ended June 30, 2021
We determined that the variable milestone payment related to Manufacturing Development Services should be allocated to the Manufacturing Development performance obligation. We concluded that this milestone payment represents the SSP of the services based on the estimated cost of providing the services including a reasonable margin. The services related to Manufacturing Development will be provided between Closing and the completion of an agreed manufacturing development plan. The variable consideration will be reduced if we do not complete the development by pre-agreed dates. We utilized the most likely amount method to estimate the variable consideration to be included in the transaction price. Completion of Manufacturing Development is partially dependent on the timing of regulatory submissions by CSL Behring as well as regulatory approvals of the developed manufacturing processes. Since we cannot control the timing or outcome of any regulatory decisions, we concluded that we would recognize revenue related to this payment when it becomes probable that the milestone has been achieved. We did not recognize any revenue related to Manufacturing Development during the three and six months ended June 30, 2021.
We recognized $0.4 million of collaboration revenue in the three and six months ended June 30, 2021, compared to nil in the same periods in the prior year. We generate such collaboration revenue from services rendered in relation to completing the HOPE-B clinical trial on behalf of CSL Behring. CSL Behring may request additional development services or to request us to support the transfer of manufacturing to a party designated by CSL Behring. These collaboration services will be reimbursed at the pre-agreed full-time-employee rate (“FTE-rate”). We concluded that these rights at Closing do not represent material rights.
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We also analyzed the impact of Closing on our net deferred tax asset in the Netherlands. Prior to Closing we had determined that the potential Closing would represent insufficient positive evidence to overcome the significant negative evidence of having been loss-making during the past three years. Accordingly, we had therefore recorded a full valuation allowance related to our net deferred tax assets. We determined that in accordance with Dutch tax law the upfront payment as well as payments related to the Additional Covenants, to the extend such activities were conducted in the 12 months ended December 31, 2020, can more likely than not be included in the Dutch tax return for the 12-month period ended December 31, 2020. Including this income in our 2020 tax position will consume substantially all of our Dutch net operating losses for the years 2011 to 2018. We treated the adjustment to our 2020 filing position resulting in the release of the valuation allowance related to our Dutch net operating losses for the years 2011 to 2018 as a discrete event in the three months ended June 30, 2021. We allocated part of the release to the tax benefit of share issuance cost incurred in 2014, 2015, 2017 and 2018. This resulted in an increase of additional paid- in capital as well as the recognition of deferred tax expenses of $3.0 million during the three and six months ended June 30, 2021. Based on changes to Dutch tax law enacted in June 2021 our remaining net operating tax loss related to 2019 can be carried forward indefinitely. We continue to expect incurring tax losses for the foreseeable future including 2021. As such, we retain our full valuation allowance related to the remaining net deferred asset as of June 30, 2021.
Revenues
We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At inception of each arrangement that includes variable consideration, we evaluate the amount of potential payments and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur in a future period.
We allocate the transaction price based on the estimated SSP of each of the performance obligations. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts that we expect to receive for the satisfaction of each performance obligation. We recognize revenue when or as control of the performance obligation transfers to the customer. For performance obligations which consist of licenses and other promises, we utilize judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.
CSL Behring
Following the Closing of the CSL Behring agreement, we recognize license revenue related to the License Sale of the global rights to the Product. We evaluated that our performance obligation related to the License Sale was satisfied on Closing and recognized $462.4 million in license revenue related to a $450.0 million upfront payment and $12.4 million of payments in relation to Additional Covenants. We will recognize additional license revenue in relation to the License Sale when it becomes probable that regulatory and sales milestone events will be achieved as well as when royalties on sales of Product have been earned.
We recognize collaboration revenues associated with Manufacturing Development. We will recognize collaboration revenue related to a contractual development milestone when it becomes probable the milestone will be achieved.
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We recognize collaboration revenues associated with Development Services that will be reimbursed by CSL Behring relating to clinical development activities. These services are provided by our employees. Collaboration revenue related to these contracted services is recognized when the performance obligations are satisfied.
BMS
In May 2015, we and Bristol-Myers Squibb (“BMS”) entered into a collaboration and license agreement and various related agreements with BMS (“BMS CLA”). We have recognized license revenues associated with the amortization of the non-refundable upfront payment and target designation fees we received from BMS in accordance with the BMS CLA. We evaluated our outstanding performance obligation following the amendment of the BMS CLA on December 1, 2020 (“amended BMS CLA”) and determined that our remaining performance obligation related to license revenues 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.
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 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.
Cost of Contract Revenues
We expense contract fulfillment costs associated with license revenue recognized under the CSL Behring Agreement as costs of contract revenues.
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;
● Costs associated with the rendering of collaboration services as well as the continued development of Product between Signing and Closing; 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 reimburse 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 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 and advisory fees related to obtaining the CSL Behring Agreement.
Other items, net
Our other income primarily consists of payments received to subsidize our research and development efforts, income from the subleasing of our Amsterdam facility, the recognition of the equity stake received in VectorY B.V., as well as an employee retention credit under the U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
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 June 30, 2021 and 2020
The following table presents a comparison of our results of operations for the three months ended June 30, 2021 and 2020.
Three months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
Total revenues
$
463,868
$
1,535
$
462,333
Operating expenses:
Cost of contract revenues
(23,178)
—
(23,178)
Research and development expenses
(32,747)
(28,401)
(4,346)
Selling, general and administrative expenses
(17,299)
(11,511)
(5,788)
Total operating expenses
(73,224)
(39,912)
(33,312)
Other income
7,590
669
6,921
Other expense
(226)
(500)
274
Income / (loss) from operations
398,008
(38,208)
436,216
Other non-operating items, net
4,718
(4,343)
9,061
Net income / (loss) before income tax expense
$
402,726
$
(42,551)
$
445,277
Income tax expense
(3,258)
-
(3,258)
Net income / (loss)
$
399,468
$
(42,551)
$
442,019
Revenue
Our revenue for the three months ended June 30, 2021 and 2020 was as follows:
Three months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
License revenue
$
462,400
$
1,530
$
460,870
Collaboration revenue
1,468
5
1,463
Total revenues
$
463,868
$
1,535
$
462,333
We recognized $462.4 million in license revenue related to the License Sale on Closing of the CSL Behring Agreement in May 2021. We did not recognize any such license revenue related to the CSL Behring Agreement in the three months ended June 30, 2020.
We recognized $1.5 million in license revenue related to upfront payments and target designation fees received from BMS in 2015 under the BMS CLA for the three months ended June 30, 2020. We did not recognize any license revenue under the amended BMS CLA during the three months ended June 30, 2021.
We recognized $1.5 million collaboration revenue in the three months ended June 30, 2021, compared to $0.0 million for the same period in 2020. Since May 6, 2021, we recognize collaboration revenue related to services we provide in accordance with the CSL Behring Agreement. Our collaboration revenue increased further as a result of increased services provided to BMS following our December 2020 amendment of the BMS CLA.
Cost of contract revenues
We recognized $23.2 million in cost of contract revenues for the three months ended June 30, 2021, compared to nil the same period in 2020. We recorded $16.7 million of expenses related to payments owed to our licensors on Closing as well as $6.5 million of other external expenses incurred to fulfill the License Sale to CSL Behring.
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Table of Contents
Research and development expenses
Research and development expenses for the three months ended June 30, 2021 were $32.7 million, compared to $28.4 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 June 30,
2021
2020
2021 vs 2020
(in thousands)
Etranacogene dezaparvovec (AMT-060/061)
$
2,332
$
4,673
$
(2,341)
Huntington's disease (AMT-130)
2,472
2,095
377
Programs in preclinical development and platform related expenses
2,425
1,770
655
Total direct research and development expenses
$
7,229
$
8,538
$
(1,309)
Employee and contractor-related expenses
13,082
9,990
3,092
Facility expenses
4,397
4,185
212
Disposables
3,601
2,501
1,100
Share-based compensation expense
3,286
2,894
392
Other expenses
1,152
293
859
Total other research and development expenses
$
25,518
$
19,863
$
5,655
Total research and development expenses
$
32,747
$
28,401
$
4,346
Direct research and development expenses
Etranacogene dezaparvovec (AMT-060/061)
In the three months ended June 30, 2021 and 2020, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial. 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. We also incur costs related to 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. During 2020 and up to the Closing of the CSL Behring Agreement we also incurred costs related to the preparation of a Biologics License Application (“BLA”) and marketing authorization application (“MAA”) and for commercialization of the Product. After the Closing, CSL Behring will be responsible for the clinical and regulatory development and commercialization of the Product. Direct research and development expenses related to clinical development incurred between Closing and June 30, 2021 are presented net of reimbursements due from CSL Behring.
Huntington disease (AMT-130)
In the three months ended June 30, 2021, and June 30, 2020, our external costs for the development of Huntington’s disease were primarily related to the execution of our Phase I/II clinical trial in the United States. In addition, our external costs in the three months ended June 30, 2021, included expenses related to the preparation of our Phase I/II clinical trial in Europe that we announced in April 2021.
Preclinical programs & platform development
In the three months ended June 30, 2021, we incurred $2.4 million of costs primarily related to our preclinical activities primarily associated with product candidates, SCA3 (AMT-150) and Fabry disease (AMT-190 and AMT-191), as well as various other research programs and technology innovation projects, compared to costs of $1.8 million in the same period in 2020, which also included costs related to our product candidate for Hemophilia A (AMT-180) that was deprioritized in June 2020.
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Table of Contents
Other research & development expenses
● We incurred $13.1 million in personnel and contractor related expenses in the three months ended June 30, 2021, compared to $10.0 million for the same period in 2020. Our costs during the three months ended June 30, 2021 increased by $3.1 million as a result of the recruitment of personnel to support the development of our product candidates;
● We incurred $4.4 million in operating expenses and depreciation expenses related to our rented facilities in the three months ended June 30, 2021, compared to $4.2 million in the same period in 2020; and
● We incurred $3.3 million in share-based compensation expenses in the three months ended June 30, 2021, compared to $2.9 million for the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended June 30, 2021 were $17.3 million, compared to $11.5 million for the same period in 2020.
● We incurred $4.5 million in financial advisory fees in relation to our licensing transaction with CSL Behring in the three months ended June 30, 2021, compared to nil in the same period in 2020;
● We incurred $4.2 million in personnel and contractor related expenses in the three months ended June 30, 2021, compared to $2.9 million in the same period in 2020. The increase in the three months ended June 30, 2021, relates to the recruitment of personnel;
● We incurred $3.7 million in share-based compensation expenses in the three months ended June 30, 2021, compared to $2.8 million in the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel; and
● We incurred $2.0 million in professional fees in the three months ended June 30, 2021, compared to $3.0 million in the same period in 2020. We regularly incur accounting, audit and legal fees associated with operating as a public company.
Other items, net
We recognized $3.0 million in other income in relation to the equity stake received in VectorY B.V. in conjunction with the Settlement Agreement in the three months ended June 30, 2021, compared to no such income for the same period in 2020.
We recognized $1.3 million in other income of employee retention credit under the U.S. CARES Act in the three months ended June 30, 2021, compared to no such income for the same period in 2020.
We recognized $3.0 million in other income from payments received from European authorities to subsidize our research and development efforts in the Netherlands in the three months ended June 30, 2021, compared to $0.3 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 June 30, 2021 and 2020 were as follows:
Three months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
Interest income
$
37
$
81
$
(44)
Interest expense - Hercules long-term debt
(1,902)
(970)
(932)
Foreign currency gains / (losses), net
6,583
(3,645)
10,228
Other non-operating gains
—
191
(191)
Total other non-operating income / (loss), net
$
4,718
$
(4,343)
$
9,061
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 $6.6 million during the three months ended June 30, 2021, compared to a net loss of $3.6 million during the same period in 2020.
In the three months ended June 30, 2021, we recognized income of nil within other non-operating gains as there was no change in the fair value of the BMS derivative financial liability for the CoC-payment, compared to income of $0.2 million during the same period in 2020 related to changes in the fair value of the BMS warrants from the BMS CLA.
Income tax expense
We recognized $3.3 million of deferred tax expense in the three months ended June 30, 2021, and nil in the same period ended 2020.
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Comparison of the six months ended June 30, 2021 and 2020
The following table presents a comparison of the six months ended June 30, 2021 and 2020.
Six months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
Total revenues
$
464,322
$
1,639
$
462,683
Operating expenses:
Cost of contract revenues
(23,178)
—
(23,178)
Research and development expenses
(64,777)
(54,414)
(10,363)
Selling, general and administrative expenses
(30,300)
(20,583)
(9,717)
Total operating expenses
(118,255)
(74,997)
(43,258)
Other income
7,942
1,526
6,416
Other expense
(459)
(839)
380
Income / (loss) from operations
353,550
(72,671)
426,221
Non-operating items, net
7,833
2,121
5,712
Income / (loss) before income tax expense
$
361,383
$
(70,550)
$
431,933
Income tax expense
(3,471)
—
(3,471)
Net income / (loss)
$
357,912
$
(70,550)
$
428,462
Revenue
Our revenue for the six months ended June 30, 2021 and 2020 was as follows:
Six months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
License revenue
$
462,400
$
1,577
$
460,823
Collaboration revenue
1,922
62
1,860
Total revenues
$
464,322
$
1,639
$
462,683
We recognized $462.4 million license revenue related to the License Sale on Closing of the CSL Behring Agreement in May 2021. We did not recognize any such license revenue related to the CSL Behring Agreement in the six months ended June 30, 2020.
We recognized $1.6 million license revenue related to upfront payments and target designation fees received from BMS in 2015 under the BMS CLA for the six months ended June 30, 2020. We did not recognize any license revenue under the amended BMS CLA during the six months ended June 30, 2021.
We recognized $1.9 million collaboration revenue in the six months ended June 30, 2021, compared to $0.1 million for the same period in 2020. The increase in collaboration revenue primarily relates to the increased activities under the amended BMS CLA and the CSL Behring Agreement.
Cost of contract revenues
We recognized $23.2 million in cost of contract revenues for the six months ended June 30, 2021 compared to nil the same period in 2020. We recorded $16.7 million of expenses related to payments owed to our licensors on Closing as well as $6.5 million of other external expenses incurred to fulfill the License Sale to CSL Behring.
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Table of Contents
Research and development
Research and development expenses for the six months ended June 30, 2021 were $64.8 million, compared to $54.4 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.
Six months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
Etranacogene dezaparvovec (AMT-060/061)
$
5,979
$
9,213
$
(3,234)
Huntington's disease (AMT-130)
4,443
3,155
1,288
Programs in preclinical development and platform related expenses
4,714
3,225
1,489
Total direct research and development expenses
$
15,136
$
15,593
$
(457)
Employee and contractor-related expenses
24,677
19,338
5,339
Facility expenses
9,021
8,201
820
Disposables
6,945
4,911
2,034
Share-based compensation expense
5,960
5,289
671
Other expenses
3,038
1,082
1,956
Total other research and development expenses
$
49,641
$
38,821
$
10,820
Total research and development expenses
$
64,777
$
54,414
$
10,363
Direct research and development expenses
Etranacogene dezaparvovec (AMT-060/061)
In the six months ended June 30, 2021 and 2020, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial. 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. We also incur costs related to 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. During 2020 and up to the Closing of the CSL Behring Agreement, we also incurred costs related to the preparation of a BLA and MAA and for commercialization of the Product. After the Closing, CSL Behring will be responsible for the clinical and regulatory development and commercialization of the Product. Direct research and development expenses related to clinical development incurred between Closing and June 30, 2021, are presented net of reimbursements due from CSL Behring.
Huntington disease (AMT-130)
In the six months ended June 30, 2021 and June 30, 2020, our external costs for the development of Huntington’s disease were primarily related to the execution of our Phase I/II clinical trial in the United States. In addition, our external costs in the six months ended June 30, 2021, included expenses related to the preparation of our Phase I/II clinical trial in Europe that we announced in April 2021.
Preclinical programs & platform development
In the six months ended June 30, 2021, we incurred $4.7 million of costs primarily related to our preclinical activities primarily associated with product candidates, SCA3 (AMT-150) and Fabry disease (AMT-190 and AMT-191), as well as various other research programs and technology innovation projects, compared to costs of $3.2 million in the same period in 2020, which also included costs related to our product candidate for Hemophilia A (AMT-180) that was deprioritized in June 2020.
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Table of Contents
Other research & development expenses
● We incurred $24.7 million in personnel and contractor related expenses in the six months ended June 30, 2021, compared to $19.3 million for the same period in 2020. Our costs during the six months ended June 30, 2021 increased by $5.4 million as a result of the recruitment of personnel to support the development of our product candidates;
● We incurred $9.0 million in operating expenses and depreciation expenses related to our rented facilities in the six months ended June 30, 2021, compared to $8.2 million in the same period in 2020 as a result of expanding our organization; and
● We incurred $6.0 million in share-based compensation expenses in the six months ended June 30, 2021, compared to $5.3 million for the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel.
Selling, general and administrative expenses
Selling, general and administrative expenses for the six months ended June 30, 2021 were $30.3 million, compared to $20.6 million for the same period in 2020.
● We incurred $8.1 million in personnel and contractor related expenses in the six months ended June 30, 2021, compared to $6.1 million in the same period in 2020. The increase in the six months ended June 30, 2021, relates to the recruitment of personnel;
● We incurred $6.8 million in share-based compensation expenses in the six months ended June 30, 2021, compared to $4.8 million in the same period in 2020 primarily driven by increase in awards granted, including those to newly recruited personnel;
● We incurred $5.0 million in professional fees in the six months ended June 30, 2021, compared to $4.2 million in the same period in 2020. We regularly incur accounting, audit and legal fees associated with operating as a public company; and
● We incurred $4.5 million in financial advisory fees in relation to our licensing transaction with CSL Behring in the six months ended June 30, 2021, compared to nil in the same period in 2020.
Other items, net
We recognized $3.0 million in other income in relation to the equity stake received in VectorY B.V. in conjunction with the Settlement Agreement in the six months ended June 30, 2021, compared to no such income for the same period in 2020.
We recognized $1.3 million in other income of employee retention credit under the U.S. CARES Act in the six months ended June 30, 2021, compared to no such income for the same period in 2020.
We recognized $3.0 million in income from payments received from European authorities to subsidize our research and development efforts in the Netherlands in the six months ended June 30, 2021, compared $0.5 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.
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Table of Contents
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 CoC-payment as described elsewhere in the Quarterly Report on Form 10-Q .
Six months ended June 30,
2021
2020
2021 vs 2020
(in thousands)
Interest income
$
77
$
903
$
(826)
Interest expense
(3,453)
(1,945)
(1,508)
Foreign currency gains, net
11,209
957
10,252
Other non-operating gains, net
—
2,206
(2,206)
Total non-operating income, net
$
7,833
$
2,121
$
5,712
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 $11.2 million during the six months ended June 30, 2021, compared to a net gain of $1.0 million during the same period in 2020.
In the six months ended June 30, 2021, we recognized income of nil within other non-operating items as there was no change in the fair value of the BMS derivative financial liability for the CoC-payment, compared to income of $2.2 million during the same period in 2020 related to changes in the fair value of the BMS warrants from the BMS CLA.
Income tax expense
We recognized $3.5 million of deferred tax expense for the six months ended June 30, 2021 and nil in the same period ended 2020.
Financial Position, Liquidity and Capital Resources
As of June 30, 2021, we had cash, cash equivalents and restricted cash of $680.2 million which include payments received from CSL Behring following the Closing. This is expected to fund our operations into the first half of 2024 (assuming a full repayment of funds borrowed from Hercules under our term loan facility by 2023, as well as payments we expected to make in relation to our acquisition of Corlieve). We expect that the achievement of $0.3 billion of regulatory, first commercial sale, and development milestones would further extend our runway by 12 to 18 months.
Six months ended June 30,
2021
2020
(in thousands)
Cash, cash equivalents and restricted cash at the beginning of the period
$
247,680
$
380,726
Net cash generated from / (used in) operating activities
375,206
(62,944)
Net cash used in investing activities
(6,191)
(4,606)
Net cash generated from financing activities
65,128
3,549
Foreign exchange impact
(1,665)
223
Cash, cash equivalents and restricted cash at the end of period
$
680,158
$
316,948
We had previously 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. As a result of receiving the upfront payment upon Closing of the CSL Behring Agreement, we generated $375.2 million cash flows from operations during the six months ended June 30, 2021. We recorded net income of $399.5 million and $357.9 during the three and six months ended June 30, 2021, compared to a net loss of $42.6 million and $70.6 million during the same period in 2020. As of June 30, 2021, we had an accumulated deficit of $426.8 million.
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Table of Contents
Sources of liquidity
From our first institutional venture capital financing in 2006 through May 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. In May 2021, we received a $462.4 million cash payment due from CSL Behring upon Closing. In addition, we could potentially receive up to $0.3 billion in regulatory, first commercial sales and development milestone payments from CSL Behring.
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 the six months ended June 30, 2021, we issued 921,730 million ordinary shares for net proceeds of $29.6 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 June 30, 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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Table of Contents
Net Cash generated from / used in operating activities
Net cash generated from operating activities was $375.2 million for the six months ended June 30, 2021 and consisted of net income of $357.9 million adjusted for non-cash items, including depreciation and amortization expense of $3.7 million, share-based compensation expense of $12.8 million, unrealized foreign exchange gains of $12.3 million and other non-cash items, net, of $0.5 million. Net cash generated from operating activities also included favorable changes in operating assets and liabilities of $12.6 million. These changes primarily related to a net increase in accounts receivable, prepaid expenses, and other current assets and receivables of $3.4 million primarily related to an increase in various prepayments and a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $15.9 million primarily related to an increase in amounts to be paid to licensors upon the CSL Behring Closing. Net income primarily consisted of $462.4 million license revenue recognized on Closing.
Net cash used in operating activities was $62.9 million for the six months ended June 30, 2020 and consisted of a net loss of $70.6 million adjusted for non-cash items, including depreciation and amortization expense of $3.5 million, share-based compensation expense of $10.1 million, fair value gains on derivative financial instruments of $2.2 million, unrealized foreign exchange gain of $0.9 million, and a decrease in other non-cash items, net of $1.6 million. Net cash used in operating activities also included unfavorable changes in operating assets and liabilities of $1.3 million. These changes primarily related to a net decrease in accounts receivable and accrued income, prepaid expenses, and other current assets of $1.1 million and a net decrease in accounts payable, accrued expenses and other liabilities of $2.3 million.
Net cash used in investing activities
In the six months ended June 30, 2021, we used $6.2 million in our investing activities compared to $4.6 million for the same period in 2020.
Six months ended June 30,
2021
2020
(in thousands)
Build out of Amsterdam site
$
(4,470)
$
(1,816)
Build out of Lexington site
(1,721)
(576)
Acquisition of licenses, patents, and other rights
—
(2,214)
Total investments
$
(6,191)
$
(4,606)
The build out of the Amsterdam site consumed $4.5 million cash during the six months ended June 30, 2021, compared to $1.8 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 six months ended June 30, 2021, we generated $65.1 million in our financing activities compared to $3.5 million for the same period in 2020.
Six months ended June 30,
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, net of issuance costs
29,565
-
Proceeds from issuance of shares related to employee stock option and purchase plans
960
3,549
Net cash generated from financing activities
$
65,128
$
3,549
In January 2021, we received $34.6 million net proceeds from the Hercules 2021 Amended Facility.
We received net proceeds of $29.6 million associated with our ATM offering in March and April 2021.
During the six months ended June 30, 2021, we received $1.0 million from the exercise of options to purchase ordinary shares in relation to our share incentive plans compared to $3.5 million for the same period in 2020.
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Funding requirements
We believe our cash and cash equivalents as of June 30, 2021, will fund our operations into the first half of 2024 (assuming a full repayment of funds borrowed from Hercules under our term loan facilities by 2023, as well as payments we expected to make in relation to our acquisition of Corlieve). We expect that the achievement of the $0.3 billion in regulatory, first commercial sales and development milestones would further extend our runway by 12 to 18 months. 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;
● payments we will make in relation to the contemplated acquisition of Corlieve;
● the scope, timing, results, and costs of our current and planned clinical trials, including those for AMT-130 in Huntington’s disease;
● 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 for CSL Behring.
● 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 June 30, 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 $15.6 million interest payments)
$
6,068
$
79,498
$
—
$
—
$
85,566
Operating lease obligations
5,862
12,712
13,576
25,954
58,104
Total
$
11,930
$
92,210
$
13,576
$
25,954
$
143,670
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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 milestone payments from CSL Behring. 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 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 June 30, 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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